September 24, 2024
THIMPHU – With retirement just four years away, a civil servant in Thimphu faces an uncertain future. After decades of dedicated service, he has yet to build a home, a looming concern as his retirement approaches.
While he has managed to save some money, most of it was spent on his children’s education in private colleges. Compounding his financial burden are the long-term medical treatments he is undergoing in India. Despite owning a small plot of land in his village, the dream of building a house remains distant, overshadowed by family expenses and ongoing healthcare costs.
This situation is not uncommon. Many Bhutanese, including civil servants, struggle to secure housing despite stable and prestigious jobs.
The revised National Housing Policy of 2019 promised affordable housing to bolster social and economic stability, yet many still find themselves priced out of home ownership.
Increasingly, many Bhutanese are seeking work abroad, drawn by the promise of foreign currency earnings that enable them to build homes back home. In Thimphu, a significant number of buildings and flats are owned by those who have worked overseas.
According to the 2022 Bhutan Living Standards Survey (BLSS), nearly half of Bhutanese do not own a home, with 68 percent of the urban population living in rented apartments.
The National Housing Policy 2020 states that 58 percent of Bhutanese live in rented houses, with many facing a rental burden that exceeds the international standard of 30 percent of household income.
Rent hike is a major problem, despite existing regulations meant to curb them.
“The rent is increased without any notice, and although there are regulations, they are rarely enforced,” said a corporate employee.
On the other hand, landlords argue that high interest rates on construction loans compel them to keep rents elevated.
For instance, the Bank of Bhutan (BOB) charges 10.75 percent interest on housing loans, while Bhutan National Bank (BNB) charges 11 percent and Druk Punjab Bank (PNB) offers a slightly lower rate of 8 percent.
“Working in the private sector makes it difficult to avail loan facilities, and when we don’t have access to loans, building a house becomes impossible,” said Rinzin Dorji, a private-sector employee.
Studies reveal that low participation in formal savings among Bhutanese reduces the pool of deposits available for commercial lenders. This lack of savings often results in many low and middle-income households having no credit history, making banks hesitant to extend loans.
As a result, banks are hesitant to extend long-term housing loans, further limiting access to homeownership for many Bhutanese.
Lepcha, an employee one of the private companies in Pasakha, said that the government should initiate affordable loan programmes for housing construction.”Interest rates should be brought down to 4 to 5 percent to encourage more people to build homes.”
He highlighted the benefits bank employees receive from affordable loans—benefits that should be extended to all citizens.
Further complicating the situation is the rising cost of land, construction materials, and labour, all of which have made building a home increasingly expensive.
Countries worldwide have implemented various measures to tackle the growing issue of affordable housing.
Singapore, often cited as a model by Bhutan, has adopted two major initiatives to ensure housing affordability for its citizens. The first is the Build-To-Order (BTO) scheme, where individuals can purchase flats from the Housing Development Board (HDB) with a subsidised rate and a 99-year lease. Alternatively, buyers can acquire flats directly from homeowners or the open market, with leases of up to 94 years.
Government’s pledge on affordable housing
The People’s Democratic Party (PDP) has made multiple promises regarding affordable housing.
One early move by the government was revising the tenancy agreement for residents of Changjiji Colony, allowing them to stay until they resign.
Beyond this initiative, the government has also asked the finance ministry to develop more low-income housing.
The government has also plans to initiate a flagship programme called ‘Rent to Own’. Under this scheme, housing stock will be developed and made available to civil servants, private sector employees, and low-income groups.After a specified period of occupancy, these houses would become eligible for ownership.
The government has also pledged to support first-time homebuyers by easing access to loans, reducing interest rates to four percent, and extending the loan repayment period to 30 years.
In addition, the government has pledged to increase the loan-to-value (LTV) mortgage ratio from 70 to 95 percent, making it easier for individuals to secure loans for house construction or apartment purchases.
For real estate developers, the government has committed to facilitating the lease of state land for housing development, engaging the private sector in building housing stocks, and creating special financing windows to support down payments and installment payments.
The government has allocated Nu 1.5 billion for affordable housing under its economic stimulus programme.