…..𝑯𝒐𝒖𝒔𝒆 𝒐𝒘𝒏𝒆𝒓𝒔 𝒂𝒏𝒅 𝒕𝒆𝒏𝒂𝒏𝒕𝒔 𝒂𝒓𝒆 𝒕𝒐 𝒄𝒂𝒓𝒓𝒚 𝒃𝒓𝒖𝒏𝒕 𝒐𝒇 𝑩𝒂𝒏𝒌𝒔’ 𝒄𝒐𝒏𝒖𝒏𝒕𝒆𝒓𝒗𝒂𝒊𝒍𝒆 𝒇𝒐𝒓 𝒄𝒐𝒖𝒏𝒕𝒓𝒚’𝒔 𝒔𝒊𝒛𝒂𝒃𝒍𝒆 𝒆𝒄𝒐𝒏𝒐𝒎𝒚 𝒂𝒔 𝒘𝒆𝒍𝒍 𝒂𝒔 𝒕𝒉𝒆𝒊𝒓 𝒐𝒘𝒏 𝒔𝒏𝒂𝒈 𝒇𝒓𝒐𝒎 𝒕𝒉𝒆 𝒔𝒂𝒎𝒆 𝒑𝒐𝒐𝒍 𝒐𝒇 𝒆𝒄𝒐𝒏𝒐𝒎𝒚.
Tenants cry over exorbitant house rents. Majority of tenants are from the middle or low income groups and they spent large pie of their salary on the rent.
Karma Penjor who is working as videographer in one of the private companies said “I live in Changzamtog with my wife and two children. The house I live in is of two bedrooms apartment with the rent of Ngultrum (Nu.) 11400 per month. When I first startarted living there in 2020, the rent was only Nu. 10400. I earn Nu. 13700 per month and 90% of my salary goes in paying the rent. Furthermore, my wife is unemployed and has two children, making things even more difficult. As a result, I occasionally work as a freelancer to supplement my family’s need”.
Wangmo, who lives in Babena, stated, “When I was chosen through an interview, I was so excited that I didn’t care about the salary and accepted the position as soon as possible. My salary was Nu.10000, and I was paying Nu.10500 in the rent for one-bedroom apartment. The rent was higher than my salary. Despite the fact that I was working, I ask pocket money from my parents”.
Likewise, Pema Lhaden said, “My friend and I are sharing a one-bedroom apartment. The rent for a one-bedroom apartment is Nu. 10600. We only make Nu. 12000 per month, so living alone is extremely difficult. We divide the rent and can at least save a small amount”.
Tshewang, who lives in Olakha said that previously, my base salary was Nu. 7000, and I have to pay Nu. 3000 for rent. In comparison to other places, the rent here is low, but it has only one room. I have to manage kitchen, sitting area, and bedroom within this room. It is difficult to entertain guest and friends into this room as it is too small.
However, for most of the house owners, the rents that they receive from tenants are just enough or insufficient to cover their monthly equated monthly installment (EMI) for loan availed for the construction of house.
Sangay Om, house owner said, “Rent might seems high for the tenants but for us, it’s not even sufficient to cover monthly bank interest. All the rents we get are used for paying the loan and extra Nu 73000 is paid monthly from my pocket money. This Nu. 73000 is paid from money earn by weaving and asking few amounts from children. House loan is very difficult to pay off. Incase housing loan is reduced, we would also reduce the house rent too”.
Similarly, a house owner, who requested to remain anonymous said, “We are hardly living because of loan. Through rent we can pay only half of the loan, remaining half is paid by ourselves. Sometime, it’s so happen that the tenant delay to pay rent on time. Thereby, we delay to pay the loan and we have to bear the penalty from bank for delay payment of EMI. Tenants just have to pay the rent but if we think about house owner, they already have to pay the loan and sometimes penalties, at the same time bear the expenses of maintenance and repairing of the house”.
Banks have specific technical procedures in place to calculate the Minimum Lending Rate (MLR). Lending rates differ from banks to bank. Bhutan Development Bank Limited has a minimum lending rate of 7% per year, while Bank of Bhutan Limited has a rate of 6.5 percent.
“In terms of interest rate, our bank has low interest rate with 8.93% (percent) for commercial loans and 7.98% for non-commercial loans,” said the Bank of Bhutan official. I don’t see any problem with the interest rate. If people are referring to global rates and our interest rates may be slightly higher due to the country’s economy. Moreover, MLR is calculated by each bank themselves considering their own performance. Each Bank sends their MLR and then RMA calculates all those MLR and finalized the average.
Official of BDBL said, “People think that we will find it easier to lower the interest rate but there are many things to consider for the calculation of minimum lending rate (MLR). The MLR is determined by three parameters: the marginal cost of funds, negative carry charges on the cash reserve ratio (CRR), and operating cost. BDBL has high interest rate due to a high deposit rate, which also results in a high operational cost and as the margins are high, MLR is also high. Furthermore, BDBL provides a greater number of commercial housing loans. We do not deny non-commercial loans, but there is a greater demand for commercial housing loans. Commercial housing loan interest rate is 10.50% for up to 5 years”.
Royal Monetary Authority of Bhutan (RMA) stated at the same time, “Previously, the tenure for the housing loan was 20 years, so it is likely that the house owner will be unable to repay the loan on time. Given that situation, the tenure has now been increased to 30 years, so repaying the housing loan is no longer a problem”.
Karma Dorji (name changed), house owner said, “My duty is to deposit the rents collected to the bank diligently every month and I am not sure if I would see my loan being cleared during my lifetime. And perhaps, my children would have to take over my responsibility when I am not around or else bank would”.
RMA went on to say, “Furthermore, we determine the base rate for each bank based on their individual performance. The minimum lending rate is 7.16%, and it is determined by taking into account the MLRs of all banks. We cannot go lower because it would result in a loss for the banks “.
Tashi Tshering, 53 year-old and father of four who is a tenant said that if banks and authority could work on bringing only housing loan interest lower and ensure that rents are also lowered accordingly, it would make lives of people and alike me much easier. Trust me, there are many like me, he added.
Meanwhile, tenants and many of the house owners who have availed loan for their house construction shall protect to save country’s economy and banks since, the loan interest is protected for the same reason. However, the only difference is although tenants, house owners and banks are in the same pool of country’s sizable economy but banks are conuntervailed with higher interest rates for the sizable economy while others take the brunt of their conuntervaile as well as their own snag of sizable economy of the country. And bank shareholders await for their overdue dividends.