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Real estate sector braces for revival

Shahiduzzaman Khan | Published: June 29, 2019 21:27:22 | Updated: June 30, 2019 21:27:31


The real estate sector is expected to perform better in the next fiscal year. Many prospective buyers had kept their investment on hold last year fearing unrest in the election year.

The housing market was not in a good shape last fiscal year mainly because of interest rate increase. Interest rate in the first half of the year rose in the face of liquidity crisis in the banking sector. The average interest rate rose to 11 per cent in 2018 from 8.5 per cent a year earlier because of liquidity crunch.

However, home sales are likely to pick up in the coming fiscal, spurred by hopes of political stability and positive economic growth outlook. This year, the market is expected to go up by 9.0 per cent in terms of sales of the number of units. Loan facility extended by the government for public sector employees is likely to have a positive impact on the demand for homes.

The government has proposed 20-29 per cent tax reduction on housing and land investment in its latest budget proposal so that taxpayers get the opportunity to voluntarily reveal their undisclosed income on purchase or construction of flat or building. Besides, stamp duty and registration fee on the sale and transfer of property have been brought down for the upcoming fiscal year.

As tax rates in the real estate sector have decreased, the taxpayers will be encouraged to voluntarily disclose their tax returns. This would also facilitate expansion of real estate sector on one hand, and augment the country's revenue collection on the other.

The total fees for registration of flats will be 14-16 per cent, and 17 per cent for land registration from the next fiscal. There will be provisions for location based special tax treatment in respect of investment in residential buildings, flats and lands.

The real estate sector was in great disarray. Prices of construction materials including rods, bricks and stones jumped significantly. The upward trend in prices of construction materials had been a cause of anxiety as the sector had faced challenges on many fronts. Flat registration cost jumped by 15 per cent and there was double digit interest rate for home loan.

The leaders of the construction industry association even threatened to stop all types of building works last year if the government did not take steps to check the spiralling prices. In fact, phenomenal rise in interest rates and prices of major construction materials created volatility in the country's real estate sector. The dreams of the middle-income people to own flats or apartments were shattered with such hikes in prices.

The industry was heading for a crisis as a market syndicate became active in raising the prices of key construction materials such as rod, cement, stone chips and bricks abnormally and frequently. The construction activities almost came to a halt due to skyrocketing prices, particularly of rod and cement.

Reports say the price of per tonne 60-grade rod increased to Tk 68,000- Tk 70,000 from Tk 59,000- Tk 60,000 last year. The price of the material was Tk 52,000-Tk 53,000 a year ago. Price of 40-grade rod increased to Tk 53,000-Tk 56,000 from Tk 42,000-Tk 43,000 a year ago. To be precise, prices of rods registered an overall 23 per cent increase in a year.

Manufacturers attributed the price hike of rod to the increase in prices of raw materials in the international market, hike in transport cost and the rise in bank interest. But the reality is that the price of billet in the international market is $525 a tonne, down from $560 last year.

On its part, the government could do many things to boost the real estate sector. It could regularly interact with the all stakeholders to find a way out as the price hikes will also cause problems to the government's development works across the country. The government could also train masons across the country for developing them as skilled workers, aiming to make the real estate sector vibrant by promoting green-building methods. The trained masons might also help boost the country's expatriate manpower sector.

The way prices of land and construction materials are showing an increasing trend, owning flats for common people has become a distant dream. Land price in the capital city is probably the third highest in the world and it is galloping every day. Owning a 1000-square feet apartment in posh city area will cost a customer Tk 12 to 16 million.

Reports say over 8,000 flats are presently unsold which were around 13,000 a year ago. Many ready residential apartments could not be either sold or transferred to their buyers because of the non-availability of power and gas connections. The delay in the transfer of apartments has been taking an economic toll on the buyers in the form of the rent and interests charges on bank loans that they are paying every month. Similarly, the real estate companies are also counting interest on their bank loans.

It is true that common people are apparently feeling encouraged to buy flats following the incentives given to the housing sector. Assuming that political and social stability will prevail in the days ahead, the real estate sector is likely to get rid of the stagnant state and also flourish to a decent level.                               

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