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Several fiscal measures outlined in the proposed national budget for FY 2025-26 could severely impact the country's real estate and construction sector, which is already grappling with rising costs and declining demand, industry insiders have warned.
As per the proposed budget, value added tax (VAT) on services of construction companies and linkage accessories like iron products, plastic and paint would go up considerably, leading to further hike in construction cost, they added.
Besides, proposed move to ensure the land registration at actual market value would also fuel building construction costs, both for residential and commercial.
Realtors and allied industry people said construction of new buildings is directly linked to more than 250 other sectors including steel, cement, ceramic, and plastic.
"As a result, any tax hike would create burden on both the customers the linkage industries," said a top executive of a real estate company.
He said the proposed hike in the taxes would cause an adverse impact on the prices of rod and different other iron products, especially those are used for construction purposes.
Presenting the proposed budget on Monday, Finance Adviser Dr. Salehuddin Ahmed said the VAT rates have been slightly increased.
About 20 per cent higher tax has proposed at the production stage of different "MS Products" in the budget for FY'26.
In the case of production of various types of screws, joints (connectors), nuts, bolts, electric line hardware and pole fittings including nails and bait, the VAT rate has been fixed at 7.5 per cent instead of 5.0 per cent, according to the budget proposal.
The rate of VAT on the services of construction companies has been increased to 10 per cent from 7.5 percent, it said.
The VAT rate at the production stage of all types of tableware, kitchenware, household goods, hygienic and toiletries, and other similar products made of plastic has been fixed at 15 per cent from 7.5 per cent.
When asked, Senior Vice-President of Real Estate & Housing Association of Bangladesh (REHAB) Liakat Ali Bhuiyan told the FE that they are deeply concerned over the proposed hikes in the tax rates.
"We are very much concerned over the proposed tax measurers as prices of many key ingredients would go because of it," he said.
He further said: "We are analysing the possible impact of the proposed tax measurers and would to come up with our feedbacks after Eid-ul-Adha," he said.
According to sources, the country's real estate sector has been facing a blow due to the prevailing economic downturn.
Besides, realtors find themselves in a difficult situation to undertake new projects due to some provisions of the latest Detailed Area Plan (DAP).
Realtors and land owners have been trying to press home their demand for necessary amendment to the DAP.
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