There has been considerable fall in the sales of apartments and lands in the capital city and elsewhere due to covid-19 pandamic in recent times. Flat sales dropped by 40 per cent on an average in the last few months.
The leading realtors, hit by the fall in sales, said squeezing in bank financing and the people having less money are the main reasons behind the present fall in sale of residential properties in the city. They also said clients, who earlier signed contracts to buy flats, are also making delays in paying installments, leading to a slump in the real estate sector.
Declining trend in flat sale has also caused a falling trend in sale of building materials, like mild-steel rod, cement, and brick etc. Although this is the high time for property sale, the would-be buyers apparently lack solvency to buy new apartments in the city.
Many potential expatriate buyers have postponed their decision to buy flats, following the coronavirus in the US, Europe and the Middle-East. They are an important buying group, but economic downturn in the developing world has been affecting local real estate business.
Bank funding for purchasing flats has been squeezed in recent times, and that's one of the major reasons behind the present situation. Earlier banks used to fund almost cent per cent of the total flat price.
Flat sale in the country hit the rock bottom in 2007, when a nationwide crackdown on corruption saw sale of only about 3,000 flats, against the average sale of 7,000-8,000 flats during the previous few years. Market watchers say steep rise in flat prices is also hindering their sales.
The average price of apartment in prime locations in the city is now over Tk 12,000 per square feet (sft). The prices of apartment in posh areas like Dhanmondi, Gulshan and Banani range between Tk 18,000 and Tk 20,000 per sft.
According to the Real Estate and Housing Association of Bangladesh (REHAB), an organisation of over 100 developers, a medium-sized company sells 12-14 flats per month on an average. RAJUK has enforced height restriction in some areas like Dhanmondi, Gulshan, Banani and Baridhara etc. Such restriction is forcing the developers to increase apartment prices in those areas. The housing and its allied sectors are contributing around 10 per cent to the country's gross domestic product (GDP).
Since the government's role in facilitating the sector is declining day-by-day, the sector is facing various problems. Fund constraint is one of the major obstacles for maintaining sustainable growth of the industry. Besides many other problems, the sector is facing an uneven competition as the government is being involved in the housing business rather than playing the role of a facilitator. For example, the government has taken an initiative to develop satellite towns around the city. This has created a situation where the government has become the competitor of the private sector.
There is no scope for developing Dhaka city as a modern and ideal mega city. The reason is that it has been developed in an unplanned way. Developing satellite cities are essential for spreading the growing population in the future. Population in and around Dhaka city should be spread so that the pressure on the capital is decreased. Only then, Dhaka can be developed as a modern and ideal mega city.
Housing was declared as an industry in 1991. But, to date, it has not taken the shape of an industry, and not been given any benefit. In order to give a boost to this ailing sector, the government should extend a 5-year tax holiday in line with the facility offered to other industries.
Utility services should be provided to this industry at rates that are commensurate with other industries. Capital goods, plant and machinery can normally be imported by industries at a low duty tariff. For the housing industry, importing capital goods such as shuttering materials, props, and overhead cranes etc. should be accorded the same facility.
In the capital city, according to reports, over 10,000 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 their buyers in the form of the rent and interests charges on bank loans they are paying every month. Similarly, the real estate companies are also counting interest on their bank loans. The problem also has its impact on remittance flow.
The situation in the real estate sector, no doubt, is not encouraging. The government has imposed a total ban on gas connections to new flats and apartments. But it did not really explain as to what will happen to those apartments having built-in piped connections already and still waiting for gas supply.
The government kept the realtors waiting for long citing supply shortage as the reason for its failure to make available gas and power connections. It never asked them to stop building new ventures citing gas and power supply shortage. Responsible ministers and bureaucrats repeatedly assured the people of improvement in gas and power situation within a short period.
The government made a move to create a 'one-stop service' to reduce the cost of doing business for realtors. But it has also fallen flat due to legal complications. The service was planned to ease sufferings of the realtors as they need to get clearance from 12 state agencies and departments before constructing multi-stories apartments.
Each of the state agencies and departments operates in accordance with its own laws and hence, they did not agree to such initiative. The agencies claim that the service is difficult to offer from one single point. In fact, the problem of killing time would not arise if concerned departments and agencies did their jobs properly.
Emerging situation demands that something should be done to protect the interests of the buyers of apartments, industry operators and the economy. The government and the leaders of the real estate sector must sit together to devise means to bring an end to the ongoing stalemate.
Housing is one of the basic rights of every citizen. 'Housing for all' should not merely be an empty political slogan. The government should create an environment with right policies so that the housing industry can flourish, and this will also be a great boon for the national economy.