Even as the country’s real estate sector continues to display its sluggish trend, the realtors are going to begin a five-day housing fair with a hope to revive the business.
Since 2010 the housing sector has been in trouble due to political unrests, squeezing bank loans and crash in stock market. Lack of gas and electricity supplies has only exacerbated the situation.
According to a survey of the Real Estate and Housing Association of Bangladesh (REHAB) among 209 companies in 2014, a number of 12,185 flats worth Tk8,811.19 crore remained unsold. Annual sales fell to 1,749 flats in 2014 from 1,965 in the previous year.
The realtors blamed high rates of bank loan interest and a bar to invest untaxed money for the slowdown in the housing sector business.
“The bank interest rate is too high and unaffordable for a flat buyer in Bangladesh. Sometimes banks also denies loans to potential flat buyers,” Md Wahiduzzaman, REHAB vice-president (administration), told the Dhaka Tribune.
He said the clients also needed to pay up to 20% of total flat value as registration fee, which also discouraged purchasing flats.
Wahiduzzaman said they had sent a letter to the finance ministry through the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) to reduce bank interest rate.
He said the apex trade body was also negotiating with the government to bring down the interest rate to single-digit one.
“A number of 3.5m people are directly or indirectly involved with the housing sector. If the sector cannot be made vibrant, we may see social and economic unrests,” Wahiduzzaman stressed.
The realtors want allowing undisclosed money to be used in buying flats as it could prevent outflow of capital.
According to Global Financial Integrity (GFI) report, there was a capital flight of about Tk76,000 crore from Bangladesh in 2013 and the REHAB believed that was the untaxed money, said Rabiul Haque, REHAB senior vice-president.
“If the government allows investment of untaxed money in the housing sector without any condition, it will stop capital flight and help the sector become vibrant again and contribute to the economy.”
The bad days of the real estate business have inevitably affected its backward linkage industries, the construction materials including cement and steel.
“Sales of steel declined around 50% since the slowdown in the housing business,” said Anamul Hoq Iqbal, vice-president of Bangladesh Auto Re-Rolling and Steel Mills Association.
He said the interest against bank loans was rising. Anamul Hoq said if the situation didn’t improve, the mill owners would have to slash the existing workforce and leave many unemployed.
According to the association, about half a million people are engaged in the sector and total investment is Tk30,00,000 crore.
Although Bangladesh has the capacity to produce 7m tonnes of steel annually, it now produces only 4m tonnes due to slow demand. The current demand is estimated at 3-3.5m a year.
In 2008 the sector, however, enjoyed a 10-15% growth in steel consumption, which now reduced to zero rate, the association leaders claimed.
The demand of cement also kept falling due to dull business of housing industry, said Abdul Khalique Parvez, senior vice president of Bangladesh Cement Manufacturers Association.
“We are unable to use the installed capacity of the cement sector, hurting our investment,” he said.