• Tuesday, Nov 24, 2020
  • Last Update : 03:26 pm

Understanding the biggest problem in home buying

  • Published at 11:37 pm March 9th, 2020
bproperty issue 21
Courtesy

In Singapore, a 30-storey building usually takes two years to build. But in Bangladesh, even a six or seven-storey building can take half a decade

The biggest concern for a prospective homebuyer in majority of the countries around the world tends to be along the lines of home financing, mortgages or desirability of the property. However, when it comes to Bangladesh, such concerns are not among the top ones. After all, home-buying in Bangladesh is synonymous with delays. So, how can things like financing the purchase of a flat or even determining the legitimacy of the property be the biggest problems in real estate of the country? Even after decades of trying to solve this issue, there are hardly any “significant” advancements, and more homebuyers would complain about the fact that they were handed over their purchased property much later than the promised date. So, how, and more importantly why, is it that the same scenario keeps happening over and over again without any sign of end or solution?

There are over 1,000 members in the country’s biggest consortium of real estate developers, REHAB, and a few hundred more non-members who are currently engaged in the construction and development of real estate projects in Bangladesh. However, only a handful of those organizations actually develop properties using their own funds. A vast majority of builders rely almost entirely on the funding received from selling their residential units. Most of the time, a developer will first procure property and create a design or blueprint to create mock-ups of the project, which they then begin marketing to prospective buyers. The cash flow from these buyers is then invested in the construction of the said project. While the idea is sound, the reality is very different as the time it takes to find said buyers can be a while.

Furthermore, if and when a buyer derails from their commitment to pay their monthly instalments for a few months, the regular cash inflow dries up and the result is an inability to sustain the construction of the project.

However, this is not the only cause of woe. A number of times, it is the inaptness of the people in charge of the project that cripples the schedule. According to a 2018 study, on the causes behind construction delays in privately funded large building projects in Bangladesh, a lack of experienced construction managers as well as lack of proper management, improper planning — along with some others — were found to be the main factors. Very few local managers have the capability to handle major development projects. Such projects are necessary for modern landscapes as, with each year, there is less and less habitable and construction-ready land in the urban landscape of the country. These managers lack skill and knowledge regarding resource allocation. There is also no proper understanding of estimating the various aspects of construction. As a result, the construction plan that is created is flimsy at best and does not have the necessary fortitude behind it to execute it.

Another thing these developers and managers have going against their favour is the failure to create a realistic estimation of time and price. In Singapore, a 30-storey building usually takes two years to build. But in Bangladesh, even a six or seven-storey building can take half a decade. The reason? The planners overestimate their capabilities, underestimate the bureaucratic nature of the industry and/or are coerced into providing a more — even though unattainable — “positive” handover schedule by the owners which they feel will be more marketable to prospective buyers.

This is the result of the developers’ notion that consumers do not want to invest in a property that might take a long while to finally own. Coupled with the fact that almost all aspects of construction such as attaining planning permission may take months, buyers may only be able to get their hands on their purchase several years after the original promised date.

One of the main reasons for schedule delays, especially for land projects, which a majority of developers in the country cite are construction site limitations and utility connections. Many a time, land development projects have to wait for the government to bring utilities such as running water or electricity to the corresponding area, since most of the recent projects have tended to be outside the existing operations of Wasa or PWD. This can take years as a certain amount of development needs to take place in a particular area before such utility connections are allotted.

Much of these problems could have been avoided if there was not a massive scarcity of land within the existing urban landscapes of Bangladesh. Cities like Dhaka have barely any space left at or near the city centre. And the places that are left are priced so high that it directly impacts project costs and the subsequent pricing of completed flats. A majority of the people today want “affordable” homes. According to the latest figures by Bproperty, about 80% of people preferred to buy homes that were within Tk50 lakh in 2019. So taking on real estate projects where apartments may cost a few crore of taka is futile and unproductive.

But in all fairness, even if a project is well within existing city bounds, getting new electrical or running water connections can be a time-consuming process that greatly contributes to the delay of a project’s completion.

Constant delays in handover have broken people’s faith in real estate over the years. False promises have, unfortunately, become the norm in the real estate industry. “Not everything is as it seems” has been the prevalent “common sense” for a while, and people have become used to the idea that the swimming pool or grand reception promised on the brochure might not be there when the project is finally completed. However, the all-too-normal massive schedule delays have a great toll on those who are or might be interested in engaging in real estate. This is having a significant detrimental effect on the future of the industry as well as on the people and the country’s development.

Years of distrust have made people sceptical about investing in real estate — after all, buying homes is a big investment. Even a modest home can cost somewhere between Tk40 lakh to Tk80 lakh, depending on location and features. Often times, people take out loans to finance their dream of a home which they need to repay. So, when someone decides to buy a home, they do that only after taking all economic conditions under consideration. As a result, when there are delays in moving into their newly purchased home, they face the burden of unexpected and unnecessary extra costs.

The unchanging and unrelenting underhanded ways of many developers have forced the Bangladesh government to enact several regulations to safeguard the rights of flat and landowners from deceitful builders — the Real Estate Management Law in 2009, the Real Estate Development and Management Act in 2010, and the Real Estate Development and Management Regulation in 2011. For those flat or landowners who feel they are at the end of their rope and must take action against their concerned developers should look to the act of 2010, which details the rights of a flat owner as well as reimbursement conditions in case of a delay in handover. 

According to the act’s Section 15, in the case of a flat owner, they will be entitled to the equal amount they have already paid. And for a landowner who has come to an agreement with a developer, they will be entitled to the amount equivalent to the set value as per the agreement. Furthermore, these payments need to be made to the owner, along with any incurred compensation, within six months via account payee cheque. As for the compensation of extension of the handover date, the developer and the owner must come to a mutual agreement to determine a fair amount. And, if for some reason, no predetermined amount was set beforehand, the developer will have to pay an amount equivalent to 15% of the property’s value.

The Real Estate Housing Association of Bangladesh (REHAB) has its own set of regulations or codes of conduct in regards to delays in handover, which they feel is fairer for both concerned parties. For example, whereas the 2010 act set three months or 90 days as the most delay allowed for handing over the property in question after full payment has been made, REHAB has set that limit to six months or 180 days. Another change is, instead of paying a pre-set compensation for extending the handover schedule (which is to be a set percentage of the property value or a set amount), the landowner will be entitled to a mutually determined monthly rental compensation.

Another path many take up, especially to avoid any chance of such misgivings, is by dealing only with developers who are well-established and have a great reputation in the market in delivering timely. Unfortunately, this has limited the scope of prospective buyers and people have grown to mistrust a majority of builders aside from a few leading developers, such as Assure Group and those associated with real estate service providers like Bproperty. However, it is not that all the developers have the habit of delaying handovers. A few bad apples have led to the diminishing of an entire industry’s reputation.

The population of Bangladesh is growing at about 1.1%, according to some figures, with an urbanization rate of 1.69%. Every year, we need about 120,000 additional household units for the growing population, but instead, the current supply sits at around 25,000 — almost all of which is being produced by the private sector; chiefly developers. So, handover delays are neither novel nor exclusive to residential real estate. Even government projects and infrastructures get delayed almost every other day. Roads take 10 years to construct and open instead of three, lands take 15 years to be ready for construction instead of five, but it is the handover delay of residential properties or homes that impact a person more directly and more severely.

79
77
blogger sharing button blogger
buffer sharing button buffer
diaspora sharing button diaspora
digg sharing button digg
douban sharing button douban
email sharing button email
evernote sharing button evernote
flipboard sharing button flipboard
pocket sharing button getpocket
github sharing button github
gmail sharing button gmail
googlebookmarks sharing button googlebookmarks
hackernews sharing button hackernews
instapaper sharing button instapaper
line sharing button line
linkedin sharing button linkedin
livejournal sharing button livejournal
mailru sharing button mailru
medium sharing button medium
meneame sharing button meneame
messenger sharing button messenger
odnoklassniki sharing button odnoklassniki
pinterest sharing button pinterest
print sharing button print
qzone sharing button qzone
reddit sharing button reddit
refind sharing button refind
renren sharing button renren
skype sharing button skype
snapchat sharing button snapchat
surfingbird sharing button surfingbird
telegram sharing button telegram
tumblr sharing button tumblr
twitter sharing button twitter
vk sharing button vk
wechat sharing button wechat
weibo sharing button weibo
whatsapp sharing button whatsapp
wordpress sharing button wordpress
xing sharing button xing
yahoomail sharing button yahoomail