The phrase “once in a generation crisis” is often said about the current crisis we have been enduring since the beginning of this year, yet, it can feel as if this undoubtedly powerful phrase is still undervaluing the extent of Covid-19 pandemic. It has wreaked havoc across nations and economies with little to no reprieve. Even as the economic recession turns the corner, some sectors are still trying to find their footing amidst the mess and two of those sectors are the real estate and construction.
It has been months since the lockdown, or as it was officially called “general holiday,” was lifted in Bangladesh. However, the real estate and construction sector have still quite a long way to go before things can truly return to normal as we are not really passed the coronavirus crisis. Although looking back on the general holiday period now, it is astonishing how everything all of a sudden “stopped” in the housing and construction sector of the country. Without much prior notice or noise, people in these sectors found themselves at home, and for those informal workers employed in the construction sector, out of work.
Work on almost every major real estate and construction project — be it private or government —found itself suspended at the tail-end of March this year, without any certainty when things would return to normal. And, as construction remained on hold, steel plants, cement plants and all other supportive industries began to feel the pinch of the suspension as production greatly exceeded sales and operation costs raced upward. So, many of the plants took the only road in front of them — temporarily shutting down and furloughing people. While many held out for quite a while, the toll eventually became too much for most as weeks rolled on.
Property developers also experienced a similar situation during the early days of Covid-19 in Bangladesh as the construction of projects could not move forward due to health hazards, while operational costs climbed and handover deadlines took extensions.Disgruntled investors, a lack of buyers in the market and an uncertain future threatened the favourable conditions the sector was poised to enjoy this year.
The fear of the recession and losing all the progress the market made in the last few years gripped developers, buyers and sellers, alike.With May 30 being set as the last day of lockdown, those involved in the real estate and construction sector had felt a glimmer of hope that the industries could restart their activities and the market could begin to recover their losses.
Since the withdrawal of the general holiday, the real estate sector, the construction industry and its ancillaries have been trying to return to its former pace but have still been struggling. The cement industry of the country, which had been enjoying a couple of stellar years as they reached $3 billion in valuation in 2018, suffered tremendously during the pandemic. Cement was produced at only 10% of capacity during April and May, and is yet to reach its peak manufacturing capacity — standing at around 60-65% of production, according to industry insiders. The sector lost over $472 million during the pandemic and it will take quite a while to recuperate that.
To help the sector step away from a crisis state and into a recovery period, industry experts are calling for an adjustment to the clinker tariff in line with the current international market and an exemption from advanced income tax that will reduce the operation cost of cement makers and maximize their profits. Clinkers, which is a major raw material for cement production, is almost entirely imported from abroad —about 80%. Reducing tariff and exempting advanced tax on this would significantly reduce the cost for manufacturers and might even help lower the price of cement for consumers.
Construction-wise, the onset of “normalcy” has allowed the resumption of numerous infrastructural projects and mega projects — albeit at a reduced pace. The pandemic, coupled with the sudden appearance of flooding, has pushed back the completion of the Padma Bridge to sometime in 2022. On the other hand, the work on Dhaka’s Elevated Expressway has received an unexpected boost and work is now in full swing.
Unfortunately, though, most of the construction projects are having to move forward at a slower pace as scores of people working informally in the construction sector have moved back to their village homes due to unfavourable living conditions during the lockdown period. However, people have begun to move back to the cities now as life returns to the “new normal.”
The real estate sector is also returning to normal — to an extent — as property transactions resume on a regular basis. The “wait and see” period for real estate is almost over now as more and more people return to the market and follow up on their previously postponed decisions to invest in real estate. Many who put off their decision to buy homes are now again looking at properties and making bookings. The banks, who limited their loan activities, have also resumed their normal processes.
As a result, the as usual conditions for real estate investment is already in place — with the added benefit of new favourable government regulations such as a9% home loan interest rate and the opportunity to invest previously undisclosed money penalty-free.
The Covid-19 period, although still ongoing, has been tasking on all the sectors of economy. However, very few sectors have suffered more than the real estate and construction industry. Fortunately, we are now on the road to recovery and things are not looking all that bad — given the circumstances. Many economists and experts predict a quick turnaround for the economy of Bangladesh. Such growth will surely contribute and hasten the recovery of the real estate and construction industry even further. For now, we should at least hope to put the entire Covid-19-induced recession and downturn in the rearview and not circle back to it ever again.
This article is being published under special arrangement as part of a partnership with Bproperty.com.
