What is happening in the current real estate sector of Bangladesh? May 2017 Update

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real estate update may 17 664548
June 7, 2017 Real Estate Industry

Get the latest scoop in the industry from various dailies and stay up to date with the real estate sector in Bangladesh.

“Real Estate Investment Risks and Ways to Overcome Them”

Source: Prothom Alo Date: 24 May 2017

A roundtable seminar titled “Real Estate Investment Risks and Ways to Overcome Them” was held on 13 May at the Daily Prothom Alo office. The event was organized by the Daily Prothom Alo and sponsored by building technology and ideas ltd. Several real estate experts were present who gave valuable recommendations to support the real estate sector of the country. Participants in the roundtable talk featured  Dr M.  Shamim Zed Bosunia- President of Institute of Engineers Bangladesh (IEB) and eminent Professor of Civil Engineering (Ex.) (BUET), FR Khan- Managing Director of bti, Tania Amir- Senior Advocate, Supreme Court Bangladesh, Abdul Qayyum- Associate Editor, Prothom Alo and others.

The following recommendations were discussed at the roundtable to reduce problems of apartment buyers.

  • The buyer should seek the help of lawyer to verify the land and flat ownership documents.
  • The loan amount received by real estate company should be used in the project against which loan was received.
  • The apartment buyer should inspect quality of construction materials used in the project.
  • Considering the environment and economic aspects, higher buildings are more important.
  • Real estate companies should think of building housing projects outside of Dhaka City too.
  • The government has to reduce the registration costs of the flats.
  • Residential areas need to be created with adequate facilities like the industrial areas.

“Roundtable Seminar on Initiatives for Multi-storied Housing Projects in Public-Private Initiative”

Source: Bonik Barta Date: 8 May 2017

A roundtable seminar was held at the Samson H Chowdhury Center in Dhaka on Sunday, titled ‘Housing Sector in the National Economy.’ Architect and city planner Mobasher Hossain presented the keynote paper.  The seminar was organized by the Center for Communication Network (CCN) where Housing and Public Works Minister Mosharraf Hossain was the chief guest and State Minister for Finance and Planning MA Mannan was the special guest.  Speakers at the conference stated that land crisis due to unsolved urban planning is escalating day by day. To solve the housing problem, the government should step away from allotment of plots. Architect and city planners believe that plots allotted should be cancelled too. According to them, as a substitute for the housing crisis, public-private joint venture has to step up to develop environment-friendly multi-storied housing projects across large areas.

 “Lake City Concord Apartment Fair”

Source: Kaler Kontho Date: 14 May 2017

The article features a four-day apartment fair which was held from 17 May to 21 May 2017 at Lake City Concord.  Lake City Concord is said to be the first “township mega satellite city” in Bangladesh. It is situated in a pollution free zone at Khilkhet 20 minutes away from Baridhara. The fair had several special offers for spot booking and also featured 3 bedroom ready flats which required a down payment of Tk 42.5 lac.

“Real Estate Sector Will Face Trouble if VAT is Increased”

Source: Jugantor Date:  14 May 2017

The article features the highlights of a REHAB Press conference. In the conference, the impact of VAT increase on real estate sector of Bangladesh was discussed.

The press conference was held on 13 May in the capital city of Dhaka where REHAB members commented that Bangladesh real estate sector has been stagnant since 2010. Under these circumstances if the upcoming budget imposes 15% increase in VAT on real estate, then construction cost will increase and everyone including developer companies, landowners and apartment buyers will face the repercussions.

REHAB members further stressed on the problems faced by real estate sector in Bangladesh for the past decade. The issues highlighted were cessation of refinancing scheme in 2009, insufficient loan amount for home loans, lapse in government policies etc. REHAB members recommended reactivation of the refinancing scheme, development of projects around Dhaka city or Municipal area, availability of home loan with low interest rate and long tenure. Acting President of REHAB, Liakot Ali Bhuiya stated that Bangladesh has the highest registration fee among SAARC countries with a rate of 14% whereas in other countries it is only around 4-7%. Also present in the press conference were co-chairman of REHAB press and media standing committee, Kamal Mahmud, REHAB director and National Budget 17-18 committee member Md. Zahir Ahmed besides others.

“National Budget 2017: How it should be”

Source: Doinik Purbokone May 16 2017

The article features an editorial by REHAB Vice President and Chairman of Chittagong Regional Committee on how the budget of 2017 ought to be. He emphasized about the role of REHAB as a development partner of the government to resolve the country’s housing problem for the last 25 years. He commented housing industry is playing an active role in attracting foreign investors, remittance flow as well as creating entrepreneurs, providing job opportunities etc. all of which has contributed to national economic growth. He stated although real estate sector has suffered in previous years due to political unrest, economic recession, the sector has been reviving since 2016 owing to political stability, economic growth, availability of bank loans and increase in salaries of government officials.

However, policy reforms are required to strengthen the sector. For instance, in most Third World countries, the registration fee of land is 7 percent, but in our country it is 11 percent for land value and 14 percent for flat purchases which is a big obstacle for apartment buyers. He recommended that these costs should be reduced by half. According to REHAB, so far about one and a half thousand to two thousand flats of nearly hundred companies in Chittagong and Dhaka are ready this year. In the meantime, there were more than one thousand unsold flats last year. He suggested that since market conditions are now favorable for buyers if correct measures are not taken right now, then the country will face adverse effects economically along with real estate sector.

In order to overcome this situation, he suggested the following measures to be implemented in the budget of 2017.

  1. Activation of refinancing scheme with single unit interest rate and long term installment facility and setting up of a Tk 20 billion fund
  2. Reduction in Taxes and fees related to flat and plot registration to be set at a total of 7%.
  3. Improvisation of legally acquired unexplained money for the purpose of housing allowance, the amendment of Section 19B of the Income Tax Ordinance-19844
  4. Withholding existing Value Added Tax for a period of time and not imposing new Value Added Tax to facilitate the industry
  5. Reduction in income tax of real estate industry entrepreneurs.
  6. Reduction of Gain Tax according to Section 53 of the Income Tax Ordinance 1984 from 15% to 4%.
  7. Increase the flow of the housing sector through funding to the Bangladesh House Finance Finance Corporation.
  8. Cancellation of Tax refunds imposed under section 53 of the Income Tax Ordinance 1984 in respect to all lands under RAJUK and CDA.
  9. Special loans facilities to rescue buyers, landowners and developer organizations from crisis in cases of incomplete projects.
  10. Exemption of developers for 5 years from supplier VAT and source tax.
  11. Encouraging urbanization and urban development for 5 years in urban areas and 10 years in city outskirts with “tax holidays”.
  12. Introduction of secondary market in real estate sector with nominal registration expenditure.

“Problems of Customers Increasing in Real Estate”

Source:  Daily Ittefaq Date: 18 May 2017

The article features the manifold problems apartment buyers currently face after buying an apartment such as selling an already sold apartment, not receiving handover on time, price escalation after negotiation etc. The highest complaints are received against companies not enlisted under REHAB according to the article. There have also been several complaints against real estate companies who are REHAB members too.

However, REHAB has policies to take action against these members and sometimes memberships are even cancelled after investigation. Despite everything, complaints are increasing day by day, reports the article. The article cites the example of Mr. Zahir Uddin Ahmed from Algichor Village who purchased a flat worth Tk 1 crore and 18.5 lac in 2011. He has paid off 93 lakhs of the apartment price and was supposed to receive handover by September 2014. However, he is yet to receive the handover or get back the money. There are several other incidences like this one against several real estate companies in Bangladesh.