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bti Blog July 2018
June 6, 2018 Real Estate Industry

“Big change needed in policy for planned urban development”

Source: Bhorer Kagoj

Date: 3 May, 2018

The article features an interview with Iqbal Habib, who is a renowned architect and Member Secretary of Bangladesh Poribesh Andolon (BAPA). In the interview he commented about the original plan for the development of Dhaka, as well as the reasons for the lack of implementation of the plan. He also opined about the housing crisis in Dhaka.

Commenting on the development of the capital city, Mr. Habib spoke that the original plan was developed initially in 1917 and sequentially a master plan was developed in 1959. However, due to political crisis, none of the plans were implemented and it wasn’t until the late 90s before development of Dhaka commenced including residential, commercial zones with education facilities, waste treatment facilities, and other amenities required for a developed city. When asked about the fulfillment of those plans, he said although in the initial periods, Dhaka saw a structured development, the progress was very slow and lacked in several areas due to mismanagement and bureaucracy. As a result, ultimately the vision for a well-planned Dhaka city remained unfulfilled.

Speaking about the housing problem in Dhaka, Mr. Habib commented that most of the homebuyers in Dhaka hail from the upper class and there is little opportunity for middle and low-income people to afford housing. He stated that government needs to bring about big changes in the policy to ensure housing for all. He further stated government should invest in mega projects that will have facilities like playground areas, water bodies, gardens, etc. to give residents a natural surrounding which is getting lost in the urban city.

“Demand for hassle-free investment in real estate and lowering of registration fee”

Source: Kaler Kantha

Date: 6 May, 2018

The article features a discussion meeting between National Board of Revenue (NBR) and Bangladesh Land Developers’ Association (BLDA) regarding budget for FY 2018-19. In the meeting, members from BLDA proposed the inception of a 10- year Tax Holiday for developing projects in the outskirts of Dhaka to facilitate development of real estate sector outside Dhaka and at the same time reduce demand of housing in the densely populated capital city.

Chairman of BLDA Mostafa Kamal Mohiuddin commented that real estate plays an important role in increasing national income and contributes approximately 21%. Moreover, housing is a basic need for everyone. Government and private companies are working collaboratively to fulfill the housing demand. According to the feature, there are 12,000 industries currently operating in related sectors and investment in real estate sector is around Tk. 10,75000 crore. Also, approximately 2.5 lac human resources are involved in the real estate sector with most of them being low-income people.

BLDA members proposed a 10 year period where people can invest in the real estate sector without facing any hassle from concerned authorities about income source. Mr. Mohiuddin spoke that due to additional charges in real estate investment as well as mismanagement in the tax system, many people are buying second home or plots in foreign countries, where investing is much easier, whereas in our country if some spends for than Tk. 10 lac when buying flats or plots, people have to face many questions about their income source. As a result, government is losing revenue.

 BLDA members further demanded registration fee to be reduced to 3.5% from the existing 7% for secondary market of real estate sector. In addition, to strengthen the real estate sector, members asked for the creation of a special fund of Tk. 25,000 crore with low interest rate which will facilitate investment in real estate sector.

For areas in Dhaka and Chittagong, concerned authorities charge 4% and 3% respectively as land tax, 2% as gain tax, 1.5% as stamp fee, 1% as registration fee, 1 % as government tax and 1.5% as VAT. BLDA members asked the land tax to be reduced to 2% and 1% respectively apart from reducing other relevant charges as well.

Also present in the discussion were Deputy Director of Bashundhara Group Md. Mostafizur Rahman, NBR member Md. Feroz Shah Alam, besides several others.

“Interest rates rattle people”

Source: The Daily Star

Date: 20 May, 2018

The article highlights the spike in increase rates which is adversely affecting many sectors and its consumers, including the real estate sector. The article states that home loan interest rate increased from 8.5% last October to 12.5% in March this year. As a result, borrowers have to pay a large sum of money in installments. According to REHAB, the unusual rise of interest rates has slowed down the real estate market over the last couple of months, as customers are reluctant to buy flats taking loans with the inflated interest rates.

According to data from several reputed banks, interest rates have increased not only for home loans but also for loan products of various sectors including industrial, SME, trade financing, besides others. The article elaborates that even with high rates, banks are unable to lend due to liquidity crisis. Bankers and other financial experts suggested that interest rates are not likely to go down unless the cost of deposits is reduced.

“REHAB for Tk. 20,000 crore refinancing fund”

Source: Dhaka Tribune

Date: 27 May, 2018

The article features demand by REHAB members for establishment of Tk. 20,000 crore refinancing fund to help lower and middle-income people afford housing. The article cites that this has been a long-term demand by REHAB and they would like to see it fulfilled in the upcoming budget.

Among others, REHAB vice-president Liakat Ali Bhuiyan also urged Government to lower existing registration fee from 17% to 7% and allow undisclosed money to be invested in real estate sector without being harassed about income source. REHAB members also asked for the restoration of a section in the Income Tax Ordinance 1984, 19B which states, ““notwithstanding anything contained in this Ordinance or any other law for the time being in force, no question as to the source of any sum invested by any person in the construction or purchase of any building or apartment shall be raised if the assessed pays, before the assessment is completed for the relevant assessment year, tax at the rate.”

 “Homebuyers desire homes with green open space”

Source: Housing.com

Date: 31 May, 2018

The article highlights the mindset of real estate consumers who are increasingly looking for homes with open green space inside the residential buildings as outdoor green space is shrinking day by day in urban cities. A homebuyer – Aniket Mehta states his preference to invest in a home that provides children play area in the complex to foster a healthy environment for his children in the city. Realtors state that they try to utilize every square footage area and having open space in real estate projects in metropolitan cities is a luxury due to the scarcity of land as well as lack of planning in urban development. However, many developers try to accommodate open green space in residential complexes by providing rooftop gardens, podium parking, water bodies, vertical gardens, etc. Many homebuyers these days look for homes that provide more than the basic facilities. They look for natural surroundings as well as a place where they can socialize and live a healthy life amidst the urban city. Ultimately it is the homebuyers with the ability to afford complexes with such amenities who opt for such projects.