The housing sector is experiencing a revival as the government has taken an initiative to boost investment by giving scope to invest undisclosed money and providing other incentives, reducing thereby the registration cost for apartments.
As a result, the sector has overcome the collapse experienced in 2010 and returned to a positive trend. Big corporates are now investing in the sector which is now all set to see a revival. There are crucial changes brought to the sector by entrepreneurs behind this turning of the tide and it has impacted the very concept of the housing in Bangladesh.
Alamgir Shamsul Alamin, president of Real Estate & Housing Association of Bangladesh (REHAB), in an interview with The Business Standard reflected on the current market trend in the housing sector, diversification of housing system and the housing fair held in Dhaka.
TBS: The housing sector has overcome the collapse of 2010 and returned to a positive trend. What is the present situation of the sector?
The housing business in the country started flourishing after the 1990s. A huge amount of investment came into the sector before 2010. At that time the market size crossed about Tk50,000 crore mark.
However, the businessmen faced slowness till 2018 due to different causes, including the gloomy trend in the share market. During the period the number of the members of the association dropped to below 1000 from 1400. In the last year, more than 100 organisations have become our members. The investment in the sector has soared – it has reached Tk60,000 crore at present.
The sales of flats and plots have also increased over the last years. The REHAB members are now eyeing ultramodern green and luxury apartments. Besides, our members are taking initiative to build small two-room flats for small middle-income families in the towns.
TBS: The government has given scope to invest undeclared money in the housing sector in the current fiscal year. How much dynamism has it added to the housing sector?
We have long been demanding scope for investing undisclosed money to overcome long-standing sluggishness and losses incurred by the businessmen in this sector. The government has taken the issue into cognizance in the latest budget. As a result, we have been witnessing a positive change. We have learnt that the sales of every member of REHAB have shot up. But we do not want to know their rate of growth, for strategic reasons.
TBS: Though the housing business has expanded, the prices of the flats are not within the range of the common people. What initiatives the REHAB members are taking to bring the middle class within the housing schemes?
There is a yearly demand for more than one lakh apartments in Dhaka, but the REHAB members can provide about 25,000 flats. The prices of apartments could not be cut as the price of land and building materials are high. In the last five years, the prices of flats has not increased more than 5 to 6 percent, whereas, the prices of lands increased several times.
However, a number of companies including Sheltech, RAKEEN and Eastern have taken an initiative to sell flats at a lower price. We are thinking of making flats for service-holders, targeting single families. The REHAB members are giving attention to build two-room small flats.
TBS: Flats built with individual initiative in different areas of Dhaka city can be bought at Tk30 lakh to Tk40 lakh. Why flats built by the REHAB members are not available in this price range?
The price of anything depends on quality and production cost. In the case of housing, the location is a big factor. The flats built by individuals do not maintain quality. The REHAB members follow a number of criteria, including inclusion of parking, open space etc. They are also cautious about using materials. Their cost goes up as they look for a good location. As a result, they cannot sell a flat at a price as low as those built at the individual level, even if they wanted to. However, the members have been trying to lower the price of apartments.
TBS: How the flat prices can be brought within the reach of the common buyers?
After becoming the REHAB president, I created a slogan – "Become a home owner with the money spent on rent." But for this, the government have to formulate a realistic policy.
In every civilised country, there is an opportunity for home loans. The buyers are given long-term loans at a low interest rate. In our country, this opportunity is very limited.
On the other hand, the government agencies that provide housing loans are suffering from fund crisis. The rate of interest came down to single-digit thanks to various initiatives taken by the government, but recently the bankers have raised it to double-digit again. If this continues, how will the common people buy flats? Aspirants looking for affordable flats have to pay various charges including registration fees and taxes. These charges must be lowered.
TBS: Regarding the cost of flat registration, what is the situation now? What needs to be done in your opinion?
At present 4 percent gain tax, 3 percent stamp duty, 2 percent registration fee, 2 percent value-added tax (VAT) have to be paid at the time of flat registration. This is why the flat prices shoot up. We propose that such costs must be cut down to half. All registration costs in the secondary market should be waived too.
TBS: There is no alternative to decentralisation to ensure that Dhaka remains liveable. Why are not your residential projects being taken outside Dhaka?
The precondition for that is a developed communication system. In many countries, people come to office every day from 200 kilometres away and go back after office hour. It is challenge for us to come to office in Dhaka from Gazipur, which is just 30 kilometres away. It takes at least four hours to commute that distance. As long as the transport system is not developed, taking residential projects in remote areas will not be profitable.
TBS: The allegation of cheating the customers and irregularities against the realtors is as old as the sector. What is REHAB doing to maintain transparency?
We receive many allegations of taking instalments and money against flats without handing over the apartment. We investigate each allegation and take action accordingly. We have a separate board which settles these through mutual understanding. The committee has settled more than 1000 allegations in last two years.
None of our member company has been caught cheating with its customers. If there is any type of misunderstanding, all the dues of the subscriber is returned.
TBS: Many are engaged in housing business without becoming REHAB member. Most of the allegations of fraud are against them. What your comment on this issue?
See, REHAB is the only government-approved organisation in the housing sector. The commerce ministry issued a clear guideline that none can get involved in housing business without becoming a REHAB member. We have been alerting the customers about this. If a buyer is cheated even after this, we do not have much to do.
However, we have an initiative to identify if anybody is doing housing business without becoming a member of the association.
TBS: What contribution does the housing sector have so far made to the country's economy?
Alongside providing housing, which is a basic need of men, the sector has been making a contribution to the nation's economic growth. The real estate businessmen have been playing a role in the revenue earning of the government, employment etc. It is responsible for the development of some 269 types of linkage industries including rod, cement and tiles.
The entire construction sector's contribution to the economic growth of the country is about 15 percent. The real estate industry is not only providing housing but also providing food for two crore people dependent on 35 lakh workers of the sector.
TBS: What are the features showcased in this year's Housing Fair? What is your expectation from the fair?
REHAB is organising "REHAB Winter Fair 2019" on December 24-28 at Bangabandhu International Conference Centre. There are 230 stalls in this year's fair. This year 30 building materials and 14 financing firms are participating in the fair. The buyers and visitors can enter the fair from 10 am to 9 pm.
There are attractive prizes on the raffle draw of the entry tickets. Though there are arrangements for selling flats in the fair, our main aim is to create relations between the buyers and sellers.
Thank you for giving time to The Business Standard.
Thanks to The Business Standard too.