When everyone is hesitant on the question of life or livelihood, we are likely to see bright days ahead in real estate after the announcement of the budget by the finance minister.
The government has set a target of 8.2 percent growth in Gross Domestic Product (GDP) in the 2020-21 fiscal year. Given the situation, this may seem like a very ambitious goal to many, but to me, it does not seem very difficult, provided certain conditions are fulfilled.
The IMF forecast back in April that Bangladesh's GDP growth could be 9.5 percent in the next financial year (a prerequisite they also mentioned for the growth was excelling in private investment). These growth figures are very important as the mood in the housing industry shifts with the upward economic trends.
In the last five years, when the country's GDP experienced sustained growth, we observed the housing sector bounced back quickly from the recession. It happened although there were always some problems and the housing sector has also been ignored over the years by the policymakers.
However, this sector, directly and indirectly, contributes about 12 percent of the country's GDP. The fate of 260 linkage sectors also swings with the pace of development of this very sector.
Let me give a small example. The production of steel mills has come down to 30 percent due to the closure of real estate and construction activities in this volatile situation. Cement production has come down to 10 percent as well. This shows that the sector has a tremendous influence on the economy.
The housing sector is one of the most affected domestic business sectors in the recent pandemic. The livelihood of four million people depends on this sector. The fate of construction workers as well as the future of half a million professionals are cloud-capped. "White-collar" employees, especially sales and marketing professionals, engineers, architects and accountants, are experiencing this ambiguity. The two-month lockdown has caused indescribable losses in the service sector.
Although the holidays are over, economic activities have not fully resumed. All in all, our business is suffering tremendously. New sales and instalment collections remained almost stopped for two months. Besides, the project sites were also shut due to lockdown.
Since the opening of offices on May 31, we have been adapting to the new normal ecosystem, putting utmost priority on the safety and well-being of employees and customers. We are also renovating our project sites by maintaining social distance and safety rules.
Obviously, it is increasing project costs. However, we have given the topmost importance to the health of our workers. When lockdown was imposed, we wanted to make sure that our people are healthy and fit after the break.
In this particular case, we have achieved a 98 percent success. Our people are back, and they are fit and healthy at work. At present, we are focusing on long-term possibilities rather than short-term problems.
We are trying to see the bright side of this year's budget. The good thing is one of our long-standing demands has been emphasised in it. The finance minister proposed no inquiry into undisclosed money invested in real estate, including commercial property. The NBR or the ACC will not be able to raise any question if the undisclosed money is conditionally invested in the housing sector. With this opportunity, the housing sector will definitely gain momentum.
In other words, owners of undisclosed money are getting an opportunity to invest in this sector by paying a certain amount of tax for per square metre of space. There could be no better initiative to bring back a class of people from transferring money abroad.
Even then, I know some people will surely oppose it. Those who have been protesting this opportunity for many years have indirectly cooperated in transferring undisclosed money abroad in the name of investment. Of course, I do not expect them to be silent this time.
I like the finance minister's proposal that 50 percent tax will be levied if money laundering is proved. Hopefully, this initiative will encourage people to invest in this huge sector.
Besides, Covid-19 crisis is also an eye opener for investors who like to invest in Malaysia, Canada or Singapore. It has been proved that no one is safe from such global miseries even by investing abroad. Many could not even fly at this time.
Therefore, the main interest should be making Bangladesh like Singapore and Malaysia by investing in the country's housing and development sector. I hope investors will take advantage of this opportunity.
In the budget for the next financial year, the target of collecting VAT has been set at Tk100,026 crore. Besides, the revenue collection target has been set at Tk300,030 crore. An average of 10,000 units of flats is handed over in the country every year.
But most of the buyers are not registering their flats even after the physical handover for many years. Hence, the government is losing revenue. If the flat registration cost is brought down to 5-6 percent, then at least 60 percent of unregistered flats will come under registration. The government will get revenue, and VAT collection from this sector will also increase.
Also, in our country, the transfer fee of a second-hand car is much less than the registration fee of a new car. But the same amount of money has to be spent on the registration of secondary flats. This inequality needs to be eliminated.
It is not logical to charge more than 3 percent in registration fee for transferring a used flat. If we take this issue seriously, we will be able to create a secondary market for real estate, which will add value to the primary market for sure. That will ultimately ensure money movement in this trade.
The housing loan is being given at a rate of only five percent to ensure housing for government employees. If this opportunity is also given to a flat buyer of a maximum size of 1,200 sq ft for his first home, it will allow the middle class to have a place of their own to live. This initiative is needed to make real estate affordable for people, to make the market sustainable and also to create new buyers for industry growth.
Any significant policy changes in the budget pertaining to the linkage industries have a direct impact on the housing sector. In this year's budget, it has been proposed that the regulatory duty on some imported chemical of MS Rodlike ferro-manganese, ferro-silico manganese and ferro-silicon be increased from 10 percent to 15 percent. As far as my knowledge goes, the price of various raw materials for making rod is increasing in the international market as well. In this situation, it is necessary to reduce the regulatory duty on chemicals instead of increasing it. Price enhancement of any raw material related to the real estate industry will affect the price of housing.
But all in all, this budget seems quite optimistic. Thanks to the finance minister for this brave and timely stand. Now we hope that quick implementation of the stimulus package, creating a fund for the middle class, special home loan facilities at a 5 percent interest rate for the middle-income group, and reasonable reduction in flat registration fees will help the industry emerge from the crisis.
The coronavirus situation has created an unexpected economic challenge for us that cannot be tackled by anyone alone. On the contrary, we can hope to get rid of this crisis through the collective efforts of all. We believe that the policymakers will take the role of torchbearers to remove the darkness in trade created by Covid-19.
Tanvir Shahriar Rimon, is the CEO of Ranks FC Properties Ltd