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Realestatesectorstillstruggling|VIEWS&OPINION|Thefinancialexpress

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Realestatesectorstillstruggling
MJalalHussain

Real estate sector plays a dominant role in economies of both

developed and developing countries. Bangladesh, a small country
with a huge population, has seen everrising demand for housing.
The main reason for demand is demographic. The country's
population size and growth invariably highlight the importance of
housingtotheeconomyandtothelivesofthepeople.Demandand
supplyofpropertyareimportantdeterminantsfordevelopmentand
growthoftherealestatesector.
Shelter is one of the basic needs of human beings and a
constitutionalrightofacitizen.Therighttoliveinownhouseorto
haveshelterisafundamentalrightofpeopleanditisnationallyand
internationallyrecognised.Thedemandforhousingfacilitiesinurban
areas in developing countries like Bangladesh is hysterically
increasing due to population increase and its fast growth rate. Poor
rural people are migrating to find jobs and many wealthy people too are moving to urban areas like Dhaka and Chittagong
citiestofulfiltheirexpectationsofbetterlifeoftheirfuturegenerationandforenjoyingmodernfacilitiesofcitylife.Thishas
resulted in a high demand for housing all over the country, especially in major cities of Bangladesh. The private real estate
firms have taken initiatives to ensure optimum uses of land in a planned way and provide housing facilities like houses,
residentialapartmentsandcommercialflatsinthelastfewyears.Theyhavebeenprovidinghousingfacilitiestoallsectionsof
people,therichandthemiddleclassateconomic,competitiveandaffordableprices.
Butthisimportantsectorgotanunbearableshockinmarketingitsproductsduetounstableeconomicsituationprevailingin
the country. It is known to all that the performance of an economy of a country is dependent on the performance of all

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Realestatesectorstillstruggling|VIEWS&OPINION|Thefinancialexpress

sectors,viz.,service,industryandagriculturalsectors.Thedemandforrealestatemarketisstillveryhighbuttheunstable
anduncertaineconomicsituationcreatedbythepoliticalsituationhasdownsizedpeople'sinvestmentinrealestateandother
areas.Increaseinborrowingcosts,pooravailabilityoflocalandoverseascreditforhousingfinance,fallingindustrialoutputand
weakprivatesectorinvestmentarethekeyreasonsbehindbleakeconomicoutlookofBangladesh.
Theadverseeffectsontheeconomyhavealreadycomeintheformsofunemployment,abnormalrenthike,scarcityofhouses,
negativeeffectonGDP(grossdomesticproduct)growthandsocialimbalance.Thecontributionoftherealestatesectortothe
BangladeshGDPis7.15percent,6.92percent,6.88percent,6.91percentand7.08percentfortheFY200910,201011,
201112,201213and201314respectively.Butthesectorhasbeenstuckinacrisissince2010.Noimprovementisnoticed
uptonow.
Therealestatesectorhadbeenperformingwellfrom2004to2009inallrespects.Afterthecrashofstockmarketin201011,
therealestatesectorwasgettingseverelyaffectedintermsofexpansion,developmentandturnover.Thissectornowfaces
great challenges in marketing, poor macroeconomic environment, land regulations, enhanced registration fees, AIT, VAT,
financingconstraints,highfinancingchargeslikehighinterestrate,lackofgasandelectricityconnection.Distortionsinsavings
ratesandresourcemobilisation,highinterestratesofferedbyvariousgovernmentsavingsinstrumentscomparedtothoseof
privatefinancialinstitutionsmakeitdifficultforprivatesectorinstitutionstoraisehousingfundsfordevelopmentofrealestate
business.
The prices of materials for housing such as bricks, cement, rod and sands have been swelling. Labour costs have also been
increasingbutthepricesofapartmentshavebeendwindlinginthelastfewyears.Asaresult,realtorsandtheirbusinessesare
gettingproblemsinrecoveringthecostofinvestment.Somehousingcompanieshaveendedupinhugelossesandsomeare
closed.Owingtothehighpropertyprices,thecapitalrequirementstodayposethegreatestimpedimentonthepathtohome
ownershipforwiderangingsectionsofthepopulation.Ifthepresentscenarioofrealestatecontinuesforlongtimeitwould
haveappallingeffectsonhousingformillionsofpeoplewhohavealreadymigratedtourbanareas.Houserentswouldgoup
beyondthecapacityofthemiddleincomegroup.Thebackwardlinkageindustrieswouldsufferandunemploymentrateswillgo
upinthecountry.
However,therealestatesector,contributingsignificantlytoGDP,employingmillionsofpeopleinvariousprofessionsandskills,
providingsheltertomillionsofpeopleinurbanareas,deserveseconomicandfinancialsupportfromthegovernment,financial
institutions,thecentralbankandprivatesectorinvestors.Interestratesonhomeloans,whicharegenerallylongterm,are
high compared to other developing countries around the world. Interest rates on housing loans from commercial banks in
Bangladeshvaryfrom14percentto18percent.Thishasseverelyaffectedtherealtorsandthebuyers'financingcapabilities.
Thegovernmenttooksomemeasurestoboostrealestatesectorbuttheseseemtohavefailedtoachieveanyfruitfulresult.
TheactivitiesoftheRealEstate&HousingAssociationofBangladesh(REHAB)toredressandrejuvenatetheslowmovingreal
estatesectorleavemuchtobedesired.Thepoliciesofthegovernmentandthecentralbankneedtobereviewed,analysedand
evaluatedtofindoutwhathasreallygonewrong.
Therealestatesectorneedstobemadebuoyant.Theauthoritiesneedtotakeeffectivestepsforthis.Suchmeasuresshould
include easing of housing loan policy, increase in limit for loans, reduction if skyhigh rates of interest for housing loans,
removal of lengthy and timeconsuming RAJUK (Rajdhani Unnayan Kartripakkha) policies on real estate firms, reduction of
highregistrationfees,AIT,VAT,stampfeesandprovidinggasandelectricityconnectionstonewlybuiltapartments.
ThewriteristheCFOofaprivategroupofcompanies.
m.jalal.hussain@gmail.com

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