Without a doubt, the real estate sector of Bangladesh is going through a difficult time. The market is seeing a significantly reduced transaction rate for the past few months.With how the world is currently moving forward, people are more reclusive about how they are spending their hard-earned money. Many people are preferring to save as much as possible in the fear of unexpected emergency situations — even ignoring their housing needs to some extent or putting off their plans for real estate investment.
But if the sector is to sustain and thrive, it needs those investors back.It needs the money to flow back into the market — all the while competing with other sectors and other needs.
The last few years have shown that this is not impossible. Real estate in Bangladesh had been growing considerably until the pandemic hit, with 2019 being a milestone for the sector and contributing Tk141,000 crore to the national economy.However, the situation was quite different back then and the real estate sector was not competing as much with other sectors to attract investors and buyers.Now, around 6,000 ongoing projects are in a state of uncertainty, and that number may grow even larger.
That is why the property sector needs to ramp up its efforts. It should double up on the tried and true methods that have helped generate sales and transactions in the past while, ideally, favourable regulatory measures, introduced by the government, should support from the flanks.
That means relying on old-faithful tactics like offering discounts on apartments and land projects. There are very few things that work to attract people as effectively and efficiently as the words “sale,” “cashback offer” and “massive discounts.” People often clamour when they see the opportunity to get their hands on good deals. And developers and sellers need to lean on it more than ever.
Offering price cuts usually work wonders for a project and helps it sell quickly. Reducing profit margin for the time being and offering lucrative price cuts need to be the first steps toward recovering lost business.
And that is only the first step. Coupled with discounts, developers and sellers should try to incorporate greater amenities that people look for in their homes and offices while maybe even reducing the initial booking money and adding easy-to-understand refund terms to their projects. All of these, including price reductions, have been a staple of “property fairs” and events. These strategies have helped generate the most sales for real estate entities. So, why shouldn’t they be promoted now when the situation is dire?
In fact, another aspect should be added to this list of real estate consumer attractors and that is home loan assistance such as the service provided by Bproperty who have agreements with several financial institutions to make attaining real estate loans easier.
However, even such potential right moves could fail to be fully effective if enough support from the outside — from a regulatory body, per say — is not present.Real estate developers, investors and consumers have been seeking support, such as reduction of property purchase-related taxes and fees, for some time now.
Now is the right time to reduce costs, as the announcement date for the national budget for the next financial year is nearing.The registration cost for apartments and land and other related taxes are some of the highest in the region, and this has been a deterring factor for consumers for a long while.
REHAB has been at the forefront of this call and have repeatedly requested authorities to reduce the registration fee from 12% to 5%. Another request that REHAB has been raising recently is to reduce the home loan interest rate to 5%, which is the same rate that government employees enjoy when taking a home loan. Even though interest rates were lowered just recently and capped at 9%, the situation has changed and requires an immediate second look so that real estate buyers and the market can reinvigorate.
Another aspect that requires a second look is REHAB’s call for allowing previously undisclosed income of people to be invested in the real estate sector. While controversial, the government has already been contemplating the idea of allowing undisclosed income to be invested in flats.Such income would generate a much-need influx of cash flow to the market as well as tax for the government.
But along with home loan interest rates, access to home loans needs to be ensured and made easier — which remains the most preferred way to finance a property purchase. But for middle-income people, attaining the necessary amount in full from a home loan often becomes difficult as asset valuation can be significantly unfavourable in many cases. That is why the valuation of assets during leveraging needs to be relaxed more along with a quicker disbursement of loans.
Lastly, the allied sectors of real estate need to be taken care of if the property sector is to recover and flourish. Rising gas prices, VAT, import taxes and fees coupled with the prices of raw materials that have been on the rise since last year are increasing the overhead costs of projects, as they continue to remain stagnant during the coronavirus crisis.
Waving off some of these costs, or at least reducing them, from allied sectors such as the cement and the steel industries will reduce the cost of property development and enable sellers and developers to offer larger discounts to attract more buyers.
At a time like this, the real estate industry needs a boost from the government and lucrative tactics to regain the attention of real estate enthusiasts. There is no market without buyers. While the need for housing and real estate is constant, the unfavourable economic climate has reduced urgency in people. To restart it, the market needs some encouraging words and strategies. So, with a little bit of support and by doing what the real estate sector does best, the country may have its thriving real estate sector back sooner rather than later.
