The sales of new apartments have taken a serious hit in Bangladesh. This downturn in housing business has happened for a myriad of reasons. Sector specialists state that the housing market has hit a brick wall due to higher costs of property and eroding purchasing power of people in the ongoing economic downturn. As per last quarter's data from the Real Estate and Housing Association of Bangladesh (REHAB), apartment sales fell to 10,000 units in FY 2022-23 from 15,000 units in each of the preceding two fiscal years, representing a drop of 33 per cent.
Cost of construction materials has shot up significantly in recent months. Price of MS Rod per tonne had retailed between Tk 70,000 and Tk 75,000 two years ago and today it costs between Tk 90.000 and Tk 100,000. Similarly, cost per 50kg bag of cement two years ago used to hover between Tk 400 and Tk 450 but today it costs Tk 500 to Tk 550. These additional costs are passed on to prospective buyers who had taken loans from financial institutions and many are cancelling their orders while new buyers are opting for older apartments.
According to a report published recently in this newspaper, mid-sized apartments up to 1,500 square feet are in high demand in 10 areas of the city. The sale of older property takes a lot of hassle out of the equation including being a much better financial proposition. Not only increased cost of material but also piped gas available with the older apartments, a facility not in offer from newly-built apartments, is given preference. Thus the sales of second-hand property get the better of that of the new ones.
With real estate companies having scaled back a lot of their ongoing projects, there is also a shortage of new apartments in the market. Reportedly, all real estate companies have been forced to revise upwards the per-square foot price of their property and this has acted as a dampener. Although the residents have become used to the sight of liquefied petroleum gas (LPG) cylinders in their kitchens, the upward prices of these also add to the monthly family budget. At a time when prices of everything are increasing, it is natural for buyers to weigh all the options on the table.
Many buyers have opined that they can save as much 40 per cent (depending on city locality) if they choose a ten-year old apartment that comes furnished with all amenities. Realtors have been hit not just by runaway prices of construction materials. There is the new detailed area plan (DAP) to contend with. The new DAP has made fundamental changes to building design and realtors now have to go much higher to compensate for the area they must leave free. This also has added to costs which many customers are not willing to bear. At the end of the day, buyers will make an informed decision when there are options available. But second-hand apartments are available in a limited number. Given that Dhaka boasts a population that has reached around 17 million people, a lot of buyers may simply have to forgo any purchase at all. This is bad news for both buyers and realtors. The government is also a loser as it stands to lose billions of Taka in registration fees. During the ongoing economic downturn, perhaps implementation of certain rules in the new DAP should be put on hold for sometime, at least until the economy can ride out the worst of the inflationary pressures.
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