The just concluded REHAB (Real Estate and Housing Association of Bangladesh) Winter Fair 2014 has flagged, more than anything, the concerns of a host of stakeholders over the future of the country's real estate and housing sector. For sometime now, this important sector is trying to ride out some of the most critical difficulties. Growing over the last two decades, initially with rosy prospects, this sector is now facing the most daunting of the challenges. One of the visible indicators marking the difficult time the sector is passing through is the decline in apartment sales-- a phenomenon that has been lingering for consecutive years. This, no doubt, casts a gloom not just for the realtors but also for a large number of stakeholders directly or indirectly reliant on the sector. The sector's sales fell by as much as 60 per cent in 2013 and the situation is far from improving as a significant number of flats remain unsold. An overview of apartment sales shows that the graph is steadily sliding, especially since 2012. The slump, many believe, is due mainly to the buyers' lack of access to low-cost home loans. This, obviously, has prompted the Housing Minister to assuage the looming crisis, albeit verbally, by announcing disbursement of Tk 200.00 billion as long-term loans with single digit interest rates to the middle-income apartment buyers. It remains to be seen how seriously the government takes up the issue so that the benefits could reach the target group.
The condition of the housing sector does broadly reflect the state of the national economy in as much as the linkages it seeks to establish are all in concrete financial terms. Developing the sector is not simply building houses but also the development of socio-economic infrastructure. It is well linked with human settlements, employment, backward and forward linkage industries and environment. In Bangladesh, the real estate sector, a rough reckoning suggests, now contributes around 7.0 per cent to the gross domestic product (GDP). It employs around one hundred thousand skilled people and another 0.35 million in the backward linkage industries. The sector has around 300 backward and forward linkage industries, such as cement, iron and steel, bricks, electrical equipment, tiles, fittings, ceramics and so on. Such industries, too, have been adversely hit by the current sluggish business trend. Due to lack of demand, both productivity and sales in these industries have been experiencing a drastic decline. The worst affected are the manufacturing units of mild steel (MS) rods and cement-- both highly capital-intensive industries.
The present situation is indeed unfortunate. Many construction projects are left incomplete. Many people who invested their money face uncertain future. Besides, financing institutions, particularly the commercial banks, are counting heavily on default loans. Observers believe that the present crisis is due, for the most part, to the lack of understanding of the importance of the sector to the overall economy of the country by the successive governments. There has not been any worthwhile facilitating policy which could keep the key stakeholders - the realtors themselves, the buyers, financing institutions -- afloat in times of crisis. There is still time.
Salvaging the real estate sector
FE Team | Published: January 02, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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