Imbroglio in real estate sector
Thursday, 5 May 2011
Shahiduzzaman Khan
While the port city of Chittagong is witnessing a boom time in real estate sector, its growth in the capital city of Dhaka is sluggish due to many reasons. Non-availability of utility services, mainly power and gas and sky-rocketing prices of land are stunting the growth of real estate in most major cities of Bangladesh. A report published in the FE this week said an unhealthy competition led to doubling of apartment prices in Chittagong in the last 15 months. Many local entrepreneurs and wealthy returnees from the Middle-East have emerged as new breed of realtors and engaged themselves in haphazard and unplanned construction of apartment complexes in the port city. Almost everyday a new real estate project is reportedly being launched there. Its growth is so fast that the sector is now facing an acute shortage of construction workers while land prices are jumping everyday. Each decimal of land in posh areas of the port city now costs more than Tk 30 million. Prices of ready flats hit a record high of Tk 10,000 per square feet in its posh areas while in other areas, they range from Tk 3500 to Tk 7000 per square feet, depending on the quality of flats and access roads. There is every chance that the market in Chittagong may tumble any time as so many companies are launching projects without assessing the actual demand. But in the capital city of Dhaka, the scenario is all-together different. Reports say more than 10,000 ready residential apartments could not be either sold or transferred to their buyers because of the non-availability of power and gas connections. Apartment sales fell by around 25 per cent to 30 per cent in the last few months. Construction work of more 9.0 to ten thousand apartments has, reportedly, remained stalled for the same reason. The recent political crisis in the Middle East is also contributing to sales of a lower number of flats. The delay in the transfer of apartments has been taking a heavy toll on their buyers in the form of the rent and interest charges on bank loans they are paying every month. Also some land-owners who had given their pieces of land to the developers, have also been complaining about delays in completion of flats in liveable conditions. Likewise, complaints have also come from those who had made payments to the developers for purchase of flats about the developers pressing them (buyers of flats) for taking delivery of apartments in unfinished conditions - that is without gas and power. On their side, the real estate companies are counting interest on their bank loans. The problem has also its impact on remittance flow. A sizeable part of the monthly remittance comes for the purchase of residential apartments. That flow has now ebbed. The ongoing development in the real estate sector has left a negative impact on other businesses, including those involved in trading andor manufacturing of steel, cement, paints, tiles and electrical goods, besides the wholesalers and retailers involved in the related trade. What is more disturbing is the net effect of the slowdown on an estimated 3.0 million labourers and their dependents in the sector for their livelihood. Many of the day labourers are now finding it hard to get work. Then again, if the current situation persists for some more months, many real estate companies are most likely to default on servicing their bank debts. The situation in the real estate sector is, thus, quite disconcerting. The authorities concerned have imposed a total ban on gas connections to new flats and apartments. But they did not really explain as to what will happen to those apartments having built-in piped connections already and still waiting for gas supply. The authorities concerned kept the realtors waiting for long, citing supply shortage as the reason for their failure to make gas and power connections available. They did not earlier alert them about the need for putting on hold or slowing down building new ventures because of gas and power supply shortage. Responsible functionaries and officials of the government did rather, time and again, hold out assurances about improvements in gas and power situation within a short period. But there is yet no real and tangible improvement in the situation. Earlier, the authorities concerned issued a directive to all concerned for mandatory use of solar power through installation of solar panels on top of their buildings. This was a pre-requisite for getting power connections. But that move has failed to generate any favourable response. High-rise apartment builders found it too expensive as devices for installation are costly. Since they are failing to install solar power atop their buildings, they are not getting power connections as well. A move was initiated by the government to create 'one-stop service' to reduce the costs of doing business for the realtors. But it is yet to see the light of the day due to legal complexities. The service was planned to ease sufferings of the realtors as they need to get clearance from 12 state agencies and departments before constructing multi-storied apartments. Each of the state agencies and departments operates in accordance with its own laws and hence, the agencies concerned did not agree to such an initiative. They claim that the service is difficult to offer from one single point. However, the foot-dragging would not have arisen had the concerned departments and agencies done their jobs properly. In reality, it takes at least one year to get permission from different authorities, although the government is committed to taking a final decision on an application within one and a half months. The emerging situation demands that something should be done to protect the interests of the buyers of apartments, industry operators and the economy. The government and the leaders of the real estate sector need to sit together to devise ways and means to bring an end to the stalemate. The suggestion to introduce pre-paid meters for use of gas and electricity by residents of Dhaka does deserve a close scrutiny. Power and gas, thus, saved could then be made available to the newly-constructed apartments. In this connection, the situation can also be improved by reducing the extent of power and gas pilferage, an area where authorities concerned are mostly found to be reluctant to act upon. szkhan@dhaka.net
While the port city of Chittagong is witnessing a boom time in real estate sector, its growth in the capital city of Dhaka is sluggish due to many reasons. Non-availability of utility services, mainly power and gas and sky-rocketing prices of land are stunting the growth of real estate in most major cities of Bangladesh. A report published in the FE this week said an unhealthy competition led to doubling of apartment prices in Chittagong in the last 15 months. Many local entrepreneurs and wealthy returnees from the Middle-East have emerged as new breed of realtors and engaged themselves in haphazard and unplanned construction of apartment complexes in the port city. Almost everyday a new real estate project is reportedly being launched there. Its growth is so fast that the sector is now facing an acute shortage of construction workers while land prices are jumping everyday. Each decimal of land in posh areas of the port city now costs more than Tk 30 million. Prices of ready flats hit a record high of Tk 10,000 per square feet in its posh areas while in other areas, they range from Tk 3500 to Tk 7000 per square feet, depending on the quality of flats and access roads. There is every chance that the market in Chittagong may tumble any time as so many companies are launching projects without assessing the actual demand. But in the capital city of Dhaka, the scenario is all-together different. Reports say more than 10,000 ready residential apartments could not be either sold or transferred to their buyers because of the non-availability of power and gas connections. Apartment sales fell by around 25 per cent to 30 per cent in the last few months. Construction work of more 9.0 to ten thousand apartments has, reportedly, remained stalled for the same reason. The recent political crisis in the Middle East is also contributing to sales of a lower number of flats. The delay in the transfer of apartments has been taking a heavy toll on their buyers in the form of the rent and interest charges on bank loans they are paying every month. Also some land-owners who had given their pieces of land to the developers, have also been complaining about delays in completion of flats in liveable conditions. Likewise, complaints have also come from those who had made payments to the developers for purchase of flats about the developers pressing them (buyers of flats) for taking delivery of apartments in unfinished conditions - that is without gas and power. On their side, the real estate companies are counting interest on their bank loans. The problem has also its impact on remittance flow. A sizeable part of the monthly remittance comes for the purchase of residential apartments. That flow has now ebbed. The ongoing development in the real estate sector has left a negative impact on other businesses, including those involved in trading andor manufacturing of steel, cement, paints, tiles and electrical goods, besides the wholesalers and retailers involved in the related trade. What is more disturbing is the net effect of the slowdown on an estimated 3.0 million labourers and their dependents in the sector for their livelihood. Many of the day labourers are now finding it hard to get work. Then again, if the current situation persists for some more months, many real estate companies are most likely to default on servicing their bank debts. The situation in the real estate sector is, thus, quite disconcerting. The authorities concerned have imposed a total ban on gas connections to new flats and apartments. But they did not really explain as to what will happen to those apartments having built-in piped connections already and still waiting for gas supply. The authorities concerned kept the realtors waiting for long, citing supply shortage as the reason for their failure to make gas and power connections available. They did not earlier alert them about the need for putting on hold or slowing down building new ventures because of gas and power supply shortage. Responsible functionaries and officials of the government did rather, time and again, hold out assurances about improvements in gas and power situation within a short period. But there is yet no real and tangible improvement in the situation. Earlier, the authorities concerned issued a directive to all concerned for mandatory use of solar power through installation of solar panels on top of their buildings. This was a pre-requisite for getting power connections. But that move has failed to generate any favourable response. High-rise apartment builders found it too expensive as devices for installation are costly. Since they are failing to install solar power atop their buildings, they are not getting power connections as well. A move was initiated by the government to create 'one-stop service' to reduce the costs of doing business for the realtors. But it is yet to see the light of the day due to legal complexities. The service was planned to ease sufferings of the realtors as they need to get clearance from 12 state agencies and departments before constructing multi-storied apartments. Each of the state agencies and departments operates in accordance with its own laws and hence, the agencies concerned did not agree to such an initiative. They claim that the service is difficult to offer from one single point. However, the foot-dragging would not have arisen had the concerned departments and agencies done their jobs properly. In reality, it takes at least one year to get permission from different authorities, although the government is committed to taking a final decision on an application within one and a half months. The emerging situation demands that something should be done to protect the interests of the buyers of apartments, industry operators and the economy. The government and the leaders of the real estate sector need to sit together to devise ways and means to bring an end to the stalemate. The suggestion to introduce pre-paid meters for use of gas and electricity by residents of Dhaka does deserve a close scrutiny. Power and gas, thus, saved could then be made available to the newly-constructed apartments. In this connection, the situation can also be improved by reducing the extent of power and gas pilferage, an area where authorities concerned are mostly found to be reluctant to act upon. szkhan@dhaka.net