No sunny days, always

Shamsul Huq Zahid The heyday of the country's real estate sector, apparently, is over, at least for the time being. The demand for residential apartments that started rising from the year 2000 and peaked between 2005 and 2010, is now at its low ebb. As fears are mounting over the business prospects, there are too many worried faces in the sector. And equally worried are the financial institutions which have a substantial level of exposure to the sector. Over the last two decades, the average sale price of per square feet of apartments built in prime locations of Dhaka city increased by more than 600 per cent. In fact, the rate of increase in the case of apartments in posh areas including Gulshan, Banani and Baridhara was between 1500 per cent and 2000 per cent. By any count, the increase was astronomical. Yet there was no dearth of buyers. The non-resident Bangladeshis (NRBs) and the nouveau riche who have amassed wealth through fair or foul means until recently were the main buyers of the costly apartments. But since the government stopped giving gas and power connections to the newly built apartments due to severe shortage of both, the realtors saw a change in buyers' mood. Initially, the prospective buyers booked apartments with the expectations that the situation with both the utility services would improve soon. But their hopes were largely dashed as the realtors could not ensure the services. Many buyers have stopped payment of their installments and the prospective buyers decided to wait until power- and gas-supply situation improves. The state of affairs with the real estate sector was well reflected in the booking and buy orders received during the recently concluded 'Housing Fair', organized by the Real Estate and Housing Association of Bangladesh (REHAB) in Dhaka. In the previous REHAB Fair, the builders could manage booking and sale orders worth Tk 12 billion. But the latest fair failed to attract not many prospective buyers; booking and sale orders worth a meagre amount of Tk 1.0 billion was received, though the Association had launched a massive publicity campaign and offered apartments at a discount of 15 per cent on all sales at the fair. Besides, attractive gifts including free plots, cars, refrigerators etc., were tagged with the sale of apartments in Dhaka. Yet the response was extremely poor. On an average, the sale of apartments, reportedly, has declined by 40 to 50 per cent in recent months. A newspaper report, quoting REHAB sources, said the number of unsold apartments in Dhaka is now around 12000. The circles concerned blame the power and gas crises, stock market debacle, liquidity problems in the banking sector and an overall depressed economic scenario, for the drop in demands in the real estate sector. In any business, there are ups and downs. One cannot expect 'sunny' days throughout the life of one's business. What is happening now in the real estate sector is a normal phenomenon. But it would not be out of place to mention the unrealistic rise in the prices of both land and apartments in Dhaka city over the last few years. There is no denying that Bangladesh is a land-scarce country and everyone, having some disposable income, is trying to grab a piece of land or an apartment, particularly in Dhaka city. Yet how realistic is the value of a 'katha' of land in Banani or Gulshan that has shot up to Tk 50 million in a country with a per capita income of $800? The way the prices of land and apartments in Dhaka city have skyrocketed in recent years, the middleclass people have stopped dreaming about owning 'sweet' homes. Their lifetime savings would not even be a fraction of the value of a small apartment. Abnormally high cost of land and increase in the prices of construction materials are blamed for the rising costs of apartments. But until recently, an uninterrupted flow of funds from questionable sources has been primarily responsible for the abnormal rise in real estate prices in and around Dhaka. The taxation department has not been vigilant enough to stop that flow. The flow of black or grey money in the real estate sector has declined in line with the general economic condition of the country. With the return of favourable climate, the flow would turn strong again. (e-mail: zahidmar10@gmail.com)