Rescuing realtors, home buyers from cost rises

Bangladesh's real-estate sector passes through times hardly seen before, for a gamut of adversities that lately include the on-stream global crises. Customers' purchasing capacity wanes amid existing sluggish economic situation and inflationary pressure exacerbated by the Middle East conflict, in addition to perceived regulatory paradoxes and high-interest regime.
As such, the housing sector, which contributes approximately 18 per cent to the national GDP and directly supports the livelihoods of about 5.0 million people, is currently facing an unprecedented convergence of global and domestic pressures.
Beyond its structural importance, the sector is a primary recipient of foreign remittances, accounting for more than 22 per cent of the total inflows through land-and apartment purchases. However, the resilience of this engine of growth is being tested as potential buyers pull back and developers struggle to maintain project viability.
The current atmosphere of uncertainty is deeply rooted in heightened geopolitical tensions between the United States-Israel axis and Iran, which have triggered a surge in global oil prices and disrupted overall supply chains. These rising energy costs have a cascading effect on the local price of construction materials, including rod, cement, and stone, which are essential for property development.
At the same time, record-high domestic inflation has significantly eroded the disposable income of the middle class, making the purchase of a home-once a primary life goal-an unattainable luxury for many. Consequently, developers are witnessing a worrying trend of declining apartment sales and a rise in the cancellation of existing bookings as customers prioritize daily survival over long-term investments.
Amidst these turbulent times, the Real Estate and Housing Association of Bangladesh (REHAB) transitioned to new leadership following elections. Realtors at present face the dual challenge of advocating for policy reforms to lower construction costs while ensuring that future urbanization does not destroy the nation's remaining agricultural land, which is critical for food security. As the industry navigates this crisis, the focus has shifted toward finding a sustainable path that balances economic growth with affordability for the general public.
The primary challenges currently stunting the sector's growth are rooted in macroeconomic instability and a deepening liquidity crisis. The most immediate hurdle is the sharp increase in construction- material prices, specifically of rod, which has jumped from Tk 78,000-80,000 per tonne to Tk 98,000 per tonne-a nearly 20-percent increase in a short period of time. This volatility creates a massive cash-flow deficit for developers who sold units at fixed prices years ago, making it difficult to sustain ongoing projects. Furthermore, the industry is grappling with a flawed regulatory framework, particularly the current Detailed Area Plan (DAP), which industry leaders claim contains discriminatory height and density restrictions that discourage planned investment.
A closer look at these challenges reveals a complex web of financial and administrative burdens. On the financial front, the high interest rates on housing loans act as a significant deterrent for middle-class buyers. When interest rates remain in double digits, the monthly instalments often exceed the average rental costs, making homeownership financially unviable for many.
Additionally, the construction industry is highly sensitive to external shocks. The US-Iran conflict has not only increased fuel prices but also disrupted the supply chain for imported raw materials. For small and midsize developers, this combination of rising costs and falling buyer interest creates a risk of total project abandonment.
The regulatory environment presents its own set of hurdles, specifically regarding the revised detailed area plan for 2022-2035. REHAB leaders have criticized the plan for being "inequitable," pointing out that building- height permissions vary drastically across different areas without a clear scientific basis. For instance, a landowner in a privileged enclave like Mirpur DOHS might be allowed to build an eight-storey structure, while a citizen with a similar plot nearby is restricted to only four stories. This lack of a "one- city, one- policy" approach creates frustration among landowners and discourages the efficient use of limited urban land.
Beyond this, the bureaucratic process at RAJUK remains a bottleneck, with developers requiring nearly 40 different permissions for a single project. This complexity often leads to systemic delays and hidden costs that are ultimately passed on to the final apartment price.
Finding a way out of this crisis requires a multi-pronged approach involving government intervention and structural reforms. A significant step has already been taken by Bangladesh Bank, which recently doubled the housing loan limit to Tk 40 million from the previous Tk 20 million. However, the facility depends on banks' performance. Banks with a non-performing loan (NPL) ratio below 5.0 per cent can provide up to Tk 40 million while those with NPLs between 5.0 and 10 per cent can offer up to Tk 30 million.
This policy promotes financial discipline and supports the housing market with needed credits.
To ensure long-term stability, industry experts emphasise the need for a stable National Housing Policy that spans at least 20 to 30 years. Such a policy would protect the sector from frequent changes in rules and allow for better planning of infrastructure and services.
Furthermore, there is a strong call for vertical expansion as a mandatory strategy to save the country's agricultural land. By building vertical rather than horizontal, Bangladesh can accommodate its growing population without compromising its ability to produce food. Industry leaders suggest that height restrictions should only apply to sensitive areas like flying zones, while elsewhere, high-rise development should be encouraged.
Another vital solution is the implementation of a digitized "One-Stop Service" at Rajuk. This would allow developers to submit all fees and documents in one place and receive approvals within a fixed timeframe, eliminating the need to navigate multiple offices and reducing the opportunity for corruption.
The REHAB is also focusing on affordable housing projects for the lower-middle-income group, with plans to promote flats priced around Tk 4.5 million on the city's outskirts. To make this a reality, the government could provide fiscal incentives such as reduced registration costs and subsidized interest rates specifically for first-time homebuyers.
Ultimately, the survival of the real- estate sector depends on restoring buyer confidence and ensuring developer liquidity. Achieving this requires a shift toward single-digit interest rates for housing loans, which would make monthly installments comparable to house rent.
By combining financial incentives with a rationalized and stable regulatory framework, the government and property developers can ensure that the housing sector continues to serve as a cornerstone of the national economy while fulfilling the basic human need for shelter.
A synchronized effort between developers and financial institutions, and the state is a must-have to turn the current challenges into an opportunity for planned and sustainable urbanization.
saif.febd@gmail.com