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Hope for home fades out

Realtors rue slump as building materials get costlier

SAIF UDDIN | March 27, 2024 00:00:00

Hope of middle-class people for home fades out for exorbitant prices of key construction materials. And realtors lament to see real-estate business plummet for apartment being unaffordable to many of these limited -income group of townsmen in recent times. Both sides are thus hit by general inflation Bangladesh has been in grip of for so long a time, sector sources say and call for delving deeper to the roots that they feel warrants government interventions.

According to them, the property-development sector, which is heavily linked with different allied sectors, suffers from a slew of ills like lower demand and sales, recent hike in lending rates, higher operational cost and some complications related to government's detailed area plan (DAP) for the capital city. In such circumstances, a number of small-and medium-scale realtors in the country have quit the business while many are stuck in the middle of their ongoing projects. Even, leading companies have also minimised their number of projects.

Managing Director of Building For Future Ltd Tanveerul Haque Probal told the FE writer that the country's real- estate sector has been going through tough times for the last several years due to some local and global factors.

"Almost all stakeholders, including realtors, allied industries and consumers, are in trouble mainly due to higher cost of living and everything," he said.

Many construction materials are required to import while some are locally manufactured.

Some of the materials' prices simply doubled within a couple of years, he added. "Whatever the realtors construct, there is also short of buyers who are already bearing the brunt of inflation in the country," he narrates the situation they are caught up in. "There is hardly any scope for realtors to ask for higher price of flats since the local real-estate market is highly competitive one," says Mr Probal , who is also former president of the sector's trade body, REHAB. And DAP has come as another bind for the builders as its rules limited the height of a residential building in many areas, adding up to the culminating cost of each unit.

Data available with the Real Estate & Housing Association of Bangladesh (REHAB) show its members had sold around 15,000 flats in each of fiscal years (FY) 2020-21 and 21-22. However, the figure significantly dropped to around 10,000 in the FY 2023.

Construction of a building is linked to over 250 types of other sectors, including rod, cement, bricks, tiles, sanitary ware, electric fittings, paints, lift, generators, and fire-safety and- security equipment.

Market sources have said the price of MS Rod has been maintaining a higher price range of around Tk 95,000 and Tk 99,500 per tonne, depending on manufacturers, in the recent times, which had hovered around Tk 75,000 two years ago. The price of the key construction material even shot over 1,00,000 in different periods.

Similarly, per-bag cement price increased to between Tk 500 and Tk 550, which was around Tk 400 three years ago. Per-piece better- quality brick now sells at Tk 13 to Tk 15 whereas it was below TK 10 three years ago.

Data available with the REHAB revealed that prices of locally available building materials like sand more than doubled between 2021 and 2023. Price of per- cubic-foot local sand increased to Tk 35 in the last year from Tk 15 in 2021. Cost of Thai Aluminium frames for windows and doors also got pricey, having marked a significant rise from Tk 280 per square foot in 2021 to Tk 480 at the end of last year. An MS Rod trader in old Dhaka, Tanim Dewan, told the FE writer that due to higher price the demand and sales of rod manufactured by different mills dropped significantly.

"The sale is so limited in this ongoing dry season-the right time for construction work-I don't know what will happen in coming days," Mr Dewan whines.

As a consequence of building materials' higher price and other factors, cost of construction of housing unit has increased by 30 to 35 per cent in most cases, says an executive of a housing company. His company used to undertake 25 to 30 projects every year before pandemic and now the number declined to seven or eight only. "It's better to sit idle than you don't undertake new project due to volatility," he says on a note of frustration, adding that often the realtor has to increase the price over the agreed one, causing misunderstanding between realtor and buyers.

According to sources, the country's real-estate sector started facing downturn with the outbreak of covid-19. Following a transient respite, the realtors' ill fate started coming back with the beginning of Russia-Ukraine war in early 2022, culminating in price hike of almost every piece of construction materials. The apex trade body of the country's realtors, REHAB, had around 1200 members several years ago, whereas the number declined to 841 recently. And the drop indicates some companies have suspended their operations.

The dullness in the sector still persists in line with the unfavourable economic situation of the country, REHAB Senior Vice-President Liakat Ali Bhuiyan told The Financial Express in an overview of the predicament. How can a realtor sell at lower price than his expenses for a project, he raised a question. "The new REHAB committee has taken the helm and it will start working soon to define way forward and walk the way."

The new REHAB committee for 2024-26 took over in the second week of March.

Meanwhile, the higher price of new flats has been a boon for old properties business. In this context, several virtual and traditional marketplaces have been operating in the country to facilitate such sales. Those operating on the secondary market include Bproperty, BTI Brokerage, Concord Property Solutions and Ratul Properties.

Talking to the FE, General Manager of virtual-marketplace Bproperty Khan Tanjeel Ahmed said Bangladeshi housing market had never been more volatile given what the market has been going through for the last couple of years. "Soaring raw-material price coupled with an uneven demand and supply curve has become the

bane for the real-estate market. " As a result, the primary housing sector is taking a larger blow than the secondary housing market simply due to the rise in construction-material prices.

A sharp decline in flat sales, from 15,000 units in the FY 2022 to a mere 10,000 units in FY 23, is alarming and believed indicative of a deeper underlying issue.

"This downward trend, if left unchecked, can have far-reaching implications not only for the real-estate sector but also for the broader economy," he says. He feels that addressing the root causes for this downturn, however, requires a clever observation that tackles both supply-side constraints and demand-side factors. Government interventions, industry collaboration, and innovative solutions are imperative to stabilise the market, he suggests.

According to data from the Bangladesh Bureau of Statistics, the real-estate sector's contribution to the gross domestic product (GDP) was around 8.0 per cent.

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