Real estate sector is in disarray  

Real estate sector is in disarray   

The real estate sector is in doldrums again. Prices of major construction materials including rods, bricks and stones have been on a significant rise over the last several months.

The upward trend in prices of major construction materials has become a cause of anxiety as the sector is already facing challenges including over 15 per cent flat registration cost hike and double digit interest rate for home loan.

The leaders of the construction industry association, according to reports, are now threatening to stop all types of building work after April 15 this year if the government does not take any steps to check the spiralling prices.

In recent days, phenomenal rise in interest rates and prices of major construction materials has created volatility in the country's real estate sector. The dreams of the middle-income people to own flats or apartments are being shattered with such hikes in prices.

The price of per tonne 60-grade rod, according to reports, rose to Tk 68,000-Tk 70,000 from Tk 59,000-Tk 60,000 recently. The price of the material was Tk 52,000-Tk 53,000 a year ago. Price of 40-grade rod increased to Tk 53,000-Tk 56,000 from Tk 42,000-Tk 43,000 a year ago. The prices of rods registered an overall 23 per cent increase in a year.

The price of one bag of cement has now risen by Tk 60 just in a month, which is very unusual. A bag of cement of different brands is now being sold at Tk 420 to Tk 460. No new tax has been imposed on cement and its raw materials during this period. The prices of stone chips and bricks also have also registered a rise.

Manufactures attribute the price hike of rod to the increase in prices of raw materials in the international market, hike in transport cost and the rise in bank interest. But the reality is that the price of billet in the international market is now $525 a tonne, down from $560 in September 2017.

On its part, the government needs to firmly deal with the situation. It can organise an exchange of views with the participation of all stakeholders to find a way out as the price hikes will also cause problems to the government's development works across the country.

The way prices of land and construction materials are showing an increasing trend, owning flats for common people have become a distant dream. Land price in the capital city is probably the third highest in the world and it is galloping every day. Owning a 1000-square feet apartment in posh city area costs a customer Tk 12 to 16 million. Beyond the city, the prices are also escalating in the district and upazila headquarters.

The government could easily facilitate the process by reducing the registration fee for a flat or apartment sold for the second or even third time. There are both sellers and buyers of second-hand apartments in the country. But the registration cost for second-time transfer of an apartment is similar to a new one. This deters many from making such a transaction.

Reports say a total of 11,000 flats remain still unsold until today. The number was 14,000 a year ago. About 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.

The delay in the transfer of apartments has been taking an economic toll on their buyers in the form of the rent and interest charges on bank loans they are paying every month. Similarly, the real estate firms are also counting interest on their bank loans. The problem also has its impact on remittance flow. A sizeable part of the monthly remittance comes for the purchase of residential apartments. That flow has now almost dried up.

The ongoing development in the real estate sector has also its negative impact on other stakeholders, including steel, paints, tiles and electrical goods manufacturers and wholesalers and retailers involved in the trade. If the current situation persists for some more months, many real estate companies might default in servicing their bank debts, thus, hurting the banks a good number of whom are already in the midst of liquidity shortage.

The situation in the real estate sector is, no doubt, discouraging. The government had imposed a total ban on gas connections to new flats and apartments. But it did not really explain what will happen to those apartments having built-in piped connections already and waiting for gas supply. The government kept the realtors waiting for long citing supply shortage as the reason for its failure to make available gas and power connections.

The industry is heading for a crisis as a market syndicate has become active in raising the prices of key construction materials such as rod, cement, stone chips and bricks abnormally and frequently. Industry insiders say construction activities will come to a halt unless the government steps in immediately to check skyrocketing prices of rod and cement.

All said and done, the price hike of all construction materials will obviously push up overall construction cost. As a result, prices of flats will also jump in the near future. If the situation does not improve immediately, about seven million people, directly or indirectly involved in this sector, will face an uncertain future.

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