Dr. Md. Ali Afzal, the president of Real Estate and Housing Association of Bangladesh (REHAB), the top real estate business organization of the country, has said that the proposed budget, which imposes an additional tax of about 1.5 crore taka on building construction on 5 katha land and a 15 percent tax on flats built by developers, is a suicidal decision for the country.
He said this in a discussion on Thursday.
The REHAB president said, “Suppose a person has bought 5 katha land with his entire life's savings; if he has to pay an additional tax of Tk 1.5 crore after constructing the building, he may not decide to build it. The land will remain unused. This will discourage new investment in the housing sector and development activities will also decrease."
He has said that another thing is that the impact of this additional tax will ultimately be passed on to the buyers, because no developer company will do business at a loss. On the other hand, landowners will also try to impose additional tax burden on developers. As a result, the cost of project implementation will increase and that cost will be adjusted with the selling price of the flat.
‘That is, the price of flats will increase as a result of imposing additional taxes and the general buyers will have to bear the ultimate burden. So I think this decision will have a negative impact not only on the housing sector but also on the overall economy.’
Dr. Md. Ali Afzal said, “Landowners will naturally ask developers how much benefit they will get from the additional tax burden. As a result, the construction costs of developers will increase further during the implementation of the project.”
He said, “On the one hand, the increase in the prices of construction materials, inflation and high prices of raw materials, along with the burden of new taxes - all together will increase the cost of housing projects significantly. As a result, a flat that is possible to sell at a certain price today will have to be sold at a higher price due to the additional cost.”
The REHAB president said, “The burden of this additional cost will ultimately be borne by the common people of the country, because developers will be forced to adjust the additional costs with the price of the flat. As a result, the price of the flat will increase, which will directly affect the buyers.”
Dr. Ali Afzal said that such a tax increase is harmful to both the country's economy and the general public. Therefore, the proposed tax should be withdrawn immediately.
He also said that the housing sector has been neglected in state policymaking for a long time. Many people have the impression that everyone involved in this sector is rich and their ability to pay taxes is very high. But the reality is different.
The REHAB president said, “If it is thought that the housing sector is a 'tax collection machine', where revenue can be obtained by putting pressure on it, then it is a wrong idea. The state has the impression that it is possible to easily collect revenue by imposing additional taxes on this sector. But in reality, imposing additional taxes will reduce investment, increase construction costs and ultimately the goal of revenue collection may also be disrupted.”
He said, “The reality is that a large portion of flat buyers in Bangladesh are not rich or upper-class people. Rather, the middle class, lower-middle class and various professionals, especially government employees, are the main buyers in the housing sector. Most of them cannot afford to buy a flat worth Tk 5 crore, Tk 10 crore or Tk 20 crore. They try to fulfill their housing needs by purchasing small-sized flats according to their ability.”
He said that if new taxes are imposed and expenses increase, these middle class and lower-middle class people will be the most affected as the impact of additional expenses will ultimately affect the price of the flat.
The REHAB president also said, “Housing is one of the basic needs of people. Every person needs a permanent address to lay their bodies in comfort. The issue of owning a house or flat is very important in the social reality of Bangladesh. Even in the case of marriage of sons and daughters, the first question that often comes up is whether they have their own house or not.”
He said, “Many countries in the world consider housing as a basic need and provide special incentives for building or purchasing a house for the first time. In many countries, the government provides direct financial assistance, while in some places low-interest loans are arranged.”
Citing Australia as an example, he said that their government provides a certain amount of financial assistance to first-time homebuyers.
The REHAB president said that in many countries around the world, the government provides direct assistance in building or buying a home for the first time. Grants are given to first-time homebuilders, and in many countries there are also very low-interest loans.
“Another important point is that the economic growth of a country largely depends on the dynamics of the housing sector. There are many examples of this in the world. When a major economic crisis occurred in the United States, the government formed a special fund and provided housing loans at only 1 percent interest. As a result, the housing sector was strengthened and the economy bounced back.
Not only the United States, but also Europe, Canada, Australia and currently various countries in the Middle East are giving importance to the housing sector and accelerating economic development. But unfortunately, this sector has been neglected in Bangladesh for a long time.”
“In addition, the interest rate on bank loans has reached 13 to 15 percent at present. It is very difficult to run a business with such high interest rates. On one side, the prices of construction materials and other inputs have increased, while on the other side, there is the impact of inflation. According to calculations, construction costs have already increased by 40 to 45 percent,” said REHAB president Dr. Md. Ali Afzal.
Bd-pratidin English/Lutful Hoque
