The housing sector is a key driver of investment and employment in the country. However, this sector is now going through a crisis. The downturn in the sale of plots, flats, and houses has resulted in a major stagnation. With no new investments and many old projects almost at a standstill, entrepreneurs are struggling to meet operational costs.
Overall, the sector is facing significant challenges. Entrepreneurs report that the slump has affected at least 60% of their business. This impact has extended to around 250 related sub-sectors, such as rods, cement, and others tied to the housing industry. The livelihoods of workers in this sector, which supports a large workforce, are also at risk. To revitalize the housing sector, entrepreneurs have called for immediate actions, including revising the DAP (Detailed Area Plan).
Recent data and discussions with entrepreneurs involved in the industry reveal that the housing sector, a major contributor to the economy, is currently experiencing a silent recession. In the 2023 fiscal year, this sector contributed nearly 8% of Bangladesh's GDP. With investments surpassing 1.5 lakh crore taka, it directly supports the employment of approximately 3.5 million people.
Currently, there is a demand for at least 100,000 new apartments annually across the country. The housing sector has the capacity to meet this demand. However, due to the business downturn, entrepreneurs are only able to meet 8% of the demand. As a result, there is a significant supply gap compared to the demand.
The main reason behind this is that buyers' purchasing power is insufficient. Due to high interest rates, most buyers are unable to afford new apartments. A quality apartment is largely out of reach for the middle class. The price of a livable flat in a good location now starts at a minimum of 1.5 crore taka. Even if someone takes a bank loan for such a flat, they must have the ability to make a down payment of at least 30%. This requires a minimum monthly income of over 1 lakh taka. Entrepreneurs report that this has created a crisis in flat sales.
Data shows that there is no new investment in this sector, and many companies are abandoning plots and flats without making profits just to cover operational costs. Many housing companies are unable to pay their workers' salaries. The industry has been grappling with various challenges for the past few years, including land scarcity, lack of urban planning, and a shortage of skilled labor.
The impacts of the Russia-Ukraine war, high inflation, rising interest rates, and abnormal price hikes in construction materials have only worsened the situation. Among all these, the failure to amend the DAP has emerged as a major issue. The DAP, imposed on entrepreneurs in 2022, dealt a significant blow to the industry, and since then, new initiatives and investments have almost come to a halt.
Liakat Ali Bhuiyan, Senior Vice President of the Real Estate and Housing Association of Bangladesh (REHAB) stated, "The housing sector is now going through the most critical period. There are several reasons for this, but the most important one is the failure to amend the DAP. If the DAP is not reconsidered, the sector cannot progress. Currently, the plans are essentially blocked. The sale of flats has been reduced by at least 60%. There is no work happening. The condition of around 250 industries directly related to the housing sector, including rods and cement, is also poor. If one doesn't function, the others cannot either. The livelihoods of 3.5 million workers in the housing sector are at risk, and indirectly, almost 15 million people are also dependent on this sector. They are all in uncertainty now."
Entrepreneurs also report that the booking and sale of small and medium flats in the capital have decreased by 20-25% in one year. The sale of high-quality or luxury flats has dropped by nearly 60%. With the decline in flat bookings and sales, small and medium housing sector entrepreneurs are facing financial difficulties. Additionally, the sale of plots and land has also significantly decreased. Primarily, the rise in raw material prices, such as rods and cement, and the new detailed area planning (DAP) have increased the construction costs of flats by almost 25%.
This has led to a reduction in the number of new projects in the housing sector. At the same time, there is stagnation in individual house construction as well. In addition, demand for bank loans is not being met. Due to political and economic instability, the sale of flats has been down for the past seven months, causing many small companies to struggle to pay salaries and office rents. In this situation, some entrepreneurs are being forced to sell flats without any profit due to the high construction costs.
Iqbal Hossain Chowdhury Jewel, Managing Director of JCX, mentioned that after the political change, many businesspeople and politicians, who traditionally invested in the housing sector, have gone into hiding. Additionally, the interim government's measures have blocked the opportunity to invest undisclosed funds in housing, leading to a decrease in investments. As a result, people are no longer buying large flats as before; instead, they are selling their assets.
Regarding the DAP, he added, "The new DAP has led to a recession in the housing sector since 2023. Entrepreneurs are no longer getting their plans approved by RAJUK. Consequently, the number of projects that should have been carried out has not happened. After the new government formed, the situation in the housing sector worsened. Those who had booked flats are also not paying their installments regularly. However, the interim government has accepted the need to amend the DAP. We hope it will be changed soon, which will help revive the sector."
Reports suggest that the sale of flats in 2024 has further decreased compared to 2023. Particularly after the political changes, flat bookings and sales in Dhaka have fallen. People are now hesitant to buy flats unless absolutely necessary.
Entrepreneurs also suggest that countries like the US and many European nations have mortgage corporations that provide home loans for 25 to 30 years. In those countries, flat buyers pay 30% upfront and then apply for long-term loans from these mortgage corporations. Bangladesh should adopt such a system as well.
According to REHAB sources, stagnation has affected the entire economy, and it has been reflected in the housing sector. Sub-sectors related to housing, such as cement, rods, electrical appliances, tiles, paint, pipes, sanitary items, etc., are at risk. The lives and livelihoods of millions of people indirectly linked to these sectors are also at a standstill. Entrepreneurs believe that immediate measures need to be taken to rescue this sector.
Analysis of data also shows that under normal conditions, nearly 20,000 flats were bought and sold annually, with transactions exceeding 25,000 crore taka. Now, the sector is virtually inactive, putting 3.5 million construction workers at risk of unemployment. In the past three months, the steel sector alone has faced a financial loss of 35,000 crore taka.
Along with stagnation in the housing and construction sectors, the government's mega-projects and other infrastructure developments have nearly stalled, causing 90% of cement factories to stop production. Despite being a major exporter, the cement industry is now struggling. Developers with large bank loans are left with half-finished projects. As a result, they are facing huge financial losses due to interest payments on the loans.
It has also been pointed out that the registration costs in Bangladesh are much higher compared to other countries. Additionally, VAT and tax rates are also high. As a result, there has been a long-standing demand to reduce registration fees and VAT/tax rates significantly. In the upcoming budget, there has been a proposal to allow the investment of undisclosed funds or black money in flats, plots, or land without any conditions for a certain period, as a measure to address the sector's current slump.
Source: Kaler kantho
Bd-pratidin English/ Afia
