Real estate suffers for political strife

The ongoing political turbulence has emerged as the latest setback for the real estate sector, which is already bearing the brunt of high interest rates.

“The nonstop blockade has affected our sector significantly as we cannot transport raw materials to construction sites,” said Md Wahiduzzaman, general secretary of the Real Estate and Housing Association of Bangladesh.

As a result, most realtors are keeping construction work on hold, he said. “Yet, the workers’ wages have to be paid regardless of work being done or not.”

The real estate sector incurred losses worth around Tk 792 crore in 22 days till yesterday due to the blockade, he said at a press conference at the National Press Club in Dhaka yesterday.

On average, the daily overhead cost of a real estate firm is around Tk 3 lakh, meaning, the blockade is causing losses of Tk 36 crore to REHAB’s 1,200 members a day.

Realtors said the higher overhead costs will obviously increase the price of apartments, while the sector has been experiencing a slump in sales in the last couple of years.

“Our apartment sales have dropped to the lowest level this month due to political unrest,” said Liakat Ali Bhuiyan, vice-president of REHAB.

People are not investing in real estate and many realtors cannot even realise the instalment money from customers due to the political stalemate, he said.

“Real estate is a vital sector for the economy as it involves more than 200 linkage industries,” said Rabiul Haque, senior vice president of the association.

He urged the political parties to shun violence immediately for the sake of the economy and general people.

“Violence has to come to an end. We want a permanent solution,” Haque said.

Realtors also urged the government to arrange low-cost housing loans and provide the loan rescheduling facility in the housing sector in a bid to boost their sales.

“Low-cost housing loans can revive the ailing real estate,” Wahiduzzaman said.

However, apartment buyers have to pay up to 16 percent interest on loans which discourages them, realtors said.

The realtors urged the government to form a Tk 10,000 crore fund to disburse long-term loans at a single digit rate of interest for the middle-income apartment buyers.

The sector’s sales fell as much as 60 percent in 2013 and the situation is not any better now, according to REHAB. The slump can mainly be attributed to buyers’ lack of access to low-cost home loans and an abnormal rise in apartment prices between 2011 and 2012, industry insiders said.

The number of new projects undertaken by developers has declined by around 75 percent in 2013 from the previous year, according to the association.

Currently, REHAB members build 15,000 apartment units on average a year.

The real estate sector contributes around 7 percent to the country’s gross domestic product at present, employing around one lakh skilled people and another 35 lakh in linkage industries, according to industry people.