A             fter enjoying a boom period, called the 'golden period' by some experts, from 1996 till 2010, the real estate sector has almost come to a standstill at the moment. The construction boom saw new industrial buildings, corporate offices, housing units (apartments), and other types of infrastructure. The slump started in 2011 because of a phenomenal appreciation in the price of land and construction materials, which scared away many new investors, a lot of whom have invested the money elsewhere in countries like Malaysia, Canada, Dubai, Singapore, etc.

If a flat in Dubai or Malaysia is rented out for BDT 100,000, a flat of the same size would fetch about BDT 40,000 in Dhaka. Allured by the prospects of buying a flat for cheap, many non-resident Bangladeshis had started to come to Bangladesh in 2011 and 2012 to invest in apartments, but the price hike in land and construction materials, exorbitant registration fees, VAT and other hidden costs made them pull out at the last moment. Even local investors have bought flats in some of those countries by transferring money illegally through unlawful channels.

According to REHAB sources, the growth rate of the real estate, renting and business service sector soared in the 2000-2010 period. However, this sector expanded at a slower rate compared to overall GDP growth, resulting in the downward trend in real estate as a percentage of overall GDP.

The manipulation of some unscrupulous owners of land developing companies registered under BLDA has also caused many potential investors/buyers to turn away from the sector. These companies put up sign-boards on agricultural land anywhere and everywhere and started to sell plots, thus misguiding genuine buyers. Many of them took money from hundreds of clients but failed to hand over plots as of yet. It has been alleged that out of the 150 members of BLDA, only about 10 are genuine and doing business sincerely. Regarding abnormal price hike of land in the country, there are allegations that there is no government control over the price hike within Dhaka city. Landowners seize every little opportunity to raise prices up to two to three times in a year. No doubt increased land prices have a direct impact on apartment prices.

In the case of the apartment buying and selling business, the phenomenon of 'more supply than demand' played a part and as a result we see thousands of unsold flats in the urban areas of the country. At one point, BDT 70,000 crore had been invested in the apartment sector. At one point, there were 22,000 unsold flats in the country. Non-availability of timely utilities connection is another factor for making the sector unattractive for the new investors. Many of the flat owners have been running after DESA and WASA for electricity and water connection for years. In many places, household gas connection is unavailable. As a result, many owners are disposing of their flats at throw-away prices. 

According to some experts, in many countries banks offer long-term loans to real estate companies at low interest. But in Bangladesh, such loans are offered at very high interest rates. There are a number of private financing organisations in the country, but none of them are ready to reduce interest rates. This is another reason why apartment are sold at very high prices.

How can the real estate sector turn around? As explained by experts, this is a large sector that needs government support and patronisation. With more and more people migrating to the cities and towns from the rural areas, there will be need for more flats of various sizes and shapes. But who will construct such flats? It will be done by the private sector of course. But how can they sustain if they do not get the necessary facilities to continue with their business? 

Proper development of the real estate sector requires pragmatic planning spanning the next 30 years, steady and reliable source of finance, simplification of registration formalities, and strong policy for regulation. If Bangladesh Bank instructs commercial banks to offer loans at low interest rates, many companies would come forward with new projects. The registration fees and VAT, which are exorbitant now, should also be reduced, according to some investors. Land registration is a particularly painful undertaking, they comment. The entire procedure needs to be simplified.

Investors are also scared away when they are asked to show sources of their money. Though the government said that one can whiten one's money by paying 10% tax, many are fearful of questioning by the anti-corruption agencies and NBR. There should be a transparent one-stop service where they can go and settle their problems. Experts are of the opinion that if investors are allowed to invest after paying 10% to the government, the money will remain in the country. In that case, people would not run to Malaysia or Dubai buy flats.

According to REHAB, presently about 34% of the people of Bangladesh are living in urban areas, which will rise to 50% by 2025. The need for residential and office accommodation for this large population can easily be deduced from these statistics. Therefore, both the private and public sector will have to sit down together to find a mechanism to address the challenges. The real estate sector needs government support to grow and offer better services to the customers.

The writer is a businessman.