The real estate industry just passed through a long slump, with sales dropping significantly, with signs of recovery only showing recently. What steps has been or can be taken to revive the sector?
From 2009, the real estate sector as a whole was growing fast and 2012 was the best year for most realtors. However, we faced a severe crisis from 2013 to 2016 after the government made a major correction in per square foot prices.
Initially, a price correction of 20% to 30% was made for areas where prices were too high, like Dhanmondi, Gulshan, and Baridhara and later the correction was applied to almost all areas. This area based price correction played a key role in bringing down the industry for those years.
When the price is set to low, the real estate sector cannot thrive. The market went into recession and to avoid further losses, many real estate companies refrained from taking on any new projects.
The percentage, however, went up in the last six months. Now the interested buyers know or apprehend the real price or cost so no one can cheat with them.
The year 2017 was comparatively better.
However, markets go through cycles, and industries like real estate usually recover, as the demand for housing does not diminish in busy cities like Dhaka. Last year was a year of renewed interest in real estate and due to that, the market has started to stabilize.
We expect the real estate sector to rise in 2018, but there are significant challenges ahead. We are assuming the year will be steady or we will grow a little bit.
A latest survey by Brac Institute of Governance and Development (BIGD) finds 57% of middle-income people cannot afford to have a house in Dhaka. But they are a major portion of the population, but there is a big gap between their income and the price of flats. What steps can be taken to help them afford a house?
Bangladesh does not have a middle class, what we have is a lower middle class. The customers buying apartments are from upper middle class. If we consider Bangladesh’s per capita Income, middle income people exist socially, but not economically. The real estate sector is driven by customers from the upper middle class.
The high land price is one of the reasons we cannot offer much for those clients. If we want to give houses to the middle class, we will have to buy lands outside Dhaka. But they are not interested to buy property outside Dhaka.
If we want to offer all benefits for such class, government patronage and international help is must. The government needs to make partnership with private sector, also have to offer low interest rates like 4%-5% for loans offered for middle class and lower middle class people so that they can afford a property.
Around 20 companies, who are leading the sector, do not compromise with quality so they cannot offer low price flats. If there is international funding, we may come out with something for middle class people.
Also, the cost for materials like rod and cement are the same for both luxury and small flats. The cost of engineering is also the same. We can only reduce costs on the facilities provided, but that is not always possible. So it is difficult to come out with low cost flats. The government needs to provide low cost land, both in Dhaka and outside to help people afford housing.
Government’s economic steps in minimizing transfer cost, registration cost and bureaucratic costs which are borne by customers, would also help the middle class afford housing within their capacity.
Many companies, who are not REHAB members, are flouting rules in construction of buildings. What steps can REHAB take in this regard?
It should be made mandatory for all housing companies to take REHAB membership before doing business. Developers taking small projects cannot survive in this industry as most of them do not maintain rules, creating suffering for the landowners.
The government needs to encourage developers who maintain all rules and take action against those who flout them. Also, REHAB should control its membership as only 500 of the 1,200 companies currently registered are actually working.
REHAB should work to maintain quality, and promote consumer issues, dispute management among land owners, customers and developers, decrease registration cost and bank lending rates etc.
The Detailed Area Plan for Dhaka has provisions to keep open space, but the real estate companies want more space to expand housing facilities. Do realtors encourage keeping open spaces?
As the population keeps on increasing in Dhaka at an alarming rate, finding suitable land will become more and more difficult in the coming days. Professional real estate companies, who maintain construction quality, code compliance and safety, often become uncompetitive in their offers to land owners, due to unrealistic competition among real estate developers, especially when compared to companies where code compliance is not strictly followed.
It is Rajuk’s responsibility to implement the Detailed Area Plan and policy makers should follow up on it. Implementation of any plan is a continuous process, and cannot be implemented in a few years. I think we need some years to develop this city in a planned way. If Rajuk can take action, we may see a planned city like Tokyo may be in another five years or so.
What are your achievements throughout Sheltech’s journey?
Since we founded the company with Kutubuddin Ahmed and Tapan Chowdhury 30 years ago, we have maintained professionalism by developing around 3,500 flats with a capacity of around 17,500 residents. We also have 160 projects pending delivery, which we expect to complete on time.
Where do you see the real estate industry in the next 10 years?
If we consider the last 10 years, the first four were excellent for real estate business, but the next six not so much. It is not a seasonal business, as ups and downs are very common. In the last four years, we have barely survived.
If good days come, we hope to continue our professionalism and take the industry to new heights.