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All the excess liquidity is flowing into real estate sector

  • Published at 02:08 am January 31st, 2021
Underconstruction buildings <strong>Dhaka Tribune/Syed Zakir Hossain</strong>
Dhaka Tribune/Syed Zakir Hossain

As per a rough estimation of REHAB, about Tk 3,500 crore was invested in the country’s real estate during July-December of 2020

Injected with untaxed investment money and the good fortune of excess liquidity in banks, realtors can now hope for a further boost in apartment and plot sales.

As per a rough estimation of REHAB, about Tk 3,500 crore was invested in the country’s real estate during July-December of 2020. 

“The real estate sector has indeed turned around. It is comparatively in better shape as untaxed money is pumped into the sector. The arrival of the Covid-19 vaccine is also pitting positivity into people's minds,” Tanvir Ahmed, managing director of Sheltech Group, told Dhaka Tribune.  

It is a positive sign that the banks are reducing interest rates as they have excess liquidity in their hands, he also said.

On top of that, banks are proposing to finance projects to companies that have good credit ratings and proven track record of repayment. They also offer a better interest rate, said Ahmed.    

"If the prices of raw materials related to the sector maintain its current rates amid the momentum, we will see a better growth," he added.

Single digit lending rates and excess liquidity in banks have made access to finance affordable and easy for aspirants willing to buy apartments on credit, said Liakat Ali Bhuiyan, chairman of Brick Works Development. 

On the other hand, credit facilities for government employees and cutting flat registration cost in the previous national budget helped the sector to rebound from the crisis, said Bhuiyan, also former first vice president of the Real Estate and Housing Association of Bangladesh (REHAB).

The overall business situation is rather better than the past. The impact of Covid-19 pandemic is not as bad as we expected,” said Md Sheikh Shadi, chairman of Assure Group.

Buyers are happy to buy flats on credit as the interest rate is reduced to single digits. In addition, they are getting loans on easy terms, said Shadi.  

"But there are certain obstacles in the sector, such as flat buyers facing harassment from different government agencies. I have about 500 ready flats, and confirmed buyers, but still not getting occupancy," he added. 

The government should work on those problems and resolve it to gear up its revenue earnings from the sector, said Shadi.

The sales of apartments and plots saw a significant rise during July-December of 2020, which began with the government allowing untaxed money investment in the sector without question in the national budget. 

Besides this, the sector people are witnessing more queries from buyers about projects and flats in recent months, while the banking sector has seen a rising demand for loans to buy flats.  

“There is no significant growth in 2020 compared to 2019. But the sector did not witness as much damage as we had expected due to the Covid-19 pandemic,” said Muhammad Ariful Islam, deputy general manager (project management) of Sheltech.

"During the pandemic, activities were almost shut and sales came to a standstill. But we have been able to overcome the situation. In recent times, inquiry about flat prices, size, location and ongoing projects have increased," said Islam

When people have money or opportunity to avail money from financial institutions, they will make investment or dare to buy flats, he also said.

The banks are also experiencing more application for loans to purchase flats.

“Right now, we are charging a 9 per cent lending rate as directed by the government. Banks are investing where they feel comfortable,” said Tariqul Islam Chowdhury, managing director and CEO of South Bangla Agriculture & Commerce Bank.

The disbursement of home loans has increased a little bit in recent times and hope it will continue, he also said.

"As there is excess liquidity, we have to invest but the profit margin is very low. Despite the low margin, we are committed to comply with government instructions and think about our customers," he added.   

On top of that, it has been seen that untaxed money holders are taking loans to invest along with their stash.

“For the last two months, the disbursement of loans for housing has increased. People are taking loans from banks to invest in the housing sector along with the black money,” said Mati Ul Hasan, additional managing director of Mercantile Bank. 

Right now, the lending rate is quite affordable compared to previous ones, as banks are offering single digit rates. Although the rate reaches double digits due to processing fees and service charge, it is still better than the past, said Md Belal Hossain, a private service holder.

He recently booked a flat on credit.    

He urged financial institutions to increase the number of instalments cushion the burden of big repayment amounts.

However, REHAB prefers credit than government policy support to purchase properties with untaxed income or black money.

People previously had some undisclosed money in hand, but they were unable to invest as different law enforcing agencies used to question its sources,” said Kamal Mahmud, vice president of REHAB. 

After the black money whitening scheme was launched, people invested in the real estate sector, which helped the sector to rebound even amid the pandemic, said Kamal, also managing director of Skiros Builders.

According to the National Board of Revenue (NBR) data, over Tk 10,220 crore was whitened in the first half of the current fiscal year. 

In addition, low deposit rates also encouraged people to invest in the housing sector as it would give better returns than deposits.

Besides, excess liquidity also pushed the demands of mid-size flats as people are getting loans to some extent easily. But the role of bank loans is limited for the rebound, said Mahmud.

Mahmud also urged banks, especially state-owned ones, to invest a portion of excess liquidity in the housing projects with long-term repayment to help the sector become more vibrant.