Unlike most other industries, the real estate sector has seen mostly steady one-directional growth over the years. And that is because of the non-depreciable attribute of lands and other real estate assets. But that doesn’t mean it will remain the same in the future too. With the periodical imposition of new laws and regulations, as some of the old ones are getting changed or discontinued, it becomes hard for normal people to cling on to their property-related decisions.
In the last decade, disturbance in the global economy took a huge toll on the housing market and only aided on the global housing crisis. However, things started to take a turn in the last quarter of the parting year of the decade as the authorities introduced new, more real estate-friendly regulations to the market. In that regard, a look forward is a must to understand what direction the sector is going in, as well as what to expect from the real estate sector in 2020.
Interest rate on home loans
Over the years, land prices and the cost of building a home as well as buying a new one surged to the point that it has become very difficult for average people to afford any one of them. As a result, the only way left for them is to take financial support from a bank or other organizations. But unfortunately, that is also out of reach for many people due to high-interest rates.
Most home loan providers offer loans with a double-digit interest rate that can go as high as 14%. A very few providers, including Bangladesh House Building Finance Corporate, offer loans in a single-digit interest rate but that is not sufficient.
However, in the REHAB Winter Fair 2019, we saw some positive initiatives in the right direction. Some banks offered a lower home loan interest rate – some in single digits – as well as financing homes up to 85%. This move has shown a positive response from consumers and the result may even have a lasting effect on the home financing sector.
Reduction in registration tax?
One of the reasons why people feel less interested in property purchase is the registration tax. The appeal for reducing the registration taxes has been in the bucket list of both consumers and real estate developers for a long time. The load of an additional 16% cost is huge for someone who has already paid a substantial amount for the property purchase.
The government, however, showed agreement to the appeal and agrees to reduce the overall registration tax and advised the Bangladesh Bank to lower the interest rate. However, the order has not been followed through yet, and it might take the start of the next fiscal year to go into effect.
Construction material cost
The cost of construction material has shown a significant increase over the last few years. Expect to see the continuation of that trend this year too. The price of steel bars per ton has shown a 50% increase in just two years. The price of a 50-KG cement has also risen by Tk 50 after the national budget was announced, although the materials are produced locally.
The year of eco-friendly blocks
Recently, Dhaka made headlines for being one of the most polluted cities in the world. According to the Air Quality Index, Dhaka is one of the cities with the worst Air Quality score in the world right now. There are lots of reasons as to why the air of Dhaka is so unhealthy; one of them is the emission of harmful chemicals from brick factories. As a measure of preventing such air pollution, the government has taken initiatives to go green by using environmentally friendly bricks in all their government projects. This kind of brick is made of sand, fly ash and other materials that are less harmful to the environment.
The ultimate goal is to go fully green and reach total usage by the fiscal year 2024-25. This is a big initiative and a bold move; if we can pull that off, then it will have a profound impact on the environment as well as the real estate market.
Advancement in the digitization of the real estate sector
Real estate is one of the sectors which has been affected by the digitization movement in Bangladesh. Construction planning, property search, advertising, and marketing are just some of the aspects of the movement. However, in Bangladesh, Bproperty has created a major buzz across the real-estate industry. As a result, day by day, people are getting more familiar with property-related transactions from a real estate online portal.
Since people are trusting and loving the idea of property-related transactions through Bproperty, Bproperty also takes this opportunity to serve its audience better than ever. From legal services to property purchases, Bproperty offers a complete property solution. This has also led to more businesses arising offering property search facilities. Overall, this is a good indication for the real estate sector as businesses like this will only add to property-related demand.
Like every year, this year will also have its ups and downs but that doesn’t mean there will be a drastic difference unless something like digitization takes a dramatic turn. Although the unpredictable nature of the future makes it uncertain, we only expect good things to happen.
Will 2020 be the year to hit a new benchmark for the real estate industry in Bangladesh? What are your thoughts on this? Share them in the comments section below.