The primary factor that determines housing constructions and pricing of properties is the inhabitants. Housing is mostly built so that the people have a space to live in. After the dry season in the real estate market due to the political instability of our nation, the real estate market looks better this year. A lot of positive changes are happening right now, with a boost in economic growth and increase in per capita income. What does this mean for potential homeowners? Read below to know more about the ongoing situation and the future of real estate in Bangladesh.
Growth had slowed down in the last three months of 2018 because of the lack of political stability of our nation. A lot of buyers were unwilling to buy flats because of the uncertainties, especially due to increased interest rates. However, all of that has changed recently and realtors, buyers and sellers are happy to see the real estate market is slowly making a comeback in 2019. Moreover, the government has enabled government officials to get home loans of up to Tk. 75 lakh. Because of all these factors, the market seems to be a little more stable now compared to the last few years which is encouraging more people to buy flats. Amidst all this positive changes, many realtors think that if the government brings down the bank interest rate between 7% to 8%, there would be a significant increase in apartment sales.
However, there’s another issue. Currently, new apartment owners have to pay a stamp duty of 3%, a registration fee of 2%, a gain tax of 4% and a local tax of 2%. Counting other kinds of VAT and taxes, the overall comes between 13.5% – 14% on total deed value, which is actually a lot. Depending on the location you want to reside in and the type of property, the tax will vary. If housing accommodation is one of the primary reasons for people to buy more properties, attaching big price tags is not going to solve the real estate sector in Bangladesh. So, the question remains – what does the future of real estate in Bangladesh look like?
Recently, the Income Tax wing of the National Board of Revenue (NBR) has sent out letters to different government departments to cut down the current real estate related taxes and fees as per the instruction of the Finance Minister. According to the ministry officials, the decision would include the stamp duty to be reduced to 1.5% from the current 3%, VAT will be reduced to 2% from the current 3% and the registration fee to be reduced to 1% from the current 2%. THE NBR requested various government agencies, in this regard, to provide the general citizens with the purchasing power to buy their desired properties. Therefore, the nation is hopeful that fees and extra costs would be brought down in the upcoming fiscal year FY 2019-20.
It’s very evident that potential buyers and sellers lost their interest in buying and selling lands and apartments due to the unnecessarily high extra costs that come along with it. As a result, a large number of apartments and lands remain unsold. Moreover, other neighboring countries of Bangladesh have comparatively lower registration costs. Bangladesh on the other hand has almost 4-7% higher costs in comparison.
The future of real estate in Bangladesh will have many improvements. Because of getting various requests regarding the aforementioned issues, a reduction in tax will be imposed that will vary from area to area. In areas such as Gulshan, Banani, Motijheel, Tk. 4,000 per square meters tax will be imposed which was previously Tk. 5,000. In Dhanmondi, Lalmatia, Uttara, Bashundhara R/A, and all Defence Officers Housing Society (DOHS), the tax imposed will be Tk. 3,000. For areas other than the mentioned above, the tax imposed will be Tk. 800 up to Tk. 1500.
Many say that this proposed budget will benefit our economy and the real sector of our country. Only time will tell us if that’ll be the case for the real estate sector in Bangladesh.