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The ongoing pandemic and a temporary shutdown of all major economic activities have led the entire country towards a halt. In such challenging times, on June 11, the Honorable Finance Minister, AHM Mustafa Kamal, Ministry of Finance Government of the People’s Republic of Bangladesh in the budget declaration session, has announced the 8.2% GDP growth target in FY 20-21. Bangladesh aims to keep the inflation rate under 5.4%. This is quite an ambitious target but not impossible to achieve. The real estate sector after the new budget has a lot of new possibilities. It is now the right time during this crisis, to reinstate the sector’s confluence of ebb and tide with stronghold leadership.

A sneak-peek of FY 19-20

In FY 19-20, a lot of proposed changes had been implemented in the real-estate sector. The noteworthy changes were:

  • The imposition of a single-digit home loan interest rate 
  • A zero-equity house loan scheme for middle income to lower-income families by BHBFC
  • Reduction of stamp duty
  • Bproperty has also expanded its activities by establishing several new marketplaces across the country with the goal to penetrate into the maximum localities and cater to the locals with all necessary real estate related solutions.

The fiscal year 19-20, henceforth, gave a major boost to the real estate sector by making some major amendments and remodeling the fees that you need to pay while buying a property. These will surely be a fast-forward step to create opportunities for general people to invest in properties without any hard and fast rules.

The status-quo at the end of FY 19-20 and the beginning of FY 20-21

a financial graph on a paper with ruler, pens and pencils
A big paradigm shift will happen in the real estate sector due to the favorable decisions of the budget.

In the light of the pandemic and due to the effect of lockdown, all real estate constructions are on hold. This is continuing for at least 2-3 months. Even after the offices resumed from May 30, due to the safety and security of the construction workers, almost all the real estate projects are still under seizure. As a result, a significant amount of loss has incurred. Many people, who were planning to invest in a property before the outbreak had somewhat stepped down after the start of the lockdown. But after the bit of relaxation of the lockdown, the Bproperty website had a nearly 50% rise of traffic on their site. This might mean that people, whether it is due to the budget announcements or something else, are thinking of returning to the market and invest again.

The major changes in the real estate sector after the new budget (FY 20-21)

bird's eye view of some houses
Some of the major decisions will be the key stakeholders for revolutionizing the sector

It has been a month since the new budget has been declared after the announcement of budget regulation. Keeping the previous amendments in place, the government has taken two key decisions that will reflect the major changes in the real estate sector after the new budget. These new decisions will surely incentivize the investors to spend immediately. Let us explore a brief overview of these new decisions.

No inquiry into undisclosed money invested in real estate

Another major aspect of this budget is the Honorable Finance Minister has announced that if any undisclosed money is invested in real estate, that won’t be ever inquired of by the Anti-Corruption Commission (ACC) or the National Board of Revenue (NBR). This is quite a revolutionary decision and will create a major channel of investment in the real estate sector. Hence this will ultimately lead the sector to expand and create scopes for major development. The decision will have a big-scale trade-off in the future of the real estate. This will incentivize a lot of investors to come forward and invest without any fear of regulatory scrutinization. This is not only good for the real estate sector but also upscale the economic growth of the country. The real estate sector after the new budget has now every potential to bloom with more flamboyance.

Reduction and inclusion of other costs in the registration cost clout

Previously, the registration cost for buying a property was 14% of the total cost of the property. But at present, in the new fiscal year, the government has chopped this off to 10%. Not only that, but the registration cost of 10% will also cover other fees as well. These are stamp duty, VAT, and local government tax besides the registration fee itself. This is a big step forward to revitalize the market and fight against the economic recession. The decision was well acknowledged by The Real Estate & Housing Association of Bangladesh (REHAB) and is looking forward to the regeneration of the sector after the pandemic.

A percentage of the fees in relation to the property price of this newly proposed registration cost breakdown is as follows.

The buyer of a property will need to pay, (% of the property price)

  • 1% as registration fee
  • 1.5% as stamp duty
  • 3% as VAT  and
  • 2% as local government tax

a pie charrt showing the percent composition of property registration costIf we make a percent composition of this registration cost, 13% goes to the registration fee, 20% to stamp duty, 40% to VAT, and 27% to the Local Government Tax. It means a major portion of the registration cost goes to the collection of VAT. The least amount goes to the actual property registration fee. This is a major decision by the government for increasing the capacity of investment in infrastructural development. The decision as well lessens the burden of 4% registration fees cost of the general buyers.

What are your thoughts on the real estate sector after the new budget of FY 20-21? Do you think the above decisions will have a positive impact on real estate in the upcoming days? Let us know your thoughts in the comment section below.

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