Flats sale, land transfer hit rock bottom
Bangladesh’s real-estate market has been going through a sluggish trend at least for the last eighteen months with the sales of both flats and land reaching rock bottom, business-insiders said.
Land prices had been skyrocketing for the last two decades till 2010. In areas of Dhaka and on its outskirts, the prices soared by more than 300 percent between 2000 and 2007. The prices rose further by about 50 percent between 2007 and 2010, according to Real Estate & Housing Association of Bangladesh (REHAB).
As direct correlation to the land prices flats prices skyrocketed beyond purchasing power of the clients, the upper to middle income people around the same period but the down-trend effect took about a year or so to hit the flats segment of the real estate marker compared to the land market segment.
People familiar with land-registration process have attributed the current sluggish trend primarily to factors such as a substantial fall in land prices, enhanced official cost in executing sale or purchase deeds and higher registration cost. Analysts, however, see collapse of the Bangladesh’s stock market in 2010 and labour market in the middle east as some of the major factors behind burst of the real-estate market in Bangladesh.
The government earns revenue amounting to at least Tk 50 billion on an average a fiscal year from 13 different segments of the real estate industry. The revenue-generating sources are registration of transfer deeds, including fees, certified copies of the documents, stamp fees, tax at source, renewal fees, land handover fees and other kinds of fees.
But the total revenue receipt from the sector in the first quarter of the FY’15 was recorded less than 15 per cent of the overall annual target.
Official figures show revenue collection from land property transfer fell by nearly 32 per cent in the July-September period of the current fiscal year over the preceding three months (April-June) or the last quarter of the previous fiscal.
Inspector of Registration Office (IRO) Mr. Sharafat Ali Khan confirmed the downtrend in land sales in recent months. He said expatriate Bangladeshis on an average account for nearly 25 per cent share of annual land transfer. “But they are now facing many difficulties, especially in Malaysia and Middle-Eastern countries, which is casting a negative effect on this sector.”
Seeking anonymity, another senior official of the IGR Office said “Sales of the land property dropped more than 40 per cent in comparison with the volume in 2009 and 2010. Since then, the downward trend in the sale continues,” he said.
Experts also suggested that the government take immediate and strict measures to remove various kinds of anomalies and corruption in the country’s century-old property-registration system to ensure hassle-free and faster registration process.
Land and apartment buyers normally pay a minimum of 8.0 per cent and a maximum of 14.0 per cent of the land prices to government exchequer in the form of fees and charges, depending on the location of the property.
Currently, apartment buyers pay 14 per cent, including gains tax at 3.0 per cent, stamp duty at 3.0 per cent, registration fee at 4.0 per cent and value-added tax (VAT) at 1.50 per cent.
The registration cost is 7.5 per cent in Pakistan, 7.0 per cent in India, 5.0 per cent in Sri Lanka and 4.5 per cent in Nepal, according to the REHAB.
Around 15,000 flats are built a year in Bangladesh, the REHAB figures indicated.
“Thirty per cent of the apartments have remained unregistered,” another REHAB official said. He said the housing industry has been facing a very difficult time since in July 2010 when the government suspended fresh gas and power connections to households.
Md. Humayun Kabir, a lawyer of the Supreme Court, who deals with land-related matters, said the land sales have gone down significantly in recent times. “People might have felt insecure to invest in land at the moment because of current confrontational politics,” he observed.
He also mentioned lengthy procedure involved in mutation as it takes five to six months, causing sufferings to the buyers of land.
Meanwhile, other sources noted that many potential buyers of land and apartments were not in a position to show their funds matching the deed value because of a large amount of money remaining still undisclosed, for a variety of factors.
Such buyers fear about getting into tax-related troubles later on, if their wealth statements, submitted along with annual tax returns, do not provide reasonable grounds for explaining properly and the sources of funds for purchases of land or apartments, the sources added.