Bangladesh’s real estate industry – once one of the heavyweights in terms of growth – is now struggling to stay ahead amid the economic downturn, as hurdles triggered by policy measures and soaring costs of construction materials are putting the industry on the defensive.
Latest amendments to the Bangladesh National Building Code (BNBC) have inadvertently led to soaring flat prices, rendering housing increasingly unaffordable for the average city dweller.
Additionally, escalating construction material costs, particularly mild steel (MS) rods, have exacerbated the situation. The revised floor area ratio (FAR) regulations have led to a significant increase in flat prices, making housing increasingly unaffordable for the average citizen.
This situation is compounded by the worsening USD shortage, which has raised the prices of imported raw materials, adding pressure to the already strained real estate market.
Industry stakeholders are calling for urgent government intervention to stabilise material prices, and address bureaucratic inefficiencies to safeguard the future of Bangladesh’s housing sector.
Alamgir Shamsul Alamin Kajal, director in charge at Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) Standing Committee on Real Estate and Housing, said, “The Bangladesh National Building Code (BNBC) was initially formulated in 2008.
“This code was subsequently revised in 2020. The recent amendments to the floor area ratio (FAR) regulations within the updated law have inadvertently led to a surge in flat prices.”
Kajal said, “Because as per the new rules, the height and area of the building will have to be reduced, at the same time, the number of flats will have to be decreased as well. We are against any disparity in the FAR, and the rules should be standardised.
“Taking wide roads as parameters should be the same everywhere. This escalation in pricing has rendered flats increasingly unaffordable for the average citizen, surpassing their purchasing power. The housing sector will be in crisis.”
He then pointed out, “We are always interested in change, but it should be people-friendly and business-friendly. REHAB is the only organisation in the housing sector in Bangladesh and we are the biggest stakeholder.
“But the Housing and Building Research Institute (HBRI) did not discuss these matters with us before the latest amendment became effective. As a result, our interests were not protected.”
Kajal continued, “In the housing business of Bangladesh, 99 per cent of the raw materials, except local bricks and sand, are imported. The price of raw materials has also increased due to the increase in the USD rate, which has severely impacted this industry.
“There are more than 270 sectors linked to the construction industry, including providers of key materials such as MS rod, cement, sand, brick and tiles. The USD rate has increased by 35 per cent – 40 per cent in four years. But we cannot increase flat prices at the same level.”
Developers are at a loss because on one hand sales have decreased, on the other hand production has decreased because the cost of materials has increased. The overall sale of flats has decreased as the prices are high, industry insiders told The Business Post.
Abu Elias Linkon, currently building his home in the capital’s Banasree area, said, “The price of construction materials, particularly of the mild steel (MS) rods, is increasing day by day.”
According to data from the state-run Trading Corporation of Bangladesh (TCB), each tonne of MS rod was being sold for Tk 93,500 on Thursday.
Linkon added, “However, in reality, the rate has reportedly crossed Tk 100,000. The rising cost of rods is having a direct impact on the real estate and construction sectors of the country as it drives up building costs. This has reportedly increased the price of a flat by around 30 per cent.
“Not only rods, but the prices of other construction materials are also soaring steadily. Therefore, we urge the authorities concerned to look into this matter sincerely, and take every initiative to keep the prices of construction materials as low as possible.”
Industry insiders say the primary challenge in project approval for the real estate sector in Bangladesh stems from the inefficiency of the RAJUK office, making it nearly impossible to get designs approved within the stipulated 45-day period.
In this regard, Mohammad Nizam Uddin Jitu, chairman at FBCCI Standing Committee on Real Estate and Housing, said, “The main complication in project approval is the incompetence of RAJUK office.
“Even if it is said to approve the design within 45 days, it is absolutely impossible now. We have talked about a one stop service for design approval. Doing so will reduce this suffering somewhat.”
Jitu then said, “In addition, the price of fuel oil has increased by several points, which in turn caused the freight costs to go up. This cost has to be paid by someone. It ultimately falls on the buyers.
“Even the government has increased property-registration fees for some important areas in the current fiscal, further fuelling cost hikes.”
Expressing the gravity of the situation, Jitu said, “Once we had 1,700 members in our association but now it is only 800. This means more than 50 per cent of the members have already left the sector. We are facing obstacles everywhere.
“Banks are no longer interested in giving us loans. They have unofficial reluctance, because the repayment term is very long.”
