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The current situation of the real estate sector in Bangladesh

Md.Shafiul Islam Rayhan
27 Dec 2021 00:00:00 | Update: 27 Dec 2021 01:37:31
The current situation of the real estate sector in Bangladesh

It is very surprising that the real estate market in Bangladesh is performing quite well at present compared to many other countries in the world. The sector that suffers the most from economic downswing in any country is the real estate sector. So, at the beginning of Covid-19 pandemic in Bangladesh, real estate professionals had the idea that as the pandemic is wreaking havoc on the economy as a whole, it would take a long time for the sector to turn around. But the idea was not correct. We have seen that in the three months of April, May and June, when the first lockdown began in late March 2020, sales fell to the lowest level in the history of the real estate sector in the country.

However, a different trend was noticed from July and the customers started looking for real estate products. Sales began in earnest towards the end of August, and numerous unsold ready-made flats were sold in the recent years. Besides, the demand for old small and medium flats was widely noticed. The real estate market analysis of the last one year in different major cities of the world shows that, the sales rate in Mumbai, New York, Berlin, Dubai, Istanbul, Rome, Paris and other real estate friendly big cities has decreased by 30 to 60 per cent. Compared to that, the sales rate in Dhaka has decreased by only 20 per cent vis a vis the normal time. Now a question arises there, what is the reason of the increase in sell of real estate products during this pandemic and why the real estate sector is performing better in Dhaka than other cities in the world? Now let us discuss the phenomenon in detail.

Expatriates play a great role in the economy of Bangladesh. The remittances have been increasing day by day as increasing numbers of expatriates have been working outside the country. Many expatriates have lost their job abroad and as the standard of living outside the country is very expensive, they are planning to return home permanently and buy a flat with their long-term savings. That is why many of them are leaning towards buying flats. A large number of expatriates, especially those who have lived in the Middle East for a long time but have not received citizenship in that region, are mostly looking for small or medium sized flats in the country. There is another category of expatriates, especially those living in Europe or America who bought a flat or land in this country a long time ago, now they want to sell these properties because they have got citizenship in that country and their next generation is not likely to return to Bangladesh. In this case, they are selling many properties for less than the market price. When a product is sold below the market price, a new buyer or investor is born there.

Almost all investment avenues have become more risky since the beginning of the pandemic. The situation is very critical in almost all sectors except medicine, IT and agriculture. So, few want to invest in a new business. That is why many people who were earlier not interested in buying real estate are currently thinking of buying or renting a small or medium flat without finding another way to invest. Also at present the banks have a lower deposit interest rate than ever before. As per the rules of Bangladesh Bank, now banks or finance institutions are paying interest to depositors at a maximum rate of 6 per cent. So many people are not too keen on keeping their money deposited in the banks.

There are many expatriates who have bought real estate products a long time ago but are now determined to sell at a lower price due to the low number of customers in the market. Another reason to get products at a lower price is that many small and medium developer companies do not have enough cash in hand and they are selling their products at a much lower price than the market price or only at their construction cost without any profit. However, it is not possible to get a complete idea of ​​the price of a product, how much the current market price has gone down, what area is likely to have a higher price in the future without the help of a professional investment consultant. Now home loan interest rates are the lowest in many years. From April 2020, Bangladesh Bank has set a maximum interest rate of 9 per cent for all types of loans except credit cards and many are taking advantage of this opportunity. In many cases, government officials and employees are getting loans at a much lower rate of four and a half or five per cent. And because of the long-term repayment of these loans, many are investing in real estate. Banks or financial institutions are increasingly interested in providing home loans as many of the other sectors are currently in dire straits. Home loan default is much less likely than any other loan.

Many businesspersons have made hefty profits in the past and bought various properties but many businesses are losing a lot of money during the Covid-19 pandemic period as there is not enough cash and sufficient supply to sustain the business. Many businesses need a lot of time and money to rebuild when their infrastructure collapses. In many cases, it cannot recover. And many are willing to sell such properties for less than their market value and some opportunity-seeking buyers are taking advantage of these opportunities.

Although the corona virus outbreak has affected all sectors, now the garment sector has seen some improvements since July this year. For example, due to the long lockdown in our neighboring country India, many buyers are leaning towards Bangladesh. Many countries around the world are gradually severing trade agreements with neighbouring Myanmar due to the military coup and most of their country's readymade garments orders are coming to Bangladesh. Experience shows that the demand for real estate products increase steadily when the garments sector runs well in this country.

While the demand for residential real estate products is relatively good the demand for commercial real estate products has declined significantly in the last one year. Because overall business has shrunk so much, many businesses have moved offices into smaller spaces instead of buying or renting large spaces. Also, because of the increasing number of customers on e-commerce platforms, merchants are selling their products and services on various online platforms, especially websites, apps, Facebook, Instagram or YouTube and thereby reducing the number of outlets or shops. On the other hand, the demand for residential space is increasing to reduce the demand for commercial space. Now many people are working online from home. Students are studying online so they are decorating every room like home office.

Even in the case of new flat construction, lay out planning is taking the shape of home office interiors. The current demand for small and medium sized flats is likely to increase even more in the future

Real estate plays a vital role in the national economy as the sector contributes significantly to the direct and indirect employment of about five million people by operating more than 200 sub-sectors.

 

The writer is a real estate and investment consultant. He can be contacted at [email protected]

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