Housing sales dip to 5-year low amid recession

A 20%-30% surge in flat prices owing to a sharp rise in the prices of construction materials and the latest Detailed Area Plan (DAP) for Dhaka city has caused real estate sales to plunge to a five-year low this year, according to industry insiders.

The five-day housing fair that ended in the capital Sunday also bore witness to buyers losing affordability, as the volume of spot orders received in the fair was the lowest in the past seven years. The number of visitors was also some 3,000 fewer compared to last year, organisers said.

Data revealed by the Real Estate and Housing Association of Bangladesh (REHAB) shows that realtors and their linkage industries received spot orders worth Tk351 crore at the fair this year although housing companies got orders of around Tk401 crore even last year amid the pandemic.

REHAB President Alamgir Shamsul Alamin Kajal told TBS that the inflation pressure caused by the Russia-Ukraine war has left a big impact on house sales as people's purchasing power has decreased. Besides, a 30%-50% reduction in the floor area ratio (FAR) depending on the area in the new DAP has forced housing companies to increase apartment prices, he added.

The prices of construction materials including rod and cement have increased by 30% to 50% over the past year, he mentioned, adding that if the current situation continues, realtors will be forced to hike apartment prices by another 20%-30% next year. This will create problems for buyers and sellers, he observed.

"The number of apartments and plots sold in various cities of the country including the capital Dhaka and Chattogram this year is lowest in the last five years," Alamgir said.

Fewer orders, visitors in housing fair

Small- and medium-sized flats were in higher demand at the REHAB Fair this year.

On the concluding day of the housing fair at Bangabandhu International Conference Centre in the capital on Sunday, REHAB said flats, plots, and commercial spaces worth around Tk302 crore were sold or booked in the fair this year. Besides, the backward linkage industries including rod, cement, and ceramics received another Tk50 crore worth of orders in the fair.

This year, about 450 apartments of 123 housing companies were sold or booked, while the number of plots sold or booked is 300.

The fair drew some 17,000 visitors this year, according to REHAB.

In the 2021 edition of the housing fair, about 640 apartments of 155 companies, and 450 plots worth Tk401 crore were sold or booked. The number of visitors to the fair was around 20,000 last year.

Due to the reduction in the Floor Area Ratio (FAR) of buildings in the announced latest DAP, most of the buildings in the main city of Dhaka will be 4-5-storey-high, which could be 8-10-storeyed previously, said industry people. 

REHAB officials said that the new DAP has decreased the building size by 40% to 50% due to FAR reduction, which is why realtors have increased the prices of apartments. Because of this, buyers are struggling to buy apartments.

Infographic: TBS

Many people who have plans to buy flats are waiting to see if prices come down.

Small flats in higher demand

Realtors have said that the demand for small- and medium-sized flats was high in the recently concluded housing fair.

Sheltech Ltd Senior Assistant General Manager AKM Rafiul Islam told TBS, "We have all types of flats including small, medium, large, and luxurious. But this time the demand for small and medium flats was a little higher."

Echoing him, Concord Real Estate Executive Officer Afjal Hossain said generally small flats are 1,000-1,300 square feet and medium flats are between 1,300 square feet to 1,600 square feet in size and are priced between Tk1 crore and Tk2.5 crore. "These flats are in high demand now," he added.

Besides, the demand for apartments was high in areas such as Uttara, Mirpur, and Mohammadpur where land is relatively cheaper.

REHAB Vice-president Kamal Mahmud claimed that the demand for flats in Uttara and Mirpur areas has increased many times this year due to improved transportation facilities in the areas.

Navana Real Estate Limited Senior General Manager (Sales) Moazzem Hossain said, "We are getting more customers from the Mirpur side. Most of the customers are looking for ready flats."

Credence Housing Limited Manager and Team Leader (planning and investment) Rezaul Karim said, "Ready flats in Mohammadpur's Iqbal Road, Humayun Road, and Babar Road are attracting more customers."

Realtors participating in this year's housing fair also said that flats in Dhanmondi, and Khilgaon also were in good demand. 

Rehab vice-president Sohel Rana said this time the middle class bought more apartments and flats in the housing fair as always.

An official of a luxury apartment-selling company, however, claimed that their sales of luxury apartments have not decreased. In fact, it has increased over the previous year, he said, adding that they build and sell luxury apartments priced between Tk8 crore and Tk40 crore.

Mohibur Rahman who works in a private company has booked an apartment of Credence Housing in Mohammadpur area in this year's REHAB housing fair.

He told TBS, "I had been trying to buy an apartment for three years. Prices are increasing every year. I have booked a 1,350-square-foot apartment for Tk95 lakh. I booked the flat this year from the thought that prices will go up further next year. I paid Tk15 lakh in the fair, the rest of the flat price will be borrowed from a bank. An agreement was signed with the housing company in this regard."

2022, a dull year

According to the latest data provided by the Directorate of Registration, apartment sales contracts worth around Tk19,000 crore have been registered in all sub-registry offices across the country from January to October this year. During the period, sales contracts worth around Tk10,000 crore have been registered in areas under Dhaka.

Last year, from January to December, around Tk35,000 crore worth of apartment sales contracts were registered, while the figure was about Tk31,500 crore in 2020, about Tk38,000 crore in 2019, and about Tk29,600 crore in 2018.

Registration directorate's Assistant Inspector General Sheikh Md Anwarul Haque said that the number of sales contracts of apartments, plots, commercial spaces, and commercial plots that have been registered till September this year, is not even half of that of the same period even during the Covid crisis. Apartments, in particular, are the least sold this year, he added.

Low demand for bank loans

Delta Brac Housing Finance Corporation Ltd Managing Director and CEO Nasimul Baten told TBS that the loan disbursement to the housing sector remained somewhat similar to last year till July this year, but the disbursal has been decreasing at a year-on-year rate of about 10% since July.

"Our main borrowers are housing companies. Due to the war in Ukraine, the prices of all kinds of housing materials have increased. As a result, many people are not able to take up any project. Again, due to the new DAP, housing traders are refraining from taking up new projects. So, they have reduced the amount of borrowing."

Effect of the withdrawal of relaxed rules for the investment of undisclosed money

In FY22, the revenue board allowed black money to be invested in the housing sector without prying into the sources. 

Alamgir Shamsul Alamin (Kajal) feels that sales in the housing sector have slowed due to the withdrawal of this opportunity in the current financial year's budget. 

Since 2012, an average of Tk1.5 lakh crore has been invested in the housing sector every year. In FY22, an additional investment of about Tk20,000 crore was made thanks to the amnesty offered to undisclosed money holders. 

Overall, new investment in the housing sector is likely to fall below Tk1 lakh crore this year, he said.