Realtors rely on govt’s stimulus package
Like other economic sectors, real estate and housing in Bangladesh has been grappling with Covid-19 pandemic which still shows no signs of abating. For turnaround, this vital economic sector now pins hopes on the government's recently announced twin measures--stimulus package and the provision of converting black money into white-- with the expectation that government's promised loans are distributed in a fair, effective and prompt way and there is a considerable response from the key players in the black economy.
The housing and real estate companies are considered service industries as per government circular issued in 2013 and are entitled to avail themselves of advantages of the government's Tk.72,750 crore stimulus package under which Tk.30,000 crore was allocated as loans for the affected service providers and industries through scheduled and commercial banks at an interest rate of 9 percent, of which government subsidy will cover 4.5 percent. This package is to provide emergency funding for the industrial units as working capital with the prime objective of keeping the pace of growth and preventing the axe from falling on an estimated 40 lakh workers employed in the housing and real estate sector across the country at the present time. Bangladesh Bank has already set up a Revolving Financing Scheme to share half of the Tk. 30,000 crore stimulus fund in order to ensure liquidity for the banks and financial institutions.
But government initiative to salvage industrial and services sectors seems not working as expected as there is apparent delay and loathness noticed on the part of the banks and financial institutions in disbursing loans and it is evidenced when Bangladesh Bank recently cautioned them (scheduled banks and financial institutions)that they were uncooperative with the industry owners and ordered them to disburse loans by this month. For quick and smooth release of funds, Bangladesh Bank also relaxed the guidelines for the Internal Credit Risk Rating System for Banks (ICRRS) but asked bankers to follow their own credit risk policies and set up 'Special Desks' to allocate loans.
In the case of whitening the black money in the recently announced 2020-'21 budget, it is a timely decision from the government side as it has been taken in an apocalyptic situation created by the Covid-19 but there are some pros and cons of this much-talked about issue. Now this black money after a 10 percent tax could be invested in the development of real estates. Earlier, this facility was restricted to economic zones, hi-tech parks and buying flats at nominal tax rates.
There is no doubt that the provision of whitening black money would encourage dishonest people to steep in corruption and thus to amass wealth through ill-gotten gains and unsavoury practices that will hinder the country's long-term socio-economic development. But it has an advantage of dissuading people from stashing money abroad. According to some estimates, over Tk. 50,000 crore has been funnelled out from the country every year.
In a new development, the government has reduced the flat registration fees considerably and this timely initiative will definitely give the housing and real estate sector a shot in the arm since an average of over 10,000 flats have been handed over to buyers every year and a lion's share of them has remained unregistered due to high registration fees, depriving the government of a huge amount of revenue earnings.
But the government still needs to concentrate on some other key issues like setting up of an one-stop-service center and a special supervisory body to monitor developers' activities in order to help the housing and real sector to bounce back with a vengeance. Establishment of a one-stop-service center is the need of hour to do away with the archaic red-tape system through which a developer or a builder is required to approach at least 10 to 12 different government ministries and agencies to get a project approved.
It is said in the business that losing money is somewhat acceptable but losing reputation is a disaster and the latter has taken place in the country's housing and real estate market for the past many years when some unscrupulous realtors hoodwinked their customers both at home and abroad. Since 1980s, builders and developers have begun to look overseas market of over 10 million Bangladeshi migrant workers whose life-time dream is to own a flat or plot in their country and initially there was overwhelming response. But as years wore on, their enthusiasm became lacklustre when many of them were duped and delayed for years in handing over their properties and subsequently, Bangladeshi expatriates virtually have turned their back on the housing and real estate market in their own country.
That is why government should zero in on the establishment of a strong special monitoring cell to regain confidence in this vital economic sector of housing and real estate to which around 260 sub-sectors are related and their combined contribution to the country's GDP is estimated at 12 percent. There is also a need to rethink the Detailed Area Plan (DAP) in the wake of growing population in Dhaka.