Budget likely to bring Cloud 9 in the Real Estate-The insight of our CEO, featured in the Daily Star

Text By, Tanvir Shahriar Rimon, CEO, Ranks FC Properties Ltd.

Posted on Posted on Jun 15, 2020

When everyone is hesitant about the question of life or livelihood, we are likely to see the brighten colour of trades in Real Estate after the announcement of the budget by the Finance Minister. The government has set a target of 8.2 percent growth in the gross domestic product (GDP) in the 2020-21 fiscal year.

Given the situation, this may seem like a very ambitious goal to many, but to me it doesn’t seem very difficult subject to fulfilling certain conditions. Similarly, the IMF strongly forecasted back in April that Bangladesh's GDP growth could be 9.5 percent in the next financial year (a prerequisite they also mentioned for the growth, that was excelling the private investment). These growth figures are very important to me as I witnessed the vibration of this housing industry moves with the upward economic trend. 

In the last five years, when the country's GDP growth has been sustainable, we observed a quicker bounce back of the housing sector from the recession. Although there were always some problems and the housing sector has also been ignored over the years by the policy makers.  However, this sector directly and indirectly contributes about 12 percent to the country's GDP. There are 260 linkage sectors’ fate also swing with the pace of the development of this very sector. 

Let me give a small example. The production of steel mills has come down to 30 percent due to the closure of real estate and construction activities in this volatile situation. Cement production has come down to 10 percent as well . This shows that the sector has tremendous influence on the economy!

The housing sector is one of the most affected domestic business sectors in the recent Pandemic situation. The livelihood of 4 million people involved in this sector. The fate of the construction workers as well as the future of half a million professionals are cloud capped . “white collar" employees especially sales and marketing professionals, engineers, architects, accountants, are going through this ambiguity. The long two-month lock-down situation has caused indescribable losses to the service sector. 

Although the holidays are over, economic activities are not yet fully operational. All in all, our business is suffering tremendously. New sales & instalment collection were almost stopped for 2 months. Besides, the project sites were also shut due to lockdown.

Since the opening of the office on May 31, we have been adapting to the new normal ecosystem.  Putting utmost priority to the Safety & well-being of employees and customers. We are also renovating our projects site maintaining social distance & safety rules. And obviously it is increasing the project cost. However, we have given topmost  importance to the health of our workers. While going to the lock down, We wanted to make sure our peoples are healthy & fit after the break. In this particular case, we have achieved 98 percent success. Our people back fit & healthy at work. At present, we are focusing on long-term possibilities rather than short-term problems.

We are trying to see the cloud 9 through this year's budget. Good thing is, one of our long-standing demands has been emphasized in it.  The finance minster proposed no inquiry on undisclosed money while investing in Real Estate (including commercial property). NBR or the ACC will not be able to raise any question if the undisclosed money is conditionally invested in the housing sector. With that opportunity housing sector will definitely gain a momentum. 

In other words, the owners of undisclosed money are getting an opportunity to invest money in this sector by paying a certain amount of tax per square meter. There could be no better initiative to bring back a class of people from money transferring abroad. Even then, I know some people will surely oppose it. Those who have been protesting this opportunity for many years have indirectly cooperated in transferring undisclosed money abroad in the name of investment. Of course, I do not expect them to be silent this time. On the contrary, I like the Finance Minister's proposal that 50 percent tax will be levied if money laundering is proved. Hopefully this initiative will encourage people to invest in this huge sector.

Besides, Covid crisis is also an eye opener for investors who like to invest in Malaysia, Canada or Singapore . It has been proven that no one is safe from such global misery even by investing abroad. Many could not even fly that time . Therefore, the main interest should be making Bangladesh to Singapore, Malaysia by investing in to the country's housing & development sector. I hope investors will take advantage of this opportunity.

In the budget of the next financial year, the target of collecting of VAT has been set at one lakh 26 thousand crore. Besides, the revenue collection target has been set at Tk 3 lakh 30 thousand crore. An average of 10,000 units of flats are handed over in the country every year. But most of the buyers are not registering flats even after taking physical handover for many years. Hence, The government is losing revenue. If the flat registration cost is brought down to 5/6 percent, then at least 60 percent unregistered flats will come under registration. The government will get revenue as well as VAT collection from this sector will also increase.

Also in our country the transfer fee of a second hand car is much less than the registration fee of a new car. But the same amount of money has to be spent for the registration of secondary flats. This inequality needs to be eliminated. It is not logical to charge more than 3 percent registration fee for the transferring used flat. If we take this issue seriously, we will be able to create a secondary market for real estate which will add value to the primary market for sure that will ultimately ensure money movement in this trade. 

Another important issue I should address, as the housing loan is being given at a rate of only 5 percent to ensure housing for government employees, if it is also given to any flat buyer of a maximum size of 1,200 sq ft for their first home, will benefit the middle class to have a place of their own to live. This initiative is needed to make real estate affordable for people, to make the market sustainable & also to create new buyers for the industry growth . 

Another point that needs to be mentioned that any major policy changes in the budget pertaining the linkage industries , has a direct impact on the housing sector. Analyzing this year's budget in detail, I noticed that it has been proposed to increase the Regulatory duty(RD) on some imported chemical of MS Rod like Ferro-Manganese, Ferro-Silico Manganese and Ferro-Silicon. It has been proposed to enhance from pre-budget 10 % to 15%. On a separate note as far as my knowledge is concern, the price of various raw materials for making rods is increasing in the international market. In this situation, it is necessary to reduce the RD of chemicals instead of increasing . As I strongly believe the price enhancement of any raw materials related to real estate industry will affect the price of housing.

But all in all, this budget seems to me to be quite optimistic. Thanks to the finance minister for this brave & timely stand. Now We hope that the quick implementation of the stimulus package, creating a fund for the middle class , special home loan facilities in a 5% interest rate for middle income group, and the reasonable reduction of flat registration fees, will help the industry emerge from the crisis, We believe.

The Corona situation has created an unexpected economic challenge for us that cannot be tackled by anyone alone. On the contrary, we can hope to get rid of this crisis through the collective efforts of all. And we believe that the policy makers will take the role of torch bearers to enlighten the darkness in trade created by Covid 19