Like hundreds of real estate investors, Arifur Rahman (not his real name) wanted to take benefit out of rising property prices. He had invested in plots of a real estate company that launched several projects in the city and adjacent areas. Impressed by a company’s advertisements, Rahman invested in multiple plots in the outskirts of Dhaka city in 2010. Around 20 of his friends and relatives also invested in the projects, speculating high returns. But drastic fall in land, plot and apartment units dashed their hopes. Many wanted to link the fate of the real estate market with the stock market crash after 2010. “Our combined investment was around Tk100 crore.
Each one in our group booked plots in these projects,” says Rahman. But the projects, which were scheduled to be ready by 2012, have been suspended and his queries sent to the company went unanswered. “Some of the projects where we invested were yet to take off,” said Rahman. The story of Khan Mohammad Asfaq Hasan, a 30-year old, is grimmer than that of Rahman. Hasan invested Tk50 lakh in a project of Canadian Garden City in Naraynganj, a concern of Global Neway, in January, 2012 by selling his ancestral land and borrowing from his relatives. “The company promised to hand over the plot by 2012 but is yet to fulfill its commitments,” Hasan said. Rather, the company’s brokers, who tantalised me before, now intimidated me. They threatened to humiliate me when I asked to get my money back,” he said. Abul Kashem was slightly luckier than Rahman and Hasan. Kashem had booked a 1,150 square feet apartment unit in a project of Multi Plus Engineering Construction Ltd in Khilgaon in mid-2011. He paid Tk200,000 as an enrolment fee for two apartment units diverting his fund from stock market that was on declining trend at that time. “And now the real estate sector condition is not good. Then, I asked the company to return my money. Fortunately, I have a friend in the company. So, I easily got the money back,” he said. Many small real estate companies are on the verge of closure, leaving behind investors with nothing except purchase agreements, said an industry insider. Recently, Real Estate and Housing Association of Bangladesh (REHAB), a platform of realtors, cancelled its five members in response to complaints lodged by their clients of not refunding millions of taka to them. The five companies are Green Delta Housing and Development, RSA Real Estate, Janata Development and Technologies, Intimate Home Builders and Style Real Estate. Real estate has become a popular investment avenue during 2009-10 when it was booming and prices of property prices went sky-high.
Before beginning to nosedive in property prices from early this year, it had remained flat in 2011 and 2012. The builders, however, blamed economic slowdown and political chaos for slump in their sales. The combined unsold apartment units of the realtors in Dhaka is 20,000 to 22,000 valued more than Tk3,300 crore, which is more than 24% of the country’s gross domestic product (GDP), according to the REHAB. The situation might look even grimmer if the figures for unfinished projects or those under construction were to be included. For the entire sector, the unsold apartments could be many times more, as a majority of the developers, estimated nearly 500, are not REHAB members.
Even after 30% drop in apartment prices in last one and a half year, offering up to 25% discount and wide range of gifts such as LCD televisions and cars, realtors have failed to hook expected buyers. “Realtors, already weighed on electricity shortage, started feeling the pain of economic slowdown and deepening political uncertainty,” said REHAB President Nasirul Hamid. REHAB Vice President Liakat Ali Bhuiyan estimated that apartment sales in recent time fell more than 50% due to economic slowdown, electricity shortage and the sorry-state of the capital market. Construction works of around 10,000 units have already been suspended because of the strikes and blockades, he said. Sheltech Managing Director Toufiq M Seraj said that his company experienced 30% drop in sales in the recent months. But most alarming is that cancellation of apartment houses, mostly booked nearly one year ago, is gradually increasing over the last eight months, he said.
In the last one year, cancellation rate rose to 25%, enlarging the list of backlog of apartment units, he said. Tanveerul Haque Probal, managing director of Building For Future, also attributed to a combination of political instability and poor economic growth. The country’s economy grew more than 6% in the last three years. “Unsold apartment houses are growing. People are cautious ahead of national election and some are expecting more fall in property prices,” he said. “The market is actually almost bottoming out.” The real estate sector contributes to about 12-14% of the country’s GDP and employs about one lakh skilled and about 35 lakh unskilled workers.
It emerged in its present form in the early eighties. Policy Research Institute Executive Director Ahsan H Mansur said the real estate sector has no entry barrier. “With the stock market booming and no let-up in demand for real estate, a number of players have entered the scene. Though not all new developers are dubious, many investors fall prey to unscrupulous companies,” he said. Until there are entry barriers and tough rules for developers, it’s your responsibility to verify the builders’ past track record before investment, he said.
According to Sheltech Field Survey in 2010, Dhaka is presently growing with an unprecedented growth accommodating more than 600,000 people per year, meaning every year more than 120,000 units are required to house them. In this situation, the supply in the city is only around 25,000 units, of which real estate developers contribute 15,000 units and the remaining by the individual developers, said the survey.
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