Apartment sales slow for rising prices

Overall flat sales are going slow due to their high prices owing to the country's macroeconomic vulnerabilities, a rise in raw material prices as well as an increase in registration costs, according to realtors.

According to them, flat prices increased by up to 40 percent during the last one and a half years due to a rise in prices of construction materials, which is a direct impact of the fallouts on the global economy for the Russia-Ukraine war.

An assessment of the Real Estate & Housing Association of Bangladesh (REHAB) shows that the cost of rod required per square feet increased by Tk 130, cement Tk 24.75, sand Tk 28.12 and stone chips Tk 78.75.

In case of bricks, it was Tk 50, aluminium frames Tk 40, iron grilles Tk 12, general electrification Tk 30, sanitation Tk 30 and labour charge Tk 60.

In this situation, the cost of constructing buildings increased by around Tk 500 per square feet.

Against this backdrop, flats prices increased by around 35 per cent to 40 percent depending on the location of the property, industry insiders noted.

The realtors cited that the devaluation of the local currency, taka, against the US dollar also fuelled the prices of raw materials abnormally.

A number of prospective clients opted against making purchases as property prices increased due to the price hike of raw materials, Nashid Islam, director at ABC Real Estates Limited, told The Daily Star.

"Price of raw materials increased as an impact of the Russia-Ukraine war," he noted, adding that sales in the real-estate sector was stagnant.

Besides, guidelines in Detail Area Plan (DAP) prepared by Rajdhani Unnayan Kartipakkha (RAJUK) are not clear, which is also having a negative impact in the real estate sector, he said.

"As there is no clear clarification regarding the new DAP, we cannot take decisions about new projects," he noted.

He demanded that the government issue clear clarifications on the new DAP.

There is a huge gap emerging between realtors and buyers due to the abnormal price hike of flats due to the price rise of raw materials and significant increase in the cost of production, said Kamal Mahmud, first vice-president of the REHAB.

This situation cam about just two to three months before the last national budget, he said, citing that the sector's sales were coming about at a snail's pace.

Basically, people do not have enough money to purchase flats as the overall economy is not favourable for the real estate sector, he said.

"We are all even worried that the backward linkage industries are also suffering with the real estate sector and hundreds of thousands of workers will become unemployed," he said.

The impact may ultimately fall on the economy, he said, citing that the realtors have no immediate alternative to resolve the challenges.

If a revival of the economy comes about after the upcoming national elections in January, the situation may improve, he noted.

Referring to the property price hike, Mahmud said prices of mid-size flats (1,200 square feet to 1,500 square feet) increased to around Tk 1.20 crore from Tk 85 lakh during last one and a half years.

Besides, buyers need to spend 20 percent of the real price of the property to register the flats. "So how will people purchase a flat?" he asked.

The realtors are posting advertisements with different lucrative offers which are turning out to be not that effective at this moment, he noted.

Sales are at a moderate level due to the ongoing economic crisis, said Enamul Haque, executive director (real-estate sales) of Concord Real Estate Ltd.

There is little demand for properties as prices have increased significantly, said Aysha Siddika, executive director (brand) of bti.

According to her, purchase of properties was usually a long-term plan for a person, so prices of properties do not instantly affect renowned companies.

Even signing of flat sharing deals with landowners has started again, she said.

She said the companies focus on sales promotion, discounts and different offers to sustain business.

But the existing situation is not favourable for the small companies which are financially weak, she noted.

The sector is passing through a difficult time, said Shihab Ahmed, senior general manager and head of sales and customer service at Shanta Holdings Ltd.

This is due to the ongoing economic slowdown for the depreciation of the foreign currency reserves, leading to high import costs and material prices, impacting the real estate sector, he said.

"Even projection of cost is difficult and uncertain as prices may increase instantly as well as signing money for land owners increased significantly due to scarcity of land," he noted.

Besides, he said, investors and buyers were observing the political situation, which was one of the reasons for the slow sale of properties.

On the other hand, the condition of the share market is not vibrant enough to contribute to a growth in the sales of flats, he noted.

However, a senior official of a renowned bank, on condition of anonymity, said demand for home loans has not reduced.

Ther is even no record of people returning loans and refraining from purchasing properties due to the price increases, he said.