Overall sales of flats declined nearly 17 per cent in the last fiscal year of 2022-23 owing to economic uncertainties and a rise in prices of raw materials, according to realtors. 

Nearly 10,000 units were sold in the fiscal year whereas around 12,000 in the preceding year, according to the Real Estate and Housing Association of Bangladesh (REHAB).

Flats are usually sold while they are under construction and handed over once complete a couple of years later.

According to the realtors, the prices of raw materials increased abnormally last fiscal year due to a depreciation in the value of the taka, the local currency, against the US dollar.

According to realtors, the prices of raw materials increased abnormally last fiscal year due to a depreciation of the local currency against the US dollar.

The price per square feet of rod increased by Tk 130, cement Tk 24.75, sand Tk 28.12, stone chips Tk 78.75, bricks Tk 50, Thai aluminium Tk 40, grille Tk 12, general electrification Tk 30, sanitation Tk 30 and labour charge Tk 60, according to the REHAB's assessment.

This led to construction costs rising on an average by Tk 484 per square feet, it said.

Against this backdrop, flat prices increased by around 30 per cent to 35 per cent on an average, said industry insiders. Prices vary depending on the location of the property.

"Economic uncertainties and price increase of apartments due to a rising trend involving raw material prices reduced the sales of apartment," said Tanvir Ahmed, managing director of Sheltech Group, one of the leading realtors in Bangladesh.

Besides, people have tightened their belts to be ready for economic setbacks induced by any political instability centring the national elections which were due to be held at the end of this year, he said.

This too had an impact on the real estate market, he added.

"Our sales declined by 5 percent last fiscal year and the downtrend in sales will remain until the country attains some sort of economic stability," said Ahmed.

The situation may even take a U-turn after the general election if the economy returns to normalcy, he said.

Some flat sales emanate from stock sales but the index has remained stagnant for the past one and a half years, he said.

Some people are hoping for property prices to skyrocketand declining to provide their lands to real estate developers, particularly those in densely populated areas, he cited.

Interest on borrowing has also increased for home loans. Against this backdrop, the real estate sector is in the back foot and there is no alternative way out, he said.

Demand for property never falls drastically, even if prices increase significantly, said Aysha Siddika, executive director (brand) of bti, one of the country's top developers.

Flats are usually purchased through long-terms plans, so a drop in sales does not affect the industry overnight, she said.

Since property prices are high, companies having the financial strength are attempting to purchase land instead of signing flat sharing deals with landowners to reduce property costs, she said.

If the exiting situation prolongs, small companies which are financially weak will have to close down their businesses, noted Siddika.

Definitely companies will be able to sustain themselves if their business strategies focus on sales promotion, discount etc, she said.

Sharing the price increases per square feet, Kamal Mahmud, first vice-president of REHAB, said last fiscal year's sales were the lowest in the four years preceding the year the pandemic emerged.

He said the price of mid-sized (1,200 square feet to 1,500 square feet) flats had increased to Tk 1.20 crore, whereas earlier they were around Tk 85 lakh.

He said mid-sized flats were in demand the most but the scenario has changed due to the economic uncertainties and price increases of properties.

However, he said, the realtors were not getting approval for new projects due to different conditions being attached to Detail Area Plan (DAP) of Rajdhani Unnayan Kartripakkha (RAJUK).

The DAP contains detailed maps, zoning regulations, and land development guidelines specific to their designated area.

For instance, realtors now do not get approvals for high rise building but there could be cases where smaller ones may not be commercially viable, Mahmud said.

Against this backdrop, the realtors are apprehensive of sustaining their business, he noted. According to him, even big realtors are also not taking up projectsat the rate they had previously.

Shihab Ahmed, head of sales and customer service at Shanta Holdings Ltd, said their flat sales had slightly slowed due to the present circumstances.

According to him, both buyers and developers are suffering, with customers having to dole out more money to purchase properties while realtors having to do with lower profit margins for the slow sales.

Md Kamrul Islam, managing director of Abiding Development & Holdings Limited, said flat prices increased by 30 percent to 35 percent per square feet on an average, although this can vary depending on the property's location.

Islam, also a director of the REHAB, said he was able to sell only nine flats last fiscal year, a third of what he usually attains.

Wishing anonymity, a senior official of BRAC Bank Limited who deals with home loans, said demand for home loans have remained the same.

According to him, there are all kinds of applications -- be it for low-priced flats or those in the premium segment.

The bank feels safe to provide home loans to clients of renowned real estate developers who normally do not default on loans, unless there is an unexpected incident, he said.

Besides, there is a trend of applications coming in of a number of people collaborating on constructing buildings as such initiatives reduce the cost burden on each person, he said.

Flat registration used to account for 15 percent of the overall cost and this has risen to 19 percent, which is a burden for property owners, he pointed out.