Real estate companies in Bangladesh are cautiously taking up new projects as the war in Ukraine, the strain on foreign currency reserves, the dollar shortage, runaway inflation and higher construction costs have cemented worries that sales of flats might slow in the coming months.

One of the realtors that have cut the number of new projects is Assurance Developments Ltd.

"As part of risk mitigation, we have reduced the number of projects by 40 to 50 per cent," said Md Arifur Rahman, chief executive officer of the company.

"We are not launching new projects at this moment in order to ensure that our investment does not get stuck."

Arifur says the construction cost has gone up by Tk 1,500 to Tk 12,000 per square foot depending on the size and locations of the properties.

Building Technology & Ideas Ltd (bti), one of the top realtors in the country, says it is initiating new projects after an in-depth analysis due to the present condition of the economy.

The hike in raw materials prices has pushed up the price of flats by Tk 1,000 per square foot on an average, said FR Khan, managing director of bti.

As a result, the prices of flats have gone up by Tk 10 lakh to Tk 50 lakh in the past six months.

Khan says that the pressure of higher global inflation and the Russia-Ukraine war have directly affected the real estate sector in Bangladesh and apprehends that the demand for flats may fall owing to the fallout of the volatility in the global economy.

Overall, the real estate sector is not at a comfortable stage at the moment as the price of land is increasing, he said, adding that developers will not be allowed to construct buildings over a third of land due to the new rules introduced in Dhaka city.

Presently, bti is implementing 73 projects.

Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh, said: "Under the current circumstances, there is no scope for realtors to be over-ambitious."

"Realtors should move very carefully and focus on completing their ongoing projects."

Alamin says the construction cost of a Tk 1 crore flat now stands at almost Tk 1.25 crore, an increase of 25 per cent.

One of the major construction items is stone. Its freight cost was $8 per tonne two years ago. It had risen to as high as $28 in recent months before falling to $19, he said.

Similarly, the price of rods has jumped to Tk 88,000 per tonne from Tk 68,000 before the pandemic, while the price of cement has gone up by 25-30 per cent.

Tanvir Ahmed, managing director of Sheltech Group, another reputed real estate company, says his company has not cut the number of projects yet.

He thinks the situation around gas and electricity would take some time to have an impact on the real estate sector.

There has not been much impact on the prices of raw materials despite the dollar shortage. In fact, the prices of rods and cement have stabilised, he said.

Sheltech Group has about 45 ongoing and new projects.

Assurance Development's Arifur says despite the property price hike, the demand for flats has not declined.

"The sales of secondary flats have also increased owing to lower prices and availability of utility connections."

Mohammad Kayum Khan, head of mortgage at IPDC Finance Ltd, one of the leading lenders in the real estate sector, says the number of home loan seekers has remained unchanged compared to previous years.

"This indicates that the trend of flat sales is good."

One managing director of a real estate company says the discontinuation of the scope to legalise untaxed money by investing in the stock market might have some impacts on the sector.

He says the sales of high-end and large apartments would slow in the coming months as many investors would like to adopt a wait-and-see approach ahead of national elections.

"But the demand for mid-sized flats would be there since they can be rented out quickly in the highly populated Dhaka city. The rental demand is very high," the managing director said.

People are a little bit tense because of the protracting war, the dragging pandemic, the dollar shortage, the fall in foreign currency reserves and the overall direction of the economy, he said.

"People mostly focus on negative news. So, sales might fall in the next few months."

REHAB's Alamin urged the government to ease the home loan process, saying only 2-3 per cent of borrowers in the category are defaulters.