Flat prices on the rise

The prices of flats have started to rise in Dhaka ending a three-year stagnation as demand for new homes increased and construction costs surged.

Flats in Dhaka are as much as 6 per cent more expensive now, depending on their location and amenities. Prices could go up further in the coming months, according to realtors.

Before the latest turnaround, the price of flats had remained almost unchanged since 2018 owing to sluggish sales.

"On average, property prices increased by 3 per cent over the past year, mainly due to the higher cost of construction materials," said Faizur Rahman Khan, managing director of building technology and ideas (bti), one of the leading real estate companies in Bangladesh.

"However, in some areas, particularly Gulshan and Banani, prices have soared abnormally."

bti sells flats for Tk 7,000 to Tk 18,000 per square foot (sqft).

Since cement and steel are major components of the construction sector, property prices follow suit when the price of the materials rises.

Cement and steel prices increased 10 per cent and 34 per cent respectively over the past year in the wake of the spiralling cost of scraps in the global market.

Kamal Mahmud, vice-president of the Real Estate and Housing Association of Bangladesh, said the prices increased by at least 8 to 10 per cent in the last one year.

"The price should go up by at least 12 per cent to keep pace with the hike in the cost for raw materials."

The price increase in the steel and cement sectors fell on the housing sector, which will create pressure for flat buyers, according to Mahmud, also the managing director of Skiros Builders.  

A recent assessment of Bproperty, an online and offline property solutions provider that facilitates property transfers and rentals, said the price of new flats in Badda was about 18.4 per cent higher this year compared to those added in 2020, going from Tk 4,901 per sqft to Tk 5,801 per sqft.

Niketan is experiencing a boom in property prices as data showed a 21 per cent increase compared to last year.

Properties in the areas like Aftabnagar, Rampura, Ibrahimpur, and Nikunja see price increases of 7.8 per cent, 9.8 per cent, 14.9 per cent and 9.4 per cent, respectively.

Dhanmondi has seen a 0.9 per cent rise so far in 2021, while it was 1.9 per cent in Mirpur and 2.7 per cent in Uttara. The price declined by 2.4 per cent in Gulshan.

The surprise of the year has been Mohammadpur, where prices are 8.8 per cent lower than a year ago. The average price of flats in Mohammadpur in 2021 is Tk 4,809 per sqft compared to Tk 5,274 last year.

Regarding the trend, Mahzabin Chowdhury, head of marketing and public relations at Bproperty, said the current property market offered full of opportunities for new investors.

"The prices of flats are still quite affordable across many developing areas but won't be for too long," she said, adding that the domestic property market had proven itself to be robust despite the coronavirus pandemic.

Mir Nasir Hossain, managing director of Mir Holdings, said the demand was still low as people did not want to spend big amid the Covid-19 crisis.

"The demand was very high in May and June as people had thought the government would not withdraw the scope to invest the undisclosed income to purchase properties in the budget for fiscal 2021-22."

The government has also continued the unquestioned opportunity extended to the investment of untaxed money in the real estate sector. 

Hossain, a former president of the Federation of Bangladesh Chambers of Commerce and Industries, called the price increase nominal.

"It should go up by at least 8 per cent to adjust with the raw material costs. However, this is not possible due to excess competition in the housing sector."

Industry people say the demand for properties is picking up as there have been limited investment opportunities in the productive sectors because of the pandemic-induced economic slowdown, a drastic fall in bank deposit rates, cheap loans, and the continued scope to invest untaxed money.

The lowering of registration costs has also pushed up the demand.

Shihab Ahmed, general manager for sales and customer services of Shanta Holdings, a real estate company that mainly caters to premium customers, said they had not increased the price yet.

Nasimul Baten, managing director and CEO of Delta Brac Housing Finance Corporation, said the price swings seen last year were not significant.

"Rather, the demand for home loans has slightly fallen recently due to the prolonged lockdown."