Realtors welcome budget but want cuts in registration fees

The proposed budget for the next fiscal year comes as a relief for real estate companies struggling to survive the coronavirus pandemic as it allows black money-holders to whiten their assets with full amnesty by investing in the sector.

"Both the industry and the economy will benefit greatly as a huge amount of value-added tax and registration fees will be generated if untaxed income is invested in the sector," said Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh (REHAB).

However, the realtors urged the government to reduce registration fees from the existing 14-15 per cent to 5-6 per cent in light of the ongoing crisis.

According to various market players, the demand for apartments will increase by at least 30 per cent in the next fiscal year. During his budget speech last Thursday, Finance Minister AHM Mustafa Kamal assured that people would now be able to disclose any untaxed properties, including land, apartments, and residential complexes, without scrutiny between July 1, 2020 and June 30, 2021 if they pay 10 per cent tax.

Since many people became unemployed because of the recently concluded nationwide shutdown, the demand for renting or purchasing property has fallen, developers said.

"Considering the emergency situation, the government made a befitting decision which could uplift the vulnerable economy," Alamin said.

Due to the recent nationwide shutdown, 85 of the 1,100 REHAB member companies incurred about Tk 886.12 crore in losses. If the losses of all members were tabulated, it would be around Tk 11,000 crore, according to REHAB Vice President Liakat Ali Bhuiyan.

There are many instances where a person legally earns money abroad but sends the funds back home through unofficial channels to evade taxes.

To secure some of this untaxed income, the government on several occasions in the past allowed black money-holders to legalise their assets through investment in real estate. However, the Anti-Corruption Commission (ACC) often raised questions about the source of the investors' income.

Now these individuals can invest in the sector without facing any hassles, Bhuiyan said, adding that they don't know how long the industry will take to recover from the ongoing crisis.

For a number of reasons, the country's real estate industry witnessed sluggish sales in the past few years and the current economic uncertainty caused by the pandemic could plunge demand even further.

"The demand for apartments fell this year as no one wants to buy property in times of crisis," Bhuiyan said.

REHAB members have about 6,000 projects currently lost in limbo due to the two-month nationwide lockdown that began on March 26 as employees are unable to return to work because of the social distancing and other health guidelines in place.

As a result, allied sectors of the industry are also counting losses but could now benefit from the government's decision, said Shihab Ahmed, general manager for sales and customer services at Shanta Holdings, a developer.

However, not everyone was so quick to welcome the proposed budget.

Four construction projects of Selim Raza Pintu, owner of Raza Holdings, have been sitting idle for the past two months, during which he had to spend around Tk 22 lakh on operating expenses.

"Undisclosed income will not help us greatly, rather lowering registration fees to 5 per cent will help a lot," said Raza, who is also a REHAB director.

According to Kamal Mahmud, managing director of Skiros Builders, apartments with a price range of Tk 60 to Tk 90 lakh have high demand as this is the preferred range for middle-income earners.

Mahmud also believes that sales will increase by 30 per cent in the upcoming fiscal year.