Realtors caught in energy crunch

Real estate is likely to embrace new challenges in the upcoming fiscal year, while the sector is struggling to find a balance between declining sales and getting utility connections to new residential and commercial units.
At the same time, the government is yet to respond to the sector's demand for restructuring the increased rate of advance income tax (AIT) and tax at source, what insiders claim is a must for the industry to flourish further.
Apart from this, the realtors are worrying about whether the government would continue the scope for legalising black money through investment in the real estate sector. If not, they said their sales would drop by 20 percent in the coming year.
Industry insiders demanded the government develop a special fund to finance the middle and lower-middle income groups of people, so they can take loans from that fund at a competitive rate of interest for buying accommodation.
In recent months, sales of land and apartment have dropped by 30 percent due to a lack of new electricity and gas connections to residential and commercial projects and an increase in land transfer costs.
Insiders claimed that the realtors and developers have failed to deliver nearly 10,000 ready apartments worth Tk 8,000 crore to the clients on time.
In addition, due to a lack of electricity connections, a total of 700 new projects comprising an estimated 10,000 apartments had to suspend construction works, affecting the demand for land or apartments in Dhaka and other cities and towns in the country.
Also, the demand for apartments has been on the wane among the local and non-resident Bangladeshis, while the country has been deprived of an additional Tk 800 crore in remittances just because of this reason.
Recently, the government has started giving electricity connections to new residential projects after a halt of nearly two years, on condition that an urban residential or industrial unit has to manage 7-10 percent of its total loads from solar power.
And apartments and other small-scale residential power consumers will have to bear the costs of solar panel installation, as a precondition to get electricity connection.
The current government suspended giving new electricity connections to new residential and industrial units soon after taking charge in January 2009, mainly due to limitations in power supply.
Small-scale consumers, particularly in rural areas who consume less than 2,000 watts, started getting new connections. However, the urban consumers are yet to get the facility, as they are assumed to consume more than 2,000 watts.
This new decision has created misunderstanding and unhappiness among both the consumers and local real estate developers and homemakers.
The developers said installing a solar panel in an apartment will increase their total cost. They also cannot expect new gas connections to their fresh projects soon.
“The clients do not clear their payments, and we cannot keep promises to deliver projects to them on time. Now, it would not be realistic to ask them to pay for solar panel installation,” said Tanveerul Haque Probal, managing director of Building for Future Ltd.
"We still lack necessary infrastructure to set up solar panels in every apartment," he said, adding, "Solar panels and other equipment are pricey."
Probal also called upon the government to continue the option of allowing the investment of black money in the sector. “Otherwise, this investment will shift to other countries, for example where the cost of housing is more competitive compared to ours.”
In addition, the government is likely to introduce property tax in the national budget for 2011-12, which the homemakers and realtors feel an added burden amid reduced demand for land and apartments.
The developers and realtors think the country is not ready yet for this new tax, which will discourage investments in the sector, and will fuel house rent.
The realtors also demanded the government revise the increased land registration fees that created a deadlock in the land registration process.
“The government should take a quick decision about restructuring the increased rate of advance income tax and the tax to be deducted at source on apartment registration fees,” said Toufiq M Seraj, managing director of Sheltech (Pvt) Ltd.
He said the tax at source on apartment registration has been increased 10 times, creating a deadlock in the sector.

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