Developers hit a rough patch as flat sales, bookings drop up to 35%

Highlights

• Sales of flats priced above Tk10 crore decreased by 50%
• 25% increase in construction costs
• Buyers feel the pinch of rising costs
• REHAB demands DAP revision
• Approximately 10,000-15,000 flats are sold annually in the country

Flat sales and bookings in the capital have plummeted by approximately 35% over the past one year, impacted by inflationary pressures, rising construction material costs, and political shifts triggered by the July-August revolution. 

Real estate developers have reported a 25% increase in construction costs, primarily due to the higher prices of raw materials like steel and cement, and the Detailed Area Plan (DAP) that limits flexibility for construction.

They warn that prices may increase further unless the Detailed Area Plan is revised.

Representatives and senior officials from around 25 real estate companies shared these insights during discussions with TBS today (25 December), at the REHAB Housing Fair being held at the Bangabandhu International Conference Centre in Dhaka's Agargaon.

The developers said leading firms with a long-standing reputation have experienced a 20% fall in the sales of small and medium-sized flats, while sales of flats priced above Tk10 crore have decreased by 50%.

Mezba Uddin Maruf, director of Green Hut Real Estate, said sales have declined by approximately 30% to 35% compared to the previous year. 

He attributed the drop in flat bookings and sales in Dhaka to the political changes following the student-led uprising. 

The REHAB Housing Fair is being held at the Bangabandhu International Conference Centre in Dhaka’s Agargaon. Photo: Jahir Rayhan

"Previously, 5-8 flats used to be sold per month, but this has now reduced to around 2 flats," Maruf said, noting that only those with urgent needs are currently buying, while individuals who already own flats are purchasing less frequently.

The company currently has over 30 ongoing projects in the capital, with approximately 200 flats available for sale. At Banashree, the price per square foot ranges from Tk5,500 to Tk6,000, while in Bashundhara, it ranges from Tk7,500 to Tk9,000. At Jalsiri Housing, the price is Tk9,500 per square foot. The flats in these locations range from 1,300 to 1,500 square feet in size, with the Jalsiri Housing flats being larger at 2,850 square feet.

Md Sazzad Masud, assistant general manager of Akter APL Properties Ltd, said prices have increased by approximately 25% compared to the previous year. At Sector 9 of Uttara, flats are being sold at Tk11,000 per square foot, he said.

He went on to say, "Our company has a strong reputation. Our target customers are primarily upper-middle-class and upper-class individuals. We do not compromise on product quality. Maintaining high standards requires the use of proper materials. It's not just about rods and cement; items like power substations, generators, and lifts need to be imported. 

"With the rising dollar rate, opening letters of credit has become challenging. Inflation is high, and securing bank loans has become increasingly difficult.

"Additionally, the Detailed Area Plan has made it harder to find new construction sites in Dhaka. In many areas, there are restrictions against building structures taller than seven stories. For us, constructing buildings with fewer than 10 stories results in financial losses. All these factors are driving up flat prices in the capital."

Buyers are now realising that prices that started to rise in 2022 are no longer decreasing, Masud said. "Prices are consistently going up, and they will continue to rise further."

Buyers feel the pinch

Explaining the impact of the price increase of construction materials on buyers, Rancon Real Estate AGM and Head of Sales, Debabrata Roy, said, "The raw materials that used to cost Tk100 now cost Tk125. Ultimately, this increase has to be passed on to the buyers."

He said, "We design our products keeping a specific class of buyers in mind. Our flats are priced above Tk3 crore, with properties in Dhanmondi and Gulshan ranging from Tk16 crore to Tk32 crore. These flats are sized between 4,500 and 4,700 square feet. However, even this category of buyers is now decreasing."

Depicting a picture of the fall of flat sales, Debabrata further said, "We used to sell 16-20 flats per month, but this has now decreased by 20%. However, this may not be the case for larger companies like ours. Overall, considering other companies, sales have decreased by 35%-40%."

Chief Operating Officer at Sheltech (Pvt) Ltd Shajahan Raihan said sales this year are 20% lower than last year due to political changes. "Customers are now hesitant to invest in this sector."

Raihan also mentioned that after 5 August, prices of some construction raw materials dropped due to reduced demand compared to a year ago. "Currently, the price of per kg rod is Tk81 to Tk82, which was over Tk96 a year ago, and the price of a bag of cement is Tk450, down from Tk520 last year."  

However, he noted that the prices of imported electromechanical equipment such as lifts, generators, and electric substations are increasing due to exchange rate fluctuations, which, in turn, are raising the overall production cost of flats.

REHAB demands DAP revision

REHAB Vice-President (Finance) Abdur Razzaque said, "The exchange rate of the dollar was once Tk90, but now it is Tk125. The price of imported goods has increased by 45-55%. Two years ago, skilled workers' daily wages were Tk600, but now they have risen to Tk1,000. As a result, a flat that was priced at Tk1 crore two years ago is now priced at Tk1.5 crore."

Currently, flats priced between Tk80 lakh and Tk1.5 crore are selling more, he said.

"The housing sector is facing a crisis due to the high prices of construction materials, restrictions imposed by the Detailed Area Plan, and the rising interest rates on bank loans," Razzaque said.

He further said, "We used to construct buildings in accordance with the Dhaka Metropolitan Building Code 2008, allowing for an 8-story building on a plot of three and a half kathas. However, with the introduction of the Detailed Area Plan, only 5 stories can now be constructed. 

"As a result, developers are finding it challenging to take on such land, as returning flats to property owners may not be profitable. We believe that revising the DAP could potentially lower the cost of flats."

Razzaque said rising bank interest rate is also a concern for the real estate sector. "Two years ago, it was possible to get a loan for buying flats at an interest rate of 9%, but now it has risen to 14%. Many used to take loans for up to 50% of the property value, but now with increased costs, the overall situation in the housing sector has become stagnant."

REHAB proposals under consideration

At the inauguration ceremony of the five-day fair 23 December , Rajuk Chairman Major General (retd) Siddiqur Rahman Sarkar said that the proposals presented by Rehab are being considered by the government with great seriousness. 

"We are currently reviewing some demands raised by real estate developers regarding the Floor Area Ratio and other regulations in the DAP," he said.

The review of the new building construction regulations will be completed within two weeks, he said. 

"Currently, separate designs are prepared for building plans and construction work, which causes problems in obtaining the occupancy certificate. From now on, Rajuk officials will be involved at every stage," said the Rajuk chairman.
 
Buyers' interests

It was observed at the fair that most of the visitors were looking for medium-sized apartments or flats ranging from 1,300 to 1,500 square feet. The top-tier companies are unable to offer flats below Tk1 crore.

Nazrul Islam, who came from Bashundhara Residential Area, said, "There are no flats below Tk1 crore. How can we, the middle class, buy flats?"

Syed Ifte Ali said, "I was looking for flats in the Mirpur or Uttara areas where it is easier to commute due to having metro rail service. I thought I could get a 1,350-square foot flat for Tk1 crore, but after visiting 10 companies, I found that there were no flats of my choice below Tk1.35 crore."

The Rehab fair featuring 220 stalls will run until Friday. It remains open daily from 10am to 9pm. This year, two types of entry tickets are available — single-entry at Tk50 and multiple-entry at Tk100.

According to Rehab data, approximately 10,000-15,000 flats are sold annually in the country.