'Real estate sector struggling, survival now the priority'

Once considered one of Bangladesh's most promising and profitable industries, the real estate sector is now in a quagmire, grappling with rising construction costs, complex tax regulations, foreign currency shortages, and political transitions.

Despite these challenges, JCX Developments Ltd is moving ahead with several state-of-the-art projects in partnership with Japan's Creed Group, said M Muhit Hassan FCCA, director of JCX, in an interview with The Business Standard's Abbas Uddin Noyon. He shared insights into the company's initiatives and the broader condition of the sector. 

While the housing sector was gradually recovering from the pandemic, it took another hit last August. What is the current state of the industry?

The entire real estate sector has been struggling since 5 August last year, and we are no exception. Most of our projects are high-end, modern apartments ranging from 4,000 to 9,000 sq ft, targeting a niche clientele. These units once saw strong demand, but new buyers have largely disappeared, and many existing clients are delaying instalment payments.

There's now a demand for smaller units, but we can't pivot quickly. Our business model and product life-cycle don't allow us to suddenly start building 1,500–2,000 sq ft apartments. Meanwhile, we must continue developing our luxury projects to maintain goodwill and brand value, though sales have stalled.

Shifting to smaller units would take one to two years. This year has been extremely challenging, with survival being a struggle. Most luxury apartments aren't selling, bookings have dried up, construction costs have surged, and we're facing mounting pressure from tax and VAT authorities for revenue collection.

When did JCX start, and how is it doing now?

JCX was incorporated in 2018 and began operations in 2019. We've handed over 12 projects to our customers. Currently, we have around 60 projects in our inventory — 28 are ongoing, 22 are upcoming, and 10 are future projects. The majority are high-end products ranging from 4,000–9,000 sq ft. 

Our strategy used to be that we wouldn't sign on any plots under 10 katha. Now we're signing on 5–6 katha plots too to keep up with the current market demand. We've recently signed nearly thirteen small plots in Jolshiri and Bashundhara.

Getting Rajuk/Jolshiri authority approval for these projects takes 6–12 months, and even more for some special projects. Without approval, we cannot start construction or even sell the units. We've signed the plots with our respective landowners, but it'll take time before they become our saleable inventory.

What type of buyers are you targeting, and how are you different from others?

We started by targeting the premium segment. Due to the country's economic situation, we've made some strategic changes. We're now focusing more on smaller apartments. We consistently deliver flats to clients on time and ensure quality construction.

Our core motto is quality construction and timely handover. We deliver most projects to our clients as per schedule. We never compromise on quality. Each of our projects has its own architect, so there are no two projects that look alike. This helps customers easily identify a JCX project. We are also a LEED Certified developer focusing on constructing green, environmentally friendly, sustainable buildings. It gives us a competitive advantage in the market. Compared to others, we sell better in the Bashundhara area.

We are also working with Creed Group from Japan. They visit every month to check our project progress and the quality of our construction. Whatever deadline is set for a task, it must be completed within that timeframe. Their engineers also come and perform quality checks.

Has your partnership with foreign companies helped build customer trust?

Absolutely. There are many allegations of fraud in real estate investment. In that landscape, we've become a symbol of trust. Japanese real estate investment firm Creed Group is working with us. They operate in Bangladesh and 10 other countries — including Japan, Vietnam, Thailand, Malaysia, Cambodia and Indonesia. Their motto is to develop affordable housing projects in Bangladesh.

We're currently working on luxury apartments in Bashundhara and Jolshiri. But due to the foreign partner's vision and the country's economic realities, we're having to shift towards affordable housing projects.

You are known for high-end projects. Why are you now planning for affordable housing? Where are you building them?

By affordable, we mean — if someone is paying Tk50,000-60,000 in rent, and they pay that amount to the bank as an EMI and get ownership of the flat. For this to work, flat prices should be in the range of Tk 45–50 lakh. But that's not the case in Bangladesh. Compared to apartment prices, rent is very low. However, we've tried to gradually move towards affordable housing like in Japan, with 700–800 sq ft units.

We're now planning to build apartments near the metro rail. We'll be able to meet customer demand in those areas. We're also looking for land towards the end of Purbachal. But we're not finding sufficiently large plots suitable for an affordable housing project.

What are the current challenges in the real estate sector?

The rising cost of raw materials is a major challenge. Land prices are also a huge problem. After the political changes on 5 August last year, a new challenge has emerged – a lack of buyers. Many of our major clients are no longer in the picture.

The increase in bank interest rates and the liquidity crisis are other issues. Customers can't get loans now, and interest rates are more than 11%. And a large number of clients are not paying their instalments means we can't repay our own existing loans in due time. If we can't make repayments, we can't secure new loans either. All these things are interconnected.

The new budget increases land registration values but lowers tax rates. What will be the impact on the sector?

We see this as a challenge. We're getting calls from various buyers – they want to complete registration before June. Though the initiative is positive, there's a concern that the cost of purchasing an apartment will rise.

For example, someone is buying a flat for Tk2-3 crore but only showing a mouza value of Tk50 lakh. One reason may be that they want to pay less tax. But more importantly, their tax files don't have enough white money. So, they won't be able to register the flat at the real market value. Registrations will basically stop. Buyers won't register the flats. And for compliance-focused companies like us, the issue is – we cannot sell anything without registration.