The housing sector in Bangladesh is heading towards a stagflation/downturn for a temporary period as a fallout of the Russia-Ukraine war and Covid-19, Fasiul Mowla, chief executive officer (CEO) of Anwar Landmark Ltd said. In an interview with The Business Standard, he said the drastic decline in the income of clients had impacted the real estate sector badly.
Now that the decline trend is being mitigated, investors are hopeful of seeing a ray of light. For this, however, some policy intervention needs to be introduced by the government to speed up the sector's recovery.
The CEO also touched upon the Covid-19 price hike in the real estate sector, pointing out the impact of the unstable situation of raw material prices in the international market.
And there will be some impact in the housing sector of Bangladesh also in terms of price escalation of building materials, he said, adding that it might not be like during Covid-19, but there would be stagflation because of the war specially for the limited or middle income class of buyers who intend to purchase a flat with their life savings, instead of a home loan.
As a result, there will also be a fall for real estate developers' regular unit sales and revenue for a short span of time.
About the possible solutions and duration of instability in building materials, he said as of this moment there was a belief that the situation won't continue for a long period.
"As soon as the international market gets back to normal, the downturn will go away automatically, so we intend to be patient. And we are confident that we can recover through more unit sales when the market is stable, which we believe will come in a very short time. The government also can intervene here by reducing current registration costs and help businessmen recover the dues from clients," he said.
"The real estate sector has been contributing around 8% to our national gross domestic product [GDP], which amounts to Tk1.41 lakh crore according to the Bangladesh Bureau of Statistics [BBS] and along with its linkage industries the share of total GDP is 15% approximately as per REHAB, and this way we [Anwar Landmark] are also contributing a significant amount to the country's economy."
On plans to ensure affordable housing for all, he said the demand for flats had increased and the housing sector was an important indicator of the economy. "But right now, due to the high material cost, most of the apartment prices are hard to afford by the general or middle-class people.
"Now, if we can develop most of the projects in our own [purchased] lands, that will reduce the apartment price because we won't have to pay a huge amount as signing money to the landowners and also, we will be able to ensure affordable housing through the development of mega/township projects in some prospective locations both inside and near Dhaka city."
About the current mortgage market, Fasiul Mowla said despite the pandemic, this is a very good time for customers to invest in the sector, because the interest rate of banks and other non-bank home loan institutes have come down to 8.0%. Also, the interest rate on fixed deposit schemes has also declined to 5% to 6%.
"Nowadays, home loans are easy to access for developers like us with a fair business profile and also for buyers with good profiles. Also, the default ration is very low for home loans. And the loan tenure should be increased up to 30 years in order to make investments in real estate more favourable," he said.
On the measures taken to recover from the impact of the Covid-19 pandemic, Fasiul Mowla said the flexibility of the private sector in Bangladesh has always been a matter of great pride at home and abroad. "If we look at our real estate sector, the same can be observed. Instead of focusing on the incurred losses, the companies have been looking forward to a future where they can overcome the losses and bounce back into business. Embracing the new normal, working from home or the concept of remote working has become a part and parcel of our life," he said.
He said companies have learned how to survive with the help of automation, becoming more data-centric and analysis-driven.
"On top of that, from last years' experience, I would like to be hopeful. I am already thankful to the policymakers for reducing the registration fees as well as interest charges. The housing fund by our central bank, Bangladesh Bank, should be made available to the real estate sector. Alternatively, a significantly workable fund can be created to be disbursed through our FI and NBFIs with a special interest rate to the customers who will feel encouraged to make purchases that can breathe a new life in the business of this sector."