For bank official Shariful Islam, the middle class dream of having a place to call one's own seemed very close to reality. He had booked a 1,100 square feet flat in the capital's Malibagh area back in 2017. He had completed all the necessary payments – Tk60 lakh to be exact – by March this year.
The developer company, Tamanna Properties, was scheduled to hand over the flat in April but then Covid-19 pandemic hit the world and everything went out of control. Instead of handing over the property on time, the company in May issued a notice to Shariful, asking for an additional Tk6 lakh citing the increasing cost of raw materials.
The notice mentioned that the building would be completed within the following six months only after the payment of the extra sum.
"It's not just me," Shariful Islam told The Business Standard, adding that 14 flat owners of the apartment building, Snigdha Home, were served the notice and were forced to pay the extra money.
A continuous spike in prices of essential construction materials and supply shortage have dealt a big blow to the country's real estate sector, industry insiders said, adding a number of projects – which resumed following the relaxation of Covid-19 restrictions – may come to a halt again owing to the fresh crisis, hindering the recovery efforts.
The buyers are also bearing the brunt of the rising cost of raw materials as they are being forced to pay extra money for their bookings.
To put things into perspective, steel prices have gone up by a whopping 30% in the past six months.
In March, a tonne of steel was being sold at Tk52,000. But contractors and developers are now spending Tk78,000 for every tonne of steel.
Md Amanuzzaman, owner of a Dhaka-based steel dealer Messrs Aman Steel Corporation, said the prices of steel and cement saw a steady rise since November 2020.
"Things started to spiral out of control from March this year. The number of orders are going down due to the rising prices," he said.
Meanwhile, the price of cement has gone up by Tk30 per 50kg bag, the price of stone by Tk3,000 a tonne, and the price of sand has ticked up by Tk2,000 a truck.
Besides, the price of one piece of locally produced brick has gone up by Tk1.5, auto bricks by Tk2.5, ceramic bricks by Tk5, and concrete bricks by Tk8.
Prices of floor and wall tiles have also seen a rise during this period.
Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh (REHAB) said that prices of almost all types of construction materials have shot up by 20%-30% in the last six months.
"We have had meetings with steel and cement producers. They can't do much as prices in the international market are on the rise.
"However, it is possible to keep the situation under control with monitoring from the government".
Rehab Director Naimul Hasan echoed Alamin.
He said, "More than 300 different materials are required to construct a building and of these, prices of some 100 items have gone up".
Asked about the current volatility in the local market, manufacturers of steel and cement – two most common construction materials – have cited the skyrocketing prices of raw materials in the international market as the main reasons.
Mohammad Shahidullah, first vice-president of the Bangladesh Cement Manufacturers Association (BCMA), told TBS that prices of raw materials of rod and steel have almost doubled over the past one year.
The price of ferrosilicon, a major raw material of mild steel rod, has gone up from Tk1,80,000 to Tk3,52,000 per tonne, while that of silico manganese has soared from Tk1,20,000 to Tk2,20,000 per tonne and ferro manganese from Tk1,25,000 to Tk2,30,000 per tonne.
Steel scrap – one of the most important raw materials of the steel industry – is selling for Tk50,000 per tonne in the local market, up by Tk20,000 higher compared to a year ago, which has led to a significant rise in steel price at the consumer level.
Shahriar Jahan Rahat, deputy managing director of steel manufacturer KSRM, said due to the Covid-induced disruption of the supply chain, raw material imports have suffered from congestion at ports.
Prices of cement clinker and other raw materials as well as shipping costs have gone up by $20 per tonne over the last three months due to rising prices in the international market.
Bangladesh has a monthly demand of 40 lakh tonnes of cement, said Mohammad Shahidullah.
He added that the cement clinker is made from coal. The price of coal in the international market has increased by about 50% over the past three months. As a result, the raw material for making cement has also become costlier.
In addition, international shipping has increased by 50%, he added.
Buyers forced to spend more
Arshadur Rahman, another client of Tamanna Properties, also had to pay Tk6 lakh extra for his flat.
"No extra money can be charged as per the contract with the developer company. However, I have paid the money to avoid any further complication," he said.
When contacted, Bulbul Ahmed, managing director of Tamanna Properties, said, "We have taken the additional amount after discussing with the flat owners."
Abdur Rashid Khandaker, who is a businessman, fell victim to the same predicament when he bought a 1,800 square feet flat in the capital's Gulshan-Baridhara area for Tk4.55 crore.
His developer company, Wills Properties Limited, charged him an additional Tk18 lakh.
"I have no option but to give them [the developer company] the money. Tk11 lakh has already been paid, He said."
Rashid and Shariful are just like many others who are now deep in debt due to the price hikes.
As per Rehab data, the number of under-construction flats in Dhaka and Chittagong is over 50,000 and all the owners now have to pay extra money for their homes.
The prices of these flats, depending on size and materials used, have increased by 10%-12%.
Construction work uncertain
Retired government employee Yusuf Ali Sardar, with all his life savings, started building his dream home, a seven-storey building in Dhaka's Merul Badda area, in November 2019.
However, the pandemic forced him to suspend the construction work and the hiked price of construction materials added to his misery.
He said, "I have spent all my budget and couldn't even finish half of the work."
Individuals like Yusuf Ali as well as the big developer companies have suffered huge losses in the past several months.
The country's leading developer company Navana Real Estate, which is currently working on more than 2,000 apartments in 17 projects, had to increase their prices to adjust with their expenses.
A senior official of Navana Real Estate Ltd, while seeking anonymity, told this newspaper that the company had to suffer losses from the flats sold earlier.
Rehab Director Naimul Hassan, said, "Developer companies are now in a very tough spot due to the rising prices.
"The under-construction projects were priced according to the costs in an earlier time. Now companies are struggling to make a profit".
He said that the government should form a monitoring cell that would oversee and control the prices of construction materials.
Md Shahidullah, co-chairman of Bangladesh Cement Manufacturers Association (BCMA) and secretary general of Bangladesh Auto Re-Rolling and Steel Mills Association, suggested lowering the existing duty on construction essentials to ease the problem.
He said, "No company can charge inflated prices for raw materials due to a competitive market system. These businesses are suffering a great deal because of an unstable global market. Now the government should reduce duties and vats to stabilise the sector."