It's a new reality wrought by the Covid-19 pandemic. Facing a cash crunch, people are selling off their apartments to readjust their lives.
Government property registration offices logged Tk8,000 crore sales deals for old apartments and flats – a record in recent years – thanks to Covid-hit owners moving out and new people with deep pockets filling in.
Take the case of Nabiul Hasan Raj, a former multi-national company job holder who started settling in life as he bought an apartment in Dhaka's upscale Baridhara area in 2018. The 34-year-old put in all his savings and borrowed from relatives for the Tk80 lakh home. But Raj's shining career turned out to be a short-lived one as he lost his job in late 2020 followed by Covid pandemic.
After failing to repay the loans, Raj sold his 1,100 square feet flat last year, started a new business and moved to a rented apartment with his wife and two kids.
Hatimul Bari Kochi, a Bangladeshi migrant to the USA whom Raj used to know, bought the property with his pandemic-era savings at the same price Raj bought it. "The location and price were good. Besides, the apartment had the utilities and interior ready," Kochi says, adding the property has "a bright prospect for the future".
This is a hallmark case offering an insight to the surge of old apartment sales in major Bangladesh cities in 2021. Many sold their apartments thanks to the pandemic-led income crunch, while non-resident Bangladeshis snapped up the comparatively cheap homes.
There are few more factors fueling this fire sale such as the dwindling number of flats ready to move in, rising prices of construction raw materials and a real estate market set to charge buyers double in upcoming months, making those looking for real estate investment to scramble for older flats instead of brand new ones.
The property registration offices recorded around Tk6,000 crore and TkTk5,500 crore old apartment sales deals in 2020 and 2019 respectively.
Sheikh Md Anwarul Haque, assistant inspector general at the Directorate of Registration, told The Business Standard that they registered more sales deals for old flats, commercial space and residential plots in different cities during the Covid-19 pandemic compared to the last couple of years.
"The government collected about Tk13,000 crore revenue from property registration last year, while Tk1,000 crore came from old flat sales registration," he said.
A buyer has to pay value-added tax (VAT), tax and other duties to the government for property purchase. The registration process requires mention of whether the apartment is old or new. However, government fixed revenues are the same regardless if the flat is old or a new one.
Remitters rule the roost
Naimul Hassan, director of the Real Estate & Housing Association of Bangladesh (REHAB), told TBS that the expatriates have bought most of the old flats in the last two years.
"The demand for older or second-hand apartments has increased during the pandemic since the properties are cheap compared to new ones. Plus, old houses offer more spacious living areas, ready-to-use utilities and ready interiors," he said.
Economist Ahsan H Mansur said Bangladesh received larger-than-expected remittances in 2020 and 2021. The country got more than $22 billion remittances last year, which was more than 4.50% compared to the previous year.
"Most expatriates want decent living for their families staying back in the country and arrange better housing for them. They usually invest money in sectors which are readily available. That's why they preferred buying old flats or plots. Besides, there are also many businessmen who are also interested in investing in housing," he said.
Ahsan H Mansur added pricier construction materials have also raised new apartment prices, while the old apartment market was comparatively affordable.
New home cost to double
Iqbal Habib, an architect and urban planner, told TBS that the draft of the detailed area planning (DAP) has proposed to reduce the height of buildings in Dhaka and surrounding areas. If the DAP is implemented, the space around the building will have to be kept almost double than the current requirement.
This means flat prices will double once the DAP is implemented, making people motivated to buy old and ready apartments.
REHAB President Alamgir Shamsul Alamin Kajal said the existing construction codes allow an around 20,000 square feet building on five kathas of land in Dhaka. The new DAP will allow only a 13,000-sq ft building on the same amount of land forcing realtors to raise flat prices.
According to people involved in old apartment sales, old flats are in high demand in Moghbazar, Uttara, Bashundhara, Dhanmondi, Mohammadpur and Mirpur areas of the capital. Old property usually costs Tk2,000 less per square foot than a new one.
They said a 1,335 square feet old flat is up for sale in Dhaka's Mohammadpur area at Tk69 lakh. In Gulsan, the price for a 1,250 square feet old apartment hovers around Tk56 lakh. In the Banasree area of the capital, a 1,005-square-feet old flat now costs Tk48 lakh.
Industry insiders said the price of an old property does not depend solely on the location, rather it also depends on the overall condition of the flat, communication system, parking and available facilities in the area. How long the flat has been used also plays a major role in the pricing.
Around six companies including bproperty.com work as brokers in old property sales. According to officials of the firms, there are 4,000 apartment sales advertisements on their websites.
REHAB President Alamgir Shamsul Alamin Kajal said the ongoing housing projects in Dhaka have few ready flats. As a result, ready flat buyers are now going for old apartments.