The government’s reported move to reduce the property registration cost, hopefully, would give the much-needed boost to the country’s real estate sector. If granted finally, the fiscal concessions in relation to property transfers would fulfil a long-standing demand of the realtors. Now the builders should have genuine reasons to be happy at the prospect of getting some relief with regard to the property registration cost that is claimed to be the highest in South Asia.
The Ministry of Finance (MoF) which, according to a report published in this paper, approved an official summary concerning the cut in registration cost, must have done its homework. The slash in tax rates and fees, naturally, would affect the government’s revenue earning and the relevant authorities, including the National Board of Revenue (NBR) are, surely, aware of it.
Yet the proposed move might prove helpful in making some revenue gains also. The high cost of property registration has been prompting many buyers to conceal actual cost of land, flats and apartments in their transfer deeds. This practice does benefit the buyers, financially, but puts the sellers, particularly those who are honest taxpayers, in trouble. The latter find it difficult to show in their tax returns the amount they had received in excess of that mentioned in the transfer deeds. The reduction in taxes and fees might encourage, at least, some buyers to show the actual or near-actual buying prices in the transfer deeds. In that event, the loss of revenue due to cut in taxes and fees could be compensated, to some extent.
Realtors say that they have more than 10,000 unsold units of apartments and flats. The number could be more since there are some builders who are not members of the Real Estate and Housing Association of Bangladesh (REHAB), the national trade body of the builders. So, the number of their unsold unit remains in the dark. High registration cost is not the only reason for lacklustre demand for flats and apartments. There are other reasons such as lack of easy access to finance and delays made by a section of builders to hand over flats to the buyers. Allegations of fraudulent practices against some builders have also been discouraging many prospective buyers.
So, the proposed tax cut is unlikely to make any major change in the situation now prevailing in the real estate sector. It might help the sector only partially. The prices that the realtors demand for apartments even located in places away from the centre of the Dhaka city being high are beyond the reach the middle and lower middle classes. One of the main reasons for high prices of commercial or residential spaces is the abnormal cost of land. It is none but the realtors are to blame themselves for the high land prices as they are engaged in a rat race to buy plots in the city, leading to soaring costs of land.
For a sustainable turnaround of property business, there has to be an easy and affordable access to home loans and an end to fraudulent activities on the part of so-called realtors along with cut in property registration costs. Any rebound of real estate sector would inevitably generate higher demand for goods and services linked to it and also workers engaged in construction industry.