Housing sector under pressure of addl taxes

Mahfuja Mukul: The housing sector has been in turmoil for several years due to various reasons. The Russia-Ukraine war and high inflation in the country have further fueled the sector. Added to this is the increase in the price of construction materials. All in all, flat-apartment prices have already risen beyond the reach of the middle class.
In this situation, before the presentation of the budget for the fiscal year 2024-25, the people related to the housing sector made several proposals to the government. However, they think that those demands have been paid in the budget. Although the undisclosed amount of 15 percent tax has been given an opportunity to invest in the housing sector in the proposed budget. However, the housing traders see the additional duty on various materials of this sector as a blow to the roof.
In the proposed budget for the financial year 2024-25, the tax on brick, an essential material for the construction sector, has been increased, duty has been imposed on various products used in the construction of pre-fabricated buildings. VAT increased on generator and AC. The main demands of the housing traders are VAT-tax, registration cost and there is no hope in the budget of the new financial year.
Housing sector entrepreneurs say that no strong measures to reform the financial sector are visible in the proposed budget. High value of dollar, decline in reserves affects overall trade. Apart from this, due to the distress in the banking sector, the businessmen of the housing sector are not getting loan opportunities from the banks as before. As a result, the businessmen of this sector have to rely on their own feet. Many companies in the housing sector are forced to wind up their business altogether.
An analysis of the proposed budget for the upcoming financial year shows that the finance minister has proposed to impose 10 percent import duty on goods used in the construction of pre-fabricated buildings in the budget. The tax rate on bricks, an essential component of the construction sector, has been increased from 5 percent to 10 percent. As a result, the price of bricks will increase. All these will have an impact on the flat-apartment construction cost. However, the buyer will ultimately have to bear the burden of additional costs. The sector stakeholders believe that flat-apartment sales will decrease.
Liaquat Ali Bhuiyan, chairman of Brick Works Limited told, “In spite of the crisis in the housing sector, the price of construction materials is increasing instead of decreasing.” Again according to the new rules the height and volume of the building will be reduced. As a result, the number of flats will decrease. Businessmen will be discouraged from investing in the housing sector. Investments are already falling. Currently, the housing sector is going through a transitional period. Policy support to pull this sector was needed in the budget, on the contrary, customs and taxes have been sitting. The middle class will now have to give up hope of flats, traders will be forced to wind up their business.
The imposition of one percent duty on generators, a very important accessory of housing traders, will increase the price of generators in the country’s market. Besides, VAT on AC will increase from 5 percent to 7 percent, so the price of AC will also increase.
The entrepreneurs of the housing sector said that black money has been whitewashed in the proposed budget by paying 15 percent tax on the purchase of flats and plots. In this case, no authority of the government can question about the source of money. This may have a positive impact on the housing sector. Businessmen feel that there is no good news for the housing sector in the budget apart from this one issue.
Real Estate and Housing Association of Bangladesh (Rehab) President Md. Wahiduzzamantold, “We have been saying time and again to reduce the registration cost of the housing sector. This was our proposal even before the proposed budget was presented. Because even if a flat goes to two buyers in new and old condition, the registration cost is the same. This discourages buyers, creating a tendency to show lower prices. Government is losing revenue. I am again recommending to the government to solve the matter.
Regarding black money investment in housing sector, Wahiduzzaman said, “Black money (investment opportunity) should not be given for one year. If it is done for at least five years, good results can be expected. In this case for the first-time 15 percent, from the next year with a higher rate of tax, giving an opportunity to turn black money into white will bring more investment. Most importantly, the housing sector is currently going through a transitional period. There is a great need for policy support in the budget to pull this sector.