Owning a home to be more elusive

One will have to pay at least Tk20 lakh in gain tax to buy a katha of land in Gulshan from the next fiscal year. It will be Tk12 lakh per katha or 8% of the total land price for Uttara. The proposed gain tax on land registration in other areas is also significantly higher – almost double the existing rates.

On top of that, if you plan to buy land and build a house, you need to add some extra money beyond your planned budget for cement, rods, lifts, ceramics, glass, switch-sockets, cables and kitchenware as these items will get increased or imposed VAT and duties and become costlier.

Even if you plan to buy just a flat, you will have to pay Tk800 per square feet or 8% of the deed value, which is also double the existing rate. Finance Minister AHM Mustafa Kamal proposed the increases in taxes while placing the budget for FY24 before the parliament yesterday.

So, the dreams of owning a home will become more elusive, with the prices of construction materials already going high because of dollar crisis and rising inflation.

Economists believe the tendency of tax evasion by hiding the real value of properties will increase further in the coming days if the proposed unusual increases in taxes come into effect. 

"If the registration costs increase, buyers and sellers may be reluctant to disclose the actual prices on their documents, leading to increased undisclosed money and a significant portion of the economy remaining informal," Ahsan H Mansur, executive director of the Policy Research Institute, told The Business Standard.

According to the proposed budget, the gain tax on land and flat registration will be raised to 8% from the existing 4% in the Rajdhani Unnayan Kartripakkha (Rajuk) and Chattogram Development Authority (CDA) areas. In other areas of city corporation and district-level municipality, the rate will be increased to 6% from the present 3%. A 4% tax rate will be applicable for upazila-level municipalities and 2% for any other areas instead of 1%.

Additionally, the maximum limit for the gain tax will be raised to Tk20 lakh per katha or 10% of the deed value, whichever is higher, up from the current Tk10.80 lakhs and 4%, respectively.

Currently, land registration costs include a 1% registration fee, 1.5% stamp duty, 2% local government tax, and 4% or 3% gain tax.

On construction costs, Bangladesh Cement Manufacturers Association Vice-President Md Shahidullah told TBS that the price of cement may increase by Tk30 per bag as import duty of clinker, the key raw material has increased to Tk 700 per tonne from Tk500. "Even the impact will be multiple with the addition of source tax and VAT," he added.

Apart from cement, the price of imported tiles will be increased considerably as the tax rebate facility to the sector is proposed to be withdrawn. Besides, additional duties have been imposed on 10-12 products including elevator, ceramic, glass, switch-socket, cable, and kitchenware.

Real Estate and Housing Association of Bangladesh President Alamgir Shamsul Alamin said if the prices of these products increase, the cost of house construction will increase by 5-7%. 

"This will affect the flat buyers. If the prices go beyond affordability, there will be a crisis in the housing sector," he told TBS.