Affordable housing: Policy packed with assurance, no implementation in view
It is high time the Bangladesh Bureau of Statistics created a real estate price index, a researcher says
If you look at the National Housing Policy 2016, you will definitely be impressed. The objective of the policy is to ensure the accessibility of people from all strata of society to suitable housing at affordable prices, and it goes about laying out a plan on how to do that.
Firstly, the policy states that the government will take up programmes to keep land prices, construction costs of houses, and house rent at a minimal level to encourage people in house ownership.
Secondly, it discourages allotting plots to individuals. It says there should be an arrangement to allot plots to a specific number of people on the basis of floor area ratio so that many people can be accommodated on a single plot, thus saving lands.
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Thirdly, government, semi-government, and autonomous institutions will submit reports to the land ministry and the housing and public works ministry every year on their lands in city areas that remain unutilised for more than 10 years. The government will use those lands for housing on a priority basis.
Fourthly, the government will create urban land banks in city areas in coordination with the land ministry to materialise housing development projects with unutilised khas land. The government will have to create land banks to provide common people with flats at reasonable prices and flat prices will come down to a great extent.
These are a few of the many components the government planned to implement to provide affordable housing to people from all walks of life.
In reality, all of this simply lies in paper.
In the last 20 years, land prices in Dhaka city increased by as much as 2,173% while flat prices rose by as much as 400% in the last 15 years. As a result, it has become nearly impossible for the middle class to buy a piece of land in the city.
"This price hike is not natural. It is artificial and does not match the natural growth of the economy," said MM Akash, professor of economics at the University of Dhaka.
He believes the uncontrolled competition to buy lands with undisclosed money is causing land prices in Dhaka to skyrocket. Real estate companies and people who have undisclosed money are buying lands in the hope of making high profits at a time when prices will increase further.
"These realtors have created a monopoly on the supply side of the land market," Akash added.
The majority of people who are buying lands and flats in Dhaka city are basically businessmen with undisclosed money. They believe buying land is safe and profitable. The government's tax policy of whitening undisclosed and ill-gotten money by buying land and flats has reinforced this tendency.
"What they all want is to whiten black money. As a result, this sector is not developing the way it should, naturally," said Towfiqul Islam Khan, senior research fellow of the think tank Centre for Policy Dialogue.
"If this system continues, we cannot increase the market base. If we fail to increase the base, the bubble will ultimately burst. And inequality will rise further," he explained.
The middle class is not in a situation to buy flats in the city, let alone lands, due to inflated land and flat prices. If someone wants to buy even a small flat in the city, they will have to spend at least Tk1 crore.
Apart from businessmen, government officials are also buying flats as the government introduced home loans for government employees in August 2018 at 10% interest, with 5% to be paid by the government and the rest by borrowers.
Like government officials, bank officials also have the scope to get home loans at the bank rate, which is 5%.
"The demand for luxurious flats is on the rise in the market. If you look at the type of demand, they indicate that some people are becoming richer and more and more money is coming to them. Income inequality is growing," said Dr Sajjad Zohir, executive director of the think tank Economic Research Group.
He said flat prices may not have actually increased, as there were many forms of deception in the past. Developers and flat owners would often hide the actual value of a purchase to deceive revenue collectors.
"Suppose I bought a flat for Tk10,000 per square feet but the paper says the price was Tk5,000 per square feet. Again, many people did not register their flats because whenever they did so, they would have to be accountable to the revenue board."
"The National Board of Revenue (NBR) is now more active in looking into the matter. The difference between the reported price and the actual price has come down. Therefore, the reported price seems to be higher now," believes Sajjad.
Secondly, he said many real estate companies would not provide all the facilities needed in a flat in the past. So, flats as a result were cheaper. The facilities and quality of new flats are now much better than that of the flats 15 years back.
A flat is not just a measurement of space now; it is much more than that. Buyers have become more aware of what they are purchasing now. It is possible the accountability of real estate companies has increased.
However, ordinary people are still far away from getting home loans because the interest rate at nearly all private as well as state-owned banks is 9%.
"People will buy lands or flats with their savings – this should not be the system. We need lending instruments. It is tough for the common people to get home loans in the country," said Towfiqul.
"In many cases, the term of the loan is 10 years. As a result, the lending interest is very high," he added, pointing out that very few people get the opportunity to get home loans from Bangladesh House Building Finance Corporation, the state-owned financial institution for building and purchasing flats.
"We cannot say whether there is a bubble in the real estate sector because we do not have authentic data. We do not have any market regulator in this sector," said Towfiqul.
He observed that the existing policy regime is increasing inequality in society. It is high time the Bangladesh Bureau of Statistics (BBS) took initiatives to create a real estate price index so that policymakers as well as consumers get the real picture of the real estate sector.
"This will pave the way for understanding the actual fluctuations of prices of lands and houses. If the regulator wants to act upon the issue, we need authentic data," said Towfiqul.
He said the government would have to create long-term credit facilities so that the middle class can avail flats in the city. He also said the government could weigh whether there was any scope for blended financing in this sector.
"The government is doing nothing at all to reign in land and flat prices and house rents. If the initiatives written in the housing policy are taken up, I see no reason why land prices would rise in the city," said architect Iqbal Habib, joint secretary of Bangladesh Poribesh Andolon.
"There is no organisation to implement the policy. On paper, the National Housing Authority has been tasked with implementing the initiatives in line with the National Housing Policy. But the agency does nothing at all," he said.
Rajdhani Unnayan Kartipakkha (Rajuk) is implementing Purbachal New Town, the largest planned township in the city. Iqbal said this project is aimed at making rich people richer.
"In most cases, the people who get plots ultimately sell those at higher prices. We want to reject this kind of project. You cannot take up such projects," he said.
"There should be a ceiling on owning land in the city. In 1975, no one could own more than 25 bighas. It is high time we put restrictions on land ownership. You cannot own more than a specific amount of land in the city," suggested Iqbal.
But who will do it? According to the National Housing Policy, a 25-member apex body named the National Housing Council led by the prime minister will be formed to monitor the implementation of the policy.
It has been three and a half years since the policy was published, but the body has not yet been formed.
