Real Estate Sector Faces Unfavorable Policies

The government of Bangladesh is set to implement measures to double the gain tax rates on land and flat registration, as well as penalties for late submission of income tax returns in the upcoming fiscal year 2023-24. Under the new provisions, the gain tax on land and flat registration will rise from 4% to 8% in the Rajdhani Unnayan Kartripakkha (Rajuk) and Chattogram Development Authority (CDA) areas, and from 3% to 6% in other regions. The maximum limit for gain tax will also increase to Tk20 lakh per katha or 10% of the deed value.

The Bangladesh Economic Zones Authority (Beza) is set to construct two housing projects within the Bangabandhu Sheikh Mujib Shilpa Nagar, aiming to accommodate approximately 400,000 industrial enclave workers. These low-cost housing projects will cover 363.55 acres of land in Saherkhali Union and the Domkhali area of Korerhat Union in Mirsharai upazila. Strategically located near the industrial areas, the projects will significantly reduce workers' commute time, enhancing their convenience.

The Centre for Policy Dialogue (CPD) and analysts have emphasized the need for an increase in property tax to curb rapid wealth accumulation and rising inequality in Bangladesh. The country currently has one of the lowest property tax rates globally, with property tax accounting for only 0.27% of GDP, similar to African countries. Over the past five years, the share of property tax in overall revenue collection has been declining. In comparison, countries like Australia, Canada, the United Kingdom, and the United States generate more than 10% of their total tax revenue from property taxes.

The real estate sector in Bangladesh is expressing concerns over potential unfavorable policies in the upcoming fiscal year amid the global economic recession triggered by the Russia-Ukraine war. Reports indicate that the National Board of Revenue (NBR) plans to increase taxes and fees on buying flats and plots, disregarding the proposals of the Real Estate and Housing Association of Bangladesh (REHAB). Industry insiders argue that the sector is already grappling with rising construction material prices, and further tax increases would exacerbate the situation.

The Consumers Association of Bangladesh (CAB) has opposed the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) demand to allow the unconditional amnesty of black money investments in the real estate sector. The CAB president said such a move would encourage illegal accumulation of wealth, is unethical and illegal, and may not boost investments in the real estate sector.