Housing sector: New tax burden raises fears of another spike in apartment prices

Oishi Properties is currently developing eight housing projects across different parts of Dhaka, six of them located in the Bashundhara Residential Area. These six projects will add 96 apartments to the market. Although construction on the projects is scheduled for completion at various times this year, the company has yet to sell a single apartment.

Mohammad Ayub Ali, Chairman of Oishi Properties, told Prothom Alo that the company would normally expect to sell two to three apartments each month, but has not sold even one over the past five months. According to him, the housing sector has been struggling for the past two years.

While there had been hopes that conditions would improve following the national election in February, the conflict involving Iran dampened those expectations. The imposition of new taxes has added to the pressure, making it increasingly challenging for developers to remain viable in the coming years.

Many real-estate developers share similar concerns. In the proposed budget for fiscal year 2026–27, Finance Minister Amir Khasru Mahmud Chowdhury increased tax rates on construction materials.

In addition, he imposed a 15 per cent capital gains tax on apartments or any other financial benefits received by landowners from developers.

Several developers said the housing market has remained sluggish since the political transition of August 2024. During this period, apartment sales among all but the leading developers have nearly halved.

They had hoped the sector would recover after the political government took office, but uncertainty in the Middle East has undermined that expectation.

The new tax measures, the industry insiders argue, will further slow the recovery by increasing costs. Some fear apartment prices could rise by as much as Tk 2,000 per square foot.

Apartment living began gaining popularity in Bangladesh during the 1990s, gradually turning the real-estate sector into a major industry. At the same time, soaring land prices in Dhaka have long pushed apartment prices beyond the reach of many middle-income and lower upper-income households.

Nevertheless, more than 1,000 real-estate companies have emerged across the country, most of them concentrated in the capital. Collectively, developers supply between 8,000 and 10,000 apartments annually.

Steel reinforcement bars, or rebar, account for a significant portion of construction costs. In the proposed budget, the finance minister raised VAT on billets produced from melting scrap and on each tonne of rebar manufactured from billets, increasing it from Tk 2,700 to Tk 3,400. The government also increased electricity prices ahead of the budget announcement.

At a press conference last week, the Bangladesh Steel Manufacturers Association (BSMA) said the combined impact of higher electricity tariffs and the new tax and duty structure could increase direct and indirect production costs by an additional Tk 11,000–12,000 per ton of rebar, a burden that would ultimately be passed on to consumers.

Asked about the impact, Tapan Sengupta, Deputy Managing Director of leading steel manufacturer BSRM, said, “The increase in electricity prices alone will raise the cost of rebar by around Tk 2,000 per tonne.

So far, we have absorbed part of the additional cost, but the remainder will eventually have to be adjusted. Prices will also rise because of the new tax structure. However, we are waiting until the budget is formally passed.”

He added that the extent of any price increase would depend on market demand and international raw-material prices.

Under the proposed budget, landowners will be required to pay a 15 per cent capital gains tax not only on upfront signing money but also on apartments or any other financial benefits received from developers. Previously, landowners were required to pay the 15 per cent tax only on signing money.

Leaders of the Real Estate and Housing Association of Bangladesh (REHAB) argue that the new tax will create fresh challenges for the sector. For example, if a landowner receives 12 apartments in a 24-unit development project and those apartments are valued at Tk 120 million, the tax liability would amount to Tk 18 million. They warn that such costs could drive apartment prices significantly higher.

Sales at Sheltech, one of the country’s leading real-estate companies, have fallen by 20 per cent since the political transition. Although apartment sales improved somewhat after the national election, they declined again this month.

Providing this assessment, Mohammad Shahjahan, Chief Operating Officer (COO) of Sheltech, told Prothom Alo that the new tax on landowners would further slow activity in the housing sector. He also predicted a decline in apartment registrations, which could ultimately reduce government revenue.

Responding to a question, Shahjahan said construction material prices have been rising every year. This year, higher electricity tariffs and new taxes will trigger another round of increases. At the same time, taxes on landowners are also rising. As a result, apartment prices are likely to increase further.