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High registration cost of flats retards real estate growth

MONJUR MAHMUD
High registration cost is heavily discouraging buyers from registering their flats, holding back the overall growth of real estate sector.
More than 6,000 apartments in Dhaka now remain unregistered for long because of high registration cost, which is as high as 20 percent of an apartment price, members of Real Estate and Housing Association of Bangladesh (Rehab) say.
“Rehab members sold between 25 and 28 thousand apartments in the last 10 years and around 20 percent of those still remain unregistered mainly due to high registration cost,” SM Anwar Hossain, vice-president of Rehab, told The Daily Star.
Registration cost of apartment in Bangladesh is the highest in the region, he noted.
Present amount of the registration cost discourages people from selling their apartment and buying another one in case they want to change it or need a bigger one, the Rehab leader said. “And that's why a secondary market for apartment did not grow in Bangladesh.”
According to Rehab, presently an apartment buyer has to pay five percent duty on stamp of its value, five percent as registration fee, five percent as gain tax and 1.5 percent as value added tax (VAT) to register an apartment.
Besides, a real estate company has to pay Tk 175 per square metre as advance income tax (AIT) for building apartments and 2.5 percent (of the value) for developing lands.
Such exorbitant registration cost of property exists nowhere in the world, Hossain said. Citing examples of some neighbouring countries, he said the cost is around three to four
percent in Sri Lanka, six to seven percent in India and seven to nine percent in Pakistan.
“More than 50 percent of the apartments that were sold in the last couple of years have not been registered yet,” said another Rehab leader.
It is very difficult to pay such huge registration cost for the middle class people who buy an apartment mainly with their savings of many years, he said.
Hossain said: “Our experience is that reduced registration cost helps the government increase its revenue income from the real estate sector.”
The registration cost was as high as 31 percent three years back and the number of unregistered apartments was much higher then. But the government's revenue earnings from this sector have gone up substantially after reducing the cost to the present level, he went on.