{"id":2908,"date":"2019-07-29T19:23:09","date_gmt":"2019-07-29T13:23:09","guid":{"rendered":"https:\/\/bikroy.com\/blog\/?p=2908"},"modified":"2021-06-25T16:38:04","modified_gmt":"2021-06-25T10:38:04","slug":"how-the-2019-20-budget-will-affect-the-property-market","status":"publish","type":"post","link":"https:\/\/blog.bikroy.com\/en\/how-the-2019-20-budget-will-affect-the-property-market\/","title":{"rendered":"How the 2019-20 budget will affect the property market?"},"content":{"rendered":"

\u201cBangladesh, on the road to the future,\u201d an apt title for this year\u2019s fiscal plan.<\/span><\/p>\n

On June 13, 2019, the Bangladesh government unveiled the National Budget for FY 2019-20. The total budget for this term is BDT 523,190 crore \u2013 the largest amount in this country\u2019s history and about 5 times more than any budget passed in the last ten years. The officials seem optimistic for the fiscal term ahead, hence the bright slogan.<\/span><\/p>\n

This year\u2019s plan draws special attention to the stock market and the housing sector. These areas have been stagnant for a significant period of time, but with the new policies set in motion, conditions are sure to improve in the upcoming term. The main goal is to increase overall investment in the private sector and potentially attract foreign direct investment.<\/span><\/p>\n

In this article, we will take a look into the <\/span>property market<\/span><\/a> and the implications of the new budget plan on the housing sector.<\/span><\/p>\n

Impact on Property Market<\/span><\/h2>\n

New Budget Allocation<\/span><\/h3>\n

Our government envisions a country where every citizen will have a permanent address, which is why this year a total of BDT 6,603 crore out of the budget has been allocated to the housing sector. This is a significant increase compared to FY 2018-19 where BDT 4,963 crore was initially allotted, but then it was increased to BDT 6,146 crore.<\/span><\/p>\n

Policy Changes<\/span><\/h3>\n

The housing sector is in a slump due to high tax rates imposed in previous terms. According to sources, the total tax including registration fee, gains tax, stamp duty, local and value-added tax amounts to 14-16% of the listed price. An additional 17% tax is charged when <\/span>purchasing a plot<\/span><\/a> or land. The fees vary depending on the deed value.<\/span><\/p>\n

With such high tax rates, most people are reluctant to invest in the property market, thus leading to a widespread stagnation for the whole industry. This is where the new policies come into effect. As of FY 2019-20, plot and land registration fees are anticipated to be cut in half and area-based tax on flats will be reduced by 20% from current rates.<\/span><\/p>\n

Boost in Investment<\/span><\/h3>\n

The new policies promote investment in the property market, especially in key economic zones and hi-tech parks. The National Board of Revenue (NBR) is also allowing untaxed (undisclosed) income to be invested in the property market without any questioning. Buyers are not obligated to state their source of investment as long as they contribute 10% tax on their total undisclosed income and pay appropriate property taxes. This policy is mentioned under section 19BBBBB of the current income tax manual where it states, \u201cSpecial tax treatment in respect of <\/span>investment in residential building and apartments<\/span><\/a>\u201d is to be given.<\/span><\/p>\n

This policy incentivizes buyers to invest their hidden reserves, leading to funds getting injected into the economy. This boost in investment also generates employment within the private sector, bringing our economy a small step closer to development.<\/span><\/p>\n

Black Money Whitening Schemes<\/span><\/h3>\n

The drawback to NBR\u2019s policy is the increase in money whitening schemes. Investors will be able to pass off \u2018black money\u2019 without facing any legal action if they invest in the property market. This means there will be an influx of property investments in the near future, which on one hand will benefit the economy, but on the other will be detrimental to the morals of other investors. By allowing money whitening schemes, it will promote unethical business conduct and ultimately harm our economy in the long run as businesses will resort to unethical activities and tax evasion, costing the government a huge loss in revenues.<\/span><\/p>\n

Proposed Budget Taxation<\/span><\/h3>\n

After the initial 10% tax on undisclosed income, investors will now need to pay property tax based on the following guidelines:<\/span><\/p>\n

In <\/span>Gulshan<\/span><\/a>, Banani, Baridhara, Motijheel, and Dilkusha:<\/span><\/p>\n

For Flats\/Commercial buildings<\/span><\/p>\n