Dhaka, April 11 (bangladeshinside.com) — Land prices in Bangladesh have begun to decline after more than two decades of increase which put banks and other lenders in deep trouble as many of their borrowers used loans in land purchases diverting it from any other investments. Land purchase and sell usually guaranteed higher and definite returns.
Bankers fear the borrowers who diverted investment loans and their working capital to land purchases now run the risk of being defaulters due to the sky-fall in land prices. They said that the situation might worsen further the banking industry’s non-performing loans from 10.03 percent recorded at the end of December 2012.
Land prices had been skyrocketing for the last two decades till 2010. In areas of Dhaka and on its outskirts, the prices soared by more than 300 percent between 2000 and 2007. The prices rose further by about 50 percent between 2007 and 2010, according to Real Estate & Housing Association of Bangladesh (REHAB).
However, the land prices in Bangladesh declined 30 percent in recent months including the major cities like Dhaka and Chittagong. The posh residential areas like Gulshan, Dhanmondi and Baridhara are losing values more than the average particularly due to lack of wealthy buyers.
Analysts blames the slide in prices on anti-business environment, a slow pace of economic growth, a dearth of infrastructure development. Thousands of unsold flats are also discouraging developers to buy new lands for new projects, which are contributing to the fall in land prices, they say.
The REHAB at a recent meeting asked its members to remain cautious about buying new lands and starting new projects, as well as warned further land prices fall.
Businesspeople in Chittagong have been hit hard due to the fall in land prices. Central Bank officials said the amount of outstanding loans in the port city is around Tk 83,000 crore. Of the amount, more than Tk 10,000 crore or 15 percent has turned into bad loans despite converting many of the short-term loans into long-term ones. They fear that many of the Chittagong-based clients of commercial banks, whose money has been stuck in lands, may become loan defaulters.
Fall in land price is already affecting readymade flat sale due to high price of per square foot of residential or commercial space. The further effects on rent of flats and office space are yet to come.
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