Massive Property Tax and Rent Hike at Your Doorstep!

Mad already from stock market crash? But how about an explosion of housing?

February Fireworks over Dhaka's Super Hot Real Estate Skyline!!
In the Eve of World Cup Cricket, Feb 2011

Bangladesh Government has planned a massive new property tax beginning July 2012. According to reports: any person having more than one house or a flat in metropolitan areas will have to pay the property tax.  Rate? It has not been officially disclosed yet but, the Daily Star reports:

“.. said an NBR high official adding that the property tax will be two to three percent of the value of a taxable property.”

If this is even close- this will create an unprecedented frenzy in the superhot real-estate market of Bangladesh, which has experienced double digit yearly increase in property valuation for many consecutive years.

A flat owner whose, flat has a valuation of TK 50 Lac (typical lower range in Dhaka) will have to pay TK 1-1.5 Lac yearly in property tax. If the flat is valued at 4 Crore (typical upscale), he will pay Tk 8-12 Lacs per year.(continued in next page...)

It is quite likely the rental flat owners will pass on the tax to the renters. Typically those who offer rentals owns at least two houses or flats- one to live him/herself.

Thus it means monthly house rents will have to go up by about TK 10,000 mid range areas to TK 50,000-1,00,000 in upscale areas for a typical renters. It will be interesting to see how then the renters will pass on the cost? Perhaps buying their own flats!

ABC of  Property Tax, Posted by a Tax Collector

This tax plan is in the final stage and will be presented to the parliament. The government has solid majority to pass it into law without any trouble- except if some of it's own property owner MPs object.

National Board of Revenue (NBR) estimates that the move will help reduce the growing rich-poor gap in the country. 

There are property taxes in many countries. The primary use of property tax is to pay for the local services. For example in US, property tax buys residents of a county free schools for all children, a local public library system, prompt repair, maintenance and snow removal of all local roads, police service, fire station, social and family services for financially disadvantaged citizens living in the county, etc. The tax is payable directly to the local governments- who either directly or by contract arrange the services.

However, it is not sure if Bangladesh government has any thought or plan about these services. If the revenue is utilized to modernize such locality services, this will radically improve the living infrastructure in Bangladesh. On the other hand, there is a good possibility that this is just a revenue collection mechanism without any public interest plan.