Market Aspects 2018-02-08T07:39:52+06:00

Like any other country in the world, the housing sector plays vital roles both in the context of the economy of Bangladesh and serving the fundamental human right of shelter. Apart from providing physical shelter, housing may have significant impact on the lives of the dwellers in terms of skills enhancement, income generation, increased security, health, self-confidence and human dignity. Bangladesh, like many other developing countries, faces an acute shortage of affordable housing both in the urban and rural areas. Moreover, housing affordability is being eroded by poor land administration policies, which have resulted in very high land prices that make urban housing prohibitive for lower-income groups. Also, there is no active secondary market for real estate, mainly because of the high transfer taxes and an uninterrupted long-term increase in land prices. In spite of all these, this sector has experienced considerable growth in past few decades.

With a rising population and increasing housing demand, apartment culture has grown up in Dhaka sharply. Apartments were first introduced by the formal private developers in early 80s to the housing history of Dhaka. It first appeared in Dhaka near Central Road and subsequently the city experienced a boom in apartment development in all residential areas including Paribagh, Maghbazar, Siddeshwari, Shantinagar, Dhanmondi, Mirpur, Banani, old DOHS, new DOHS, Gulshan and Baridhara, to name just a few. In line with this, house rent in Dhaka increased by 250 percent between 1990 and 2007.

During the last decade, the total volume of Real Estate, Renting and Business service sector increased every year which implies a positive growth in the sector every year. But, compared to overall GDP growth, this sector expanded at a slower rate. That is why in overall GDP the contribution of this sector has a downward trend. The overall GDP contribution of the sector was 7.02% in 2009-2010. In a crude measure, the total volume of the sector was approximately 26575.74 crore BDT in 2010-2011. The growth in this industry also facilitated a fast growth in many linkage industries like glass and glass products industry, brick industry, cement industry, ceramic industry, iron and steel industry etc over the last decade. Such consistent growth in the real estate sector is mainly due to a consistent demand at the consumer end.

Through the analysis of consumer responses it was found that those who are looking for owning a house or within a short or medium time frame have an average monthly family income of BDT 95,441.18 and on an average plan to build their houses on 4.6 kathas of land. Those who are looking for buying an apartment within a short or medium time frame have an average monthly family income of BDT 97,300 and on an average they want to purchase 1,786 square feet flats. Among the respondents around 50% (330 out of 676) has an average family saving of around BDT 20,000. Currently, consumers are more interested to buy flats than build their own houses. People who already own a house or flat are still very willing to buy another property which actually adds in the growth in the demand. Buyers from the 40-50 years age group are more willing to build their own houses in upcoming years.

Younger segments are willing to purchase flats rather than building their own houses. But in most cases they do not have any immediate plan. For building houses, people mostly prefer Uttara, Mirpur, Purbachal area, Bashundhara area, Mohammadpur, Dhanmondi, and Gulshan areas. For purchasing flats, consumers mostly prefer Dhanmondi, Uttara, Mirpur, Mohammadpur, Gulshan-Banani, Basundhara and Malibagh-Mogbazar areas. Among different occupational groups, Businessmen, Private Bankers, and Doctors (both Govt. service holders and private practitioners) are more willing to build their own houses or purchase flats. Major sources of fund are bank loan, and personal and family savings. One overall perception of the consumers is that the government is yet to play proper roles in meeting the housing needs while the private sector is contributing significantly. Through analyzing the consumer responses, it is estimated that demand for houses in upcoming three years is around 30,000 to 40,000; in upcoming five years demand is around 60,000 to 80,000; and in upcoming 10 years demand are around 95,000 to 130,000. In case of flats, estimated demand in upcoming three years is around 75,000 to 100,000; in upcoming five years demand is around 90,000 to 125,000; and in upcoming 10 years demand are around 70,000 to 95,000.

 

In line with the demand, the prices of real estate properties are also rising very fast. Price hike of land and construction materials also add to the overall price hike. The price of land is increasing at a very high rate after 1990. After 2000, the rise in land price became steeper. There is no control of the govt. over the price increase of land within Dhaka city. Increased land price have a direct impact on apartment price. Also, after 2005, price of bricks, granular sand, cement, grade 60 rod etc. had a rapid, almost exponential, increase. Due to such unimaginable increase in land price as well as sharp increase in prices of the construction materials price increase of apartments became an obvious consequence.

 

As an obvious result of such price hike, a good amount of undocumented money has been utilized in acquiring land, apartments, buildings, shops etc. in past few years. But the usage of black or undocumented money in the Real Estate sector cannot be measured precisely because no authentic information is available anywhere. Apart from such undocumented money, foreign remittance is a prominent source of fund to purchase any real estate property along with personal and family savings, and bank loan. But,any consolidated figure about how much foreign remittance is invested per year in real estate sector was not available.

Apart from meeting the housing needs, the Real Estate sector contributes to the Government exchequer through Registration Fees, VAT, Advance Income Tax (AIT), Stamp Duty, Property Handover Tax etc. Also, the construction industry is a labor-intensive industry, whose capacity of absorbing labor is great. The industry provides many jobs for skilled, semi-skilled and unskilled workers both in the formal and informal sectors. For the migrants from the rural areas the construction industry is often a stepping stone to urban life. Real Estate sector is a major part of the construction sector. Most of the labour force engaged in the construction sector is basically engaged in the Real Estate sector. Thus real estate sector is also contributing a lot in the overall economy of Bangladesh.