Challenges of real estate developers
Residence is one of the basic needs of human beings. The right to live in one's own is a fundamental right of people and it is internationally recognised. The demand of housing in urban areas in developing countries like Bangladesh is significantly increasing due to its fast growth rate. Rural people are migrating not only to find jobs but many wealthy people are moving to urban areas for the fulfilment of their expectations of better lives for their future generation, and for enjoying the modern facilities of the city life. This has resulted in a serious crisis all over the country, especially in the major cities of Bangladesh. In recent times, the private real estate firms have taken initiatives by ensuring maximum usage of land in a planned way. In this system, it is possible to accommodate more people in a comparatively small place. Only 30 percent of the population in Dhaka has occupied already more than 80 percent of residential areas with human settlements and supportive infrastructure. Economists and real estate experts state it as highly significant, because in this way land is becoming increasingly inadequate to provide individual housing solutions. For huge demand and inadequacy of land, price of land is very high in the urban areas according to real estate participants. This is making more people inclined to build and share apartments. In Dhaka five percent of the population belongs to the high-income group. 45 percent falls into the middle-income group and the rest in the low income group. Economists and real estate participants see the middle-income group as a huge market for the real estate sector. Builders have started building apartments for the middle-income class. The large unsatisfied middle-income class is expected to be boosting market for the real estate business.
Now in Bangladesh the demand for residential real estate unit is rapidly increasing. The population in Dhaka is increasing very fast. This rapidly increasing people need more housing facilities. Increase in house rent implies that people would become less interested to stay in rented house and would try or tend to buy home. Dhaka is expanding rapidly. While there are many real estate developers in the market, there are also very few of them who have maintained the quality, safety and customer preference. In developing urban areas, real estate plays an important role as well as solving housing problem. Nowadays real estate business in Bangladesh became very competitive. Competitors are moving very aggressively to achieve their target as well as increase their market share. On the other hand, the customers are becoming more aware about the current market of apartments. The main products in the real estate sector in Bangladesh include three things – commercial units, residential units, and a mix of the two. Commercial units are shopping malls, shops, and office buildings, which are used for commercial purposes. Residential units include two segments– plot units and apartment units. Plots are segment of a land area with a certain boundary where the land is developed by the real estate developers and builders. Apartments are buildings with flats of different sizes to live in. Mixed units include buildings which are used both for living and commercial purposes. Generally the lower floors of a project are rented for commercial purpose leaving the upside to sell as apartment. In recent times, the real estate developers have introduced new and diversified products. Model towns, which are built with the structure of a small town, include all facilities for people, from offices, shopping mall, houses, schools, swimming pools, gymnasium, banks, power plant etc. Projects that include swimming pool, gymnasium, shopping malls etc. in one building are also diversified products supplied by the real estate agents in Bangladesh. All these products wrapped with diversification have a great demand in the market.
In the first decade of 21st century, the price of per katha land increased unbelievably almost all over the Dhaka. Compared to the price increase of the earlier decade, the percentage increase in price almost doubled, and in some areas it is more than three to ten times more than the earlier price. Hence, the real estate developers were bound to increase their price to cover the cost of a project. This price rise is unbelievable and unexplainable. This has a direct impact on the prices of completed flats. In the upcoming decade there will a demand for around 100,000 flats in or around the city. With this huge demand for flats in future, the private real estate sector has plenty of opportunities to play an important role in satisfying the housing needs of the people. The total volume of the real estate sector has increased every year, satisfying the housing needs of the urban people in the last few decades. Contributions to the government exchequer through Registration Fees, VAT, Advance Income Tax (AIT), Stamp Duty, Property Handover Tax etc. has increased every year. In the future, this sector has enormous potential to expand its volume and thus contribute more to the national economy. For this, sufficient government assistance is required. While negotiating with the government, it can be argued that, rather than tightening the grip to regulate this sector, if the government takes initiatives to support this sector to grow and expand its volume, then this sector will be able to contribute more not only by generating more revenue but also by generating more employment opportunities to the people and by satisfying the essential housing needs of the people.
The writer is Research Engineer, Structural Engineering and Construction Division, Housing and Building Research Institute. He can be reached at email@example.com