Bangladesh is one of the densely populated country in the world, has been experiencing severe of houses shortage for its citizens. Although majority of the population is segmented into the middle and the low income groups. The private sector housing real estate developers have met a small proportion of the national housing demand in the last more than twenty years. The real estate sector is one of the fastest growing and thrusting sectors in Bangladesh. Infrastructural development is highly important for a country to rise as a developed nation and to ensure housing facilities for the citizens of the country.
Bangladesh’s real estate market is considered to be stable and enjoys steady growth as incomes rise. Political and economic stability, falling interest rates, and larger construction projects have contributed to the mounting growth rates. The estimated size of the industry in 2018 was over $7 billion, and YoY growth was above 5% in 2017. Its direct contribution to the GDP was 6.49% as of 2017. Real estate sector is one of the most attractive sectors of investment now in the country.
The rate of urbanization in Bangladesh is 1.69%, the highest in South Asia. It is estimated that 120,000 additional units are needed to house this increasing population annually, but the current supply is around 25,000 annually. The growth of real estate is firmly associated with the growth of urbanization. According to Census 1991, 22% of the population was in urban and 40% people of the country will be urbanized within 2020, according to United Nation (2014). Moreover, compare to the South Asian countries, Bangladesh has enormous potentiality when it comes to urban growth.
In Bangladesh, real estate emerged as a crucial sector of our economy. It has a huge multiplier effect on economic activities. It is one of the largest employment-generating sectors after agriculture and garments. It also stimulates demand for allied industries, for example steel, cement, tiles and sanitary ware, cable and electric wire, paint, glass and aluminum, brick, building materials, and consumer durables. Contribution from this sector has been very significant and over the last two decades it contributed on an average 8.24% on the overall GDP of the country.
Earlier, the housing sector was facing many challenges but now the real estate sector of the country seems to be turning around. Most of the realtors had complained of a drop in sales by 30-70 per cent over the last couple of years. They suffered badly because of slothful trend in real estate business. Some developers were forced to sell apartments at lower profit margins to maintain their cash flow. Now, most of the companies in the sector have changed their strategies and are now focusing on the growing middle-income segment of the population.
There is anywhere between 2,500 to 3,000 realtors engaged in the sector, which employs more than 100,000 architects, graduate engineers, diploma engineers, management professionals and skilled manpower. Besides, there are about 269 backward linkage companies that have direct linkage with the sector that contributes directly to the gross domestic product (GDP). About 50 million workers are providing labour in this sector. Real estate development has a net positive fiscal impact on the government's revenue earnings.
As purchasing a property is a huge investment that requires savings of a lifetime, financial support in the form of housing loans can help a consumer make that decision earlier on in life, boosting the industry as well as their own wealth. As of June 2018, total outstanding housing loans amounted to nearly $10 billion, making up 9.6% of the total credit to the private sector. Between 2016 and 2018, outstanding housing loans increased by 42%. The rising popularity of home loans indicates confidence in the economy and the real estate sector.
The sector has extensive potential to attract investment in its various associated sectors. In 2015, about 10% of the total foreign remittances are invested in land and house/flat purchase. At the national level, the lion’s share (74.78%) of the total investment from remittance is invested in construction or reconstruction of house/ building/flat/ others etc. In nutshell, buoyant growth in GDP, notable transformation towards urbanization, increased per capita income, growing standard of living, declining price trend in allied industry, along with falling rate of housing finance are the most influential determinants that shall boost the real estate market in the days ahead.