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Bangladesh is currently one of the fastest growing economies in the world. In a recent publication, HSBC mentioned our economy would continue to grow at approximately 7.1% till 2030, making Bangladesh the 26th largest economy in the world from the current 42nd position. Undoubtedly, there is massive room for development in Bangladesh, and the possibilities of that happening are quite high. A significant portion of this robust change will take place concentrating on infrastructure and the Bangladesh real estate sector, impacting the growth of ancillary industries simultaneously.

Following the trend of the economy, drivers of the property market have been performing exceedingly well in recent years. On top of that, budget FY 18-19 was favorable to the real estate sector as well. Even though the market experienced a recession back in 2012, realtors are hopeful of recovery in the upcoming years. A significant part of the development is stimulating the growth of ancillary industries as well. This multiplier factor is crucial for our country since it is creating more jobs and impacting many lives. Let’s find out how Bangladesh’s real estate is helping its ancillary industries in our country.

Steel Industry

Growth of ancillary industries like steel rod is dependent on the development of Bangladesh real estate market
Growth of ancillary industries like steel rod is dependent on the development of Bangladesh real estate market

One of the major factors that boost ancillary industries like steel rod is the annual per capita consumption. In 2017, consumptions increased to 45 kgs from only 25 kgs in 2012. Industry experts predict that it will grow to approximately 73 kgs by 2022. Although a significant portion behind the growth came from government projects and the construction of export processing zones, the real estate sector contributed heavily as well. The steel rod is an irreplaceable part of building construction and is one of the most expensive materials too. That is why the continuous demand for accomodation pushed the per capita consumption to a great extent.

Cement Industry

Cement among other Bangladesh real estate ancillary industries is hopeful for a comeback in few years
Cement among other Bangladesh real estate ancillary industries is hopeful for a comeback in few years

Just like the steel rod, cement is also a vital part of the construction process. Therefore, the growth of the cement industry is closely related to the property market. Despite the continual development in real estate, the cement industry is yet to see the light of hope. That is because the market is experiencing overcapacity in production. On top of that, big players are on a spree for expansion!

The reason is, real estate and construction activities are two core drivers of the cement sector. Similarly, the urbanization rate can impact all such activities and the entire economy as well. According to the World Bank, by the end of 2016, around 35% of the total population was urbanized, and the slope is heading upwards. Positive outlooks as such in both the real estate industry and urbanization is creating anticipation of spiraling demand in the future. Hence, the growth of real estate will ultimately leave an impact on the growth of ancillary industries like cement too.

Brick Industry

Innovation is one of the key drivers for the brick industry in Bangladesh
Innovation is one of the key drivers for the brick industry in Bangladesh

Bangladesh is the fourth largest producer of bricks in Asia. It caters to 99% of the local demand of 17 billion pieces annually. This massive industry contributes to 1% of our country’s GDP per year as well. Even though the contribution of this sector is vital to our economy, a negative perception prevails due to obsolescent production technology and environment pollution. Hence, this sector is taking a new turn by introducing alternative bricks for construction.

The alternative brick provides multi-faceted benefits as it reduces construction costs by 20-25%. On top of that, such bricks work as good insulators too. Meaning, temperature fluctuation barely impacts the indoors, and therefore, it reduces electricity bills as well. Because of such benefits, people are now inclining towards these locally produced eco-friendly bricks in construction.

The real estate sector constitutes about 35% of the annual demand for bricks while large-scale buyers like governments and industrial establishments take up the rest. The current steady growth of the property market is already contributing to the growth of the brick industry. On top of that, recent environment-friendly innovations will boost this demand even more, which will mainly come from the real estate sector. Moreover, the government is spending heavily on infrastructure; hence, a major thrust is impending for brick industry as well.

Ceramics Industry

One of the factors that boost ancillary industries of real estate like ceramics is the standard of the new buyers
One of the factors that boost ancillary industries of real estate like ceramics is the standard of the new buyers

In the last five years, the Bangladesh ceramics industry has experienced a massive 200% growth in production. One of the fundamental reasons behind such robust growth is the real estate industry and the change in purchase parity of locals. Currently, it caters to 85% of domestic demand while exporting quality products to foreign markets at the same time.

According to the Bangladesh Ceramics Manufacturers and Exporters Association (BCMEA), 33% of the products are produced every year for real estate purposes, e.g. tiles and sanitary ware. As the demand for quality apartments in Dhaka is on the rise, marketers expect growth in the production of these products as well. Moreover, consumer mindset towards domestic products is shifting and taking a positive turn. Hence, the demand for local brands is growing with the enhanced purchase capacity of the newer generation of apartment buyers.

Other Associated Materials

Effect of properties on ancillary industries like cable wires and aluminum is visible on share market as well
Effect of properties on ancillary industries like cable wires and aluminum is visible on share market as well

Apart from the core raw materials for construction like cement, bricks and steel rods, we still need additional items such as glass, aluminum, and electrical wires. While the major industries enjoy maximum benefit from the development of the real estate sector, it also impacts the growth of ancillary industries too. Only this year, the engineering sector alone traded around 15% of the entire market volume in Dhaka Stock Exchange (DSE). Some of the leading performers were cables, steels, and pipes, all of which core components for property constructions.

With time, the market expects such Bangladesh real estate ancillary industries to perform even better as they are heavily investing in new technologies to cope up with the demand. The more the real estate industry flourishes, there will be more demand for such products in the future. Ultimately, the growth of the property market will bring up these related industries too.

It is evident that if the entire economy grows, all sectors will develop automatically. However, it is also necessary to consider the multiplier factor of sectors like real estate towards the growth of ancillary industries and their contribution to Bangladesh economy. Only by combining all these can a developing country like Bangladesh expect a brighter future. What are your thoughts on this particular matter? Share your insights in the comments section below.

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