The sudden urbanization in Bangladesh can be best described with the term ‘over urbanization’. It is the form of urbanization which does not lead to parallel growth of economy or industry but resulted from a huge number of people moving to the cities from rural areas. This phenomena has however, fueled the journey of the real estate market in Bangladesh. The industry has taken on the responsibility of providing accommodation to the increasing number of city dwellers.
Real estate is a crucial sector that has several multiplier effects in the economy. Real estate generates the most number of jobs after the agriculture and garments industries. It paves the way for other allied industries like cement, tiles, sanitary wares, cables and electric wires, paint, glass and aluminum, brick, building materials, etc. In the last two decades, real estate contributed 8.24% to the overall GDP of Bangladesh.
Living Cost vs. Demand for Flats:
Purchasing power of the Bangladeshi people has seen a hike in recent years. Keeping in line, the cost of living also went skyrocketing. The rent for tenants are constantly on the rise. The increasing number of people seeking rent is to be blamed here.
The increasing cost of living has led to a high demand for purchasing flats. Most people want to buy a flat of their own in an attempt to escape from high rent. Moreover, the prices of flats have gone down 20-30% in the last 4 years. According to a study conducted by REHAB in 2012 it was seen that an estimated demand for flats in three years increased from around 75,000 to 100,000. REHAB data also shows that the number of unsold flats have come down to 27,185 from 35,000 in Bangladesh, where Dhaka currently has only 12,185 ready flats are to be sold.
Prices of Materials:
Some of the important factors that determine the prices of real estate are building materials. These include: brick, cement, sand, iron, paint, timber, etc. In recent years, the prices of these materials have taken a downwards turn. This could give a huge boost to realtors and buyers and inspire them to invest more in flats before prices start going up again.
Investment in Real Estate:
Investment in the real estate sector has seen an increase in the past few years. In Bangladesh, GDP-investment ratio rose to 30.27% in FY 2016-17. This is an increase from 29.65% in the previous year. Around 10% of total remittance is being used to purchase lands and flats. On the other hand, 77.78% of the investment from foreign remittance is being used for reconstruction purposes of flats or buildings.
The real estate sector in Bangladesh is currently turning out to be a prominent part of the country again. Real estate also ensures the growth of different allied industries and thus generates many jobs for people. It is showing a lot of potential to be an attractive investment opportunity.