Overview of Real Estate Industry in Bangladesh
The real estate sector in Bangladesh is one of the fastest-growing sectors in the country. The sector has seen tremendous growth in recent years, with the establishment of a number of new real estate firms and the development of new projects. The sector has also been supported by a number of government initiatives, including the provision of tax incentives and the development of several special residential and commercial zones for the real estate sector. The sector has created a large number of jobs and has contributed significantly to the country’s economy. The future of the sector looks bright, with a number of new projects in the pipeline and a number of investment opportunities.
The country’s urban population is expanding rapidly, and there is a growing demand for housing, office space, and other commercial property. Apartment complex builders, model town developers, shopping center developers, major infrastructure builders, and commercial building contractors—all with an eye toward making a tidy profit—fall under the broad category of “real estate” in today’s Bangladesh. The government has been encouraging private investment in the real estate sector. The real estate sector offers a number of opportunities for investors, and it is expected to continue to grow in the coming years.
Real Estate industry in Bangladesh: History
Rapid economic growth, increased demand for housing, the emergence of a middle class, and rising per capita income have all contributed to the real estate industry’s steady expansion in Bangladesh. Although growth was slow at first, it all began in the 1970s with just five officially recognized companies. The business really took off and grew quickly from the early 1980s. By 1988, there were 42 different developers operating in the market. Due to rapid population growth, it became essential to accommodate more people into existing structures. Growing urbanization in Bangladesh, along with the country’s status as a developing nation, had left the government then unable to meet the housing needs of this population. There have been many ups and downs in the last 40 years as the real estate business has taken on the task of providing affordable housing for all members of society. The Real Estate Housing Association of Bangladesh (REHAB) was established in 1991 to standardize industry practices and promote consumer confidence in the industry.
Construction, building items, sanitary ware, electrical products, brokerage, designing solutions, and so on have all benefitted from the real estate industry in some way, either directly or indirectly, which has been a blessing to the economy. Millions of people have benefited from home ownership and rental opportunities in the past four decades, despite the constraints of available land.
Present Scenario of the Real Estate industry
One of the most promising areas for investing in Bangladesh right now is the real estate market. We may mostly attribute this to the increasing rate of urbanization. World Bank data shows that Bangladesh is now experiencing an annual rate of urbanization of about 3%. The urban population of Bangladesh currently accounts for approximately 38% of the country’s total population. There is a severe lack of available housing in all major urban centers, and this scarcity is expected to worsen as demand for new homes rises.
The present demand for housing in the country is estimated to be between 6-8 lakhs units across all major cities. The majority of Bangladesh’s urban population resides in Dhaka and Chattogram, hence these are where the majority of real estate development is taking place. Estimates show that there is a need for 60 thousand apartments in Dhaka alone, along with 2 lakhs more units of replacement and project delays. Compared to other cities in Bangladesh, Dhaka has been expanding at an unprecedented rate. As a consequence of this, there is a significant demand for plots and flat units. Both foreign and local investors are attracted to this market because of its large size and significant unmet demand.
In the real estate industry, all the firms essentially provide the same service: land and apartments. There are companies that specialize in either one or the other, and others that offer both. However, the offering is always the same: accommodation. Differences in quality and service can’t be drawn from the products themselves. Differences in variety, quality, design, features, and luxury brands are what set land and apartments apart in this case. Although there are more than a thousand firms operating countrywide, only a select few excel in providing exceptional service to their clients.
Commercial real estate companies and professionals in Bangladesh are represented by the Real Estate and Housing Association of Bangladesh (REHAB), the only real estate trade organization in the country. In 1991, eleven of Bangladesh’s major real estate firms from that time established REHAB to look out for each other’s interests and to help the industry as a whole. More than 1500 businesses are currently engaged in the real estate industry, with 1191 of them being REHAB members. Every major developer company in the country is represented here. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) recognizes REHAB as an “A Class” member. Members of REHAB have made great strides in the field of real estate development in recent years, which has contributed much to the growth of the country as a whole. In the form of Registration Fees, Income Taxes, and Utility Service Charges, REHAB members are major contributors to the National Treasury.
Every year in Bangladesh, REHAB hosts its most popular annual event, the REHAB Housing Fair, for its member developers, financial institutions, and suppliers of building materials. Numerous Housing Fairs have been completed with great success. REHAB intends to host Housing Fairs overseas so that Bangladeshis now residing in other parts of the world can purchase homes, plots of land, and business properties in their home country. That’s why REHAB has already held housing fairs across the United States, the United Kingdom, Australia, Canada, Italy, and the United Arab Emirates.
Real Estate Market Size
The real estate sector in Bangladesh has a market value of 6,000 crores BDT. Medium-sized flats between 1200 and 1400 square feet have seen a 39% increase in the previous five years. Dhaka and Chittagong are the two largest cities in Bangladesh, where the real estate business is booming. Dhaka and Chittagong’s ever-busy urban society has a significant demand for smaller apartments. First, the real estate market in Bangladesh spiked in 2006 and lasted until 2009, and then again in 2015 and lasted till 2018. In the years 2022-2025, we may expect a further increase. The new surge will be based on factors such as changes in generational and cultural trends, coupled with inadequate land, and a revolution in cost-effective housing. Moreover, Bangladesh has seen a dramatic increase in the number of dedicated residential zones in the last decade all around the country, like Bashundhara, Rupayan City, Purbachal, and others.
Related construction businesses including brick, concrete, ready-mix, ceramic, MS bar, sanitary supplies, etc. have also been facilitated by this sector’s growth. All these interconnected industries have a total market value of close to 60,000 crores BDT. Increases in home loans from banks reflect a growing preference among middle-class families for this method of financing. In 2019–20, the demand for home loans was BDT 1496 billion, and BDT 1,544 billion in the fiscal year 2020-2021. Therefore, the real estate industry as a whole account for a larger share of the national GDP than practically any other sector.
Contribution of Real Estate to Bangladesh’s Economy
REHAB estimates that the real estate industry and related businesses account for 12% of GDP. The real estate market has generated roughly Tk. 20 billion in sales, as well as about Tk. 2 billion each year in tax revenue for the government. Approximately 2 million people are currently employed in real estate and related industries. This includes architects, engineers, management officials, and direct and indirect laborers. These businesses have added 12-14% to GDP annually on average over the past five years.
After paying the new 2% gain tax (down from 5% in 2007) and 3% stamp duty, a customer must pay registration fees to the government, the city corporation, and the sub-registry office at rates of 2% (down from 2.5% until 2009), 2%, and 0.5 %, respectively, for a grand total of 9.5%. In addition to the 1.5% VAT, the government additionally requires buyers to pay an AIT of up to Tk. 2000 per square meter of living space. Consumer costs have dropped significantly and tax revenue has increased substantially thanks to this policy.
Covid-19 And Its Aftermath
To stop the spread of coronavirus, the government of Bangladesh instituted a series of lockdowns beginning in March 2020, which precipitated a complete economic collapse in the country. These lockdowns were also detrimental to the real estate market. The entire sector came to a standstill in the first two quarters of 2020. Yet, following that time period, the real estate market rebounded quickly thanks to regulations that made it easier to invest tax-free funds, lowered interest rates, and reduced fees. Despite the global pandemic and its economic repercussions, the real estate market has recovered significantly thanks to all these policies and the rapid economic recovery. Bangladesh’s GDP growth rate is expected to be around 6.8% per year between 2021 and 2025, so it won’t take long for the real estate market to get back to where it was. Additionally, this year has been showing a speedy improvement in the fortunes of several other sectors closely associated with the real estate market. It is expected that 2022 will be a year of development and recovery for Bangladesh’s real estate sector.
Current Trends in Bangladeshi Real Estate Sector
- Rising Demand for Studio Apartments
Studio apartments are perfect for single people and small families because they just require one large room (ranging in size from 250 square feet to somewhere around 1000 square feet) and yet include everything a person could need to live comfortably within that single room.
- Traditional Red Bricks Outlawed, Welcome Concrete Blocks
In an effort to reduce air pollution, the Ministry of Environment, Forests, and Climate Change have announced that concrete blocks will be compulsory for all construction works by 2025. Red brick manufacturing produces harmful byproducts that contribute greatly to air pollution, ozone layer depletion, and global warming. Instead, concrete blocks have been shown to have many more advantages than regular bricks. Hollow bricks are fire-resistant and at the same time much safer than ordinary bricks.
- The popularity of Steel Structures in Urban Real Estate
In urban areas, the prefabricated steel structure is becoming more common because it is more convenient and secure for corporate structures. This type of building can withstand earthquakes better than others and can be put up in a very short amount of time.
- Incorporation of Digital Platforms in the Real Estate Business
The vast majority of successful companies today offer their services exclusively online. They maintain a website where you can view their portfolio, ready flats, and works in progress. Online consulting services are also available from a lot of these companies. Recently, Bproperty, a digital real estate platform, held a virtual property fair in the year 2020, which was quite successful.
Our country’s economy largely depends on the real estate sector. This sector is directly contributing to the GDP by constructing residential & commercial infrastructures, developing vacant and unutilized land, assisting other industries to expand, inviting local and foreign investments, and generating employment. The real estate sector has maintained steady growth since its inception. It is safe to say that real estate companies in the country are really expanding towards complete socio-economic development. Our real estate sector is an indicator of our development as a nation and has given hope to millions of people in our country through either housing or employment. If the current market growth maintains consistency, a very bright future is waiting ahead of this sector as well as our nation.
When did the real estate sector of Bangladesh start its journey?
Ans. The real estate sector began its voyage in the 1970s, right after the birth of Bangladesh, with only five companies and kept growing since then.
What was the main purpose behind the establishment of REHAB?
Ans. The Real Estate Housing Association of Bangladesh (REHAB) was established in 1991 with the goal to standardize industry practices and encourage consumer reliability.
How large is the current real estate sector of Bangladesh?
Ans. The current market size of the sole real estate sector of our country is worth 6000 crores BDT.
What is the contribution of the real estate sector to our country’s GDP?
Ans. The real estate industry of Bangladesh contributes approximately 12% of the national GDP.
How many people in Bangladesh depend on the real estate sector and its linkage industries?
Ans. The real estate sector and its linked industries have been bringing food to the table of almost 2 million people countrywide. The number is increasing with the rapid growth of this sector.