Challenges, potential and the road ahead

Sustainable development practices should be made an integral part of the development. Green construction, energy efficiency, rainwater harvesting, solar energy, wastewater reuse and environmentally friendly building materials are not anymore options

Real estate industry has always been one of the key players in the economy of Bangladesh. The industry has changed the face of city skylines, created job opportunities for millions and has helped the economy grow through its link to related industries like cement, steel, bricks, ceramics, glass, paints, electronics, furniture and finance industry. Besides, the sector has been playing a key role in tackling the increasing need for housing in the country in the wake of urbanisation.
Despite the impressive performance, the industry is beset by various problems. Increased construction costs, decreased purchasing power, expensive bank loans, complicated regulation process, lack of serviced lands and poor urban planning have led to slow growth of the industry. However, with an eye on the huge housing deficit in the country and urban population growth rate, it can be easily seen that the long-term potential of the industry is great, if only the proper policies are implemented.
Bangladesh is among the fastest urbanising countries in South Asia. Every year tens of thousands of people migrate from villages to cities in search of better employment, educational facilities and better healthcare. And Dhaka, one of the densest cities in the world, takes in the lion's share of migrants.Such demographics changes create the need for housing. Indeed, owning a house is probably the main goal of middle-class families though it becomes increasingly challengingnowadays.
The problem of affordability is the most pressing one.Apartments became considerably more expensive in recent years owing to the rising prices of building materials -- cement, steel, bricks, glass, electrical appliances and finishing materials. Their prices have gone up because of disrupted supply chains, falling value of the Bangladeshi currency and more costly imports. There are no other alternatives for the developers than passing these additional costs to buyers.
However, the incomes have not been increasing in the same way.As a result, there are those who put off their plans about buying an apartment, and those who already dropped the plans altogether. The growing difference between prices of property and people's ability to purchase it greatly slows down the process of selling apartments, especially in the middle income class which used to be a driving force of housing market.
Non-affordable financing also creates some problems.It is still very expensive to borrow money for housing purposes according to the regional standards. Despite changing interest rates depending on the monetary policy, it discourages people from borrowing and buying houses. Nevertheless, long repayment period helps decrease monthly payments, but higher interest makes the price of house much higher.
Real estate developers themselves are also under huge financial pressure. Higher fund costs have increased project expenses, while slower sales have reduced cash flow. Smaller developersare finding it increasingly difficult to launch new projects.
Land acquisition remains equally problematic.Bangladesh, being one of the most densely populated countries in the world, has limited land available for development. Urban land prices have been on increase disproportionately, especially in Dhaka.
The regulatory environment also deserves attention. Approval procedures are lengthy and they involve multiple government agencies. Any delayin approval increases project costs, discourages investment and ultimately raises apartment prices for consumers.
The poor state of urban planning exacerbates these challenges.There are numerous areas in Dhaka that have grown without proper infrastructure in terms of roads, drains, educational and health care institutions and transportation facilities. Housing developments take place in many areas where the infrastructure development is not keeping pace. The result is that people living in these areas experience traffic jams, water-logging and poor utilities.
The problem of insufficient affordable housing persists.Since private developers always target middle- and high-income classes in their investments due to profitability, low and lower-middle income groups are still facing difficulties in finding suitable homes. Slum areas continue to grow partly owing to lack of affordable formal housing.
Despite all these, prospects of the industry are very bright.Over the past twenty years, there have been huge economic gains in Bangladesh and the country has built up a growing middle class. Future increase in income levels and population will ensure steady demand for housing for many decades to come. Hundreds of thousands ofyoung Bangladeshis will be entering the housing market in the years to come decades.
Several divisional cities offer considerable growth potential as well. Cities like Chittogram, Rajshahi, Khulna, Barishal, Rangpur, and Sylhet have growing economic activity. Any expansion of these cities will not only curb unnecessary migration to Dhaka but also create new property markets.
Industrialisation represents another important source of growth potential.Creation of economic zones, export processing zones, and industrial parks will generate the need for housing and other real estate developments near growing industrial belts. Workers and their employers need residences, workplaces, education, and health care facilities.
Technology has also opened up new avenues for growth. The introduction of digital land records will certainly help avoid unnecessary ownership disputes. Online approval process will bring about greater transparency and eliminate unnecessary delays. Geographic information systems and smart city technologies and construction practices can help boost efficiency and lower costs.
But unlocking the true potential of this sector would need extensive reforms.Housing finance needs to becheaper by developing new mortgage facilities, longer repayment periods, and financing schemes for first-time home buyers. The housing finance agencies that enjoy the support of the government can help make homeownership feasible for middle-class families.
Approval process for different housing-related services need to be simplified. Rather than making the developers obtain approvals from different agencies, the government could develop an integrated service where applications could be processed in a timely manner.
Modernisation is needed in land administration as well.Digitising the land registry system, resolving disputes faster, and better coordination between land administration offices would make the transactions safer and decrease the legal uncertainties.
Policy attention is needed for affordable housing.The government could think about providing incentives, lower registration charges, taxes, or public-private partnership models in housing projects for low and middle-income groups. Not only would such measures make housing available, but would create jobs across the entire construction chain.
Balanced development of the urban areas is imperative.Economic activities only in the capital should not be the strategy, greater public expenditure should be invested into creating regional urban centres with good infrastructure, educational institutions, hospitals and efficient public transportation systems. This could decrease the burden on the capital and stimulate healthy real estate market elsewhere in the country.
Sustainable development practices should be made an integral part of the development.Green construction, energy efficiency, rainwater harvesting, solar energy, wastewater reuse and environmentally friendly building materials are not anymore an optional thing. These are all cost-efficient investments for the future and increase cities' resilience to the adverse effects of climate change.
Consistency of the policies from the government is also required to enhance the confidence in the sector. Unpredictable policy changes, unclear taxation system and unpredictability of the decisions hamper long-term investments. Predictable and stable policies will always be necessary for sustainable development.
Real estate development is much more than just the construction industry. The sector builds cities, generates jobs, stimulates dozens of industries and affects quality of life of millions of people. With necessary reforms, the industry would no longer be a mere participant in the economic growth of Bangladesh, rather it would be one of the country's main driving forces.

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