Real estate development

[Reyed Mia (Apprentice, DIU)]

Real estate development

Real estate development is a business activity concerned with land and construction that provides value-adding services by developing residential, commercial, institutional, industrial and integrated projects and related infrastructure. The concept of real estate in Bangladesh emerged after liberation. Over time, real estate has become a subject of keen interest for the general public, businessmen and other stakeholders. The real estate and housing sector is one of the main drivers of any nation's economic development and industrialization. In Bangladesh, real estate has emerged as a crucial sector of our economy. It has a huge multiplier effect on economic activities and therefore, is a big driver of economic growth. It is one of the largest employment-generating sectors after agriculture and garments. Not only does it generate direct and indirect employment opportunities, it also stimulates demand for ancillary industries, for example steel, cement, tiles and sanitary ware, cable and electric ware, paint, glass and aluminium, brick, building materials, and consumer durables.

CONTRIBUTION OF THE REAL ESTATE SECTOR

The real estate sector is the growth centre for the development of any economy. As one of the most densely populated countries in the world, Bangladesh has been experiencing severe housing shortages. With the majority of the population in the middle and low-income groups, ensuring housing for all is difficult here. The private sector housing developers have met a large proportion of the national housing demand in the last 40 years.

But Bangladesh also suffers from a scarcity of land. It is an agriculture-based country where the urbanisation level of 28% (Islam, 2012) is substantially lower than in developed countries. However, urban centres are housing huge populations. People are migrating to urban areas because of both push and pull factors, thereby creating an urban sprawl. Meeting the huge demand for housing has become a challenge for the government. The real estate sector in Bangladesh has been operating for four decades, within which period it has fluctuated greatly. Today the sector plays a major role in the national economy, contributing up to 7.08% of the national GDP in FY 2013-14 (BBS, 2014). In addition, the sector also contributed to the national economy through linkage industries, such as MS bar, cement, brick, sand, ceramic tile, paint and other fixtures and fittings. Real Estate and Housing Association of Bangladesh (REHAB) declared that the sector along with its linkage industries contributed about 12% to the national GDP in 2014.

DEMAND FOR REAL ESTATE HOUSING IN BANGLADESH

There are some other socio-economic reasons behind the strong demand for the housing market besides the demand-supply interaction. The most important one is the change in family structure. Whereas in the past extended or joint families were the norm, in the last two decades, nuclear families consisting of parents and one or two children have become more prevalent. Such families find it convenient to live in apartments with two or three rooms. In addition, the services and security offered in apartments are usually better than those of other housing types. Most of the apartment complexes and high-rises provide spaces for community activities within the premises. Such spaces usually accommodate a play area for children, a community centre for ceremonies, a prayer room, etc. Moreover, it has been obligatory for an apartment building community to have a management consisting of the apartment owners responsible for the overall building. All these reasons have been shaping the apartment buyers' decisions.

REAL ESTATE TRADE AND THE INVESTMENT CYCLE

Raw land is a key feature of the real estate cycle as it is the focal point of construction and expansion of business. The most characteristic feature of a real estate boom is the speculation of large under-developed land and the sale of lots in subdivisions to small investors. It is increasingly prevalent in Dhaka city and its surroundings. These practices are the main constraints of real estate business and building construction, and the price of raw land becomes very uncompetitive.

The fact that real estate cycles coincide with major booms and that they are not greatly affected by minor cycles is consistent with the theory that real estate is not simply reacting to other cycles, but is a key factor in causing the major booms and depressions.

CONCLUSION

We all know that after food and clothing, housing is one of the basic rights of every citizen. To meet this fundamental need, the private real estate and housing developers initiated a real estate development venture a couple of decades back, especially to address the growing urban housing problem. Private sector initiative sparked a remarkable boom in investment and development activities. The relationship between real estate prices and general economic conditions have an extensive history, beginning with the ways in which long swings in construction and price development were synchronised with long swings in aggregate economic activity.

http://www.thedailystar.net/supplements/25th-anniversary-special-part-2/real-estate-development-210862