Construction business practices and pattern in Bangladesh.

Introduction

In a country of more than 180 million inhabitants, people of Bangladesh are always struggling to fulfill
their basic need of shelter, especially the people residing in the cities and towns. With the changing
economy, the pattern of movement of the people also changed. At present, people like to reside within
the cities with their own family. But, even couple of decade ago, they were intended to keep their family
in their village home. In addition, there was a significant change in the economic development. As a
result, the need for construction of new establishments for the commercial as well as residential
purpose was increased manifold. To meet this demand, a number of big companies have involved
themselves in this booming sector.

History of real estate sector in Bangladesh

In the early 1980s, the real estate sector has started to come into the picture. At that time, the number
of private companies was very limited, but with the passage of time, the number has increased to a
great extent. Then the companies have focused themselves to prepare apartments in some very limited
area like Maghbazar, Paribagh, Shantinagar, Dhanmondi, Mirpur, Banani, DOHS, Gulshan, Baridhara
area. As the area and population size of the Dhaka city has increased, the companies have spread their
area of operation beyond the central part of Dhaka. Since the last few years, the companies also
extended their operation in different divisional cities and other towns. This is happened because of the
increased demand of housing needs and acute competition among the companies.

This change has not only taken place in the area of operation, but also took in the pattern of business.
Initially, the companies intended to purchase land to construct the buildings or establishments. But,
nowadays, the business has turned into a pro-rata basis. For example, if any person has a land on a
particular area, but short of fund to establish a building, then the companies extend their hands to help
them. They try to reach an agreement with the landowner on a property share basis. The company
bears all the costs of establishment on that land and in return, both the parties (the landowner and the
company) will get their share on that establishment at an agreed upon manner. This particular move has
greatly changed the construction business of the Dhaka city as well as in the country.

Contribution of real estate sector in the economy of the country

The contribution of real estate and housing sector in the Gross Domestic Product (GDP) of Bangladesh is
very significant. As per a report published in The Daily Financial Express on April 16, 2012, the
contribution is in between 12 to 15 percent and annual turnover was more than 20 billion BDT. As like
any other industry, based on the real estate sector a number of other backward and forward linked
industries were developed in Bangladesh. The number of such industry would be around 250. Some of
the industries are steel, cement, brick, ceramic, tiles, sanitary industry, cable, electric ware, paint,
building materials, glass, aluminum, consumer durables, furniture and the like. The aggregate
contribution of these companies on the GDP will be the indirect contribution of real estate sector. At
present, around 3 million employment opportunities were created due to the direct and indirect impact
of this sector.

In addition, real estate sector is one of the most labor absorbing sector in our country. Skilled, semi-
skilled and unskilled laborers are the driving force of this sector. This sector is also an important revenue
earning source of the government. Government earns revenues in the form of registration fee, VAT, AIT,
stamp charge and other similar charges.

The real estate sector has a great contribution in the mobilization of the economy of the country. With
the development of this sector, huge value is added on the land which is used as collateral security to
get credit facility from the banks. The impact of bank loan on the economy acts as a life blood and the
contribution of real estate sector is very significant.

Reasons of development of real estate sector

As per the expert opinions, there are many forces acting behind the booming of real estate sector. Rate
of population increase is on the top of this list. Among other reasons, scarcity of land, high price,
multiple sale of a particular piece of land or building, scope of investment of illegal money, increased
tendency of residing as unit family, nature of management of security of the apartment, rapid
urbanizations are included.

Factors adversely affecting the real estate sectors

It is well known that like any other industry, real estate sector is also confronting many issues. The issues
are related with government, demography and persons involved in this sector. Political un-stability,
frequent changes in the policy with or without the change of government, poor urban planning,
bureaucratic problems, problems with approval procedure, non-availability of utility facilities are some
of the factors controlled by government. For example, for last couple of years, government has decided
to not allow any new electricity and gas connection in residential as well as commercial purposes. For
this single decision, the entire industry became stagnant and the companies are still struggling to get rid
of it.

Demographic factors might include the change in income level of the people, shifting interest towards
the suitable alternatives, level of skills of the manpower, etc. There are some companies whose
managements are allegedly known as land robber. They illegally occupy the lands of other people and
try to construct establishment on that land. As a result, the consumers are also in fear from those
companies. In addition, as the number of companies has increased to a great extent, the competition
among the companies is so acute to do business and survive in the industry.

In addition to the above reasons, the volatility of the prices of backward and forward linked products
has a huge negative impact in fixing the price of the final product. Sometimes, the price of goods
increases so high that the companies face difficulty in fixing price as well as dealing with the customer.
Conclusion

As per the experts in this sector, there are chances of very high level of urbanization by 2015. At that
time, Dhaka would be a place of 15 million people needed housing facility. To reduce the costs of
business, the price of land should be fixed properly and documented with great care, so that the price of
that land would be reasonable.

Government policy should be on very long-term basis and customer friendly. As a result, the
businessmen and consumers will be able to think about long-term investment. This will help to reduce
the price of property and also to increase the quality of products. At that time, other industries like
Banks, Non-Bank Financial Institutions, Leasing Companies will show their great eagerness to invest on
this sector.

It is the responsibilities of the industrialists of this sector to wash out the alleged claims against some of
the businessmen known as land robber. For a very small proportion, the entire sector is now under the
risk of image crisis and they should be united against those companies. This would be beneficial for the
industry itself, the customers and for the government.