Contributing Factors of Selecting

Rental House by Household in

Dhaka City
AN ADOPTION OF FACTOR
ANALYSIS
Contributing Factors of Selecting
Rental House by Household in
Dhaka City
AN ADOPTION OF FACTOR
ANALYSIS

Prepared For

Dr. Sheikh Mohammed Rafiul Huque

Course Instructor

BUS 207: Business Statistics II

Prepared By

Md. Anwar Hossain Repon

BBA, 18th Batch

Class ID: 914

Institute of Business Administration

Jahangirnagar University
Savar, Dhaka-1342.

Date of Submission: August 19, 2010

August 19, 2010

Dr. Sheikh Mohammed Rafiul Huque

Course Instructor

Bus 207: Business Statistics II

Institute of Business Administration

Jahangirnagar University

Savar, Dhaka-1342

Sir:

The report on “Contributing Factors of Selecting Rental House by

Household in Dhaka City: An Adoption of Factor Analysis” is part of
getting knowledge about the factors for which household select rental
house in Dhaka city.

The report has shown which factors are most important to select a rental
house in Dhaka city. And in which factors households give emphasize in
selecting rental house.

I think that the report will help to visualize the problems faced by
households in selecting the rental household in Dhaka city. From the
factor analysis a homeowner should give emphasize to factors which are
most important to tenants.

If you have any queries, you can call me directly. I will be pleased to give
the answer.

Sincerely yours,

Md. Anwar Hossain Repon

BBA, 18th Batch

Class ID: 914

ACKNOWLEDGEMENT

First, I would like to thank the Almighty Allah.

I would like to express my heartiest gratitude to Dr. Sheikh Mohammed

Rafiul Huque, Assistant professor, Institute of Business Administration,
Jahangirnagar University for his valuable support in selecting the group
topic. His scholarly direction, guidance helped us to understand the topic
like factor analysis. He taught us factor analysis in hand.

I also like to express my gratitude to my group members because they

help me to collect data, providing help in need. My group members helped
me to complete the report in a sound way. So I am really grateful to them.

I remember the help and assistance provided by my family members. My

family members really provide cooperation in completing the report.

Finally, thanks to Allah for making my work easy and realizable.

 Table of Contents

Executive Summary VI
Chapter I
1.0 Introduction, Objectives And Methodology 01

1.1 Objective Of The Study 01

1.2 Background Of The Study 01

1.3 Scope Of The Study 01

1.4 Methodology 01

1.4.1 Research Design 02

1.4.2 Sampling Method 02
1.4.3 Data Analysis 02
1.5 Organization Of The Paper 02
1.6 Limitations 02
Chapter II
2.0 Literature Review 03
Chapter III
3.0 Analysis 04
3.1 Correlation Matrix 04

3.2 KMO and Bartlett’s Test 04

3.3 Communalities 05

3.4 Total Variance Explained 06

3.5 Scree Plot 07

3.6 Component Matrix 08

3.7 Reproduced Correlation Matrix 08

3.8 Rotated Component Matrix 10

Chapter IV
Conclusion 11
Appendix
 EXECUTIVE SUMMARY

Factor analysis is a statistical tool which is used to determine the number

of factors or decrease the number of variables. Factor analysis is mainly
analyzed by primary data. In this report a questionnaire has been
developed to collect and to analyze primary data.

A factor for selecting rental house by household in Dhaka city is an

important topic to conduct factor analysis. There are number of reasons
how a person select or consider which rental house should he or she rent.
Among the number of reasons in the questionnaire there are 13 variables
to conduct data analysis.

SPSS is statistical software by which factor analysis conducted. When the

data are collected and giving input in SPSS then SPSS will give output
based on input. In this report we have collected 65 people’s data for 13
variables. Among these 13 variables we have selected 4 factors which are
essential for selecting a renal household. These 4 factors give an overview
of how individuals select rental house in Dhaka city.

Factor analysis is used for marketing research, product pricing and many
other marketing researches. A marketer can easily find which factors he or
she should give emphasize to increase the sale of the company or to boost
up the profit. By making questionnaire and conducting real research
marketing managers get an overview of consumer demand and
expectation.
Chapter I
Introduction, Objectives and Methodology

Factors contributing selecting rental house in Dhaka city is an important

factor now. Now there are more than ten million people in this megacity.
Almost all of them live in rental household. Which factors they consider
before selecting a rental house can be measured by factor analysis. We
have collected primary data based on a questionnaire. By giving input in
SPSS we got an outcome of the imputed data.

1.1 Objectives of the Study

a) To find out which factors rental households consider before renting
a house.
b) To find out which factors are most important to the people.
Homeowners can give emphasize on these factors.
c) Which factor we can prefer most. Most of the rental households
indicate which disadvantages and advantages in renting house.

1.2 Background of the Study

Considering factors of selecting rental house is an important issue. There
was a previous research on rental house. From that research we have
tried to set our questionnaire. There are many factors behind selecting
rental house by households. Many of which may be psychological. But
here we have tried to uphold factors which are not so much psychological.
The data is mainly primary data. So there is a chance of getting false data.
But we have tried to collect complete data of each questionnaire.

1.3 Scope of the Study

The report only covers factor analysis. No other comparative analysis has
been used in the report. Based on factor analysis we have tried to develop
our result. We have collected data for comparative analysis but because of
fitting SPSS model we haven’t tried other comparative analysis. The report
name also gives an indication that the report is on factor analysis.

1.4 Methodology of the Study

Methodology includes Research Design and Data Analysis process.

1.4.1 Research Design

Source of Data: We have collected data by developing a questionnaire
and filling it by the rental households.
Type of Data: The data are primary in nature.

1.4.2 Sampling Method

We have selected data based on random sampling. A sample of sixty
respondents have selected based on random from a large number of
rental households. We have taken sixty respondents because the variable
we have selected in our questionnaire is thirteen.

1.4.3 Data Analysis

For analyzing the factors of selecting rental house we have used only one
statistical technique that is factor analysis. And the analysis gives us scree
plot and other relevant tables for analyzing the data.

1.5 Organization of the Paper

The research paper is divided into three chapters

A. The first chapter covers introduction, objective and methodology of the
report. It also includes background, organization of the paper and
limitation of the report.
B. The second chapter provides a brief literature review about considering
factors of selecting rental house.
C. The third chapter focuses on the detailed analysis of the report.
D. Chapter four includes conclusion of the report.

1.6 Limitation
We have used only one statistical technique to interpret the collected
data. We haven’t used all the techniques of SPSS to determine the output.
Such as to determine the number of factors we have used only one
determinant and other techniques like factor loading plot, factor
determination based on significance test has not used.
Chapter II
Literature review

Factor analysis is frequently used to develop questionnaires. To decrease

the number of variable factor analysis is also used. In this report we have
tried to select the factors behind selecting a rental house by household.
We have developed a questionnaire to collect the data. We decided to
devise a questionnaire to measure various aspects of considering factors
for selecting rental house.
We have tried to generate a questionnaire based on previous research
work which we found in internet. There are 13 questions in the
questionnaire. Each question was a statement followed by a five-point
Likert scale ranging from ‘unimportant’ to ‘most important’.
The questionnaire was designed to predict in which factor a person gives
importance in selecting rental household. Which factors contribute to
select or don’t select rental house. In a factor analysis correlation matrix
helps us determine how much the variables correlate with each other. If
the variables correlate highly then there is a problem. So it is important
that variables will not correlate highly or perfectly.
Eigenvalues helps to determine the number of factors we should take for
further analysis. There are also other determinants of factors like scree
plot, priori determination, determination based on percentage of variance,
determination based on significance test etc. Here I have used only to
determinants to determine the number of factors. Those two factors are
determination based on eigenvalues and determination based on scree
plot.
Chapter III
Analysis

3.1 Correlation Matrix

Correlati VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR
on 000 000 000 000 000 000 000 000 000 000 000 000 000
01 02 03 04 05 06 07 08 09 10 11 12 13
VAR
1.00
000 .115 .126 .185 .274 .147 .318 .292 .226 .381 .258 .246 .295
0
01
VAR
1.00
000 .115 .306 .305 .128 .250 .320 .358 .094 .215 .352 .247 .429
0
02
VAR
1.00 -.01
000 .126 .306 .321 .088 .183 .424 .283 .102 .182 .192 .377
0 9
03
VAR
1.00
000 .185 .305 .321 .481 .395 .356 .341 .238 .169 .215 .218 .385
0
04
VAR
1.00
000 .274 .128 .088 .481 .566 .377 .254 .125 .130 .246 .223 .368
0
05
VAR
1.00 -.05 -.05
000 .147 .250 .183 .395 .566 .364 .258 .256 .146 .526
0 0 8
06
VAR
1.00
000 .318 .320 .424 .356 .377 .364 .241 .190 .088 .246 .237 .433
0
07
VAR
1.00
000 .292 .358 .283 .341 .254 .258 .241 .249 .301 .352 .413 .352
0
08
VAR
-.05 1.00
000 .226 .094 .102 .238 .125 .190 .249 .301 .274 .099 .142
0 0
09
VAR
-.01 -.05 1.00
000 .381 .215 .169 .130 .088 .301 .301 .508 .428 .017
9 8 0
10
VAR
1.00
000 .258 .352 .182 .215 .246 .256 .246 .352 .274 .508 .583 .284
0
11
VAR
1.00
000 .246 .247 .192 .218 .223 .146 .237 .413 .099 .428 .583 .290
0
12
VAR
1.00
000 .295 .429 .377 .385 .368 .526 .433 .352 .142 .017 .284 .290
0
13

The first output of SPSS is correlation matrix. This table contains the
Pearson correlation coefficient between all pairs of questions. First, scan
the correlation coefficients themselves and look for any value greater than
0.9. If any are found then there may arise a problem because of
singularity (variables that are perfectly correlated) of the data.

3.2 KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
.772

Bartlett's Test of Sphericity Approx. Chi-Square 242.189

df 78
Sig. .000

SPSS output 2 shows very important parts of the output: The Kaiser-
Meyer-Olkin measure of sampling adequacy and Bartlett’s test of
sphericity. It determines whether the model will fit or not. The KMO
statistic varies between 0 and 1. A value of 0 indicates that the sum of
partial correlations is large relative to the sum of correlations and hence
the factor analysis is likely to inappropriate. A very close to 1 indicates
that the patterns of correlations are relatively compact and the factor
analysis will give distinct and reliable factors. Kaiser recommends
accepting values greater than 0.5 is acceptable. Furthermore, values
between 0.5 to 0.7 are mediocre, values between 0.7 to 0.8 are good,
values between 0.8 to 0.9 are great and values above 0.9 are superb.

Here the value is .772, which falls into the range of being good. So we can
be confident that factor analysis is appropriate for these data.

In Barlett’s measure tests the null hypothesis that the original correlation
matrix is an identity matrix. We need significance level less than 0.05
here. For these data, Bartlett’s test is highly significant (p<0.001), and
therefore the factor analysis is appropriate.

3.3 Communalities

Initial Extraction
VAR00001 1.000 .476
VAR00002 1.000 .569
VAR00003 1.000 .695
VAR00004 1.000 .511
VAR00005 1.000 .783
VAR00006 1.000 .774
VAR00007 1.000 .546
VAR00008 1.000 .459
VAR00009 1.000 .698
VAR00010 1.000 .733
VAR00011 1.000 .690
VAR00012 1.000 .681
VAR00013 1.000 .616
Extraction Method: Principal Component Analysis.
SPSS output 3 shows the table of communalities before and after
extraction. Principal component analysis works on the initial assumption
that all variance is common. And therefore before extraction the
cummunalities are all 1. In the column labeled extraction reflect the
common variance in the data structure. So we can say that 47.6% of the
variance associated with question 1.

3.4 Total Variance Explained

Compo Extraction Sums of Squared Rotation Sums of Squared

nent Initial Eigenvalues Loadings Loadings
Cumul Cumul
% of ative % of ative % of Cumulativ
Total Variance % Total Variance % Total Variance e%
1 4.251 32.702 32.702 4.251 32.702 32.702 2.340 17.997 17.997
2 1.776 13.659 46.362 1.776 13.659 46.362 2.322 17.864 35.861
3 1.157 8.899 55.261 1.157 8.899 55.261 2.074 15.953 51.814
4 1.047 8.055 63.316 1.047 8.055 63.316 1.495 11.502 63.316
5 .842 6.476 69.792
6 .710 5.462 75.254
7 .689 5.297 80.552
8 .632 4.860 85.412
9 .500 3.847 89.259
10 .456 3.508 92.767
11 .350 2.689 95.456
12 .331 2.549 98.005
13 100.00
.259 1.995
0
Extraction Method: Principal Component Analysis.

SPSS output 4 lists the eigenvalues associated with each factor before
extraction, after extraction and after rotation. Before extraction, SPSS has
identified 13 linear components within the data set. Here we know that
there are as many component or factors as variables. SPSS displayed
percentage of variance (such as factor 1 has 32.702% of total variance).
We can see that the first 4 factors shows relatively large amount of
variance whereas other subsequent factors shows only small amount of
variance. There are 4 eigenvalues greater than 1, so we can take our
decision that based on eigenvalues we should select 4 factors for this
factor analysis.

In the section extraction sums of squared loadings, there are four

variables which indicate that we can take 4 factors for our factor analysis
and other subsequent factors can be discarded.
In the final part of the table which named as rotation sums of squared
loadings the eigenvalues of the factors after rotation are displayed. Before
rotation the cumulative percentage of variance was large but after
rotation the cumulative percentage becomes smaller.

3.5 Scree Plot

Scree Plot

2
lu
nE
ig
a
v
e

1 2 3 4 5 6 7 8 9 10 11 12 13
Component Number

The scree plot in SPSS section 5 also helps to determine the number of
factors we should select for the factor analysis. In the scree plot above
after component number 4 the scree plot is not so much downward
sloping. From that point we can take assumption that we should take 4
component or factor for our factor analysis.

The scree plot is another determinant of determining the number of factor

selection.
3.6 Component Matrix

Component
1 2 3 4
VAR00013 .691
VAR00008 .641
VAR00011 .641 .435
VAR00004 .635
VAR00007 .634
VAR00005 .593 .585
VAR00012 .590 .400 -.406
VAR00006 .571 -.528
VAR00002 .567 -.468
VAR00001 .504
VAR00010 .431 .726
VAR00003 .482 -.582
VAR00009 .663
Extraction Method: Principal Component Analysis.
a 4 components extracted.

This matrix contains loadings of each variable onto each factor. SPSS
displays loading over .4 because we have requested for loading over .4.
But in another case where there is no bondage of loadings SPSS will show
all the loadings. This matrix is not an important tool for interpreting
information.

3.7 Reproduced Correlation Matrix

Reproduced Correlations

VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR VAR
000 000 000 000 000 000 000 000 000 000 000 000 000
01 02 03 04 05 06 07 08 09 10 11 12 13
Rep VAR .
rodu 000 476( .096 .082 .353 .379 .162 .304 .318 .476 .425 .335 .255 .220
ced 01 b)
Corr VAR .
elati 000 .096 569( .515 .277 .083 .252 .365 .425 .045 .157 .411 .425 .464
on 02 b)
VAR .
-.06
000 .082 .515 695( .336 .007 .171 .483 .340 .195 .143 .131 .480
9
03 b)
VAR .
000 .353 .277 .336 511( .512 .474 .503 .345 .273 .115 .245 .194 .501
04 b)
VAR .
000 .379 .083 .007 .512 783( .682 .393 .252 .112 .128 .252 .208 .449
05 b)
VAR .
-.15 -.08
000 .162 .252 .171 .474 .682 774( .407 .244 .213 .218 .559
3 7
06 b)
VAR .304 .365 .483 .503 .393 .407 . .366 .293 .059 .215 .169 .532
 000 546(
07 b)
VAR .
000 .318 .425 .340 .345 .252 .244 .366 459( .263 .380 .495 .466 .400
08 b)
VAR .
-.15
000 .476 .045 .195 .273 .112 .293 .263 698( .403 .183 .077 .087
3
09 b)
VAR .
-.06 -.08
000 .425 .157 .115 .128 .059 .380 .403 733( .597 .546 .028
9 7
10 b)
VAR .
000 .335 .411 .143 .245 .252 .213 .215 .495 .183 .597 690( .676 .305
11 b)
VAR .
000 .255 .425 .131 .194 .208 .218 .169 .466 .077 .546 .676 681( .292
12 b)
VAR .
000 .220 .464 .480 .501 .449 .559 .532 .400 .087 .028 .305 .292 616(
13 b)
Resi VAR
-.16 -.10 -.01 -.02 -.25 -.04 -.07 -.00
dual 000 .019 .044 .014 .075
7 5 5 6 0 5 7 9
(a) 01
VAR
-.20 -.00 -.04 -.06 -.05 -.17 -.03
000 .019 .027 .046 .049 .058
9 3 5 8 9 9 5
02
VAR
-.20 -.01 -.05 -.05 -.09 -.10
000 .044 .081 .012 .050 .039 .061
9 5 9 7 3 3
03
VAR
-.16 -.01 -.03 -.07 -.14 -.00 -.03 -.03 -.11
000 .027 .054 .023
7 5 1 9 8 4 5 0 6
04
VAR
-.10 -.03 -.11 -.01 -.00 -.08
000 .046 .081 .002 .012 .002 .015
5 1 6 5 6 1
05
VAR
-.01 -.00 -.07 -.11 -.04 -.07 -.03
000 .012 .015 .103 .029 .043
5 3 9 6 4 2 2
06
VAR
-.04 -.05 -.14 -.01 -.04 -.12 -.10 -.09
000 .014 .029 .031 .068
5 9 8 5 4 5 3 9
07
VAR
-.02 -.06 -.05 -.00 -.12 -.01 -.07 -.14 -.05 -.04
000 .002 .015
6 8 7 4 5 4 9 3 3 9
08
VAR
-.25 -.09 -.03 -.10 -.01 -.10
000 .049 .012 .103 .091 .022 .055
0 3 5 3 4 1
09
VAR
-.04 -.07 -.10 -.08 -.11 -.01
000 .058 .050 .054 .002 .029 .029
5 9 1 9 7 1
10
VAR
-.07 -.05 -.03 -.00 -.14 -.08 -.09 -.02
000 .039 .043 .031 .091
7 9 0 6 3 9 3 0
11
VAR
-.00 -.17 -.07 -.05 -.11 -.09 -.00
000 .061 .023 .015 .068 .022
9 9 2 3 7 3 2
12
VAR
-.03 -.10 -.11 -.08 -.03 -.09 -.04 -.01 -.02 -.00
000 .075 .055
5 3 6 1 2 9 9 1 0 2
13
Extraction Method: Principal Component Analysis.
a Residuals are computed between observed and reproduced correlations. There are 37 (47.0%)
nonredundant residuals with absolute values greater than 0.05.
b Reproduced communalities
Table 3.7 shows the reproduced correlation matrix, which is an important
factor for determining whether the model does fit or not. If the
nonredundant residuals percentage is greater than 50% then the model or
the factor analysis is inappropriate and the model doesn’t fit. So it is
necessary that the nonredundant residuals will be less than 50%. In the
table of reproduced correlation matrix the nonredundant residuals
percentage is below 50%. There are 37 nonredundant residuals which
have value greater than 0.05. So the model is appropriate and fit for
further analysis.

3.8 Rotated Component Matrix

Rotated Component Matrix(a)

Component
1 2 3 4
VAR00005 .855
VAR00006 .832
VAR00004 .541
VAR00012 .799
VAR00011 .792
VAR00010 .723 .435
VAR00008 .480
VAR00003 .827
VAR00002 .631
VAR00013 .524 .559
VAR00007 .420 .534
VAR00009 .818
VAR00001 .566
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
a Rotation converged in 7 iterations.

In the rotated component matrix we determine the name of factors. Here

there are 4 factors so we have to construct four names. In the first factor
which variables load highly can be named as ‘personal factor’, in factor 2
variable 10, 11 and 12 load highly so we can label this factor as
‘convenience’, in third factor variable 3 load highly and we might label of
this factor as ‘near market’ and in the final factor variable 9 load highly
and we can tag this factor as ‘behavioral’.
Chapter IV
Conclusion

Factor analysis is a classic tool for analyzing the variables and reducing
the variables. Factor analysis gives the researcher a good result about
various factors. Researches which are mainly Likert scale based fit best
with factor analysis. There are many implications of the factor analysis.
We can use it for marketing campaign, in product research, advertising
studies and for pricing studies. Because the data is mainly primary data so
there is a great chance to get the real idea about any factor. Marketers
can implement this standard tool for analyzing different types of
marketing research.
APPENDIX

Questionnaire on Factors of Selecting Rental House

A survey on Rental households of Dhaka city

(Note: We are from IBA-JU to conduct the survey only to fulfill our
academic purpose. We give the assurance to keep your given
information secret.)

Name: Profession:

Location of home:

Home district:

Which factors you consider to rent a house?

Rate the following factors (1-5). Here 1=unimportant and 5= most

important

Factors 1 2 3 4

School is near from home

Near public transportation

Market is near from home

Office is near from home

More than 2 or 3 bedrooms and attached bathroom

Noise free environment

Neighbors are friendly and educated

Increase rent frequently

Behavior of the home owner

Space for children and entertainment (a field or garden)

Space for parking car

Water, electricity and gas

Safe area

Your income range:

Below 5000
5000-10000

10000-15000

15000-20000

Above 20000

Thanks for your

cooperation.