Real estate development is not just a vital economic activity in Bangladesh; it is a cornerstone of national progress and a key driver of socio-economic growth. With a contribution of 7.93 percent to the national gross domestic product (GDP) in fiscal year 2022-23, the sector stands as a significant pillar in the nation's economy, according to the Bangladesh Bureau of Statistics. The industry's expansion highlights its role in addressing the escalating housing demand in urban centers like Dhaka, where population growth consistently outpaces available housing. Despite its contributions, the real estate sector in Bangladesh faces a myriad of challenges rooted in economic, political, and infrastructural barriers.

This article delves into the concept of risk-based thinking within the real estate industry of Bangladesh, exploring how this methodology can serve as a tool for mitigating existing obstacles and ensuring sustainable growth. It also emphasizes the importance of public-private partnerships (PPP) in bridging the housing gap and making homeownership accessible to lower-income groups.

Landscape of real estate 

Bangladesh's real estate industry has evolved significantly over the past few decades, driven by rapid urbanization and increased economic activity. Dhaka, the capital, remains the epicenter of real estate development due to its role as the primary hub for commerce, education, and government services. However, land scarcity in Dhaka and other major cities has driven property prices to unprecedented levels, posing affordability challenges for the middle and lower-income populations.

The government’s role in mitigating the housing crisis has been limited, and the public sector's contribution to housing remains insufficient to meet the rising demand. This gap has been filled by private sector developers, who have stepped in to provide much-needed housing solutions. Nevertheless, without strategic government intervention, housing inequality is likely to persist, leaving a significant portion of the population unable to access adequate shelter.

The real estate sector's guiding principle of "No one living behind" reflects the aspiration to ensure affordable housing for all citizens, regardless of their socio-economic status. This vision aligns with the constitutional obligation of the state to provide shelter as one of the fundamental rights of its citizens. However, the journey toward fulfilling this mandate is fraught with challenges.

Challenges facing real estate development

Several impediments hinder the real estate sector's ability to address the housing deficit in Bangladesh. Key challenges include:

1.   High Land Costs - The skyrocketing price of land in urban areas, particularly Dhaka, is a primary barrier to affordable housing.

2.   Inflated Construction Material Prices - Fluctuations in the prices of essential construction materials such as steel, cement, and bricks contribute to rising construction costs.

3.   Scarcity of Land - The limited availability of land in prime areas restricts large-scale development projects.

4.   High Interest Rates - Real estate financing is often accompanied by high-interest rates, which deter potential homeowners from seeking loans.

5.   Property Transfer Fees - Excessive fees and complex administrative procedures associated with property transfers discourage investments.

6.   DAP (Detailed Area Plan) 2022-35 Challenges - Stringent regulations and land use policies outlined in the DAP present obstacles to flexible development.

7.   Outdated Housing Rules - The absence of modernized housing policies curtails innovative development strategies.

8.   Political Unrest - Periodic political instability disrupts construction timelines and investor confidence.

9.   Inflation and Currency Fluctuations - Rising inflation and the appreciation of the U.S. dollar increase the overall cost of development.

 Role of public-private partnerships

Public-private partnerships (PPPs) present a viable solution to overcoming these challenges and ensuring inclusive real estate development. By fostering collaboration between government bodies and private developers, PPPs can unlock significant benefits:

1.   Land Allocation - The government can allocate land for development projects while private developers handle the construction and marketing.

2.   Cost Reduction - Partnerships reduce overall project costs by leveraging public resources and private sector expertise.

3.   Increased Housing Supply - Large-scale PPP projects can generate substantial housing stock, catering to various income segments.

4.   Infrastructure Development - PPPs can facilitate the development of essential infrastructure, enhancing the livability of housing projects.

A notable example is the concept of mixed-income housing developments, where luxury apartments coexist with affordable housing units. This model promotes social integration and ensures equitable access to urban amenities.

Risk-based thinking 

Risk-based thinking is an essential approach for navigating the uncertainties inherent in real estate development. This methodology involves identifying potential risks at every stage of a project, from planning to execution, and implementing measures to mitigate these risks. Key components of risk-based thinking in real estate include:

1.   Market Analysis and Forecasting - Developers must conduct comprehensive market research to anticipate demand trends and price fluctuations.

2.   Regulatory Compliance - Adhering to housing regulations and zoning laws minimizes the risk of project delays and legal complications.

3.   Financial Planning - Robust financial planning and risk assessment ensure that projects remain viable even in adverse economic conditions.

4.   Stakeholder Engagement - Collaboration with stakeholders, including government agencies and community representatives, reduces opposition and garners public support.

5.   Sustainability Considerations - Incorporating green building practices and energy-efficient designs mitigates environmental risks and enhances project value.

Economic and social implications

The real estate sector's success has far-reaching implications for the broader economy. When the housing sector thrives, it stimulates growth in ancillary industries such as cement, steel, glass, and furnishings. Additionally, construction projects generate employment opportunities, contributing to poverty reduction and economic mobility.

Conversely, disruptions in the real estate market can lead to cascading effects across the economy. For instance, a slowdown in housing development can curtail industrial output, exacerbate unemployment, and diminish investor confidence. Therefore, fostering a resilient and dynamic real estate sector is crucial for sustaining economic growth.

Toward more inclusive future

Achieving the vision of "housing for all" requires a concerted effort from both the public and private sectors. By embracing risk-based thinking and fostering public-private partnerships, Bangladesh can create a real estate environment that is accessible, affordable, and sustainable.

The expansion of middle-class housing options, reduction of property transfer fees, and decentralization of urban development are essential steps toward this goal. Moreover, initiatives to modernize housing regulations and streamline administrative processes will further enhance the sector's growth trajectory.

The real estate industry holds immense potential to transform Bangladesh's urban landscape and improve the quality of life for its citizens. Through strategic planning, collaborative partnerships, and risk-conscious development practices, the nation can pave the way for a more inclusive and prosperous future.

(The author is an advocate at the Dhaka Judge Court in Bangladesh. Views expressed are personal. She can be reached at bipashapaullaw@gmail.com. )