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Causes of Declination of Real Estate Business in Bangladesh: A Case Study on

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 Causes of Declination of Real Estate Business in Bangladesh: A Case Study on Dhaka City
Dr. Jahangir Alam1
A H M Yeaseen Chowdhury2
Abstract
Real estate sector is one of the most important sectors for overall development of any
country, so as the case of Bangladesh. The aim of this study is to present the causes of real
estate business in Bangladesh. Since inception, it has been growing rapidly and
contributing to GDP. The growth and development of this sector in Bangladesh are highly
satisfactory in terms of number of developers, number of employees, apartment and plot,
project and members of Real Estate and Housing Association of Bangladesh (REHAB) etc.
At present Real Estate Business in Bangladesh is in a crisis situation. The aim of this
article is to find out the causes of declination of the real estate business in Bangladesh
especially in Dhaka City. Data are collected by field survey and by using statistical method
–the Kendall coefficient of concordance (W), total twelve causes were found and ranked.
The most important cause is the unavailability and high interest rate of housing loan and
the least important is the top competitor’s rate. This research paper may be helpful for the
Government and other stakeholders in addressing the causes so identified. As the housing
loan is the top most problem, the ministry of finance of Bangladesh can take the main
initiatives to solve this problem.

Key Words: Real estate, Causes of declination, Housing finance, Urbanization, Dhaka city, REHAB
etc.
1.0 Introduction
The real estate and housing sector is one of the main drivers of any national economic development
and industrialization. Infrastructure development is highly important for a country to rise as a
developed nation and to ensure housing facilities for the citizens of the country. In Bangladesh the
real estate has emerged as a critical sector of our economy. It has a huge multiplier effect on the
economic activities and therefore, is a big driver of economic growth and development of
Bangladesh. It is one of the largest employment-generating sectors after agriculture and ready-made
Garment sector. This sector has been contributing about 12-15 per cent to Bangladesh’s gross
domestic product (GDP). Not only does it generate directly and indirectly 2.5 million employment
opportunities, but it also arouses the demand for over 250 ancillary industries e.g. steel, cement, tiles
and sanitary ware, cable and electric ware, paint, glass and aluminum, brick, building materials,
consumer durables and so on. In addition, the annual turnover of this sector is about Bangladesh
Taka (BDT) 20 billion (BBS, 2014). Despite the significant growth of the housing sector in the recent
past, good research dealing with the development of this sector is lacking. This is compounded by the fact
that there is a lack of adequate statistical information.

1
Professor of Finance, University of Chittagong
2
Associate Professor, Department of Business Administration in Finance & Banking, Bangladesh University of
Professionals (BUP)
1
As the extent of globalisation spreads, the process of urbanisation increases. It has increased the
momentum of urbanisation in both developed and developing countries. The ever-increasing urban
population is creating an increasing demand for housing and shelter. The right to shelter is a
fundamental right embodied in both the universal declaration of human rights and the constitution of
Bangladesh. But Bangladesh being a developing country, it is very difficult for the government to
ensure housing for all. Currently the real estate sector is in a very critical position given the difficult
period it went through the year before. The pace of slow and steady growth was hampered by the
political unrest which happened in the month of January, 2014 slowing down the whole economic
engine of the nation. But in an emerging and dynamic nation like Bangladesh, all it takes is one good
month for the sentiment to change drastically. In Bangladesh the real estate companies are divided by
3 types and the types are: (1) Large Company (2) Medium Company and (3) Small Company.
The real estate sector is one of the fastest growing and thrusting sectors in Bangladesh. But the
business got the main attention in late 90s and in the mean time it experienced a boom too. This sector
is well linked with human settlements, employment and environment. It is recognized that the health
of the real estate development sector is the barometer of the national economy. Real estate
development in private sector in this country started in pre-liberation days. In the mid-60, land
development project known as “Pallabi Project” for housing purpose in the Mirpur area of Dhaka city
was started. Due to the absence of an appropriate urbanization policy, urban growth and urban
development are basically Dhaka centered.
Now-a- days the population of Dhaka city has been increased at high rates. There is no magical
solution to the present or future housing problems of the city. Government has made lands available
for modern housing by earth filling low-laying areas of Dhanmodi, Mohammadpur, Mohakhali,
Cantonment, Gulshan, Banani, Baridhara, Uttara and Mirpur by his own initiatives.
One of the reasons for the growth of the real estate sector is densely population in Dhaka city. In
the older parts of Dhaka city there are 500 dwellings per hector and in urban slum areas there are
more than 2000 persons per acre in single story Housing. While overall population growth has
been decreased considerably to 1.6 percent per year, the urban growth rate continues to be high
(although decreasing compared to previous decades) and is estimated at approximately 4.2 percent
per annum. In Bangladesh, the rate of urbanization is very high, aggravated by the high population
growth rate and rapid rural-urban migration. The trend of urban growth in this country is about 3.25%
per annum (Islam, 2012). This will change and increase Bangladesh's demand for housing. To
accommodate the increasing urban population, real estate development is essential to provide
appropriate housing in Bangladesh. There exists a high unfulfilled demand for plot and flat. This huge
demand is highly attractive for the real estate producers.

2
Real Estate Sector at a Glance:
The real estate sector in Bangladesh has been operating for four decades, within which 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). 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. Real estate sector was one of the most attractive sectors of investment
even few years before in Bangladesh. Rapid urbanization has become acute problem for the country.
Urban population growth in Bangladesh was last measured at 3.52 in 2014 according to the World
Bank. About 28.4% of the people of Bangladesh is now living in urban areas (Census, 2011) and 50%
will be living by 2025 (Singha D., 2001). In urban Bangladesh, housing backlog is estimated to 1.0 to
1.5 million with 500,000 houses added annually. Real Estate business took off in Bangladesh in 1970
with only five registered firms. From the early 1980s the business started to flourish and showed
robust growth. By 1988, there were 42 developers in business. At present, more than 1500 companies
are active in the real estate sector with 1081 of them registered with REHAB (Seraj, 2012). In the last
four decades private developers have supplied more than 100000 units of apartments to the nation and
will be supplying 25000 more units in the next three years. In the following table, we can see the
volumes from 2006-07 to 2014-15. These volumes are calculated based on the overall GDP of the
country in those years and the corresponding GDP contribution of the sector.
Table 1: Growth and volume of the Real estate, renting and business services sector
Year Size of GDP (In crore Tk) Real Estate, renting and Real estate, renting and business
business services (% of GDP) services ( In crore Tk)
2006-07 225,261 8.63 19,440
2007-08 237,101 8.48 20106
2008-09 251,968 8.30 20913
2009-10 266974 8.12 21678
2010-11 284,673 7.87 22404
2011-12 302971 7.64 23147
2012-13 321,726 7.49 24097
2013-14 340,197 7.34 24970
2014-15 360,845 7.20 25981
Source: Bangladesh Bureau of Statistics, 2015

Dhaka is currently growing at an unprecedented rate, accommodating over 600,000 people per year.
This means more than 120,000 household units are required to house the added population in this city.
At present, the supply of housing in the city is only around 25,000 units, of which 15,000 units are
provided by the private sector contributors like (real estate development companies).

2.0 Literature Review

Real estate had made a mark in the very first year of its emergence with leaping to prominence as
prime & various locations of the city and in manufacturing quality concrete products that have earned
3
them the distinguished stature they enjoy today. There is not much research conducted on real estate
business in Bangladesh. A very few columns are written in different magazines. A research was
conducted(1997) by REHAB using a sample of 126 projects of 56 real estate companies which only
represents a profile of the real estate developers. Out of 126 projects 105 was residential, 9 were
commercial, and 12 were residential cum commercial. Of the 126 projects 25 were completed, 81
were under construction, and 20 were in pipeline. Suborna, Ali Haider al mamun mridha and
Rezwanul Haque khan (2010) conducted a research on the housing real estate sectors in Bangladesh,
present status and policies implications and identified current status of private real estate sectors in
Bangladesh. In that time they did not try to find out the crisis situation of these sectors in the long run.
Islam M.S and Hossain A(2008) started a study on the depth of the housing industry with focus on the
supply chain. Sarkar M. M. R and Siddique (2008) conducted a study on the real estate sector but at
that time the real estate sector position of Bangladesh was in golden period. Sarkar M. M. R and
Siddique (2008) conducted another study focusing on the availability of and accessibility to financing
for the stakeholders of these sectors and concluded with some important policy implications. Dr.
Mizanur Rahman (2010), in his article “The Real Estate Business in Dhaka City” tried to analyze the
market situation, competition, and customer perceptions about the real estate developers. But in his
paper he does not mention how the real estate companies are suffering from different types of crisis.
T. M Seraj, (2003) in his study, the author focused on how to solve housing problem through private
sector real estate development in Dhaka. This paper focused only on housing problems and its
solution, left others.
Md. Mohiuddin (2014) in his book ‘’ the real estate sector of Dhaka City; growth and contribution to
the economy of Bangladesh’’ only mentioned the growth and contribution of the real estate sectors
in Dhaka city but not the declination movement of this sector. Mahabubur Rahman (2010) conducted
a study on the apartments for all: cutting superfluous costs. M. Seraj & Dr.Toffiq (2009) conducted
another on the prospects of private housing and future action. Leo Yaskar Dewri (2012) conducted a
study on a comprehensive study on the real estate sector of Bangladesh.

These studies suggest that the future apartment building projects should be planned to cater to
financial crisis at the time of bad situation. Banks and other financial institutions should extend their
assistance to the apartment builders. But they do not mention in their paper that how the problems of
the Real Estate Business can be solved. However, they have extended their hands to highlight the
various problems by providing information in the arena of Real Estate Business. Mr. Belayed (2010)
and others has attempted to investigate the nature of real estate business, psychological aspect of
buyers, and policy decision of the firms. But the study did not highlight the subject in details. For

4
purchasing high involvement product like an apartment, there is various economic and psychological
factors influence the buyers purchasing decisions. Also, the study suggests what kind of government
help and facilities will specifically be effective for growing Real Estate Business.
People from all socio-economic backgrounds in Dhaka face housing problem of one type or another.
While the urban destitute need rehabilitation, the slum dwellers need slum upgrading. The low-income
families are in need of low cost flats or plots and the middle and upper income families are
complaining that the cost of a decent plot or a decent flat is going beyond their means (Rahman 2001).
Due to less studies on this sector, it is necessary to have extensive studies to find out the future
potentiality, problems and solutions of the real estate sector and the availability of financing in this
respect. There were no researches conducted in finding out the causes of decline of real estate business
in Bangladesh. So the authors feel the necessity to conduct a research on finding out the causes of
declination of Real Estate Business in Bangladesh. The research outcome will be very helpful for the
new entrepreneurs, potential buyers, and policy makers of this sector.
3.0 Objective of the study: The objectives of the study are given below;
 To analyze the causes of declination of real estate business in Bangladesh;
 To analyze opinions of apartment owners, developers and potential clients regarding causes of
decline of Real estate sector in Dhaka City;
 To identify policy measures that should be addressed immediately to ensure an organic growth of
the real estate sector in Bangladesh.
4.0 Methodology
An exploratory research has been conducted for this study. Information collected to furnish this study
have come both from pr imar y and secondary sources. All the primary data were collected from
personal interview with potential buyers, apartment owners and developers by using a questionnaire
consisting of open and close ended questions. The secondary research was mainly required for the
background study on this sector and to define the research problem. Secondary sources were brochures and
reports from different member companies of REHAB, and the websites. Primary sources were the
Management and Professionals from REHAB member companies, Government Officials, Experts and
Policy Makers, and representatives from different linkage industries. Other primary sources were from
existing and potential clients. Numerical data have been analyzed and interpreted with concentration
and relation to the main issue. Theoretical analysis along with numerical evidence has been used to
substantiate the findings of the study.
For collecting qualitative primary data the Stratified Random Sampling method has been used where
the population is divided into subgroups, called strata, and respondents have been collected from each
stratum disproportionately.

5
Table-02: Respondents Selected for a Disproportional Stratified Sample
Stratum Name of Stratum Number of Persons
1 Marketing Executives of Real Estate Companies 40
2 Potential Buyers of Apartment 150
3 Developers 10
Total Sample Size 200
Hypothesis
To go ahead for accomplishing the task, we have carried out a pilot survey to determine main causes
of declination of real estate business in Bangladesh. In the pilot survey, 50 persons were selected
covering categories of stratum. Most of the persons taken in pilot survey are known to us due to our
professional and academic links. During pilot survey elaborate discussions were held regarding the
preparation of questionnaire, selecting samples, identifying the possible causes of poor declination,
etc. Twelve causes have been pinpointed based on pilot survey conducted. To make it statistically
meaningful we have drawn a Null Hypothesis. From this hypothesis, it will be possible either to accept
or to reject opinion on causes of declination of real estate business in Bangladesh. Thus the hypothesis
is:

Ho = There is no relationship in ranks of different causes of declination.

H1 = There is a relationship in ranks among the different causes of declination.
Taking care of the objective of the study and information a structured questionnaire has been prepared
based on twelve causes selected by literature and pilot surveys. This questionnaire was administered
and respondents were requested to provide ranks on those causes in the way that most significant
factor would get the first rank (hereafter rank 1). 50 respondents responded. Necessary care has been
taken to avoid any biasness during interviews so that there should have no dissimilarities in ranking
the causes by the respondents. They were given full freedom in filling up the questionnaires during
interviews so that there could have no influence from the side of researchers. During data analysis we
took necessary measures to see whether or not there is difference between these two types of data
collection procedures. At the end, when we became satisfied, we started using different statistical
measures to obtain results for analysis. To test the hypothesis and to measure the association of
variables (causes / factors) we have followed the Kendall Coefficient of Concordance (W) and chi
square test (2 ) based on the model developed by Siegel and Castellan Jr. (1988).
Moreover, a factor analysis was also carried out by using SPSS to find out major dimensions of causes for
declining trend in real estate business from potential buyers’ perspective.

6
Finally, a Focus Group Discussion (FGD) was conducted with the experts of this sector to find out the real
causes of declination of real estate business in Bangladesh.

5.0 Findings and Analysis

Table-3 given below shows that twelve causes have been ranked by the sample respondents, which are
affecting real estate business in Bangladesh. According to their opinions unavailability and high
interest rate of housing loan in the country and in the market is the most important factor with a score
of 130 and it bears the first rank. Top competitor’s rate is the least important factor and it bears last
rank with the score of 521.
Table-03: Shows the Causes of Declination of Real Estate as per the Ranks
Ranks Causes of Declination Score Obtained
i. Unavailability and high interest rate of housing loan 130
ii. Subsidence in stock market 131
iii. Transparency of income sources of Client 168
iv. High Price of Apartment 232
v. Lack of utility Connection 278
vi. High price of Construction raw materials 296
vii. Political Unrest 365
viii. Lack of foreign investment 374
ix. Bureaucratic Problem 421
x. Failure in Commitment 467
xi. Lack of policy support by Government 480
xii. Top competitors rate 521
Source: Prepared by the authors on the basis of Kendall Coefficient of Concordance (W). The
Calculation is shown in Appendix-1.
5.1 Procedure of Getting the Results
Considering the various useful tools and formula applicable for non-parametric tests, Kendall
Coefficient of Concordance (W) has been applied. To prove the application of Kendall Coefficient of
Concordance (W) in determining the position of above stated factors which affect real estate business
in Bangladesh and their ranks, average correlation and association of variables have been calculated.
The collected data are firstly arranged into KN Table (shown in Appendix-1) with each row
representing the ranks assigned by a particular respondent to the N objects. Next we find the sum of
ranks (Ŕi) in each column of the Table shown in the Appendix –1, by adding the total rank numbers of
each column. If any column gets the lowest value then that column would be ranked first and column
that gets the highest value will be ranked last. The meaning of the first rank is most important and the
7
last rank is least important. After that we found out the average ranks of each column. To find that
average rank, total rank numbers of each column have been divided by number of respondents (K).
The next step is to find out the mean value of each column. To do this the sum of Ŕi have been
divided by the number of causes being ranked (N). Each of the Ŕi may be expressed as a deviation
from the grand mean. The procedure of ranking, average correlation, W and 2 are shown below,
precisely:
n
Σ(Ŕi-R)2
i=1
W = ------------------ ----------------------- (1)
N (N2-1) /12
Where:
W = the degree of association among the 50 respondents in ranking 12 factors
Ŕi = the average of the ranks assigned to the ith Cause.
R = the average (or grand mean) of the ranks assigned across all causes.
N = Number of causes being ranked.
K = number of respondents.
N(N2-1) /12 = maximum possible sum of the squared deviations, i.e. the numerator which would
occur if there were perfect agreement among the K respondents.
Appendix -1 shows the details of calculation of W.
Now let’s have a look on the results obtained by using different statistical packages such as Microsoft
Excel and SPSS. These are as follows:
2 (chi-square) = K (N – 1) W, at (N-1) degree of freedom
Results:
W = 0.5810
2 = 50(12-1) 0.5810 = 319.55
The way of calculation is given below:
Ri 131 232 3863
Ŕi= =  ..........  =  77.26
K 50 50 50

R=
 Ri = 77.26  6.438
N 12
(ARi-R )2 = (2.62 – 6.438)2 +------+ (4.64 – 6.438)2 = 83.086
N (N2-1) / 12 = 12 (122-1)/12 = 143

8
 83.086
W= = 0.5810
143
Although equation (1) shows the intuitive rational for the statistics of W, a somewhat simpler formula
may be used. This formula is,
12∑Ri 2 – 3K2 N (N+1)2
W= ---------------------------- -------------- (2)
K2N (N2-1)
Where Ŕi 2 is the sum of the squared sums of ranks of each of the N factors.
  Ri2 = 1312 + ------------------------+ 2322 =1451281
Substituting this value into equation (2) we get,
12 (1451281) – 3 (502) 12 (12+1)2
W= -------------------------------------
502 (12) (12 2– 1)
W = 0.5141 (observed value).
The critical value of 2 from chi squared table) at 50 degree of freedom and at .001 level of
significance is 37.70 indicating that the Ho is rejected and hence, the alternative hypothesis (H1) is
accepted meaning that there is good association among the ranks of causes of decline in real estae
sector of Bangladesh which is 0.001 level of significance.
Again, test the extent of correlation among the causes of declination by calculating the average
correlation aver(rs) by the following formula to eliminate the limitation of W as W cannot be negative.
KW-1
aver(rs) = ------------ ------------------------ (3)
K –1
= 0.5724
The aver(rs) indicates that there is good positive relationship among the causes of declination
identified by the following ranks. This means that when there is no consensus among the respondents,
the variability of rankings would be zero, i.e. the average rank will be the same for all objects ranked.

A factor analysis was conducted to find out the major dimensions of causes for not buying the
apartment in Dhaka city in a short period of time. Table 05 represents the causes with corresponding
rotated component Matrix.
Table 04: Dimensions of causes for declining in Real Estate Business
Rotated Component Matrix
Component
1 2 3 4 5 6 7 8
9
V1 I would rather invest in other sectors than go for buying -
-.055 .035 .775 .169 .293 .075 -.007
an apartment .006
V2 Bank Interest rate on loan is very high -.069 -.109 -.098 .738 .231 .142 .301 .022
-
V3 The quality of the apartment is not up to the standard .001 -.017 .349 -.015 .068 .304 .658
.065
V4 I am always afraid of getting the apartment timely .069 -.105 .052 .323 .227 .008 .717 .155
V5 I am always afraid of the trustworthiness of the -
.126 -.039 .737 .154 .109 .202 .300
developers .278
V6 The price of the apartment is very high irrespective of -
.180 .077 .528 .126 .504 .322 -.049
locations .064
-
V7 I do not prefer the design of the apartment .124 .315 .219 -.088 .121 .714 .168
.117
V8 I think that I would better rent rather than buy the
.385 .192 .225 .074 .377 .516 -.108 .093
apartment
V9 The installment procedure of purchasing the apartment -
.323 .172 .061 .406 .533 .125 .181
is not preferable to me .075
V10 I think that I should not buy an apartment in Dhaka City, -
.857 .080 .074 -.078 .123 -.054 .080
since this is the megacity with unplanned traffic system .054
V11 I will not buy an apartment because of frequent earth -
.761 .168 .346 -.028 .168 .016 -.210
quake in Dhaka city .059
V12 I feel insecure when I am purchasing an apartment or -
.780 .010 -.091 .175 .190 .324 .115
plot in Dhaka City .096
V13 I do not want to give my children a permanent palace -
.124 .823 .093 -.070 .081 -.025 .154
for their life so that they do not remain idle .039
V14 I think that the total worth of purchasing an apartment is
.113 .352 .544 .027 .145 .134 -.093 .264
higher than those of renting an apartment over the lifetime
V15 I think that developers are not providing easy -
.153 .429 .139 .335 .446 .154 .019
installment procedure for the middle income people .048
V16 I think that the amount of down payment of booking an -
-.092 .185 .169 .819 -.008 .003 .096
apartment is very high .140
V17 The residence problems do not bother me, as they are -
.193 .218 .094 -.049 .667 .325 -.080
highly exaggerated anyway .061
V18 I am willing to live with my residence problems that my
.132 .011 .036 .061 -.004 .793 -.041 .120
rented premises cause me
V19 I think that Dhaka City is not a permanent place for
.615 .140 -.094 .068 .142 .314 .133 .146
living with happiness anyway
V20 Job mobility creates barriers to purchase an apartment
.444 -.036 .035 .676 .029 .205 -.146 -.098
permanently for the employees of private sectors
V21 I do not find purchasing an apartment enjoyable .295 .591 .104 .132 .133 .113 .359 -.249
V22 I think that there is lack of freedom amongst the - -
.096 .517 .120 .545 .128 -.076
apartment owners .028 .165
V23 Since we are extended family, so purchasing an
-.045 .624 -.100 .090 .192 .409 -.002 .157
apartment creates problem for extended family
V24 I think that this is not the perfect time to buy an
apartment in Dhaka City due to present economic and .091 .142 .041 .107 .149 .079 .033 .761
political situation in Bangladesh
V25 I think that I would rather buy a piece of land from
individual owners rather than from developers due to lengthy -.117 -.048 .217 .049 .800 .219 -.048 .162
process of handover.
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 9 iterations.
Findings of rotated component matrix shown in above table. From the rotated component matrix we
can see that factor 1 has high coefficients for variables V10, V11, V12 and V19. These factors may be
labeled as Dhaka being worst city. On the other hand, factor 2 is highly related with variables 13, V21
andV23. These factors may be labeled as Family Bondage. Factor 3 is highly with V1, V5, V6 and
10
V14. These factors may be labeled as unprofitable investment. Factor 4 is highly related with V2,
V16, and V20. These factors may be labeled as Lack of Loan Facilities. Factor 5 is highly correlated
with V6, V9, V15, V22 and V25. These factors may be labeled as Handover problem. Factor 6 is
correlated with V8, V17, and V18. This factor may be labeled as Less Ambition in Permanent
Residence. Factor 7 is highly related with V4, V7. This factor may be labeled as lack of trust.
However, factor 8 is highly related with V3 and V24. These factors may be labeled as Economic
Situation.
6.0 Causes of Declination: FGD
Outcome of the Focus Group Discussion with the expert of real estate business in Bangladesh
are given below:
Some developers opined that this sector fall short because of country-wide inefficient land
management. Some of the expert opined that lack of government support i.e. subsidy or policy
regarding the protection of the real estate sector in Bangladesh. There is no policy support from the
government for this sector. Some experts opined that entry barriers of this sector are very low. The
sector experiences mashroomingly of developer companies with no requirement of pre-requisite
certification. Miss trust/ lack of confidence to the developers is one of the causes.
Most of the developers are not professionals in this sector or unprofessional people are engaged in this
sector. The model followed in Bangladesh for of housing is not accepted across the world. Grabbing
the land from the poor owners who cannot afford to develop this land is the prime concern for
developers. Due to unprofessional dealings with the clients, most of the general people have the
negative attitudes towards the developers. Due to small developers, they do not enjoy the benefits of
economy of scale, so the cost of apartment has been increased. Most of the developers opined that
they do not get sufficient financial support from the banking sector of Bangladesh. Middle class
people cannot afford to develop the land, so the land has been lost the maximum value in the market.
The usage of black or undocumented money in the Real Estate sector cannot be measured precisely
because no authentic information is available anywhere. Apart from such undocumented money, foreign
remittance is a prominent source of fund to purchase any real estate property along with personal and
family savings, and bank loan. But, any consolidated figure about how much foreign remittance is invested
per year in real estate sector was not available. Some of the major causes identified by the FGD few of
which are similar or common with twelve causes already identified have been appended below:
1) High price of construction raw materials:
Price of the basic raw material for building construction like steel, rod, and cement is increasing day
by day. According to REHAB, there has been average increase 150%-400% in overall prices of
building construction materials in 2010 from 2015. In the first decade of 21st century, the price of per

11
katha land increased unbelievably almost all over the Dhaka. Compared to the price increase of the
earlier decade, the percentage increase in price almost doubled, and in some areas it is more than three
to ten times more than the earlier price. Hence, the real estate developers were bound to increase their
price to cover the cost of a project. This price rise is unbelievable and unexplainable. This has a direct
impact on the prices of completed flats. The year-wise price increase of apartment in Dhaka city has
been given below:
Figure no 01: Average Apartment Price in Dhaka (USD per square Meter)

Sources: REHAB, 2014

Apartment price in Dhaka has been on the rise since 2003 and according to the last updated statistics it
is USD 1705.47 per square meter.

2) Unavailability of housing loan with low Interest rate:

Although the real estate sector of Bangladesh is a 40 years old industry but still we do not have
enough number of financial institutions to provide finance in this sector. There are only five or six
financial specialized institutions that provide loans in this housing sector. Other commercial banks
also are providing loans to the developers and the customers as well but the charge high interest rate
worth to 12-17%.
3) Lack of utility connection:
Utility means gas, electricity and water for the construction projects. The government banned the
utility connection to the commercially developed projects. Without the utility it is very tough to
construct building and the clients who are willing to purchase apartments or flats for themselves will
not agree to purchase.
4) Bureaucratic retardness:
Apart from covering costs incurred due to economic reasons, firms also reserve a portion of their
budget in order to adhere to governmental legislations. Officials of real estate firms claim that
12
developing companies are forced to bribe government officials in order to get their approval, without
which they cannot continue their projects.
5) Political Unrest:
It is another major problem in marketing the real estate products. Due to political unrest, construction
and development works get delayed which delay the whole project. Apartment and plot sales
registered a 60 percent drop in 2013 from the previous year mainly due to political unrest and high
lending rates, the apex housing body (February 2016).
6) Failure in commitment:
Sometimes the company fails to hand over the plot or flat within the specified period for several
reasons like shortage in raw materials, legal bindings, delay in preparation of necessary papers etc. A
Focus Group Discussions was conducted with experts on this sector. The salient outcomes FGD are
stated below:
7) Lack of foreign investment:
Lack of foreign investment is another causes of decline in Real Estate Business. Foreign investors face
obstacles in investing money here and also in withdrawing the funds.
They face problems as they need to tell the source of fund from Anti-Corruption Commission (ACC),
National Board of Revenue (NBR).
8) Government Apathy:
Though Government is allotting plot and apartment with reasonable price but it lacks in taking
required initiatives for the development of this sector. Real estate sector is a very old and promising
sector but it is not yet recognized as an industry for which this sector suffers from different problems.
9) Transparency of income sources of Client:
Customer has to show their income sources to NBR (National Board of Revenue). That’s why the
customer who doesn’t want to show their sources to that Organization remains aloof from buying flat
or apartment.
10) High Price of Apartments:
The price of a apartment generally is very high. That’s why general people who are middle class
income holder cannot buy flat with their savings. Some of the important points are as follows:
8.0 Recommendations
The construction in Dhaka has multi-faceted roles for sustainable development. It provides the direct
means for physical development, expansion, improvement and preservation through maintenance. It is
the key sector in city’s development. It is understood from the physical survey that the construction
business is declining day by day. Considering all issues, following broad general recommendations for
the real estate sectors should be taken into consideration:

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a) The unavailability and high interest rate of housing loan is the main problem for the declination of
real estate business. The government should make loan easily available and with low interest rate so
that the investment in this sector rises up.
b) The subsidence in share market is the second main causes for the declination of this business. The
corrupted people in the share market should be uprooted by the government.
f) The price of the construction raw materials should be controlled so that the price of the apartments
becomes low. And everyone can be affordable to buy a flat.
g) The developers should adopt the best model developed by the rich countries of the world.
h) Government should provide subsidy for the developers so that they can set the price at affordability.
7.0 Conclusion
Apart from meeting the housing needs, the Real Estate sector contributes to the Government
exchequer through Registration Fees, VAT, Advance Income Tax (AIT), Stamp Duty, Property
Handover Tax etc. Also, the construction industry is a labor-intensive industry, whose capacity of
absorbing labor is great. The industry provides many jobs for skilled, semi-skilled and unskilled
workers both in the formal and informal sectors. Thus real estate sector is also contributing a lot in the
overall economy of Bangladesh. Residence is one of the basic needs of human beings. The right to
live in one’s own is a fundamental right of people and it is internationally recognized. we have tried to
find out the reasons of declination condition in Bangladesh. In this step, we have used well-known
statistical method – the Kendall Coefficient of Concordance (W) to test whether those reasons are
valid or not. The twelve causes have been found for the declination of real estate business in
Bangladesh. The most important cause is the unavailability and high interest rate of housing loan and
the least important cause is the top competitor’s rate. Those reasons are statistically tested and have
been found valid at conventional 0.001 level of significance. A future research in this aspect may find
out the real solutions of the problems to be found out by the potential researchers.

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