 Industry- Real Estate Industry

 Company- Bay Developments Ltd

Industry Analysis

Since the 1970s, Bangladesh has witnessed robust

development in the real estate sector, with the number
of developers rising from 5 in 1980 to 42 in 1988.
Residential, commercial, and industrial real estate are
the three main segments of Bangladesh's real estate
market. With over 60% of the market, the residential
segment is the largest segment followed by the
commercial segment, the second largest segment with
over 30% of the market. The industrial segment is the
smallest segment, accounting for around 10% of the
market.

Few significant players dominate Bangladesh's real

estate market. But there are also a few more modest
businesses operating in this sector. The Real Estate
Development and Regulation Authority (RERA)
oversees the industry's regulation. Bangladesh encountered economic changes between 1990
and 1992, which led to a downturn in the real estate market amid a corresponding decline in
investor interest. The Real Estate Housing Association of Bangladesh (REHAB) was founded
in 1991 with the goals of promoting consumer confidence and standardizing industry
practices.

Over the years, Bangladesh's real estate industry has gone through several booms and busts,
but the overall trend has been undergoing expeditious development. The rapidly expanding
population of Bangladesh has created a demand for real estate and housing, particularly in
urban areas corroborated by the rising income of the Bangladeshi population, which has
enabled them to acquire property. Additionally, foreign investment in the real estate sector is
increasing, further contributing to the growth of the industry.

In the 1970s, the real estate industry was still in its initial stages of development, with limited
housing and real estate supply and an unregulated market. In the 1980s, the industry
experienced rapid growth due to a combination of factors, such as urbanization and rising
incomes. In the 1990s, the industry continued to grow, but faced a number of challenges such
as corruption and inadequate infrastructure. In the early 2000s, the industry boomed, but in
2008, the real estate market crashed due to the worldwide financial crisis.

Bangladesh's real estate sector is a major contributor to the country's economy, making up
12% of our GDP. The GDP's contribution from the real estate industry in fiscal 2022–23 was
7.93%, according to data from the Bangladesh Bureau of Statistics. Comparing this to prior
years showed an overwhelming increase, emphasizing the sector's expanding influence on the
economy. Our real estate industry has the potential to revamp Bangladesh's trillion-dollar
economy.

Macro Environment Analysis

A macro environment analysis is a process of identifying and analyzing the external factors
that can affect a company's business. PESTEL analysis is a framework for conducting a
macro environment analysis.
Political Aspects of Bay Developments
● Governmental policies and regulations: These may have an impact on zoning laws,
land use rules, development codes, and permitting procedures, all of which may have
a big impact on real estate development.
● Taxation Policy: It is imperative for stakeholders in real estate development to
closely monitor any shifts in taxation policies, as adjustments in property tax rates or
capital gains regulations can significantly impact the attractiveness of investment
opportunities within the sector.
● Political stability: Political instability can lead to uncertainty in the real estate
market, potentially deterring investors and developers.

Economic Aspects of Bay Developments

● Economic Growth: Bangladesh has been experiencing steady economic

growth with a growing middle class and increased urbanization. The real estate
sector has grown significantly in recent years. This presents an opportunity for
Bay Developments to tap into a larger customer base seeking high-end real
estate.

● Income Levels: In fiscal year 2021-2022, Bangladesh registered a GDP

growth rate of 7.2% after the global pandemic. Rising income levels in
Bangladesh indicates more people have the purchasing power to invest in
high-end properties. This emerging affluent class can be targeted by Bay
Developments.

● Interest Rates: As of September 2023, interest Rate in Bangladesh is 6.5 %

according to Bangladesh Bank. Interest rates have been quite stable since 2019
as per the report. The maximum level was 8.75% and minimum was 4.5 %.
Fluctuations in interest rates can affect the affordability of home loans and
mortgage rates which in turn, can impact the demand for real estate. Bay
Developments have to closely monitor interest rate trends.

● Inflation: Bangladesh's average inflation rose to a 12-year high of 9.02 per cent
in the last fiscal year of 2022-2023, up from 6.15 per cent a year ago according
to the Bangladesh Bureau of Statistics. High inflation rates erode the purchasing
power of consumers. Bay Developments need to adjust pricing strategies,
consider offering longer-term leases with rent escalations, focus on value-add
investments and carefully manage debt levels to account for inflation.
Conducting thorough market research and risk assessments is essential when
making decisions in a high inflation environment.

● Infrastructure Development: Significant number of large infrastructure

projects such as Dhaka metro rail, Dhaka Elevated Expressway and Padma
Multipurpose Bridge which Bangladesh had undertaken in the last few years
were completed in 2023. These mega projects and many others are contributing
 to the communication system. Investment in infrastructure projects, such as
roads, bridges, and public transportation, can enhance the accessibility and
attractiveness of real estate developments. Bay Developments should align its
projects with urban development plans.

Social aspects of Bay Developments

● Urbanization: Bangladesh is a rapidly urbanizing country expected to host 56%

of its population in urban areas by 2050. The share of urban population
increased by 0.8% since the previous year. The share reached its peak in 2022
with 39.71%. Rapid urbanization in Bangladesh has led to increased demand for
housing and commercial spaces in urban areas. Bay Developments can focus on
urban projects to cater to the trend.

● Changing Lifestyle: Evolving lifestyles, preferences, expectations due to the

fast-economic growth evoked desire for modern amenities and security. These
factors influence the design and features of high-end properties.
● Cultural Preferences: Understanding cultural preferences and norms
regarding housing design and layout is crucial. Bay Developments have to
tailor their projects to align with local cultural values.

● Education and Employment: The accessibility and availability of quality

education and job opportunities in urban areas attract potential buyers.
Proximity to educational institutions and business districts can be a key
selling point for Bay Developments.

● Social Infrastructure: Access to healthcare, recreational facilities, and

community spaces can enhance the attractiveness of real estate developments.
Bay Developments should consider these factors when choosing project
locations.

● Demographics: Changes in demographics, such as an aging population or an

increase in young professionals, can impact the type of properties in demand.
Bay Developments should tailor its offerings accordingly.

● Security and Safety: For Bay development, ensuring the safety and security of
residents within the developments is critical given the social concern for safety
and security in Bangladesh.

Technological Aspects

● Innovation: Bay Developments Limited understands how critical it is to stay on the

leading-edge of developments in construction techniques and smart home
technologies. Through innovation, the business may improve the effectiveness and
quality of its projects, giving it a competitive edge in the rapid real estate industry.
 ● Digital marketing: Bay Developments Limited has implemented a digital-first
strategy in response to the real estate industry's changing landscape. The organization
effectively reaches a wider audience and communicates with potential customers and
investors more efficiently by utilizing digital channels for marketing and sales,
ensuring its presence in the modern marketplace.

Environmental Aspects

● Sustainability: Environmental sustainability and green building techniques are highly

valued by Bay Developments Limited. The company fulfills the growing demand for
environmentally friendly buildings and connects itself with responsible development
practices that benefit the environment and those involved through including
sustainable materials and construction techniques into its projects.
● Climate Change: Bay Developments is active in taking climate change into account
when planning and building its projects since it is aware of the issues it poses, such as
increasing sea levels and extreme weather occurrences. The company seeks to reduce
the possible effects of climate change on its developments, assuring long-term
viability and safety.

Legal Aspects of Bay Developments

● Land Use Regulations and Zoning Laws: They navigate a complex landscape of
land use regulations and zoning laws, as compliance with these legal frameworks
profoundly shapes the nature and scale of potential projects, underscoring the need for
meticulous planning and regulatory insight. The Admin and Legal Department
ensures project compliance and manages the company's legal/statutory matters
through interaction and liaison with government agencies, autonomous bodies and
organizations. Different public/private positions. They take approvals from various
authorities RAJUK, MOW etc. and NOCs from DOE, DMP, WASA, DESA, FS,
DTCB, DCC, TITAS etc.

● Property rights and ownership laws: Legal frameworks around property rights and
ownership affect how real estate transactions are conducted. They draft Legal
Documents, such as deeds of agreements, lease agreements, service contracts, sale
deeds, rental deeds etc.

Micro Environment Analysis

A micro environment analysis is a process of analyzing the internal factors that can affect a
company's business. Porter's Five Forces analysis is a framework for conducting a micro
environment analysis. It identifies five forces that can affect a company's profitability.

Threat of new entrants

(Low threat)

The threat of new entrants into the Bangladeshi real estate industry is relatively low. The
construction and acquiring land costs associated with the real estate and property
development industries frequently need significant capital investment; this creates a
significant barrier to entry for new rivals.

Government regulation and permissions for real estate development can further limit new
entrants. Government also trying to take land from the land owners for the betterment of the
environment and society. This limits the new entrants.

The level of technological skill in this sector is not so high since there is less opportunity to
protect designs, names, and ideas through patents or copyright, all of which are susceptible to
copying. Agents, consultants, landlords, managers, and staff of competitor companies are the
examples of large value supply chains that can be enrolled.

For multifaceted, large scale projects, etc projects finance may be an obstacle. The
availability of banking financing additionally prevents new companies from expanding into
the market.

In the market, newcomers may find it difficult to gain the trust of the customers as there are a
lot of strong brands in the market.

Economic periods of recession, change in property values and delays in projects are the type
of risks a real estate company usually faces but it would be extremely challenging for new
companies to perform well or may end up closing.

Bargaining Power of suppliers

(Medium to low Power)

Construction labor and material suppliers may have some negotiating influence, although it is
normal to any business. Businesses like Bay Development can negotiate power to themselves
due to the volume and reputation of the company.

Construction related suppliers who provide uncommon or specialized supplies may have
more negotiating power. The suppliers of this type of products may get advantage if certain
materials are difficult to replace.

Reputable suppliers with a track record of reliability may have more negotiation leverage as
many well-established companies usually rely on this type of suppliers.

Companies’ negotiation power may be impacted by the conditions of contracts and

agreements between the real estate company and suppliers. Long term contracts may benefit
suppliers whereas flexible contracts can provide the real estate company more power.

Given that the real estate company can negotiate depending on the market conditions but
suppliers of materials that are exposed to considerable price variations may have less
negotiating ability.

Bargaining Power of buyers

(Moderate power)

In Bangladesh, property buyers do have considerable influence particularly in markets where

there is an accessibility of excess properties. The buyers can bargain with some conditions
and price flexibility which could affect the overall profitability

Buyers today have access to a multitude of knowledge regarding real estate, homes, market
trends, and pricing through real estate brokers and market research this helps them to make
better decisions and influence their bargaining power.

Buyers may have a variety of options depending on the situation of the local real estate
market, interest rates and the economy. If there are several house options the buyers may be
pickier and more demanding during negotiations.

Buyers are often free to make deals based on the property’s condition, standard and some
specific features. The buyers may, for instance, bargain for improvements if they think the
property needs better or more work.

Threat of substitute products or services

(High)
The threat of substitute products or services of Bay Developments Ltd. is high. Bay
Developments Ltd. faces a high risk of being replaced by alternative real estate options as
they become increasingly popular and cost-effective. These alternative options include online
real estate platforms (e.g. Zillow, Redfin, Opendoor, Offerpad, etc.) and direct to consumer
(direct-to-consumer) real estate companies (i.e. DocuSign, Rocket Mortgage, etc.). These
platforms provide home buyers and sellers with a range of services, such as searching for
properties, connecting with agents, and tracking the market, without the need for traditional
real estate brokerage services. These companies offer a convenient and streamlined buying
and selling process, and they often offer lower commission rates than traditional real estate
brokerages.

In order to mitigate the threat of substitutes, Bay Developments Ltd. needs to focus on
providing value-added services that online platforms and direct-to-consumer companies
cannot offer. For example, Bay Developments Ltd. can focus on providing personalized
service, expert advice, and a strong network of real estate professionals. Bay Developments
Ltd. can also focus on developing new services that meet the changing needs of its customers.

Intensity of rivalry among existing competitors

(High)

The intensity of rivalry among existing competitors in the construction industry is relatively
high. This is because there are a number of competitors, and they are all competing for the
same customers. Bay Developments Ltd. will need to focus on differentiating its products and
services from those of its competitors in order to be successful.
Shanta Holdings and Edison Real Estate are the top competitive rivals of Bay Developments.
They offer a variety of real estate services, including property listings, agent matching, and
mortgage financing. They also compete for listings and buyers.
Shanta Holdings is a leading real estate company in Bangladesh. It offers a wide range of
services, including property listings, agent matching, mortgage financing, and property
management. Shanta Holdings has a strong brand reputation and a large network of agents.
Edison Real Estate is another leading real estate company in Bangladesh. It offers a similar
range of services to Shanta Holdings, with a focus on providing high-quality service to its
clients. Edison Real Estate has a strong track record of success and a loyal customer base.
Both Shanta Holdings and Edison Real Estate are well-established and respected real estate
companies in Bangladesh. They offer a wide range of services and have a strong network of
agents. This makes them tough competitors for Bay Developments Ltd.

References:
Sarker, M. a. T. (2023, May 31). The power of real estate. The Daily Star. https://www.thedailystar.net/supplements/real-
estate-home-loan/news/the-power-real-estate-3333861
Wikipedia contributors. (2023b). Real estate in Bangladesh. Wikipedia.
https://en.wikipedia.org/wiki/Real_estate_in_Bangladesh
Ltd, M. R. E. (2022, October 23). Overview of real estate industry in Bangladesh - Mir Real Estate Limited. Mir Real Estate
Limited. https://www.mirrealestate.com/blog/the-real-estate-sector-in-bangladesh/
REAL ESTATE SECTOR OF BANGLADESH: COVID 19 AND ITS AFTERMATH. (n.d.). https://idlc.com/mbr/article.php?
id=389
Bay Area Council Economic Institute: Connecting Business, labor, government and education. Bay Area Council Economic
Institute | Connecting business, labor, government and education. (n.d.). http://www.bayareaeconomy.org/
California, S. O. (n.d.). Governing Board – California State Coastal Conservancy.
https://scc.ca.gov/about/governance/