REAL ESTATE MARKET OF BANGLADESH: COMPETITIVENESS AND CONCENTRATION

Abstract

The real estate industry holds a significant position in the economy of Bangladesh. Its contribution to the country's GDP and employment generation is noteworthy. The development of the real estate sector positively impacts various other industries, such as design, construction, banking, and finance. The sector also plays a crucial role in attracting foreign investment to the country. However, unconstrained expansion is causing environmental concerns. Our goal is to analyze the real estate market's competitiveness, identify hurdles, and determine issues affecting the market. A competitive market creates competition among businesses to gain customers, reduce production costs, and determine pricing structure and product quantity. The real estate market is unique and differs from other markets in several aspects. Achieving perfect competition in this market is complex. The real estate market has distinct economic features where price is influenced by various factors, including government intervention, local rules, and land supply. In Bangladesh, area-based fixed prices have been set for land to prevent price bubbles, but price ceilings do not control the selling price, leading to untaxed income and revenue loss. Demand for properties and their geographical location significantly affect construction costs and property value. The availability of common facilities in the locality also significantly influences people's preference and demand for a property. The high price of properties in central business districts often turns them into Veblen goods and attracts the elite class as investment options for their untaxed money. Thus, we have researched Bangladesh's real estate market using mixed methods, including questionnaires and qualitative data analysis. In developing the questionnaire, we have considered companies operating across Bangladesh with a reputable presence in the market, all of which are members of REHAB and possess the necessary project permits. Our efforts to consider various locations revealed that the majority of preferred areas are centered around Dhaka and its environs. Real estate housing concepts have yet to gain widespread traction in local towns. While other major metropolitan areas have entered the real estate market, customer preferences still heavily favor Dhaka, with the city exhibiting a distinct concentration among the regions. The questionnaire has two parts, one focused on customer preferences and the other on entrepreneurs' and real estate professionals' opinions. We have collected authentic data from v reliable customers and representatives of reputable companies at the REHAB Winter Fair 2021. We also reviewed secondary data from various sources to ensure accuracy and relevance. Autonomous demand is the demand for a product that is not influenced by the demand for other products. In Bangladesh, real estate housing is an example of autonomous demand. An increase in autonomous expenditures leads to an equivalent increase in market share and output. Moreover, the preference for certain areas and companies contributes to a concentrated market, thereby offering companies a greater market share. where an increase in demand for a particular company's assets results in an increased market share for that company. The Herfindahl-Hirschman Index is used to measure the concentration ratio of the market. An HHI of less than 1,000 is a competitive market, 1,000 to 1,800 is moderately concentrated, and an HHI of 1,800 to 10,000 is a highly concentrated marketplace. The results of the research suggest a relatively competitive market for flats but an oligopoly market for plots, with a concentration of 1292.16 for the area and 1113.51 for companies in the plot market. On the other hand, the concentration for the area is 799.77, and for the company, it is 772.29 in the flat market. Further logistic regression analysis using the odd ratio reveals no specific concentration has been observed for the preferred area or company for both flats and plot markets. The factors that influence the markets have distinct effects on customer preferences, thereby shaping their choices. We have identified significant factors and their impact on market decisions from both customer and supplier standpoints. The valuation provides valuable insights into the current market structure and underlying reasons. The appeal of a particular property to potential buyers is often influenced by a set of factors that are common in both plot and flat markets. Established market leaders typically exert significant influence over these factors. The factors that commonly attract buyers to a specific property, both in plot and flat markets, include the location of the property, reasonable price, brand value of the company, and company rules. Dominant companies in the real estate market often strongly influence these factors, impacting buyer preferences and decisions. There are some distinct factors in the case of plots and flats, which are completely market-specified, whereas large companies have expertise in providing such facilities. Those include improved road systems, urban facilities, easy payment system, future plans of government, goodwill of the company, and individual trust on the company for the plot market and building fittings, modern vi design, extra facilities provided by the specific company, fast handover exclusively subjective for the flat market. We have assessed supporting entities' significance in real estate developers' operations, business, and market strategy using the Likert Scale. The real estate industry has expressed dissatisfaction with the services provided by both government and private entities, citing inadequate support for the needs of real estate developers. There is a prevailing sentiment that the performance of these entities is subpar, falling short of fully satisfying the industry's requirements. Industry stakeholders often use their market power to create barriers preventing new entrants from competing effectively. This manipulation of the industry landscape allows established players to maintain their advantage and stifle competition. Our key research question unequivocally centered on evaluating the competitiveness and concentration of the real estate market in Bangladesh. We have successfully identified a definitive answer to this critical inquiry.