Secondary Real Estate Market – Bangladesh’s Hidden Gem?

9th September, 2023 12:00:00 AM Print news

Dhaka, the hub of economic activity and cultural diversity, has never been high paced. Led by the rapid urbanization and population growth has resulted in a spike in never seen before housing demand which further fueled by a rapidly expanding economy and a growing middle class. However, a sobering picture of the city’s housing crisis has been painted by recent data released by the Consumer Association of Bangladesh.

An overwhelming 80% of Dhaka’s residents are in a tight spot, spending 60% of their income on rent, according to the Consumer Association of Bangladesh. Due to this financial strain, many people are unable to save or invest in home ownership, perpetuating a cycle of renting. There are approximately 1.8 million Dhaka residents living in rented homes, indicating that renting is the norm for a significant portion of the city’s residents.
According to the statistics, there is an alarming trend. Dhaka’s rents have tripled in the last 15 years, making life difficult for tenants. On the other hand, the price of new flats has skyrocketed by 390% between 2000 and 2018. Owning a home is now an unattainable dream for many Dhaka residents.

The primary real estate market has been striving in order to meet the escalating demand. The number of new housing units constructed each year ranges between 10,000 and 12,000 units. IFC data from 2022 predicts a staggering 60 lakh (6 million) units of demand for primary properties.

In 2030, the IFC projects that housing demands will surge to a jaw-dropping 10.5 million units. A housing supply of 249,000 units is needed just to begin addressing this monumental challenge.

In the face of such staggering numbers and an ever-expanding housing demand, the need for innovative solutions is more pressing than ever. Enter the secondary property market, a sector that has the potential to bridge the gap between soaring housing costs and the limited financial means of many Dhaka residents.

While primary real estate has long been the center of attention, secondary real estate has emerged as a hidden gem offering unique investment opportunities and having immense potential for homeowners and investors. Existing properties, resale homes, and rental units represent an untapped resource for providing affordable housing solutions.

Bangladesh’s secondary real estate market consists of the purchase and sale of previously owned residential, commercial, and industrial properties. In contrast to the primary market, which caters primarily to developers and first-time buyers, the secondary market is open to prudent investors and individuals looking to upgrade or downsize.
Secondary property markets are providing middle-class residents with a chance to fulfill their dreams of owning a home. By enabling the middle class in Dhaka to navigate the exorbitant prices of primary properties caused by the surge in construction material costs, the secondary properties are proved to be a boon to many people with middle income status.

There is a wide range of property option available in the secondary market, catering to different budgets and preferences. With such variety, middle-class buyers can select properties that fit their financial capabilities and personal preferences.

A secondary property market offers ready-to-move-in homes, eliminating the need for lengthy construction periods and associated expenses. It is possible for middle-class buyers to avoid construction delays and associated costs, as well as save time and money.

Dynamism is one of the key advantages of the secondary market. It’s possible for buyers and sellers to negotiate prices, terms, and conditions, thus resulting in potentially getting more favorable deals than the primary market with higher price. Furthermore, the secondary market offers a wider selection of properties, such as established neighborhoods and prime locations that already offer amenities and infrastructure.

Bangladesh’s secondary real estate market serves as an important avenue for fulfilling the housing needs of its rapidly urbanizing population, where urbanization is rapidly transforming the landscape. Compared to new developments in the primary market, which tend to command higher prices due to construction costs, properties in the secondary market are more affordable.

Besides, the primary market may have seemed unattainable for many individuals seeking properties in prime locations. However, the secondary market offers aspiring homebuyers a more accessible price point in these highly coveted areas. Due to its affordability, Bangladesh has not only attracted local investors, but has also attracted overseas Bangladeshis.

There is also a great potential for long-term growth and short-term gains in the secondary real estate market in Bangladesh. Property values in prime locations have the tendency to rise over time as the country experiences economic growth. Rental income can be derived from properties in such areas, allowing investors to benefit both from capital appreciation and rental income.

Furthermore, the secondary market allows investors to explore the concept of property flipping. Another great way for investors to maximize their returns and contribute to the revitalization of neighborhoods is to acquire undervalued properties, renovate or improve them, and then sell them at a higher price.

It is clear that Bangladesh’s secondary real estate market holds tremendous potential, yet it also faces some challenges that need to be addressed. Establishing trust and ensuring smooth transactions require transparency and proper documentation. It is imperative to create a robust regulatory framework that protects the rights of buyers and sellers, encourages fair practices, and minimizes property transaction risks.

Additionally, it is crucial to raise awareness and educate the public about the secondary market’s benefits and processes. To make informed decisions and avoid potential pitfalls, it is imperative that potential buyers and sellers are well informed about their rights and responsibilities, as well as market trends and legal requirements.

Addressing Dhaka’s housing crisis requires a multifaceted approach. Policymakers, real estate developers, and financial institutions must collaborate to make the process of owning a home more attainable. Initiatives like subsidized housing, flexible financing options, and incentives for developers to invest in affordable housing can help.

Simultaneously, attention must be directed towards the secondary property market. Encouraging the renovation and redevelopment of older properties, along with promoting transparent and accessible property transactions, can stimulate growth in this sector.

The soaring rent and property prices in Dhaka city may seem insurmountable, but with strategic planning and a focus on both primary and secondary property markets, the dream of owning a home can become a reality for most people. It is a challenge, but it is also an opportunity for the city to build a more inclusive and equitable urban landscape for all its inhabitants.

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