Land Prices Put Dhaka on Par With NY or London _ Dhaka Tribune

bangladesh>>published:09:35may3,2013>>updated:13:34july7,2013

LandpricesputDhakaonparwithNYorLondonFaisalMahmud

But the median household income here is 50 to 100 times lower than inthose cities

IfyouareaDhakaresidentanddonotalreadypossessapropertyinthecapital,thereiseverychancethatyoumightendupnotowningoneinyourforeseeablefutureevenifyourmonthlyincomeisinthesixdigitrange.

Thiswastheconclusionofarecentstudywhichcompiledayearofresearchworkbyurbanplannersandeconomistsinthecountry.Thepublication,titledUrbanBangladesh:Challengesoftransition,wasconductedbythePowerandParticipationResearchCentre(PPRC)aprivateresearchorganisation.

Accordingtothispublication,formostDhakadwellerstheprospectofbeingabletobuyahouseappearstobethepoorestinSouthAsiancitiesasthepriceincomeratiohereis5:1ormore.(EventheneighbouringIndiancityofKolkatahasaratioof3:1).

PhotoAmirulRajiv/DhakaTribune

LandinthisconcretejungleisnolesspreciousthaninLondonorNewYork

Normallyaratioofbetween2:1and3:1wouldgenerallyimplythatasignificantportionofthemiddleincomepopulationcouldaffordtopurchasehouse,althoughhighlyunequalincomedistributionwouldpushdowntheproportion,saidthestudy.

TheeverincreasingcostofhouserenthasforcedtheDhakadwellerstospend35%oftheirincomeonaverage.Sometimestheshareofincomepaidinrentisashighas45%.

CalculationsdoneinoneofthestudiesofthispublicationshowsthatevenifthecurrentincomeofapersonisTk100,000permonthandheisabletosavehalfofthisamountafterbearinglivingexpenses,itwouldtakehimatleastadecadetosaveenoughmoneytopurchasingapropertyintheoutskirtsofthecapital,providedthatthehousingmarketremainssteady,whichisveryunlikely.

Dataprovidedbytheurbanandregionalplanning(URP)departmentofBUETsaysthatinareasofDhakaanditsoutskirts,landpriceshaveincreasedbymorethan300%between2000and2007.Realestatedevelopersestimatessuggesttheincreasewouldbecloseto350%sincethen.

AccordingtoRealEstateandHousingAssociationofBangladesh(Rehab)data,thepriceofakathaoflandroseby344%inMohakhaliDhanmondiwasclosebehindat331%and300%inBananiandGulshan.

LandpricesinMotijheel,thecommercialhubofBangladesh,increasedbyaslightlyaboveaverageof214%duringthisperiod.

ThemostmodestpricerisewasinhighlycongestedAzimpur,atjust118%.

TalkingwiththeDhakaTribune,ProfDrSarwarJahan,headoftheURPdepartmentofBUET,andtheauthorofoneofthestudiesofthepublication,saidthescarcityandhighcostoflandhasbecomethestumblingblocktofacilitatingaccessibilityofthemiddleandlowerincomepeopletohousing.

Landdevelopmentmultiplier(LDM)isanindicatorthatreflectsthepremiumthathadtobepaidforaplotoflanddevelopedforhousingincomparisontoraw,undevelopedland.TheLDMofDhakawasestimatedaround2in1991,butitincreasedtoabout7.5and18in2001and2011respectively,hesaid.

Theweaknessofthefinancialsectorintermsofprovidingfundsforhousingisalsoamajorobstacletohousingdevelopment.Theformalmortgagefinancesystemissmallrelativetonewhousingconstruction,servingonlythehighestincomegroups,saidDrJahan.

ReferencingaWorldBankstudyconductedin2007,ProfJahansaidthatDhakaslandpricesarecomparabletothoseinsuburbanNewYorkorLondon,althoughthemedianincomeinDhakais50to100timeslower.

ProfJahansaidinDhakamorethan65%ofhouseholdsrenthousestolivein.Likeothercommodities,houserentincreasedtremendouslyduringthelastfewdecades.Asperavailablestatistics,itwasfoundthatthehouserentinDhakain20072008wasmorethan24timestherentin197374,hesaid.

Healsosaidthatabout60%ofurbandwellingsinBangladeshareowneroccupied,butthepercentageisonly30inDhakacity.Overtime,therehasbeenadecliningtrendinsingleowneroccupiedhousing,asrealestatecompaniesemergeandrenovateasingleownerhousesintoanapartmentcomplex,hesaid.

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TanveerulHaqueProbal,formerpresidentofRehab,saidtheincreasedpricesoflandandconstructionmaterialhaveforcedrealestatedeveloperstosellreadymadeapartmentsathighprices.

Landownersnowpreferhandingovertheownershipoflandtotherealestatedevelopers,asinthishousingmarketscenario[that]ismuchmorelucrativeforthem,hesaid.

Probalsaidthecurrentpriceofapartmentinadecentlocationofthecapitalisnotaffordabletomiddleincomepeople.Thatswhydevelopershavestartedtoconstructlowpricecondominiumsintheoutskirtsofthecapital,hesaid.

However,hesaidtheoverallsituationofthesectorwasnotgood,andthatthereasonfortheslowdowninsaleswaslackoffinancingfrombanks.Inthepast,banksusedtofinancethehousingsector.Butnowtheyseemlessenthusiastic.Ithasimpactedthesector,hesaid.

EconomistProfWahiduddinMahmudsaidapointofDhakaisthattheaverageincomeofitsdwellershasnotreachedathresholdatwhichonecanaffordtobuyahouseinsuchalargecity.

Costsofnecessarycivicamenities,intermsofinvestmentandmaintenance,arebeyondtheincomecapacityofmostofthecitysdwellers.Thisisactuallythecostofunplannedcityexpansion,hesaid.

ProfMahmudsaidoptimumuseoflandunderextremelandscarcitycannotbeensuredonlythroughmarketorprivateincentives,butthroughincentivesbypublicinterventions.

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