The size of the real estate sector and its contribution to the economy in terms of employment generation, accrual of investment, contribution to exchequer, output trends and linkage contribution of this sector.

Employment Generation:
The real estate sector is at present creating employment for about 10 lakh people who are directly or indirectly involved in the sector. According to the LFS, in 1999-2000, 2.1 per cent of the labour force was engaged in construction whereas for 1995-1996 the figure was 1.8 per cent. These figures include workers engaged in brick chipping and working in delivery trucks to architects, engineers and entrepreneurs. Some 5,000 engineers and 6,000 management staff are engaged in this sector.

Investment:
Recent information concerning investment in the housing sector shows steady growth both in absolute terms and as a percentage of total private investment and GDP. Private investment in housing and construction has more than doubled during the Fourth Five Year Plan period, from Tk 700 crore in 1989-1990 to Tk 1589 crore in 1994-1995. During the first three years of the Fifth Five Year Plan period the average investment in housing and construction was Tk 7,642 crore. As a share of total private investment, private investment in housing and construction in the 1997-1998 to 1998-1999 period accounted for 47.3 per cent which far exceeded the target of 16.35 per cent for this period. The proportion of investment in housing and construction in the national GDP increased from 3.4 percent in FY 1997 to 4.1 per cent in 1999.

Contribution to Exchequer:
The contribution of the real estate sector to the exchequer is a substantial one. Various revenues like VAT, registration fees, utility connection fees etc. generated in the real estate sector amount to about Tk 36 crore per year.

Linkage Contribution:
The real estate sector has also made substantial contributions to the growth of a host of backward and forward linkage sectors which include paints, ceramics, aluminum, furniture, consultancy and many others. In this context, we provided examples of catalytic influence of the real estate and housing sector in development of linkage industries whereby the sector is immensely contributing to employment and the GDP. Those include:

a) Bangladeshi state-of-the-art ceramic industries largely meeting the local demand for ceramics

b) Thai and Kai aluminums meeting demand for door and window frames

c) More than a dozen paint industries, many of them multinationals, are catering to local demand

d) A large number of furniture making and interior design companies supporting the housing industry

e) An exponentially growing cement sector, which is helping the country to attain self-sufficiency in this important input.

Market Structure:
19 per cent of the dwelling units are located in urban areas. Per capita floor space in urban areas is only 62.3 sq ft. About 46.4 per cent of urban dwellings are made of brick/cement. About the market concentration in the real estate sector we can say that Real Estate business, especially apartment projects, took off in the Dhaka City in the late 1970s. From the early 1980s the business started to flourish and showed robust growth. At present, more than 550 companies are active in the real estate business in the country. About 95 per cent of this business is still dominated by the top 10 companies. We also observed that the market is highly segmented, primarily based on location, price of the land and size of the apartments. The main reasons for the development of real estate business in Dhaka city were:

a)Scarcity of open spaces in important parts of the city.

b)Hazards of purchasing land.

c)Rapid increase in the population of Dhaka.

d)Fiscal-Financial incentives such as the decrease in the rate of bank interest.

e)De-restriction of remittance flows which financed the sector.

Rent of apartments had been relatively high compared to the opportunity cost of privately constructed flats. Service facilities which are enjoyed collectively, such as garbage disposal facilities, central satellite connection, security, roof top facilities and lift, save time and reduce costs.

Financing the Housing Sector:
Financial intermediation in the housing sector is not found adequate because of high interest rates and limited sources of funds. This is true both for the financing of the developers and the purchasers. The state-owned House Building Finance Corporation (HBFC) is burdened with bad loans, and loan disbursement has tended to be low in recent years. Delta-BRAC Housing came into this market as a private-NGO collaboration, but their interest rates are as high as 16 per cent which is higher than even that of the HBFC by one per cent. The major financing organisations for housing are the HBFC and the Commercial Banks while financing by other organisations like Delta-BRAC, National Housing and Micro credit lenders are insignificant. Budgetary Measures in FY2003 Budget Unlike the past fiscal budgets, the government through the FY 2002 - 2003 budget provided a number of incentives to boost the real estate sector of the country.