It is certainly not the most exciting element in an economy nor in regards to investment; but, real estate is a reliable contributor to the GDP of a nation and a vital part of its economic growth. Every country needs a flourishing property market that works both as a driver of the economy as well as its indicator. Most developed nations have a thriving and stable property market that has attained a central position in its economy, and the same is pursued by nations that are on the quick path to growth. For what it is worth, the virtue of real estate completely justifies the importance it garners in an economy.
Employment
One of the major matrices for a nation’s economic growth is its employment rate. The more the population is with job and earning sources the better the economy and the country. That is why countries focus so much of their resources on creating employment opportunities — be it formal or informal. Joblessness is the antithesis of an economic upturn, and the real estate sector — both directly and indirectly — employs a large portion of people across all nations.
But for a country such as Bangladesh, the real estate and construction industry is a major source of informal employment. Millions of people work in those sectors who are without proper education and are unable to get a salaried job. They rely on continual construction work for economic sustenance. We are currently observing what happens when there is a lengthy stretch of time without sufficient construction activity in the form of massive joblessness. The fallout from an inactive real estate and construction sector can wreak havoc on the economy of any nation.
Income
Aside from employment, real estate or properties themselves are a major source of income. To be more precise, it is rental real estate that generates income for a lot of people. Everyone needs a roof over their head but not all can afford it. Rental homes are the next — and in some cases, the more popular — best choice. Residential property owners can rent out their vacant properties to people in exchange for monthly rents.Plenty of people across the world consider renting homes as their main source of income.
Commercial properties, though, can be several times more valuable monetary-wise than rental properties, especially in the modern landscape. Over the last few years, the country has seen a commercial real estate boom. Restaurants, small offices, warehouses — these types of properties are gaining popularity, and as a result, rent for such property types are also increasing. Many people are renovating their properties and/or renting out to businesses which tend to pay higher rent than residential homes. That is why commercial renting is at the forefront of the new wave of real estate income.
Investment
When someone looks at the apartment and land prices of the last few decades of Bangladesh, it is quite clear as to why people continue to bank on real estate investments. Even amidst recessions and global crisis, some property prices, particularly in the capital city, has increased by over 1000% since just the start of the century. Global property prices have had a similar trend in the last 20 years or so with emerging markets making the most gains.
Real estate is a stable and somewhat predictable investment option. The returns, if done correctly, can be huge and stories of property depreciation is rare in modern times. This limited resource is sought-after every day and by almost everyone, which in turn fuels the economy and preserves the flow of money in the market.Real estate investments can also be the foundation of an organization from which further expansions can be possible — as evident by the giant Bashundhara Group who started out as East West Property Development Ltd.
VAT and taxes
Real estate also generates income for the government through relevant VAT and taxes. While there is no inherent property tax in Bangladesh per se, there are several related taxes that must be paid during ownership transfer/purchase of properties. Until recently, these additional taxes used to be around 14%-15% of the value of the property, but they have been reduced to around 10% since July 5. So, every time someone buys a property from a developer or person, it generates income for the government.
Furthermore, as income from rental properties is considered “income,” the owner must also provide income tax which is generated from those said properties. This taxation is crucial for the government’s plans and budgets as a great portion of income tax is received from this source. There are also several charges and taxes that are imposed on raw materials necessary for construction that generate funding for the government.
Infrastructural growth
Aside from monetary values, real estate is also the driver of infrastructure and urbanization, particularly for Bangladesh. The majority of urban development in Bangladesh has been, and continues to be, organic in nature — i.e. infrastructural development follows the people and not the other way around. As a result, wherever people move to and settle down, we see a number of new roads, bridges and necessary shops and centres being developed.
So, even if a place does not yet have all the necessary luxuries near their place of residence, those luxuries do not remain far behind for long. Real estate settlements dictate the pace of urban growth and foster the implementation of infrastructural projects — which in turn helps the government and the economy to expand its horizon which would otherwise not happen at all.
Real estate is, undoubtedly, one of the most profitable ventures in the world and is one of the primary indices of measuring the economic growth of a society.For Bangladesh, real estate has quietly and steadily raised its importance in the last few years.It will have a major role to play in the resurgence of Bangladesh’s economy as the nation steadies itself to overcome the economic crisis brought on by Covid-19. Maybe now is the time to bet on real estate and see what it returns.
