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Time capsule: Dhaka real estate

  • Published at 11:25 pm October 21st, 2019
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According to some estimations, Dhaka is a city of over 20 million people with a population growth rate of over 3.5%

From “Bahanno Bazaar arTeppanoGoli” to a rapidly growing megacity, Dhaka has been through many incarnations throughout the ages. For most of its history, the city was nothing more than a quiet settlement on the bank of a magnificent river. However, it all changed, almost overnight, when Dhaka was transformed into a major hub by the Mughals.

The Mughals expanded the city manifolds and built mesmerizing structures – albeit, a few stood the test of time. Shahbagh, which used to be the edge of Mughal Dhaka, is now one of the major central points of the city. But there is one thing which began during the tail end of the Mughal era and still rages on strong today – the demand for real estate. It wasn’t until the British began buying up land that people in Dhaka really considered the true value of it. Now 400 years later, real estate is a booming sector and any lucrative property is scooped up almost instantly, be it land or apartments. Taking a step back and looking at the entire picture, we can clearly discern two aspects behind the high demand for properties in Dhaka: “population growth and infrastructural development”. The latter has contributed to the planned growth of the city while the former, more domineering one, is responsible for the majority of unplanned growth.

A growing city

According to some estimations, Dhaka is a city of over 20 million people with a population growth rate of over 3.5%. In contrast, the population of Dhaka was just 335,760 in 1950. By the year 2035, the population count is expected to rise another 10 million or so. As a result, the government is having to quickly plan infrastructural developments and create housing opportunities for the growing masses. The goal is not just to ensure housing for all, but also to prevent the repetition of past mistakes, namely uncontrollable and unplanned growth of the city. The aggressive unplanned growth Dhaka experienced from the 50s to the late 90s has led to the development of many areas such as Shahjahanpur, Khilgaon, and Maghbazar, areas known specifically for being congested and unstructured. The north, or a number of areas there, is quite planned in comparison.

Soaring land prices

Whether planned or unplanned, Dhaka North or Dhaka South, real estate prices have skyrocketed since independence. Land has been, and always will be, the most sought after type of real estate. Would it amaze anyone to learn that in the last 45 years, land prices in some areas have increased by as much as 100,000%?

Back in 1974, it was possible to buy 1 katha of land in Motijheel for just Tk50,000. Today, it can cost around Tk5 crore per katha! That is if you can even find land for sale. Finding land to buy in the administrative hub of the country is as rare as it gets and just as costly. It’s the same situation in all the so-called “upscale” areas of the city like Banani and Dhanmondi. Finding land to purchase that costs below Tk1 crore per katha is almost impossible. To find modest-priced land within the Dhaka metropolitan area right now, you need to look to three specific areas: Uttara, Mirpur and Bashundhara R/A. 

Getting affordable 

Instead of crores, the prices of land in Uttara, Mirpur and Bashundhara R/A are in lakhs. These three areas also present the most balance between area facilities and amenities, convenience and affordability, not to mention they are also some of the most popular areas in Dhaka to live in today. However, as hard as it is to find land for building houses, it is not the only cost one should expect. Construction cost on top of land purchase cost can be staggering. That is why buying an apartment or flat, which costs much less compared to land purchase and construction, is the most popular alternative. This sentiment is further reinforced by the fact that flat prices can still be considered quite affordable. While it’s true that apartment prices have increased a lot since the popularization of the concept, the increase isn’t anywhere near the rate it is for land. In fact, the growth rate of apartment prices in Dhaka hasn’t always been in one direction. Some areas have seen their property prices go up for a few years while going down during other years.

Looking at recent property prices in some major areas and comparing them against figures from 12 months ago show us noticeable changes in price. But even if prices decrease, it is not altogether an unfavourable situation. On one hand, a positive price growth rate is favourable for the seller, while on the other, a negative price growth rate is favourable for the buyer.

As per Bproperty’s listing database, 1,200 – 1,500 sqft flats in Khilgaon saw their prices increase by 4.57% during the first half of 2019, while the prices of similar sized flats in Dhanmondi decreased by a whopping 8.71%. If we went back a few years and looked at prices of same sized flats in those two areas, we would see an inverse result. Apartment prices in Khilgaon would be going down with prices in Dhanmondi going up. The major influencer in this regard is development.

Finished, unfinished or even proposed development can have a major impact on property prices in an area. The subsequent construction of two major flyovers, a proposed metro rail project, and a thriving restaurant scene has increased the demand (along with the price) of properties in Khilgaon and nearby areas. It would be difficult recognizing Khilgaon of a decade ago, even when looking at photos side by side. Development of roads, schools, restaurants, shopping centres all influence the price of properties in an area. 

Coming back to Uttara, Mirpur and Bashundhara, these three areas together make up almost 55% of all property purchase requests Bproperty has received in the last 12 months. That’s huge, considering these areas were only formally established in the late 80s and early 90s. Quick and planned developments of amenities and roadways have seen a steady increase in popularity and urbanization in those areas.

Rent, rent, rent

For those who are still not ready to buy property, renting is the way to move forward. It is also the most popular and prevalent option in almost all the major cities of the world. It costs less, but can be a tremendous housing solution. And like property prices, rent varies from time to time and area to area. However, the development of an area doesn’t have as much of an impact on rent as it does on property prices. Dhanmondi and Mohammadpur are both located next to each other and are quite well-developed as well as popular areas, but rent varies greatly. While the average rent of a 1,000 – 1,200 sqft flat in Mohammadpur is around Tk18,000. In Dhanmondi, a similar sized flat can be around Tk21,500. The difference in average rent is even more between flats of 1,200 and 1,500 sqft, which is about Tk6,000.

What causes such a huge difference? Both areas have similar amenities and buildings, and these areas enjoy much the same convenient modern facilities. The cause can lie in people’s perception of the areas and unregulated and unorganized rent. Like these two areas, the rent amount throughout Dhaka is quite varied. But on the bright side, renting now is easier than ever due to online platforms and authorized real estate experts.

Changing paths

Finding a pattern in the development of Dhaka as a city can be next to impossible. That’s because, for the longest time, there weren’t any. Most of the development followed people, instead of the other way around. “Organic growth,” while enabling cities to grow at rapid paces, can result in messy urbanization, as was the case for Dhaka. The best examples of “planned growth” are Uttara in the north and Purbachal New Town in the east, which is still in development.

Photo: CourtesyMost of the expansions of the city between 1947 and 1971 were outlined by the Mughals and the British. Unfortunately, very few areas followed their original planning. Locations that were to solely be residential became something else, and some even became commercial. This phenomenon of the evolution of areas is ongoing even as this article is being written and will continue to do so for a long time. Many would assume cities to be static; they are anything but. They are like living beings – growing, adapting and evolving according to the needs and desires of the people. So an area that we see today might not have the same characteristics or outlook a few years or decades down the line.

Going commercial

Before Gulshan emerged as a commercial area, the only area that could claim that title was Motijheel. It had all the commercial and government offices. Major banks, NBFIs, and corporate houses still have their headquarters in Motijheel, not to mention all the administrative chapters. However, organizations have spread their offices throughout the city in recent times. Instead of cluttering the “expensive” Motijheel zone, organizations are choosing emerging commercial and even non-commercial areas. 

As mentioned, Gulshan is one of the most prominent financial zones in the city. And similar to Motijheel, the area hosts some of the most valuable and important local and international institutions. The roadside properties of Gulshan, in fact, are all commercial. It is something you don’t notice until you do. But once you do, you begin to properly comprehend the reputation of the area, its importance and role in Dhaka’s economy.

Within the last two decades, three areas have emerged as popular “commercial zones,” two being established primarily for residential purposes: Uttara, Banani and Bashundhara R/A.

Uttara has been a masterstroke in terms of urban planning. The area was designed with the goal of being an all-purpose area and till now, has been working perfectly. The forefronts of the area, in particular, Jashimuddin Avenue, Sectors 2, 3 and 5, have become very popular among organizations. Small to big – all sorts of businesses have offices in the area now. However, unlike Uttara, Banani or Bashundhara R/A were never meant to serve as commercial areas in a large capacity. These two areas had other ideas. 

Banani Model Town was established in 1964 by Dhaka Improvement Trust (DTI) to accommodate the middle class. But as we see it now, Banani has become a housing location of the upper-class and a significant commercial zone. Bashundhara R/A has been a very recent addition to urban Dhaka, and its development is still ongoing. Yet, many of the beautiful buildings of the area are home to not just individuals or families, but also businesses.

This brings us to a concept that has been gaining quite a bit of popularity in the last few years, ever since the rise of Dhaka’s startup scene. And that is the prominence of residential-commercial properties. From the outside, these properties look just like any other residential home – some even have a similar interior design. However, the tenants or owners of those places use the space for commercial purposes. The biggest benefit of utilizing these residential-commercial spaces over commercial spaces is the comparative lower rent or price. As a result, this type of property is often ideal for startups who could find better usage of their funds. Turning residential properties into commercial spaces is also viewed as more profitable by property owners since they fetch better rent and prices. Whereas the rent of a 1,500 sqft residential flat in Uttara sector 3 can be between Tk25,000 to Tk35,000, a same-sized residential-commercial property, depending on the facilities, may fetch as high Tk70,000 a month. Even if this might seem high to some, at the end of the day, this can still be a more preferable option for all parties involved.

Looking forward 

The future of Dhaka and its residents looks bright. Dhaka is a megacity, with the infrastructural and urban development to match its status. While the northern expansion of the city is in its last phase, eastern expansion is about to begin in full force. Purbachal New Town and its nearby areas are the new frontiers and the gold rush has begun. Those lucky enough to buy land in Purbachal New Town are seeing prices increase two to three times. Now, land price in Purbachal New Town can start at Tk35 lakh per katha. As for the nearby areas, the prices of plots have jumped nearly 50% in the last 12 month. People are looking at it as the next Uttara – maybe even bigger. The plan forward signals a great future both in terms of urbanization and real estate, for all parties involved.