LOCATION AND SIZE PREFERENCE FOR APARTMENTS IN DHAKA AND PROSPECT OF REAL ESTATE MARKET

BANGLADESH RESEARCH PUBLICATIONS JOURNAL

ISSN: 1998-2003, Volume: 9, Issue: 2, Page: 87-96, November - December, 2013

Review Paper

LOCATION AND SIZE PREFERENCE FOR APARTMENTS IN DHAKA AND PROSPECT OF REAL ESTATE MARKET

*S.M. Labib1, Md. Musfiqur Rahman Bhuiya and Md. Zahidur Rahaman

S.M. Labib, Md. Musfiqur Rahman Bhuiya and Md. Zahidur Rahaman (2013). Location and Size Preference for Apartments in Dhaka and Prospect of Real Estate Market. Bangladesh Res. Pub. J. 9(2): 75-78. Retrieve from http://www.bdresearchpublications.com/admin/journal/upload/1309114/1309114.pdf

Abstract The main objectives of this study is to find the real estate buyers preferences for location, flat size and their choice factor for selecting flats at different locations in Dhaka. Secondly the study tried finding out the existing market condition and location preferences of different real estate firms. The study used primary collected from buyers coming in Real Estate & Housing Association of Bangladesh, fair 2013. General weighted index method is utilized for determining ranking of factors for selecting apartment at prime areas. It found that in Dhaka Mirpur, Uttara, Dhanmondi, Mohammadpur and Bashundhara area is highly preferred. The prime concern for selecting flat location is budget, residential environment and communication facility with different facilities. Moreover the willingness of the buyers for paying for flats is relatively low from the asking price of the developers and this price is actually varied significantly. The dominant apartment size in demand varies form 1200-1600 square feet. Developers’ location preferences almost coincide with buyers focus.

Keyword: Real estate, Apartment location and size, Residential environment, Willingness to pay

Introduction Dhaka is the capital of Bangladesh and one of the major megacities in the world. It is the 9th largest city in the world (World Bank, 2010). This city approximately accommodates a vast population of over 14.5 million. For this mammoth population housing is a real need and in turn housing sector is facing major challenges in Dhaka. With very few provision of government housing, the major demand of housing is fulfilled by the private sector both individual providers and real estate developers.

Housing is one of the basic human needs and the demand for housing is increasing with the growing population. Meeting the demand for growing population in large cities is as always is a challenge. In Dhaka, to meet the growing demand of houses, real estate developers came to business in around 1980. At present according to Real Estate & Housing Association of Bangladesh (REHAB), more than one thousand real estate companies are related to house and land development in Dhaka city (REHAB, 2012).

Living in apartment houses is a pressing trend in the lifestyle of the citizens of Dhaka city. Apartment buildings are constructed both in inner city areas as well as in outer, especially along the main thoroughfares. The housing market is expanding day by day. Due to scarcity, speculation and increasing demand, the price of land in the city is increasing at a phenomenal pace: about 20 to 50 times in the last 15 years (Hasan, 1991).

With ever increasing demand for shelter housing sector in Bangladesh is facing an unbalanced condition. The demand is too high and the supply of housing is not adequate. Public housing is negligible in Dhaka city. Hence the emerging need of private

*Corresponding Author: E-mail: [email protected] Department of Urban and Regional Planning, Bangladesh University of Engineering and Technology, Bangladesh

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housing flourish the real estate business in Dhaka in last few decades. Besides the scarcity of open and vacant land, hazards in land purchasing, rapid increase in population working as catalyst for real estate boom previously.

The location preference for flats varies based on the income capacity of the people. Moreover the feel of better residential environment and communication facility guide the location choice for flats, but in Dhaka such preference is quite ambiguous. Hence to find the desired location for flats is a major concern of this study. But finding the location is not enough to take any robust decision, the variation in apartment size in different areas also need to be determined, the study also examined the present demand of different apartment size in different areas of Dhaka. After including the size and location; it is necessary to estimate and determine a proper price for the flats, the study also seeks to determine area wise average price of flats. The study focused to find out the location preference of the buyers and variation of demand in flat size and their willingness to pay for flats and provide potential target group and location for future apartment development in order to have a proper balanced real estate market for buyers as well as the developers.

Methods and Material Study design

To achieve the objectives of the study some sequential steps have been followed. For primary data collection questionnaire is prepared for the buyers and developers. A sample of 90 buyers are surveyed in the REHAB summer fair 2013 at Ruposhi Bangla hotel, this sample is taken at 95% confidence level and confidence interval of 10; for unknown population.. All the data were analyzed in Statistical Package for Social Science (SPSS) and MS Excel and finally report is produced based on the analyzed data.

Study area profile

Dhaka is situated between latitudes 24º40´ N to 24º54´ N and longitudes 90º20´ E to 90º30´ E. A substantial portion of the adjoining low-lying areas have recently been brought under the structured zones of the city due to the accelerated rate of the urban growth in Dhaka. Dhaka Municipal Corporation & Surrounding Thanas, usually known as Dhaka metropolitan area (DMA); have an area of 300.97 square kilometers (Figure 1). According to Bangladesh Bureau of statistics (BBS) in 2011, this area has a population density of; 30,748.8 person/km.

Source: Banglapedia, 2013

Figure 1: Location and boundary of study area

The population growth rate of Dhaka city is 4.34% per annum (BBS, 2008). Average dwelling size or family size is 4.9 persons per household. Dhaka is now growing with an

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unprecedented growth accommodating 600,000 people per year (CIA- the World Factbook, 2011). But the supply situation is not well off, private housing provides around 25,000 units and government contribution is nearly negligible hare. Among these 25,000 units real estate developers contribute approximately 15,000 units per year (Seraj, 2012).

Results Buyers’ location preference for purchasing flats

Buyers from all around Dhaka show variation in location preference. With their varying income and living standard they prefer different location according to their needs and choices. Among all the respondents, most people prefer Mirpur area as their preferred location for flats. Next Uttara is most preferred and then Dhanmondi and Mohammadpur, Bashundhara (Figure2).

Banasri and Badda area also show the demand for flats in these areas. The variation in demand of flats is caused by various reasons such as income, residential environment, and communication facilities and biased by relatives and so on. While in mirpur some areas, such as pallabi, original 10; has planned layout, uttara is planned and Dhanmondi is designated residential planned area. Hence the demand for flats in these areas is not an abrupt choice. They have some attributes that makes them lucrative for the buyers. As a result more and more buyers are attracted to Mirpur, Uttara, Dhanmondi and Mohammadpur.

Source: Field survey, June 2013.

Figure 2: Area of preference for buying flats

Factors guide the choice of buyers while selecting location for flats

As it is observed, the demand for flats is not same for all the areas in Dhaka. Mirpur, Uttara, Dhanmondi and Mohammadpur show the highest demand for flats. There must be some underlying reasons for high demand for these areas. Usually; residential living environment, better communication with work place, near to educational facilities, biasness due to relatives, living in the same area for long time, near to main road and affordable price are some major factors that guided the location choice for flats. The priorities of these factors are not same for all areas also. Considered overall Dhaka the raking of this factors show that, Affordable and price within budget is the first reason for location preference for flats, second factor is Residential living environment, and third factor is better communication with work place (Table 1).

Table 1: Factors influencing the location preference for flats all round Dhaka city

Rank of the factors Factors Weighted index value 1st Affordable and price within budget 5.00 2nd Residential living environment 4.77 3rd Better communication with work place 4.33 4th Living in the same area for long time 4.21 5th Near to educational facilities 4.13 6th Biased by relatives 3.58 7th Near to main road 3.01

Source: Field survey, June 2013

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This ranking of factors is based on the weighted index value. The values are organized in descending order to obtain the rank and the indexing is based on the weight given by the respondents. From the ranking it is evident that; Considered overall Dhaka the raking of this factors show that, Affordable and price within budget is the first reason for location preference for flats, second factor is Residential living environment, and third factor is better communication with work place, living in the same area for long time is ranked four, Near to educational facilities is the fifth factor for apartment location selection, while biased by relatives is the sixth factor and finally near to main road is seventh factor. Hence apartment location near to main road is not a highly remarkable factor for overall Dhaka. While the study tries to find the variation in the ranking of factors for the most desired location for flats, it is found that there is large variation in factor ranking for Mirpur, Uttara, Dhanmondi and Mohammadpur.

In Mirpur area; the first factor is Affordable and price within budget. Second factor is Residential living environment and third factor is Near to educational facilities (Table 2). Better communication with work place is ranked as fourth factor. Biased by relatives is fifth factor and Near to main road is sixth factor.

Table 2: Factors influencing the location preference for flats in Mirpur

Rank of the factors Factors Weighted index value 1st Affordable and price within budget 5.00 2nd Residential living environment 4.62 3rd Near to educational facilities 4.41 4th Better communication with work place 3.70 5th Biased by relatives 3.60 6th Near to main road 2.76 Source: Field survey, June 2013

Living in the same area for long time is absent for this area as respondent did not give any weight to this factor. Hence it is quite clear that, in mirpur flat price is a prime concern as well as residential living environment is another most important fact for selecting flat location. Considering these factors, Pallabi, mirpur 11, mirpur 6, mirpur 10, mirpur 1, with available site plan and less expense for flats are more preferable location for flats.

In Uttara; factors that guide the demand for flats in this area, vary from other areas. The raking of factors in Uttara shows that, Residential living environment is the first factors; while Near to educational facilities is second factor and Better communication with work place is the third factor; the fourth factor is biased by relatives and fifth factor is near to main road and finally the sixth factor is Living in the same area for long time (Table 3).

Table 3: Factors influencing the location preference for flats in Uttara

Rank of the factors Factors Weighted index value 1st Residential living environment 5.00 2nd Near to educational facilities 4.71 3rd Better communication with work place 3.80 4th Biased by relatives 3.50 5th Near to main road 3.00 6th Living in the same area for long time 2.00


The factor Affordable and price within budget is absent in uttara. Now, with planned design uttara have better environment and some English medium schools and universities are located near uttara.

Dhanmondi is located in the core of DCC area. It is a very well designed residential area with very high connectivity and provided with all the needs for living. Residential living environment is the first reason for selecting flats in this area. Better communication with work place is the second reason for selection of flats in Dhanmondi (Table 4);



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Table 4: Factors influencing the location preference for flats in Dhanmondi

Rank of the factors Factors Weighted index value 1st Residential living environment 4.52 2nd Better communication with work place 4.50 3rd Near to educational facilities 4.10 4th Biased by relatives 3.10 5th Near to main road 2.87


This area is near to most of the working centers of Dhaka (i.e. Motijheel, Farm gate, new market). The people living in Dhanmondi mostly like to live in this area as most of the facilities are available in this area. There are a lot number of English and bangle medium schools in Dhanmondi area. Some universities are also located in Dhanmondi. There are some hospitals and shopping complexes also available in Dhanmondi. But due to higher concentration of facilities this area faced problem of traffic congestion within the area itself. Despite the problem of traffic congestion this area is still lucrative as a residential area.

Affordable and price within budget, factor is not present for selection preference of flats in this area. This area is mostly designed for high income group with larger plot size.

Ranking of factors in Mohammadpur area is nearly same as Dhanmondi. This area is also well designed mostly. Some large housing projects have undertaken in this area, such as; PC culture housing, Mansurabad housing, Mohammadia housing and so on. Residential living environment is the first factor while Better communication with work place is second factor and near to educational facilities is the third factor in Mohammadpur (Table 5).

Table 5: Factors influencing the location preference for flats in Mohammadpur

Rank of the factors Factors Weighted index value 1st Residential living environment 5.00 2nd Better communication with work place 4.20 3rd Near to educational facilities 4.01 4th Biased by relatives 4.00 5th Living in the same area for long time 3.00 6th Near to main road 2.80


Besides, being within DCC area this area has also better connectivity with other areas of the city. Moreover the price of flat is not expensive as in Dhanmondi. Considering all this area attract people for its low price and better site planning.

Buyers flat size preference

Size of flats varies according to the income capacity of the buyers mainly. Family size is another factor for the varying size of the flats. For the study, respondent searching flats less than 1000 square feet are considered as lower middle income group, 1000-1200 square feet is considered as mid-middle income group and 1200-1600 square feet is considered as upper middle income group and finally respondents searching flats above 1600 square feet is considered as high income group. The study found that the upper middle income group is in highest number, searching for flats (Figure 3).

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Figure 3: Variation in demand for different size of Apartments

If we consider in percentages, Mid-middle income (1001-1200sft) is 29% of all respondents, while lower middle income is 8%, Upper middle income (1201-1600sft) is dominant with 39% of all the respondents and 24% of all respondents could be considered as high income (1600+ sft) group. Here it is clear that, upper middle income group have the dominance in the market. Hence flat size within 1201-1600 square feet has the highest potentiality grabbing the dominant demand of upper middle income group. Mid-middle income group is also potential, as with increasing cost of construction material larger size apartments are only available to high income group, but mid-middle income group is a large sector searching for flats, hence flat of 1001-1200 square feet could also draw the attention of this group.

Areas provided with better facilities for living attract high income group and thus the demand of larger flats could be observed in these areas such as; Dhanmondi, Gulshan, Bashundhara. While in less expensive areas people demand smaller or medium size flats. The study found that, the variation in apartment size is remarkable for some areas in Dhaka. In uttara around 45% of the people demand for 1200-1600 square feet flats and around 15% demand flats size more than 2000 square feet (Figure 4).


Figure 4: Variation in demand for different size of flats in different areas of Dhaka

While the demand for 801-1000 square feet in uttara is only 7% and 1001-1200 square feet is 33%. But in Mirpur area there is demand for less than 800 square feet flats and it about 9%. While the demand for 801-1000 square feet is also around 9%. The dominant share of demand in mirpur is 1001-1200 square feet. The demand for 1201-1600 square feet flats is also not very less in mirpur area, it is about 29%. There is a slight demand for above 1600 square feet flats in mirpur.



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In Mohammadpur the demand for 1001-1200 square feet flats is around 30% and rest of the 70% flats fall in 1201-1600 square feet category. Remarkable change in demand for flats can be observed in Dhanmondi and Bashudhara. In Dhanmondi around 46% of all the respondents demand for above 2000 square feet flats, around 30% demand for flats size between 1601-2000 square feet. Hence it is clear that in Dhanmondi larger flats have highest demand. In Bashudhara, 40% of all respondents demand for flats size greater than 2000 square feet, 20% demand for 1601-2000 and 20% demand for 1201-1600 sft and rest 20% demand for 1001-1200 square feet. In dhanmondi and bashudhara, there is no demand for less than 1000 square feet flats. But in Badda area the scenario is completely different, in this area 25% of the respondents searching flats, less than 800 square feet, next 25% searching for 801-1000 square feet and the rest 50% is searching for flats, 1001-1200 square feet; none of the respondents are searching flats above 1200 square feet. Hence smaller size flats have very high demand in Badda area. In Malibagh, Banasir and khilgaon flats of 1201-1600 square feet has the highest demand.

Apartment price analysis

There is always a gap between the buyers’ willingness to pay for flats and the asking price by the developers. Buyers are mostly looking for flats with least price and moderate to high quality. But developers are focused on profit maximization. Hence the willingness to pay to acquire a flat by buyers vary significantly from the asking rate of the developers, there is also variation in willingness to pay according to different area of Dhaka. On an average for all areas in Dhaka respondents are willing to pay approximately 5900 BDT. While for the next year it will be approximately 6000 BDT, but the standard deviation of this average is high, approximately BDT 4900 (Figure 5).


Figure 5: Average willingness to pay for flats and asking price by developers in different areas of Dhaka, from buyers’ point of view

In mirpur area; the willingness to pay for per square feet is on an average 4300 BDT, this could increased to 4700 BDT next year, these shows the average willingness to pay is around Tk. 4000 in this area. But the asking rate of the developers on an average is around Tk.6000. While in Dhanmondi area average willingness to pay is around 9500 BDT, it is higher than other areas. The willingness to pay in mohammadpur is similar to mirpur area. Considering all areas, it could be concluded that, the willingness to pay for different areas varies according to the buyers’ choice and ability to pay and the willingness to pay for next year (2014) on an average could be increased by Tk. 500 compare to this year (2013). But the developers’ asking price is out of the reach of the buyers by around Tk. 1500-2000. This data set only represents the buyers’ perspective and they are not confined to any specific category of developers, all types of developers are considered by the buyers while determining the asking rate.

Potential buyers and target group focus

Selecting location and flat size is mainly dependent on the targeted buyers. If the target group is higher income group, then larger size flats at prime location in the city is required, while if target group is upper middle income and mid-middle income than areas with

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better residential quality and better connectivity is require. High income groups are dependent on some specific developers; hence attracting them is always a challenge. The demand for flats is rising for the upper middle income and mid-middle income group. Hence focusing on these groups could be more potential (Table 6).

Table 6: Target income group

Income group Income range (Monthly in TK)

percentages Remarks

High income 80000-100000 and 100000+ 20% Potential group Upper middle income 60000-80000 23% Highly Potential Mid-middle income 40000-60000 38% Highly Potential Low-middle income/ low income

20000-40000 19% Low potential group

Source: Seraj, 2011(modified by author)

Potential location for apartment development

Considering the demand of the respondents in the REHAB fair and from some secondary studies, it is evident that flat demand is very high in Dhanmondi, Gulshan, Uttara, Mohammadpur, Mirpur and so on. All around Dhaka flats demand are increasing. So; all the major residential areas are potential for next projects. But considering the planned areas for residential development, the location of housing projects by government and private sectors and on the basis of the income group focus the following areas could be more suitable for next projects (Table 7).

Table 7: Potential location for upcoming projects within Dhaka Major Areas Sub-areas Income group Remarks

Uttara All sectors; Prime sectors: 3,4,7,10,11,13; Uttara 3rd phase (upcoming)

High income, upper middle income and mid-middle income

Highly potential, have high demand, Land is available

Dhanmondi All sub areas High income and Upper middle income

Highly potential, have high demand, Land is not adequately available

Mirpur Pallabi, Section 11,6, 10,13, 14, 2, 1; Rupnagar, Senpara, Sewrapara

Upper middle income, Mid-middle income and low middle income

Highly potential, have high demand, land is moderately available

Mohammadpur Bitul aman housing, PC culture housing, Munsurabad housing, Mohammdia housing, Ring road

High income, upper middle income and mid-middle income

Potential, high demand for flats, land is moderately available

Gulshan All areas High income Potential but only for high income people

Khilgaon and Rampura

Chowdhuri para, Banasri main road,

upper middle income and mid-middle income

Potential, demand is moderate

Badda DIT road, Mid-badda, near gulshan side

mid-middle income and low middle income

Potential but for low and mid-middle income people

Bashundhara Block B,C,D High income and Upper middle income

Highly potential

Malibagh and siddheswari

Siddheswari, Razarbag police line opposite, Bijoynagar, Shahajahan pur

upper middle income and mid-middle income

Potential due to close to Motijheel

Banani All areas High income and Upper middle income

Potential

Besides these areas shown in table 7, some other areas is also potential, such as; Dhaka cantonment, Mohakhali, Lalmatia, Indira road, R.K. mission road, Rayer bazaar, Azimpur.



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Actually due to larger demand and less supply flats are required in each area within Dhaka city.

Discussion Location choice for apartment in Dhaka is mainly subjugated by the affordability of buyers as well as by the investment decision of the individuals. But this incident is not identical for all the areas of Dhaka city. For less expensive areas (i.e. Mirpur, Mohammadpur) people are searching flats as they can afford it. But, at more planned areas (i.e. Uttara, Bashundhara, Dhanmondi) a lot of people attracted for their residential qualities. Ease of communication from these areas is also a determining fact, besides residing at that area for a long time and having relatives in that area is also influential (REHAB, 2012).

The factors for selecting flats in certain area, shows the dominance of “Tiebout hypothesis” in Dhaka. According to this theory the main factor influencing household location choice is quality and cost of municipal services (Friedman 1981; Reshovsky, 1979). Considering the quality “Residential living environment” comes mostly at the first position in the rank of weighted index result. Though it has some conflict with “Utility maximization theory”, which advocates that; people will seek to minimize commuting costs by selecting a housing location which provides greater accessibility to their workplace, alternatively they may accept increased commuting costs in exchange for less expensive housing further from employment (Alonso, 1964), for overall areas of Dhaka this theory works, as people made a tradeoff between “Better communication facility” and “Affordable and price within budget” while selection location for apartments.

Selecting the apartment size shows the supremacy of middle income and upper middle income group in real estate market of Dhaka and they should be the potential target group. Middle income and higher middle income group are more involved in buying flats as having own plots and constructing house is a hassle in Dhaka (REHAB, 2012; Seraj, 2012). Here, Flat sizes reveal that flats of various sizes for different class groups vary according to different locations as per the target group of real estate firms. High income groups demand larger flats and these are prevailing in Dhanmondi, Bashundhara; as high income group is focused in these areas. While for low and lower middle income group the flat size is smaller and focused in Mirpur, Badda. But the provision of smaller size flats is lower as housing developers are targeted at providing housing for high and a few for upper middle-income people. Housing projects are mainly concentrated in upper middle and high-income residential areas where land price is very high as well as the apartment price (Farzana, 2004). Hence there is considerable gap between the asking price and desired price while buying flats. In context of better real estate market, future projects for setting apartments should be in Uttara, Mirpur, Dhanmondi, Mohammadpur, Bashundhara and Badda. These areas combine all the demand side for apartments and provide a comprehensive progress in real estate.

Conclusion Real estate is a very dominant economic sector. This sector is doing great business in providing housing for a lot of people every year. The development of this sector is very potential and highly dependents on the buyers of flats. Their location preference create variation in demand for flats in different areas, price, residential environment and communication Besides the expanding competition of growing real estate firms make this sector more challenging. Hence proper selection of project location is a matter of supreme concern for each real estate firm both within and outside the Dhaka city. Considering the demand and preferences the buyers of real estate firms could make more progress and profit from this business. This potential sector could provide a better contribution to national economy and could create a lot of employment opportunities.

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BBS. (2008). Bangladesh Statistical Year Book

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CIA-The World Factbook, 2011. [Internet], Retrieved from http://www.cia.gov.library/publication/ The World Factbook

Farzana, F. “Shortages of middle-income owner-occupied housing in Dhaka- failures of government or market?” Plan Plus, Vol. 5, 2009, pp. 12-25.

Friedman, J 1981, 'A Conditional Logit Model of the Role of Local Public Services in Residential Choice', Urban Studies, vol. 18, pp. 347-58

Hasan, M. 1991. Land Development Policy for Low-income Housing in Dhaka Metropolitan Area, Unpublished MURP thesis, Bangladesh University of Engineering and Technology, Dhaka.

REHAB. (2012). A Comprehensive Study on the Real estate Sector of Bangladesh. Retrieved from http://www.rehabbd.org/Comprehensive_Study_On_The_Real_Estate_Sector_Of_Banglades.pdf

Richardson, HW 1977, 'A Generalisation of Residential Location Theory', Regional Science and Urban Economics, vol. 7, pp. 251-66.

Seraj, T. M., 2011. Real estate development in Dhaka. In: Roxena, H. & Rabbani, A.K.M.G., ed. 2011. 400 years of Capital Dhaka and beyond : Urbanization and Urban development, Vol-III. Dhaka: The Asiatic Society of Bangladesh.

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LOCATION AND SIZE PREFERENCE FOR APARTMENTS IN DHAKA AND PROSPECT OF REAL ESTATE MARKET