The highs and lows of the construction sector: A Daily Star report
BANGLADESH'S construction sector, a key part of the economy, is gradually shaking off the impacts of the political chaos in recent years thanks to improvements in recent months. Despite that it is still dogged by major challenges.
The construction sub-sector grew at 8.63 percent in the fiscal year of 2014-15, compared to 8.08 percent in 2013-14, according to the provisional estimates of Bangladesh Bureau of Statistics.
The real estate, renting and business activities performed better as it marked a 4.66 percent growth in FY15 from 4.25 percent in FY14, according to the Metropolitan Chamber of Commerce and Industry Dhaka (MCCI).
At the same time as it has depicted higher growth, the sector also experienced problems in the second quarter of 2015 covering April to June. This is despite an apparent improvement in the political situation while riding out chaos centring the anniversary of the January 5 elections.
"Continued downward trend in sales severely affected the realtors, which also has had its incidental effects on the overall economy," said the MCCI, which is the country's oldest chamber.
In its review on the economy in July this year, the chamber said despite the tremendous potential of the construction sector, various factors like land value distortion, absence of secondary property market, asset securitisation and sale of mortgages, backward linkage industries such as cement, ceramic, brick manufacturing industries, etc. impeded its growth.
The construction industry of Bangladesh has grown considerably during the last two decades, accounting for about 10 percent of the gross domestic product of the country. In addition, this sector, which employs more than 3 million people, absorbs an important share of the Bangladesh' labour force, according to industry people.
The construction sector plays a strong role in the economy amid continued urbanisation. Rising urbanisation and building of infrastructures, including roads, bridges and flyovers are the main factors behind the growth of this sector.
The sector has generated 3.5 million employment opportunities directly and indirectly and also created several dozens of ancillary industries, namely in steel, cement, tiles and sanitary ware, cable and electric ware, paint, glass and aluminum, brick and other building materials.
The government's development projects have given a big boost to the construction sector, which resulted in higher production and consumption of steel and cement. The government has a number of ongoing flyover and other construction projects in Dhaka and Chittagong.
However, the construction sector faces a few challenges. It does not yet enjoy the status of an industry in the true sense of the term. Then there is the glaring absence of a proper urban planning. In the midst of such odds, inadequate funding support, shortage of skilled and qualified manpower, phenomenal hikes in prices of land and rising manpower and material costs have all compounded the problems of the sector.
The real estate sector paid a huge price during the political chaos in January.
According to the Real Estate and Housing Association of Bangladesh (REHAB), the sector counted a loss of Tk 36 crore each day of blockade in the first quarter of 2015. Besides, around Tk 11,000 crore worth of investment by builders remained virtually stuck up.
Sales of flats and plots by developers have declined by 60 percent and adoption of new projects dropped by 75 percent, said the association.
Most of the realtors are selling flats and plots at a very low profit margin to maintain their cash flows. Nearly 11,000 ready apartments remained unsold due to the political unrest.
The real estate sector now contributes around 7 percent to the GDP, and employs around one lakh skilled people, according to industry people. What this translates to a rapidly growing sector that could easily become one of most profitable revenue earners for Bangladesh.