The secondary market: An apt solution for affordable housing

"The secondary market is actually booming for high demand even in upper-class areas such as Dhaka's Gulshan," said Tutul Kumar Saha, Senior General Manager and Head of Sales at Building for Future Ltd.

He explained that the secondary market offers the opportunity to buy affordable housing with minimal hassle. He also pointed out that newly constructed units sometimes lack gas connections upon handover.

As such, the secondary market is now worth thousands of crores with Building for Future itself selling at least two or three units per month.

"Another factor driving growth in this segment is that many people often sell their apartments to trade up for larger or more lavish units in better areas," Saha said. "But other than big businesses, individual resellers are also active in the secondary market," he further informed.

Regarding challenges in the segment, Saha mentioned that ensuring proper documentation is key when purchasing second-hand property.

Echoing the same, Shahriar Iftekhar, Senior Executive of Branding and Communications at Bay Development said, "Growth in the secondary market is being propelled by the demand for affordable housing in Dhaka."

This is especially true because of the implementation of the new Detailed Area Plan, which restricts the construction of high rises and thereby increases unit prices according to industry people.

Besides, new apartments are becoming costlier for the rise in raw material and other input costs amid ongoing inflationary pressure and the US dollar shortage.

So, the secondary market is a good option for middle and lower-income groups, they added.

However, another hurdle for the segment is beating the mindset that second-hand units are inherently inferior or lower class than fresh units.

This mindset stems from the fact that most people in the country place sentimental value on their properties and opt for making it a lifetime investment.

Still, though, the secondary market has great potential in the local context as it has become extremely difficult for people to afford new units given the rising prices, as per a market assessment by Building Technology and Ideas Ltd (bti).

The demand for housing in Dhaka has increased substantially due to the rapid urbanization of the capital city combined with exponential population growth.

Apartment prices jumped by 390 percent from 2000 to 2018 and although demand has seen a similar spike, barely 12,000 units are manufactured each year according to the market assessment.

"The secondary market has to promise plenty as it can help cater to the needs of a broader customer base. This is because unit prices in the primary market are usually too high for general people," said Aysha Siddika, Executive Director (brand) of bti.

"Also, the availability of bank financing for second-hand apartment purchases makes them even more attainable given the current economic climate," she added.

Besides, the secondary market has huge potential because at the end of the day, everyone wants to buy a home and this segment provides the scope to purchase a cheaper or smaller unit before eventually going on to sell it once again to fund larger property investments in the future.

Regarding potential challenges for second-hand apartment sales and purchases, Siddika added that such transactions are conducted under a tripartite agreement between the buyer, seller, and developer.

"So, people should be wary about whom they are purchasing the unit from while also ensuring accurate documentation," she further informed.