Apartment price rides on scarce land

Rising population and land constraints in Dhaka city entail an upward slope in housing prices.

The reasoning is intuitive – more people and the same amount of land cause more scarcity, eventually leading to constant hikes in prices of both land and flats in the megacity.

But not all land and apartments in the capital have been witnessing a similar surge in their values.

There is a great demand for flats having all modern facilities and those closer to centres of economic activities, and their prices have skyrocketed over the years too.

For instance, prices of apartments in Baridhara, an upscale residential neighbourhood, have gone up by five times over the last 15 years – the most among other areas, according to real estate industry sources.

During the same time, Lalmatia, Gulshan and Banani have witnessed their apartment prices quadruple, while Mirpur flats have seen a rise of a little more than double.

Industry insiders have attributed a sharp rise in flat prices in city areas to better communication facilities, good urban planning, security and modern civic amenities, as well as pricey construction materials.

In some neighbourhoods, prices of flats have shot up simply because there is not enough land to build new buildings for the growing demand, they added.

Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh (REHAB), told The Business Standard, "Prices of land in Baridhara, Gulshan and Banani areas have increased 10-12 times in the last two decades, so have prices of flats."

The Business Standard has analysed the prices of flats in different city areas and compiled an approximate average price list based on information between 2005 and 2020 from REHAB and its members.

TBS analysis finds that in 2005, flats with good quality were available in Baridhara at Tk4,000 per square foot. A buyer now needs to spend more than Tk25,000 per square foot for a flat with improved living facilities. In some cases, the price can go up to Tk28,000 per square foot.

Similarly, over the last 15 years, the price of per square foot has increased to Tk18,000 from Tk4,500 in Gulshan, Tk15,000 from Tk3,500 in Banani, around Tk14,000 from Tk3,500 in Dhanmondi and Tk14,500 from Tk3,500 in Lalmatia.

Currently, Suvastu Properties has an ongoing housing project in Baridhara. The company has set an asking price of Tk25,000 per square foot for a 3,400 sq-ft flat.

Nazmul Haque Khan, managing director of Suvastu Properties, said, "Prices of flats and plots depend on the use of modern technology, aesthetics and civic amenities. Land prices and construction costs play a big role in their prices too."

However, prices of flats have not increased proportionally in different areas of the city.

The price gap between flats in Mohammadpur and Baridhara has now increased to Tk18,000-20,000 per square foot from only Tk1,300 in 15 years.

According to industry insiders, flat price differences have greatly increased among Mohammadpur, Uttara, Mirpur, Lalmatia, Gulshan, Banani, Dhanmondi, Bashundhara areas.

However, according to the online marketplace Bikroy.com, prices of flats in Mohammadpur and Mirpur have gone up more than in Gulshan, Banani and Dhanmondi areas in the last five years.

The online platform has provided information about an increase in the prices of flats in different areas based on asking prices from housing companies and buyers' demand.

According to Bikory.com, prices of flats in Mohammadpur have risen by 33% in the last five years, while the prices in Bashundhara and Dhanmondi saw a 29% hike and 30% in Uttara.

Eshita Sharmin, co-managing director of Bikroy.com, said prices of residential flats in Gulshan and Banani areas increased by only 10%.

REHAB President Alamgir Shamsul Alamin said prices of flats in different areas vary based on civic amenities and land prices.

"There has been an increase in other expenses, including city corporation and land registration too in Baridhara, Lalmatia, Dhanmondi, Gulshan and Banani areas," he added.

Difference in land prices even greater

The Bangladesh Bank has provided a comparative picture of land prices in different parts of Dhaka based on information provided by Sheltech, a leading real estate company in the country.

According to the central bank's Monetary Policy Review Report 2020, the price of land in Gulshan is now more than Tk5 crore per katha from Tk22 lakh in 2000. The price has witnessed a 23-time rise over the 20 years.

During the period, the price of per katha land has increased 18 times in Dhanmondi, 15 times in Banani and 12 times in Baridhara.

At present, 1 katha land in Baridhara sells at up to Tk6 crore – the price was Tk50 lakh in 2000.

Prices of land in several areas, including Uttara, Mirpur, Mohammadpur, Badda and Basabo areas are still much less than Tk1 crore per katha. The land price in Mirpur has increased around six times over the 20 years.

Urban planner Adil Muhammad Khan said, "Land prices and people's preference for particular areas are the main reasons for the difference in flat prices. And the demand for a neighbourhood depends on urban planning and civic amenities."