Housing sector

Making housing an engine of growth

No one would disagree with declaring housing a “push” sector so that it eventually becomes an engine of growth. The suggestion, however, is not centered on traditional housing which caters primarily to the wealthy and middle class. It places particular emphasis on meeting the housing needs of low-income people.

Dozens of homes have sprung up in recent years. As a sector, housing, also known as real estate, contributes to gross domestic product (GDP). It has also contributed to the growth of several supporting industries, including cement, steel, paints, ceramics, and sanitary ware. The housing sector has grown, focusing mainly on the needs of the middle and upper classes who have easy access to formal finance. Growth was therefore distorted. It has consistently ignored the housing needs of millions of low-income people.

The state has limited involvement in the country’s housing sector. It spends funds primarily to meet the needs of government employees. Under the highly publicized ‘Asrayan’ project, many poor rural families have small houses. But, in urban areas, the government does not have enough land or resources to embark on large-scale housing projects in urban centers including Dhaka.

The middle class has been driving the growth of urban housing in recent years. Bank financing had been expensive even four or five years ago. Now it is more or less affordable for home buyers. But the problems lie in the price of land and the cost of building materials. The prices of the same rose continuously.

Low-income people dare not dream of owning a home in most urban centres. The constitution guarantees certain basic needs. Housing is one. Citizens, however, do not have access to everything the constitution guarantees. Yet, with good planning and seriousness, the government can make progress in this direction.

Land remains a scarce resource in Bangladesh. Scarcity is more in urban centers, especially in Dhaka. Any housing program for the poor and low-income people must therefore be suburban centered and vertical. The government, as suggested by some speakers at the last PRI-IFC dialogue, could replicate the successful housing program for poor and low-income people in other countries. The IFC can also extend its cooperation for this purpose.

According to IFC estimates, the housing sector in Bangladesh offers huge potential for growth. The current financing gap in the housing sector is estimated at $16 billion. There will be an investment opportunity worth $200 billion by 2030. Such a huge investment in the housing sector would spur unprecedented momentum on the economic front.

But neither the government nor the private sector alone can afford such a massive investment. The public-private participation (PPP) model could work well here. Under such an arrangement, the government could provide land and funds to the private sector for the construction of houses at an affordable cost. On top of everything, the government will have to create an enabling environment and select the right private partners.