Along with the rapid development of the country, the real estate sector of Bangladesh is also expanding steadily. The sector is on the rise due to the growing demands for housing, expanding middle-class and increasing per capita income. But the country lacks real estate benchmarking, which is a standard of measurement for financial characteristics of property.
Real estate benchmarking has been designed to help investors better avoid reckless speculation. Generally, this refers to the comparison of potential real estate investment properties against a predetermined framework of measurement.
According to the regulations of Bangladesh Bank, an individual customer can secure a maximum housing loan of Tk 12 million. The process of getting a home loan has also become more convenient than in previous years. Concerned authorities are now offering housing loans even in the suburbs, districts and upazilas. Now the question is: how can people ensure the maximum utilisation of their home loans?
The performance of the real estate market is difficult to measure in Bangladesh as information is scarce and many transactions are kept confidential. It is important to be able to compare costs within and across markets, which is only possible in a real estate sector that has benchmarking. But people cannot do this in Bangladesh as the country has no specific method for real estate benchmarking. The situation results in the harassment of many people.
In the USA, both at the operational level and at the corporate strategy level, benchmarking of facilities is frequently related to the area of space occupied. The common benchmarks adopted relate the cost of service provision per unit of area occupied; it can also indicate some measure of staff or business productivity per unit of area. The USA also has a number of published methods of measuring property areas that are used to benchmark corporate real estate.
If people have knowledge about a property, including its price and facilities, it becomes easier for them to decide what they want to do with it. But in most cases, this doesn’t happen in Bangladesh. It’s natural that prices of assets will vary depending on location. But here, both commercial builders and individual owners demand prices without considering the value of their properties. They take different amounts of money, whatever they can get from different clients, even if the property types are similar and located in the same area. They also take rents from their tenants in a similar fashion. Rent may differ to some extent due to interior designs. But it has been reported that tenants in the same building, with the same facilities of similar apartments, sometimes pay different rents. This is happening due to the lack of real estate benchmarking.
Real estate benchmarking helps a real estate investor or owner to realise their ideal number for each indicator, which the investor can use to evaluate whether a property is worth investing in. It gives investors precise equations that allow them to judge property value based on how much it’s worth right then and what kind of profits it was able to generate in the past. The results of these calculations are known as benchmark indicators. In the same way, benchmarking will enable tenants to decide in which areas they could find their desired residences according to their affordability.
If there was a real estate benchmarking standard in Bangladesh, many problems could be avoided. By discussing the issue with representatives of private organisations, land owners and related government bodies, concerned authorities can finalise a method of real estate benchmarking in Bangladesh.
Benchmarking of real estate management is required for efficient management of assets to support the core business. Management activities of benchmarked facilities are required to have common measure upon which to base comparisons. Survey reports say that a significant proportion of these measures relates to a property’s location. They include better transportation and communication facilities, proximity to educational institutions and workplaces, and the residential environment of the locality. So these things should be considered while finalising a method of benchmarking in an area.
In this situation, players in the real estate sector online services can play an important role in establishing real estate benchmarking in Bangladesh. They can make people realise the advantages of real estate benchmarking and arrange a meeting among all concerned authorities, who can finalise the process and set a method of benchmarking for the sector.
If benchmarking is established here, it would be much easier to develop the real estate sector. It can be a way to establish annual performance goals of the country. Concerned authorities can use benchmarking to set the stage for strategic actions to meet these goals.
Mark Nosworthy is the CEO of Bproperty.com, a Bangladeshi real estate service.