Rupayan

View with images and charts RUPAYAN REAL ESTATE 1.1 Introductory thoughts: The real estate sector is one of the fastest growing and thrusting sectors in Bangladesh.

Infrastructural development is highly important for a country to rise as a develop nation and to ensure housing facilities for the citizen of the country. But compared to that there have been a few studies which are far below the required number on the real estate sector and its accessibility to financing. Consequently, this sector requires an extensive study to find out the future potentiality, problems and solutions of the real estate sector and the availability of financing in this respect. This study may work as the basis of knowing the present scenario and for any future study.

1.2 Objectives of the Study: The broad objective of the study is to identify the pattern, problems and potentials of Real estate sector of Bangladesh. The specific objectives of the study are summarized below:  To assess the role and contribution of apartment business to meet the housing  Needs in the Metropolitan city areas.  To identify the demand pattern of apartment buildings in metropolitan areas  To identify the pricing situation of the sector in the light of soaring construction Materials price.  To identify the pricing situation of the sector in the light of soaring construction Materials price.  To identify the sources of funds of apartment business.  To identify the factors motivating the buyers to buy apartment.  To identify the sources of funds of the buyers for buying flats  To identify the factors motivating the buyers to buy apartment.  To identify the sources of funds of the buyers for buying flats  To identify the socio-economic characteristics of apartment buyers.

In short, the objective of the study is to find out the current condition, growth, market structure, financing condition and future prospects of the real estate sector in Bangladesh containing comparative scenario analysis with the global real estate market.

1.3 Scopes and Coverage of the Study: In our country real estate is a growing and profitable sector in business arena. There are many dimensions of study of this industry. But the main focus of the study is to identify the problem and prospects of this sector in Bangladesh from the view point of developers (Real Estate Companies), apartment buyers (Consumers or ultimate beneficiaries) and the financial institution providing housing loans. So, the study tries to explore the problem and prospects of apartment business. The apartment companies are mostly concentrated in Dhaka City and to some extent in Chittagong city. But Dhaka city is the main center of apartment development, so the study is confined to apartment projects within the Dhaka City and suburb of Dhaka City.

1.4 Methodologies: An explorative research has been conducted in preparing this paper. Pure basic research approach has been used. Theoretical and practical studies have also been incorporated.

Multiple methods were used to collect data for identifying the pattern of apartment projects of

Bangladesh and their problems: Review of relevant literature, survey, in-depth interviewing, informal interviews, and observation methods were some of them. Respondents of the study consist of apartment buyers and executives of the apartment companies, executives of the housing finance institutions.

Collection of Data: Data have been collected through face-to-face and telephone interview.

Questionnaire has been used in gathering primary information from real estate participants.

Information has been used from different secondary sources – Internet, Newspapers, annual reports, online and printed articles, journals and previous research papers on real estate sector and editorials & special housing supplement of news papers etc. Opinions have been collected from experts and participants in the real estate sector, which have been very useful in analyzing the data & information and to reach a conclusion.

The raw data also collected from Real Estate & Housing Association of Bangladesh (REHAB), Real Estate Yellow Pages (A Residential & Commercial Real Estate Directory), Annual Report of REHAB 2008, Ministry of Housing & Public Works, Rajdhani Unnoyon Kortipokkho (RAJUK), Imarot Nirmaan Bidhimala 2008, Daily Ittefaq (Weekly Report on Real Estate, Monday on every week), Weekly Bangladesh Shaptahik, Bangladesh Real Estate Law 2008

Number of flat hand over

Graphical Presentation: The data were presented in Bart Chart (Fig-1), Line graph Fig. 1.

This graph also described in statistically and possible cause and result.

Fig: 1 Yearly Number of flat hand over by the real estate company

2003

2004

2005

Year Growth of Real Estate Bussiness

2006

2007

2008

Observation & guideline preparation

Dhaka

Seni economic 20 20%

Luxarious 30 30%

Chittogong Sylhet Bogra Comilla Cox` Bajar Others Prime Location

Economic 35 35%

Luxary suprim 15 15%

Area Specialization of Real Estate sector Classification of Real Estate Product At the beginning, Sale of Real estate companies is low. Might be then, buyers were unaware of Real estate product 1 The flat sale of 2000-2007 show a positive skewness curve where the highest number (Mode) of flat sale Tk. 40-55 lac. The flat sale of apartment deviate Tk. 21.61 lack with the mean value of Tk. 53.61 lac 2 In establishment year 2000-2002, flat sold 28 % and In 2003-2004, it Was 72%.

3 Flat was sold in Dhaka (55%), Chittogong 25%, Sylhet 5%, others 15% flat was sold .

4 Banani Gulshan and Dhanmondi, Kulshi (Chittogong) are treated as most exclusive area.

5 The land Owners of Banani, Gulshan, Dhanmondi and Kulshi (Chittogong) zone are very much aware for developing their land 6 Buyers are feeling comfort to buy flats in Banani,Gulshan, Dhanmondi, & Kulshi (Chittogong) zones. Uttara is now becoming prime zone.

7 At the very beginning 15-25 lac prices flat were sold more but in the year 2004 number of flat sale of this range gone down.

8 40-55 lac prices flats became very much popular and buyers felt comfort to buy it. 5570 lac prices flats are next popular to buyers. ďƒ˜ Tools Used: In analyzing the data and information gathered, a few Microsoft Excel tools were used such as mathematical functions, trend analysis etc. Moreover when forecasting future scenario based on current situation, gathered data and information have been assumed to have linear relationship and thus linear forecasting of different facts has been incorporated. ďƒ˜ Interpretation & Substantiation: Numerical data have been analyzed and interpreted with concentration and relation to the main issue. Data and information collected from different sources were compared critically and found negligible mismatching. theoretical analysis along with numerical evidence has been used to substantiate the findings of the report.

Concept and development of real estate business 2.1 Concept of real estate business: History of Dhaka: Dhaka, formerly Dacca, is the capital and largest city of Bangladesh. It is located in the geographic center of the country in the great deltaic region of the Ganges and Brahmaputra rivers. Dhaka is served by the port of Narayanganj, located 16 km (10 mi) to the southeast. The city is within the monsoon climate

zone, with an annual average temperature of 25 deg C (77 deg F) and monthly means varying between 18 deg C (64 deg F) in January and 29 deg C (84 deg F) in August. Nearly 80% of the annual average rainfall of 1,854 mm (73 in) occurs between May and September.

Dhaka was founded during the 10th century. It served as the Mogul capital of Bengal from 1608 to 1704 and was a trading center for British, French, and Dutch interests before coming under British rule in 1765. In 1905 it was again named the capital of Bengal, and in 1956 it became the capital of East Pakistan. The city suffered heavy damage during the Bangladesh war of independence (1971). The Romanized spelling of the Bengali name was changed from Dacca to Dhaka in 1982.

Map of Dhaka City

It is a recognized fact that the health of the Real Estate Development Sector is the barometer of the National economy. In Bangladesh Real Estate Business started in Dhaka in late seventies. During 1970s there were fewer than 5 companies engaged in this business. In 1988 there were 42, such Developers working in Dhaka and now in 2008 there are about 500 companies engaged in this business.

2.2 Starting of real estate business In 1947, when India was partitioned, Dhaka became the seat of the provincial government of East Pakistan. The population increased from 0.28 million in 1951 to around 1.2 million in 1971. As the Capital of Bangladesh, which emerged as an independent country after the War of Liberation in 1971, Dhaka has now become one of the fastes growing cities in the world and its population is likely to exceed 10 million by this time. Although efforts have been

made in the past to plan the growth of the City from a district town to one of the largest cities in the world, most have been unsuccessful. As a result, the living conditions have deteriorated very rapidly and the social as well as physical infrastructure are on the verge of collapse.

Immediate actions are necessary to bring some discipline to the future growth of the city.

Then start apartment concept (multi unit home) & trend to purchase this type of asset.

2.3 Growth of real estate business Urbanization is an outcome of both population growth and rural-urban migration. As urbanization increases, more and more people are becoming city dwellers. Bangladesh is not any exception to that picture. The ever-increasing urban population is catering an increasing demand for shelter. The right of shelter is a fundamental right, which is ensured by both United Nation declaration and the constitution of Bangladesh. But it is every difficult on the part of the government of Bangladesh alone to ensure housing for all. Hare comes the need of private sector real estate development.

It is a recognized fact that the health of the real estate development sector is the barometer of the national economy. In Bangladesh real estate business started in Dhaka in late seventies.

During 1970s there were fewer than 5 companies engaged in this Business. In 1988 there were 42 such developers working in Dhaka and now in 2008 there are about 500 companies engaged in this sector. So we discuss on the topic comparatively performance of this sector against the demands.

2.4 Present condition of real estate business REHAB is the only trade organization of Real Estate Developers with a current membership of 365 Developers. All major institutionalized Developers are members of this organization.

REHAB is also the "A Class" member of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI). In the recent years REHAB has played a very significant role in nation building through Real Estate Development by its members.

Short Profile of Rupayan Housing Estate Limited: 3.1 Overview of Rupayan Housing Estate Limited: Rupayan Housing Estate Limited has come into being in 1999 with a pledge to fulfill the housing need of this populous city of Dhaka. The first Residential Project named “Rupayan Easel Dream� comprising 108 Apartments in four eight storied building was successfully completed and handed over to the honourable clients with their entire satisfaction. Since then, the company continued its advancement in development works and expanded the projects in all prime locations like Uttara, Gulshan, Banani, Niketon, Eskaton, Paltan, Shantinagar, Moghbazar, Dhanmondi, Laxmibazar, Wari, Mohakhali etc. Both Residential and Commercial Projects were undertaken and completed successfully and handed over accordingly and the company is in force with numbers of ongoing projects.

The company is operating its business in its own high rise Corporate Office at Rupayan Centre, Mohakhali C/A, Dhaka. The prestigious commercial building like Faruque Rupayan Tower at Banani, Rupayan Golden Age at Gulshan avenue and well decorated and magnificent residential building with panoramic views at Gulshan, Dhanmondi and other prime locations of the Dhaka City earned name and fame for the company.

Rupayan believes in the concept of extending housing facilities to the common people of the country keeping in view of their limited income. It is first ever in Bangladesh that Rupayan has undertaken a satellite township project for the low income group at Bhuighar, Narayangonj. Twenty-eight residential buildings along with a market are being completed over there.

There is a plan that tentative clients will be illegible to avail the apartment in this project after booking and availing Bank Loan facility and thereby the scope of making repayment of bank loan with the amount of House Rent is nearly possible. This opportunity will make the dream true of becoming the apartment owner in case of those category of clients. Rupayan has got housing project in nearby Savar region (Ashulia and Hemayetpur areas).

Rupayan Housing Estate Limited feels social responsibilities to serve the people with quality and commitment. With this end in view the company is working with a dynamic set of management personnel and skilled work force. We look forward to see a better future.

Rupayan Housing Estate Limited has come into being in 1999 with a pledge to fulfill the housing need of this populous city of Dhaka. The first Residential Project named “Rupayan Easel Dream� comprising 108 Apartments in four eight storied building was successfully completed and handed over to the honourable clients with their entire satisfaction. Since then, the company continued its advancement in development works and expanded the projects in all prime locations like Uttara, Gulshan, Banani, Niketon, Eskaton, Paltan, Shantinagar, Moghbazar, Dhanmondi, Laxmibazar, Wari, Mohakhali etc. Both Residential and Commercial Projects were undertaken and completed successfully and handed over accordingly and the company is in force with numbers of ongoing projects.

The company is operating its business in its own high rise Corporate Office at Rupayan Centre, Mohakhali C/A, Dhaka. The prestigious commercial building like Faruque Rupayan Tower at Banani, Rupayan Golden Age at Gulshan avenue and well decorated and magnificent residential building with panoramic views at Gulshan, Dhanmondi and other prime locations of the Dhaka City earned name and fame for the company.

Rupayan believes in the concept of extending housing facilities to the common people of the country keeping in view of their limited income. It is first ever in Bangladesh that Rupayan has undertaken a satellite township project for the low income group at Bhuighar, Narayangonj. Twenty-eight residential buildings along with a market are being completed over there.

There is a plan that tentative clients will be illegible to avail the apartment in this project after booking and availing Bank Loan facility and thereby the scope of making repayment of bank loan with the amount of House Rent is nearly possible. This opportunity will make the dream true of becoming the apartment owner in case of those category of clients. Rupayan has got housing project in nearby Savar region (Ashulia and Hemayetpur areas).

3.2 Ongoing Projects of Rupayan Housing Estate Limited: Rupayan Chowdhury Palace at Bashundhara Rupayan Oak Vale at Uttara Rupayan XANADU at Dhanmondi Rupayan LAKE SIDE at Dhanmondi Rupayan LAKE SPRING at Dhanmondi Rupayan ANGEL at Shantinagar Rupayan PRESTIGE at Niketon Rupayan ACACIA at Dhanmondi Rupayan NILUFAR at Bashundhara Rupayan CROWN IMPERIAL at Dhanmondi Rupayan CHANDRALEKHA at Bashundhara Rupayan APYLLION at Uttara

Rupayan APYLLION at Uttara 3.3 Outgoing Projects Rupayan Housing Estate Limited: Rupayan KARIM TOWER at Kakrail Rupayan SHELFORD at Shemoli Rupayan TAIYAB PLAZA at Narayangonj Rupayan POINT at Lalmatia Rupayan Trade Centre at Bangla Motor, Dhaka 3.4 Upcomming-Projects Rupayan Housing Estate Limited: Rupayan BHABAN at Gulshan Rupayan HUQUE CENTER at Badda 3.5 Rupayan's latest project in Narayanganj

Rupayan Housing Estate, one of the leading realtors in Bangladesh, has come forward with such a housing project that will fulfil the dreams of the middle and lower-middle class people.

Rupayan's latest project in Narayanganj, adjacent to Dhaka, is a catalyst to setting up an extended capital city downtown, after Uttara, which is now considered a part of the capital.

"Home! Sweet Home!" Not only a famous song, but it also describes the hopes and dreams of many who aspire to own a home.

Such aspirations are more reflected in the hearts of people who reside in rental homes, wishing to own a permanent address. But it is difficult for a member of the middle of lowermiddle income group to purchase an abode, owing to high property prices and prolonged payback periods.

Uttara is the outcome of an initiative taken by the then government in 1974. The then government also planned that some five downtowns or suburbs will be set up surrounding Dhaka. However, such plans were not re-initiated by the successive governments.

"There is not even a hint of such a development in the present Dhaka Metropolitan Development Plan or Detailed Area Plan," says Sadat Hossain Salim, managing director of Rupayan Housing Estate.

"Dhaka is no longer a liveable city. It is one of the most densely populated cities in the world, with around two crore people inhabitants at present," he says. "People are restricted to this one city for work, residence, shopping needs and entertainment."

"The civic facilities required for a human being to live in a society are limited in Dhaka," he says.

If the city is not decentralised or several downtowns established in and around 50 kilometres of Dhaka, the view of the city will be unimaginable in the days to come, Salim says.

"We have set up the satellite town with these concepts in mind, where all housing and social facilities such as shopping malls, schools, mosques, hospitals, playgrounds and community centres are available," he says. "My goal is to take Dhaka outside Dhaka."

However, he says, the government will have to facilitate the private sector to invest outside Dhaka.

The project, 'Rupayan Town' at Bhuigar, off the Dhaka-Narayanganj link road, stretches over 19 bighas of land.Rupayan is now offering ready flats in different sizes ranging from a minimum of 660 square feet to a maximum of 1,120 square feet at Tk 2,990 a square feet. customer can avail the key to a flat with an initial down payment of just Tk 4.14 lakh. "We have designed the project for the middle and lower-middle class people, who mostly live in rented flats. They spend a substantial amount on monthly rent," Salim says."Following the down payment, buyers can pay the rest of the money through instalments. They can make the payments with the amount they previously spent on rent," he says."Besides, we have arrangements with some financiers that will provide loan to our customers," he says. Delta Brac Housing, IDLC Finance, National Housing, Phoenix Finance, Bay Leasing, Southeast Bank and Pubali Bank are proving housing loans to prospective customers.

Although the real estate and housing sector witnessed a 35 percent drop in sales in the first three months of 2009 as a consequence of the global financial crunch, Rupayan is optimistic about its new township project.

It held a single company fair in the first week of this month to showcase the ready flats under the Tk 300 crore Rupayan Town, which comprises 28 eight-storied buildings with 784 flats in the first phase.

The Rupayan Town includes facilities like a full-time generator for electricity backup, and its own water supply and sewerage system.

Around 200 flats have been sold so far and many prospective customers are contemplating purchase.Although most buyers are based in Narayanganj, Rupayan is optimistic about selling flats to Dhaka-based customers. A good number of people from Motijheel and its adjacent Basabo and Mugda areas have booked some flats.

Rupayan Housing Estate Ltd, one of the leading realtors in the country, has completed its satellite town project in Dhaka's suburb to offer 784 ready flats mainly targeting the middleincome group.

The Tk 200-crore mega project titled 'Rupayan Town' at Bhuigar off Dhaka-Narayanganj link road is evidence of housing sector's trend towards spreading to the suburbs.

The company offers flats of four different sizes ranging from a minimum of 660 square feet to a highest of 1,120 sft with a Tk 4,14,000 booking fee, and fixes Tk 2,990 for each sft.

"Obviously it's a risky venture -- developing a housing project outside Dhaka. But we hope people who are spending a huge amount on monthly house rents will be interested in our project," said Sadat Hossain Salim, managing director of Rupayan Housing Estate, yesterday at a press meet in the capital. He said Rupayan will also arrange loan facilities for the customers through some financial institutions. The company will organise a three-day fair today at Sonargaon Hotel to promote sales of the flats. Southeast Bank, Shahjalal Bank, Prime Bank, Jamuna Bank, Mercantile Bank and Phoenix Leasing were the top financiers of the project under which Rupayan constructed 784 flats in 28 separate buildings in a 19-bigha land. "Given the rising demand for housing, it's not a big venture," Salim said, adding that it may encourage others to invest outside Dhaka. Rupayan has already built more than 1,000 flats in different parts of Dhaka city and constructed some commercial buildings in the city.

Apartment Business in Bangladesh: A Supply Side Analysis by: Rupayan Housing Estate LTD 4.1 Introductory thoughts Real estate is used for a number of purpose viz. to provide shelter, comfort, convenience, and privacy, a place of work, recreational facilities and related services. In an estimate real estate represent more

than 40% of the national wealth. Therefore, the manner in which the resources of this magnitude are used has an important effect on the well being of our people, the success or failure of business firms and the general prosperity of the country.

The term real estate or apartment as commodity used has two meanings 1) It is a name given to the commodity “realty” which include not only land but also all human improvements placed on the land, 2) It is the name given to the business engaged in by those persons who conducts commercial transactions in real estate.

The basic component of reality as a commodity is land. It means not only the surface of the earth but also the property rights and interests that attach to ownership of reality, including subsurface minerals. Thus the real estate means acquirement of land and building which is called inherent right. The men who are the owner, user, maker, financier or marketer of the property have some rights to the property 4.2 History and Development of Apartment Companies in Bangladesh In Bangladesh apartment business is a recent phenomenon, although such activities were initiated sometime in 1964. Ispahani group was the pioneer in this sector. But in early 1980s with the inception of Eastern Housing Ltd., the business started flourishing. Now this is a booming sector of the economy. From late 1980s it came under the purview of business field.

As a fast growing city of Bangladesh, such business was initially concentrated in Dhaka; some activities on a limited scale started later on in Chittagong and Khulna. At present there are about 500 firms in real estate business in Dhaka City.

4.3 Emergence of Private Sector Participation in Urban Housing The principal advantage that has accrued to the government due to the participation of private sector in urban housing is the apparent release of pressure, on its finance and administration.

People’s expectation about government’s role in meeting the urban housing needs has gradually diminished. This has happened because of two reasons. Firstly, the failure of the government to meet the increasing demand due to resources constraints and gross inefficiency, and secondly, because of the increasing role of the private formal sector in delivering housing, particularly to the middle income groups. People have become more aware that government intervention in the housing sector has favored the richer class more than the target group and increased inequality and social tension.

On the other hand, privileged class of people, who previously had only one option of getting better housing, namely through government programs, now have an alternative option of getting more or less equal standard of housing in the formal commercial sector. Government does not face the pressure for housing from this group as strongly as it did in the past.

4.4 Apartment development process by the commercial developers The process of the apartment development: 1 Initial search for land, prior to purchase or co-sharing with the landowner.

2 Acquisition, possession and registration of land.

3 Signing agreement with the landowner in case of co-sharing arrangement.

4 Obtaining relevant planning and building permissions.

5 Initial planning and designing of the apartment.

6 Overall financial management and programming.

7 Obtaining a loan, if necessary, for part of expenditure.

8 Ordering and purchasing of building materials.

9 Filling of land above normal flood levels

10 Provision and connection of basic infrastructure service 11 Actual construction of dwelling with or without assistance.

12 Transfer of title to buyers of flats/ Apartment As each stage in the process the potential builders has to rely on his or his family’s knowledge and understanding of what needs to be done. There is no opportunity to obtain permissions that are required or how to navigate through the various bureaucracies. At each stage difficulties are placed in the way of the developer. All but the really determined and those with suitable funds survive the course 4.5 Factors Affecting Apartment Development Throughout the study, some crucial factors have been identified which affect the apartment development in Bangladesh. These have been classified into nine heads and are discussed below: 1) Socio -economic characteristics of people; 2)Macro-economic factors; 2) Legal frameworks; 3) Competing housing institutions; 4) Fiscal policies; 5) Cost-benefit factors; 6) Financing opportunities; 7) Infrastructural facilities; and (8)Social facilities Figure: Factors leading to the successful growth of Apartment Companies Infrastructure Housing Land Electricity Gas Water Social facilities

Socio Economic Factors Population Growth Mobility of people Level of Income Migration towards Cities

Fiscal Policy a. Tax b. Vat c. Registration cost of land transfer

Apartme nt

Compani es

Macro Economic Factors Economic Growth rate Rate of Inflation Rate of Savings Foreign Investment

Legal Framework Companies Act- 1994 Partnership Act- 1932 State Acquisition & Tenancy Act – 1950 Transfer of Property Act – 1882 RAJUK Building Code – 1996 Premises Rent Control Act 1991

Competing housing Institutions a. Town Development b.

Authority c. RAJUK d. RDA,CDA, KDA HSD. Housing coFinance operatives NCBs BHBFC Private & Foreign Banks Private Housing Finance Co. –DBH, NHFI e) Informal Loan

Cost Benefit Factors Cost of Land Opportunity cost of Investment Cost of Building Inputs Profitability of the Co. Rental Income for the buyer

Socio-Economic Characteristics of People: The demand for housing is one of the major factors that led to the development of apartment projects. Socio-economic characteristics of people influence the demand for permanent houses. There are four major socio-economic characteristics of population that influence the demand for houses, mobility of people, population growth, income level of people, and the degree of migration towards cities.

Population growth is the major factor that necessitates increased number of residential houses. Bangladesh experienced high growth of population over the decades, which led to high demand for residential houses. Though the rate of population growth has slowed down, but the backlog in the creation of residential houses is still significant.

The growth of population in urban areas is affected not only by birth rate but also by the rate of migration from the rural and suburban areas and other towns. Migration towards major cities is increasing because they are the hub of business activities and offer employment opportunities. The rate of migration is acute in Dhaka City, as it is the capital city of Bangladesh. Most of the migrated people in major cities (especially in metropolitan cities) do not like to move to other places (especially to rural areas). Comparing the facilities in major cities, they try to settle there permanently, because culturally people in this country are less mobile.

4.6 Present position of Real Estate sector at a glance Here we provide some facts about the present real-estate situation in Bangladesh to grasp the sector’s situation in a short time.

Real Estate sector: Some facts Particulars No of Apt. units Delivered by the Developer in last 20 year: No of Apt. units Delivered by the Developer per year (2004): No of Plot units Delivered by the Developer per year: Approx. turnover per year: Contribution revenue to Government

Units/ Amounts 56,000 (App.) 5500-6500 units 4500-5500 units.

1,250 Crore Taka (Tk. 12.50 billion) 100 Crore Taka (Tk. 1.00 billion)

Source: Rehab Website- www.rehabhousing.com Direct Employment: Employment Type a. Architects: b. Graduate Engineer: c. Diploma Engineer: d. Management Official: e. Direct Labor Skilled & unskilled: f. Contribution to GDP: Source: Rehab Website- www.rehabhousing.com Contribution to GDP:

Number 2000 4000 10000 20000 1.5 million (15 Lacs ) 12 -14 %

Year

FY 05

FY 06

FY 07

FY 08

Real Estate’s Contribution to GDP Real Estate’s GDP Growth

8.6 3.4

8.5 3.5

8.3 3.6

8.1 3.6

Source: Bangladesh Bank Annual Report, 2008

8 7

% Contribution

9

Contribution to GDP

6 5 4 3 2 1 0 FY 05

FY 06

FY 07

FY 08

Year Real Estate’s Contribution to GDP

Real Estate’s GDP Growth

4.7 Supply analysis Certainly the supply of apartments in the residential sector is increasing everyday with high pace. REHAB at the time of its inception had only 11 members who were developers & builders. In 1992 the number grew to 42. In 2008 it was 200 and now about 250. High demand growth has attracted more people to come to the supply market. Therefore supply also increased at a good rate though it is far below the demand level. In the last 20 years apartments supplied

by REHAB members shows a steady growth in supply in the graph.

Apartment Units Delevered by REHAB members in last 20 years 6000 5074

No. of Units

5000 4000

3298

3000

2298 2320 2430

2140 2000 1275 1000

325

420

662

1540

1530

3620

3930

4172

4465

2684 2840

1850

840

0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

Graph 6 : Expected Trend of Apartment delivery by REHAB 9000 8000 7000 6000 5000

its n .fU o N

4000

6241

6000 3930

4172

4465

6745

7249

7753

8258

5074

3000 2000 1000 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Year

Currently REHAB members are supplying 5000-6000 units of apartments and 4000-5000 units of plots on an average per year against huge demand of housing. In the last 20 years REHAB members have supplied 56000 apartments approximately which is much less than the demand in the market. The large unsatisfied demand is partially satisfied by real estate developers who are not the members of REHAB. As REHAB could supply only 6000 against demand of 5000- 60000 which is approximately 10% of the demand. Thus 90% the biggest portion of the demand is supplied by independent developers and the consumers by themselves. That’s why it is expected that there is a vast opportunity to sell apartments & plots in market. This will make out more profit for the developers and builders. A trend analysis of future expected supply of apartment units in Dhaka has been shown in above graph. It presents an attractively growing scenario for the market players. REHAB is expecting to supply 20000 to 25000 additional units of apartment from the next year if all environments are favorable.

Housing facilities by RAJUK: Rajdhani Unnayan Kartripakkha (RAJUK) is the statutory body for the planning and development of various projects in the Dhaka city. Some completed, ongoing and future projects taken for housing rehabilitation have been stated in the following: • Completed Housing Projects of RAJUK:  Gulshan Residential Model Town  Banani Residential Model Town  Baridhara Residential Model Town  Uttara Residential Model Town (1st and 2nd phase)  Nikunja Residential Area (South) • Ongoing Housing Projects of RAJUK:  Uttara Residential Model Town (3rd phase)  Purbachal New Town at Yousufgonj and Rupgonj  Jhilmil Residential Project  Nam Village/Villa Apartments at Banani and Gulshan

•

Future Projects of RAJUK:  Rimjhim Housing Projects at DND Areas  Dhamsona Residential Area at Savar  Integrated Township Project in the Eastern Fringe (East Baridhara)  Housing for Shelterless at Khas Land  Ashulia Recreational Centre  Golf Course Development Project at Purbachal New Town  Islamic Centre at Tongi Biswa Ijtema  Permanent Display Hall at different suitable location  Planning and Research Institute Project for urban development  Construction of Health Complex at different places  Construction of Grave Yard and Cemetery for various communities  Multistoried building at Tikatuli, Moghbazar, Mohakhali etc.  Multistoried Apartments at Jhilmil, Uttara RMT, Purbachal etc.

Though DCC and RAJUK have their own projects for the development of the city dwellers’ housing problem it was not far enough for fulfilling the demand supply gap. So the private sector has to come up with the housing scheme.

Private Housing Schemes: As we have noted earlier that Real Estate Housing Association of Bangladesh or REHAB is the association of all real estate companies operating in Dhaka which have more than two hundred members. Though REHAB has no regulatory power to see the side of the consumer it tries to provide proper housing through various scheme or project taken by individual company. Most of the companies build up their projects whole over the city.

Advanced Development Technologies Ltd. Amin Mohammad Found.ltd.

ANZ Properties Ltd. Assurance Development Ltd. Bashati Consortium Ltd. Borak Real Estate (Pvt.) Ltd. Building Technologies & Ideas ltd

199 3

1

14

15

29

67

10

1

15 6

2

5

20 30

10

3

10

199 1

4

1

31

198 4

26

11

21

1

of

Completed

Coming

Ongoing

Ready

Completed

5

Coming

4

Ongoing

Completed

7

Ready

Coming

198 8

Ongoing

ABC Real Estate

Total No. Commercial Space

Total Apartment / Total Plot Flat Ready

Name of developers

Year of Establishment

4.8 A Short List of Prominent Developers working in Real Estate Sector are:

Concord Real Estate Ltd DOM-INNO Builders

199 9 200 2

East West Property Development (Pvt.) Ltd. 198 9 Hamid Real Estate 199 Construction Ltd. 0 Ideal Home Builders 199 Ltd. 8 Japan Garden City Keari Limited Mega Builders N. M. Housing Ltd. Nagar Homes Navana Real Estate Rangs Properties 198 Sheltech Private Ltd 8 Sky View Foundation 199 Ltd 8 Shinepukur Holdings Ltd. Suvastu Development 199 Ltd 8 Rupayan Real Estate 199 Ltd. 3 Russell Lodge Holding Ltd. Sagufta City Developers 199 Ltd. 4 The Structural Engineers 198 Ltd. 3 199 Tropical Homes Ltd. 6 Ena properties ltd.

4 4 3 3 4

50

5

11 0

20

10

30

11

5

5

8

5

10

4

2

8

3

3

6

1 2 20 2 7 67 10

3 1 1 1 1 1

4 2 1 2 28 15 1

11

2

1

2

6

8

4

3

3

13

9

27 3

6

1

1

4

13 8

6

2

1

3

1

1 1

1

1

10

1

1

3 2

6 4

2

1

1 3

6

2

3

9

Source: Field Survey 4.9 Marketing Mix: Product The main products in the real estate sector in Bangladesh include 3 types – Commercial Units, Residential Units and a mix of the two.

Commercial units are shopping malls, shops, and office buildings etc, which are used for commercial purpose.

Residential units include two segments – plots units and apartment units. Plots are segment of a land area with certain boundary where the land is developed by the real estate developers and builders. Apartments are buildings with flats of different sizes to live.

Mixed units include buildings which are used both for living and commercial purpose.

Generally the downside floors of a project are rented for commercial purpose leaving the upside to sell as apartment. In the recent period the real estate developers have introduced new diversified products.

Model towns, which are built with the structure of a small town including all facilities for people, like offices, shopping mall houses, schools, swimming pools, gymnasium, banks, power plant etc. represent the diversified products. Projects that include some important swimming pool, gymnasium, shopping malls etc. in one building are also diversified products supplied by the real estate agents in Bangladesh. All these products wrapped with diversification have great demand in the market price There is no common strategy for pricing in the market. Pricing strategy depends upon the cost of land developments, market condition, location etc. Developers and builders charge price based on their individual choice. But there has been a standard of pricing practice in the market depending on the size & location of the residential or commercial projects.

The price is rising rapidly in response to the shortage of land and increase in building material price.

A picture of the prices of apartments in different locations of Dhaka city is shown below:

Area Price ( Tk. Per squire feet) Eskaton 4000-4500 Baily Road 4500-5000 Shiddeshory 4500-5000 Paltan 4000-4500 Shegunbagicha 4000-4500 Moghbazar (Front) 4000-4500 Moghbazar (Back) 3500-4000 Shymoli 4000-4500 Mohammadpur (Front) 4500-5000 Mohammadpur (Back) 3500-4000 Lalmatia 4000-4500 Kalabagan 3500-4000 Green Road 3500-4000 Jhigatola 3500-4000 Azimpur 3500-4000 Mirpur 4000-4500 wary 4000-4500 Monipuripara 3500-4000 Khilgoan 4000-5000 Razarbag 3500-4000 Gendaria 3500-4000 Uttara (Old) 5500-6000 Uttara (New) 5500-6000 Gulshan 12000-13000 Gulshan (Lake side) 14000-16000 Banani 8500-9500 Baridhara 14000-15000 Dhanmondi 9500-10500 Dhanmondi (Lake side) 10000-12000 Price may vary depending on the company and its location

Source: The Daily Jaijaidin, August 27, 2008 The developers have expressed the pinion that the price of apartments will go up by 20-40% due to the fact that the building materials have now become dearer. Tk.500 would be added to the present rate (per square foot) of the flats in up to six-storey buildings and over Tk.500 to the rate of the ones in the high-rise buildings.

Flat prices will go up by 40 percent in posh areas like Dhanmondi, Gulshan, and Banani.

Apartment prices in other areas will soar by 20 percent.( Source: The Daily Star June 04, 2008)

Place (Location) Residential projects are in almost every part of Dhaka city. Dhanmondi appears to be the most preffered locality for residential projects. Other important localities where residential projects have been undertaken are Banani, Uttara, Baridhara, Gulshan, DOHS, Mohakhali, Mirpur, Shamoly, Kallyanpur, Mohammadpur, Lalmatia, Kalabagan, Shantinagar, Seginbagicha, Malibagh, Maghbazar, Siddheswari, Purana Paltan, Fakirapool, Paribagh, New Eskaton and New Baily road. Also now projects are undertaken in Chittagong, sylhet , Comilla, Bogra districts.

Market intensity & Profitability Still the real estate sector is one of the most attractive sectors for the investor for its high profitability. Gross margin in this sector was as high as 30% - 40% in 1999 1. In REHAB Fair 2005 the member organizations state that they are now are earning on an average at 10-15% as the market has become highly competitive. But with the increase of number of players in the market this profitability has gone down. REHAB registered only 11 members at the time of its inception where now it has around 250 members. Beside there are 60-70 independent developers who are not members of REHAB – according to REHAB. In the last 5 years the number of market players has increased rapidly Now Dhanmondi appears to be the most profitable area. According to REHAB real estate sector still has good profitability and it is expected to exist until 2010 1. Real Estate Sector Research 1999, Aims Bangladesh Ltd., http://www.aimsbangladesh.com/sector/real_estate.pdf Distribution Channel Real estate developers in Bangladesh use the direct distribution channel. They sell apartments to the buyers directly without using any intermediary.

Major Players: Major market players in the Bangladesh real estate market are Concord Real Estate & Building Products Ltd, Eastern Housing Limited, Advanced Development Technologies Ltd Assurance Development Ltd. BTI and Sheltech. DOM-INNO BuildersConcord Real Estate & Building Products Ltd occupies 30% Eastern Housing occupies 50% as the two major market shareholders. The other companies share the rest 30%. Concord Real Estate & Building Products Ltd has been earning on an average of Tk. 62 million approximately with net turnover of around Tk. 450 million. Eastern Housing Limited is earning in an average Tk. 41 million with turnover of around Tk. 337 million.

Market for Raw Materials Building Materials:The basic building materials required are mentioned below:Cement, Rod, Paint, Aluminum, Sanitary Goods, White Cement, Tiles, Mosaic ,brick, sand etcPrice of steel, rod, cement is in increasing condition though demand is increasing. With the rapid urbanization and increase in real estate business, price and demand for rod, cement and steel – these basic of building construction materials are increasing.. The price of cement has increased by 32% this year. REHAB estimates amplification of this price trend in the long run. Again from 2003 till now the price of rod has been increased by a devastating 100% approximately. For import lack the price for electrical wire has gone up by 100% recently.

Price of bricks was sold at Tk.3100 in 2005, the market price of which now increased to Tk. 5000. Sand price increased to Tk.12 from Tk.7.5 per square foot. Price increase scenario has been shown below:

Price Increase of Cement and MS Rod Time Cement (Tk/Per Bag) January ’03 - June ‘03 191 July ’03 - December ‘03 222 January ’04 - June ‘04 222 July ’04 - December ‘04 222 January ’05 – March ‘05 270 March '05 - june '07 350 June ’07-June ‘08 365

MS Rod (Tk/Per ton 22000 29000 36500 26500 41000 47500 50,000

Source: The Daily Star, 04 June, 2008 price increm ent of Cem ent

price increment of MS Rod

Cement (Tk/Per Bag)

MS Rod (Tk/Per ton

March '05 - june '07

January ’05 – March ‘05

26500

22000

July ’04 - December ‘04

March '05 - june '07

January ’05 – March ‘05

Cost Structure

222

July ’04 - December ‘04

July ’03 - December ‘03

January ’03 - June ‘03

191

222

January ’04 - June ‘04

222

41000

36500 29000

January ’04 - June ‘04

270

47500

July ’03 - December ‘03

350

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 January ’03 - June ‘03

400 350 300 250 200 150 100 50 0

It is estimated that transfer taxes add 30% to the cost of property acquisition and though tax rates are lower compared to other South Asian counterparts, there are no tax exemptions on housing loans. Real estate prices in Dhaka continue to remain high and the house price to income ratio is estimated at over 16 times. The mortgage market currently targets the middle and upper income segments.

In addition to the price of the apartments customers need to pay some charges & fees. These costs are added to the total value of the apartments and thus payable combined with the installments by the customers.

The additional charges and fees are: Cost Item Amount (in taka) Parking 200,000 – 250,000 Utility Connection 40,000 – 50,000 Society Registration 5000 Govt. Registration Varies with the individual apartment Additional Based on any particular service provided Source: Direct interview with real estate developers

Apartment Business In Bangladesh: A Demand Side Analysis of Rupayan Housing E 5.1 Age of the Apartment Buyer: The apartment buyers were in the age range of 27 to 78 years. The mean age of the apartment buyers was 46.93 years. Of them, mean ages of male and female buyers were 47.70 and 44.63 years respectively. The majority of the respondents (both male and female) were in the age group of 35-44 and 45-54 years. A considerable number of them were from in the high age group of 55-64 years.

Age of the Apartment Buyer (In Years) by Sex of the Apartment Buyer: % Count Sex of the Apartment Buyer. Total Age of the Apartment Buyer (in Male Female Year) Below 34 Count 3 2 5 % of Total 5% 3.33% 8.33% 35 - 44 Count 13 5 18 % of Total 21.67% 8.33% 30.0% 45 - 54 Count 18 5 23 % of Total 30% 8.33% 38.33% 55 - 64 Count 10 3 13 % of Total 16.67% 5.0% 21.67% 65 & above Count 1 -1 % of Total 1.67% -1.67% Total Count 45 15 60 % of Total 75.0% 25.0% 100.0% Combined Mean age =46.93 years, Male=47.7 & Female = 44.63 Years Combined Mean age =46.93 years, Male=47.7 & Female = 44.63 Years Source: Field survey 5.2 Family Size of the Apartment Buyer: The average number of the family members living in each apartment was 4.39. The modal family size was 4. The standard deviation of the family size was 1.3. The range, however, was from 2 to 9. But around 70% of them had 4 and 5 members in their families. Here it can be concluded that small size families were living in the apartment. Our national family size is 5.51 but here the size is about 4.39. The apartment dwellers were highly educated, so they kept their family size to a minimum level.

Family Size of the Apartment Buyer: No of Family member Frequency Percent 2 4 6.67 3 7 11.67 4 27 45 5 15 25 6 3 5 1

7 2 8 1 9 1 Total 60 Mean Size 4.39 & std. deviation of family size is 1.3 Source: Field Survey.

3.33 1.67 1.67 100.0

5.3 Educational Qualification of the apartment buyers: The study reveals that most of the sample apartment buyers were either graduates or holders of post graduate degrees. The percentage of the total samples of the respondents who held graduation and post graduation degrees were 30.8% and 46.7% respectively. However, males (35.0%) and females (11.7%) had post graduation degrees. But only a few respondents (5.8%) were undergraduates. Therefore, it can be concluded that higher educated people were the major buyers of the apartment. The preponderance of the higher educated people in apartment living culture in Bangladesh was due to quick acceptance of the new ideas prevailing in by the developed and developing countries.

Educational Qualification of the Buyer

% Count

Sex of the Apartment Buyer.

Under Graduate

Count % of Total Count % of Total Count % of Total Count % of Total Count % of Total Count % of Total

Male 1 1.7% 13 24.5% 21 35.0% 5 8.33% 5 8.33% 45 75.0%

Graduate Post Graduate MBBS Engineering Total

Female 3 4.5% 5 8.3% 7 11.7% 15 25.0%

Total 4 5.8% 18 30.8% 28 46.7% 5 9.2% 5 9.2% 60 100.0 %

Educational Qualification of the Buyer by Sex of the Apartment Buyer: Source: Field Survey.

5.4 Occupation of the Apartment Buyer: Service is the major occupation of the vast majority of the apartment buyers. Around 40% of the total apartment buyers were in this group. The second highest profession of the apartment buyers was business. These two groups of people covered the major portion of buyers that is around 70% of the total samples. The service holders and businessmen prefer to reside permanently in the urban areas because of availability of better facilities of education, income, health, recreation and other civic facilities. A few of the apartment buyers (8.33%) were bankers. They are enjoyed benefits from their employers in the form of low cost loan with large amortization period. The cost of fund in case of bankers was equal to bank rate which is around 6%-7%. For this reason some low-income group fortunate bank employees could easily enter into the apartment markets as buyers. Ten percent of the sample buyers

were housewives. Truly, most of them had no income but their spouses purchased apartment in their wives’ name. In our society doctors and teachers also bought apartments, because they had good amount of regular income.Their percentage was around 9%. A few retired persons (6.67%) also bought apartments with money received from gratuity and provident funds.

Occupation of the Apartment Buyer by Sex of the Apartment Buyer: Occupation of the % Count Sex of the Apartment Buyer.

Apartment Buyer Male Female Service Count 19 4 % of Total 31.66% 6.7%

Total

23 38.33%

Business

Count % of Total

15 25.2%

2 3.33%

17 28.3%

House Wife

Count

--

6

6

10.0%

10.0%

% of Total Retired Person

Count

3

1

4

% of Total

5.0%

1.67%

6.67%

Teaching

Count % of Total

1 1.67%

1 1.67%

2 3.3%

Doctor

Count

3

3

% of Total

5%

5%

Count

4

1

5

% of Total

6.7%

1.67%

8.33%

Count % of Total

45 75.0%

15 25.0%

60 100.0%

Banker

Total Source: Field Survey

5.5 Income of the Apartment Buyer: It has been observed that range of the monthly family income of the apartment buyers was Tk.8000 – Tk.250000, average income being Tk.40, 000. The highest percentages (25%) lie in the class interval of Tk.30000- Tk.40, 000. Twenty percent of the buyers belonged to the income group below Tk.20, 000. It appears from the study that by and large the apartment buyers were in the higher income group of the society. People with Income of less than Tk.8,000 per month could not afford the burden of the large amount of installment for buying apartment. People having income exceeding Tk.60,000 was not much interested to buy apartment because they liked different form of accommodation. So they were not interested in buying apartments.

Monthly Family Income of the Apartment Buyer (Tk.’000): Total Family Income of the Frequency Percent Apartment Buyer (Tk.in '000') Low - 9.9.

4 6.7

Cumulative Percent 6.7

10-19.9.

20-29.9.

30-39.9.

40-49.9.

50-59.9.

100-Highest.

Total

8 13 28 1.67 2 4 60

13.3 21.67 46.7 2.5 3.3 6.7 100.0

20 41.67 87.5 8.37 93.3 100.0

5.6 Present Use of Apartment: Almost all the buyers (93.3%) used their apartment as their own residences. So it can be concluded that the apartment Type of Present Use of the Apartment: buyer, bought their apartments for their residence. Only a negligible percentage (5.8%) of buyers let out their apartment Less than 1% of the buyers did not take possession of their purchased apartments.

Source: Field Study 5.7 Neighboring Relationship among the Apartment Dwellers: Out of 60 buyers 59 buyers responded about the relationship among the apartment dwellers.

45 buyers (74.2%) informed that the apartment dweller relationship was good. 14 buyers (23.3%) replied that relationship was not so congenial and only one respondent inform that the relationship was bad. response 50 45 40 35 30 25

response

20 15 10 5 0 Good

Not so congenial

Bad

neighouboring relationship

Source: Field Study 5.8 Factors Induced a Buyer to Buy an Apartment:

The study attempted to identify the preference of buying apartment as compared to constructing houses. It was reported that 58% of the buyers preferred to buy apartment instead of buying land and constructing a house thereon independently for avoiding various troubles involved in buying land and construction work. The second highest (33%) viewed that they bought the apartment for security reason. On the other hand, 10% of the buyers reported that they bought their apartments as it would enable them to live in the central area of the city. Living with upper class people of the society was stated to be the reason for buying apartment houses by 7% of the buyers.

Factors Induced a Buyer to Buy an Apartment Type of Factors Avoiding the Troubles Involved in Constructing a House Avoiding the Troubles in Buying & Taking Possession of Land Living in the Centre of the City Living with Upper Class Peoples of the Society Security Reason Total ( N = 60)* * Percentage distribution exceeded 100 due to multiple responses.

Frequency 35 10

Percent 58.33 16.67

6 4 20 75

10.00 6.67 33.33 125.00

Source: Field Study Factors Induced a Buyer to Buy an Apartment 40 30 20 10 0 Avoiding the Troubles Involved in Constructing a House Avoiding the Troubles in Buying & Taking Possession of Land Living in the Centre of the City Living with Upper Class Peoples of the Society Security Reason

5.9 Factors induced a Buyer to Buy an Apartment (Ranking by the Buyer): Factors Induced a Buyer to Buy an Apartment Factors

Ranking Position

Avoiding the Troubles Involved in Constructing a House (N = 52) Avoiding the Troubles in Buying & Taking Possession of Land (N = 46) Living in the Center of the City (N = 47) Living with Upper Class Peoples of the Society (N = 30) Security Reason (N = 57)

2 3 4 5 1

Source: Field Study 5.10 Factors Considered by a Buyer for Selecting the Site of an Apartment: Price of apartment is the most important factors for a buyer to select the site of the apartment.

Fifty eight percent buyers informed that they bought apartment of a particular site because they got price advantages of the apartment in that area. Forty two percent respondents replied that they bought their apartment by considering communication facilities. Seventeen percent of the buyers informed that they bought the apartment considering the size of the apartment.

Ten percent of the respondents selected the apartment by considering the location of the apartment. A few buyers considered physical facilities, utility services and social services available in the site of apartment.

Factors Considered by a Buyer for Selecting the Site of an Apartment Type of Factors Considered Frequency Price 35 Physical Facilities 3 Social Service 2 Communication 25 Size 10 Utility Services 1 Distance from the Main City/Location of the 6 apartment Total ( N = 60)* 82 * Percentage distribution exceeded 100 due to multiple responses.

Source: Field Study

Percent 58.33 5.00 3.33 41.67 16.67 1.67 10.00 136.67

factors condidered for selecting the site of an apartment by buyers 40 35 30 25 20 15 10 5 0 Price

Physical Facilities

Social Service

Communication

Size

5.11Factors Considered by a Buyer for Selecting the Site of an Apartment (ranking by buyers): The following table shows that the apartment buyers considered many factors in selecting the site of apartment. These were the price, physical facilities, social services, communication, sizes of apartment and so on. But they gave emphasis differently on the said factors. Tableshows the ranking of the apartment buyers. The first ranking factor is the price of apartment, second is size of the apartment, and the fourth is utility services and then social services. Last factor considered was distance from the main city and communication.

Factors Considered by a Buyer for Selecting the Site of an Apartment Factors Price (N = 66) Physical Facilities (N = 53) Social Service (N = 50) Communication (N = 54) Size (N = 53) Utility Services (N = 41) Distance from the Main City ( N = 43)

Ranking Position 1 3 5 7 2 4 6

Source: Field Study 5.12 Sources of Information about the Apartment Project: Before purchasing the apartment it is necessary that one should be informed of any the project or company. The media usually preferred by most of the buyers in choosing a project enquired about. The survey revealed that 35.% buyers came to know about the project through personal inquisitiveness. The second highest (28.33%) media was mass media which included newspaper, journals and magazines and electronic media etc. Twenty four percent

buyers informed that they learnt about the project from their friends and colleagues. Whereas 11.67% of the respondents were motivated by their relatives and family members to choose the project. So it can be concluded that besides self motivation (inquisitiveness) and mass media other influencing factors were friends, colleagues, relatives and family members who motivated in selecting the developer. Only a few buyers considered bill board, sign board, brochure, fair, personal selling etc as developer selecting media.

Sources of Information about the Apartment Project: Sources of Information about the Apartment Project Sources of Information Frequency Percent Self Inquisitiveness 21 35.00 Mass Media Bill Board, Sign Board, Brochure, Fair, Personal Selling etc.

17 1

Relatives, Family Members 7 Colleagues ,Friends 15 Total ( N = 60)* 61 * Percentage distribution exceeded 100 due to multiple responses.

Source: Field Study Figure: Sources of Information

28.33 1.67 11.67 25.00 101.67

sources of information about apartment project 25 20 15 10 5 0 Frequency Self Inquis itivenes s Mas s Media Bill Board, Sign Board, Brochure, Fair, Pers onal Selling etc.

Relatives , Fam ily Mem bers Colleagues ,Friends

5.13 Objectives of Buying the Apartment: Initiative was taken to identify the buyers’ objectives of buying apartment. Ninety five percent of the samples replied that they bought their apartments for having their own residence. Remaining samples viewed that they bought apartment for many reasons such as selling at a higher price, for social status, for rental income or for future certainty etc. It is clear that most of the buyers in our country buy apartment for solving their own residential problems.

Objectives of Buying the Apartment Objectives For Own Residence For Selling at Higher Price Social Status For Rental Income

Frequency 57 1 3 3

Percent 95.00 1.67 5.00 5.00

For Future Certainty 3 Total ( N = 60) 67 * Percentage distribution exceeded 100 due to multiple responses.

5.00 111.67*

Source: Field Study objectives of buying the apartments 60 50 40 30 20 10 0 Objectives of Buying the Apartm ent For Own Res idence

For Selling at Higher Price

Social Status

For Rental Incom e

For Future Certainty

5.14 Factors Considered for Selecting Apartment Company: The apartment buyers have selected the apartment companies after considering so many factors, such as reputation of the company, experience of the company in this line, buyers previous experiences about the company, price offered by the company, project location, status of the company either private or public ltd. etc. Table shows the ranking given by the buyers about the selection of company from whom the apartment was bought. The first ranking factor is reputation of the company, second is experiences in this line, third ranking factor is the status of the company. Other factors are experiences about the company, Apartment price and then Project location.

Table-Reasons for Selecting the Company by a Buye: Reasons for Selecting the Company By a Buyer Ranking Position Reputation / Goodwill of the Company ( N = 88) 1 Personally Known Co. (N=13) 6 Status of the Company ( N = 60) 3 Experienced Company ( N = 63) 2 Previous Experienced about the Company ( N = 48) 4 Reasonable Price (N = 82) 5 Project Location (N=16) 7 Source: Field Study 5.15 Return on Individual Investment in Apartments: No doubt, buying an apartment house is one of the highly profitable investments these days.

One of the major companies in housing sector, the Building Technology & Ideas Ltd. (BTI) has recently carried out an exercise to demonstrate the return from Investment in Apartments to its potential customers. They have shown the calculation of return for mid- town apartments as well as posh apartments (Gulshan/ Baridhara/ Dhanmondi) of the value of

Tk.25 lac and Tk.40 lac respectively. The calculation shows initial rental, yearly increase in rent and appreciation for periods of 10, 15 and 20 years.

It shows that a flat of Tk.25 lac fetches a return of 21% in 10 years, 25% in 15 years, and 29% in 20 years. Similarly a flat of Tk.40 lac brings a return of 23.5% in 10 years, 27.5% in 15 years and 32.5% in 20 year.

Mid Town Apartments

Posh Apartments (Gulshan / Baridhara/ Dhanmondi) Price of Apartment Tk. 25 lac Price of Apartment Tk. 40 lac Rental (Yearly) 9% of Apartment Rental (Yearly) 11% of Apartment Yearly Increase in Price Yearly Increase in Price Rent 5% of Complex Rent 5% of Complex Appreciation 7% of Apartment Appreciation 7% of Apartment Price Complex Price Complex (Return in Tk.) (Return in Tk.) Year Rent Apprcn.

Year Rent Appren.

1 225000 175000 1 440000 280000 2 236250 187250 2 462000 299600 3 248060 200360 3 485100 320570 4 260470 214380 4 509360 343010 5 273490 229390 5 534820 367020 6 287160 245450 6 561560 392710 7 301520 262630 7 589640 420200 8 316000 281010 8 619120 449620 9 332430 300680 9 650080 481090 10 349050 321730 10 682580 514770 Sum(10 yrs) 2820030 2417880 Sum(10 yrs) 5534260 3868590 11 366500 344250 11 716710 550800 12 384830 368350 12 752550 589360 13 404070 394150 13 790180 630610 14 424270 421720 14 829690 674760 15 445480 451240 15 871170 721990 Sum(15 yrs) 4855180 4397570 Sum(15 yrs) 9494560 7036110 16 467760 482830 16 914730 772530 17 491150 516630 17 960460 826610 18 515700 552710 18 1008490 884470 19 541490 591490 19 1058910 946380 20 568560 632890 20 1111860 1012630 Sum (20 yrs) 7439840 7174200 Sum (20 yrs) 14549010 11478730 Calculation of ROI from the viewpoint of Buyers:

Total (Rent + Appreciation) Return: Year (Total) Return 10 21% 15 25% 20 29%

Total (Rent + Appreciation) Return: Year (Total) Return 10 23.5% 15 27.5% 20 32.5%

Source: Building Technology & Ideas Ltd. (BTI) Problems in Real Estate Sector in Bangladesh Study on: Rupayan Housing Estate LTD 6.1 High pricing of apartment or plot:

Fig.2 Number of flat sale for different price of Asset Development in 2000-2004 300

250

50

0 15-25 lac

25-40 lac

Mean= Tk. 53.61 lac

100

Mode= Tk. 47.5 lac

150

Midian= Tk. 40.79 lac

Number of sale

200

40 - 55 lac

55-70 lac

70-85 lac

85 - 100 lac

100- 115 lac

115- 130 lac

Price range

There are arranged different prices flat of Asset Development & Holdings Ltd. The prices of flat were made on value of land, flat size, design, architectural view, communication and commercial and residential zone. There were five categories flat considering of price range was sold from Assets. Those were Tk.15-25, 25-40, 40-55, 55-70, 70-85, 85-100, 100-115 and 115-130 lac. The number of sold flat of 2000-2004 made a positive skewness curve where shown highest number (mode) of flat sold from Tk. 40-55 lac ranges flat. The standard deviation value is Tk. 21.61 lac. This means sale of flat price deviates Tk. 21.61 lac with mean Tk. 53.61 lac.

For this presentation we under stand if rate of flat or plot is medium then sale is increase’s here 25lac to 60 lack is maximum growth.

6.2 High price of construction materials Apartment prices to go up 20-40pc in Dhaka Posted: June 05, 2007 Source: the Daily Star Business Report June 04, 2007

Prices of apartments in Dhaka will go up by 20 to 40 percent, as building materials have now become dearer, developers said yesterday.

They said Tk 500 would be added to the present rate (per-square-foot) of the flats in up to six-storey buildings and over Tk 500 to the rate of the ones in the high-rise buildings.

The developers however admitted to a drop in sales of apartments in a span of 5 months this year by 65 to 75 percent over the corresponding period last year due mainly to surge in apartment prices."Flat prices will go up by 40 percent in posh areas such as Dhanmondi, Gulshan and Banani. Apartment prices in other areas will soar by 20 percent," said Tanveerul Haque Probal, general secretary of the Real Estate and Housing Association of Bangladesh (REHAB), at a press conference in Dhaka yesterday. Significant price hike in construction materials will force them to up Tk 250 per Sft, Probal explained, adding that the rest of the hike in flat value will be made due to enhanced cost of- construction of flats for the owners of lands given to any developer under a deal on certain terms and conditions.

The present market prices of MS rod have marked a rise by 19percent, cement 32percent, bricks 62percent and sand 72percent compared to the prices in 2005.

According to the REHAB estimation, electric wire prices increased by 100percent, aluminum and paint 32percent, labour and materials 28percent, said REHAB leaders.

Per thousand bricks were sold at Tk3100 in 2005, the market price of which now increased to Tk 6500. Sand price increased to Tk25 from Tk 14 per square foot and cement price increased to Tk 400per bag from Tk265 per bag in 2005.

They said prices of rod (60 grade) increased significantly in the last two years by Tk75000 per tonne. Presently, rod is priced at Tk 52,500 a tonne, which was Tk40,000 in 2005.

The REHAB leaders attributed the high prices of construction materials to electricity and gas crisis and increased transportation costs.

When asked who will bear the increased flat prices, Probal said, "Of course the buyers should bear the costs. But it will be decided through consensus between buyers and sellers. And here the REHAB will act as mediator to settle any dispute."

He, however, said," If a developer demands high price of an under construction flat without showing any rational reasons, it will not be granted by the REHAB."The present anticorruption drive also hampers the business of the sector, said S M Anwar Hossain, acting president of REHAB.He said, "Our clients both home and abroad are showing hesitation to transact huge amount of moneat a time." Syed Sirajul Haque, treasurer, M G R Nasir, jointtreasurer of REHAB and Enamul Haque, chairman of the Building Materials Price Review Committee of REHAB were present at the press conference.From this report we Understand increase price of construction materials Rehab incrise of rate of flat. So un limited increase of construction materials is major problem of real estate industries.

6.3 High rated registration cost of apartment & plot Registration cost is major problem in our real state and housing industries. Presently this registration cost of apartment or plot is nearly 16.50% to 17% which is barrier of apartment or plot purchase and secondary market of real state sector. The country did not making secondary market of real state on housing product due to high cost of re-registration. So government lost huge revenue from this sector. Where our nearest country India, Pakistan, Sri

Lanka’s registration cost is 7 to 9%. So there real state industry is enormous growth and government is achieving huge of revenue from this sector.

6.4 Problems faced by Developers Considering the supply side of the real estate, developers face some problems that cause them to supply their goods to its customer on regular or particular time. The Developers have to face many problems and the effect goes on the product, price, and above all the demand.

Disturbance of toll collectors who are known as ‘Mastans’, lengthy & complicated process in obtaining legal documents and the failure in timely payment of installment by buyers appear to be the major areas of problems that should be concerned by the Developers as can be seen from the following table: Problems Disturbance of toll collectors/ Mastans Lengthy & complicated process in procuring legal documents Failure in timely payment of installment by buyers Marketing problems of apartments RAJUK not acting as facilitator for real estate development Non-availability of Bank Loan for apartments Lack of required professionals/skills Hartals /strike delays completion of project Financial problems Govt. regulation hindering growth of real estate Total Respondent: 40

Percentage 42.3 19.2 19.2 7.7 7.7 7.7 3.8 3.8 3.8 3.8

Source: Survey Conducted By Students of Finance (8th Batch), University Of Dhaka 6.5 Problems in Expanding the Housing Finance System Unlike other developing countries that move towards a more integrated modern housing finance system, the trend to increasingly rely on capital markets as sources of funds for primary housing finance lenders rather than on depository institutions alone is less in Bangladesh. The general weaknesses of the financial sector have of course a negative impact on long-term lending for housing. Here we will specifically deal with housing finance issues: 1. Distortions in the savings rates and resource mobilization: A main distortion in the savings and debt system is the high rates offered by various government savings plans compared to market rates offered by private deposit taking institutions. The plans have created an inverted yield curve where lower risk savings instruments carry higher returns than higher risk instruments. These distortions make it difficult for private sector institutions to raise household funds and hinder financial market development. Indeed, it is unlikely that the bond market will develop within this financial market structure. Long-term lending operations such as housing finance are particularly affected by the difficulty of raising long-term funds in the domestic financial market.

2. Interest rate subsidies: The BHBFC has access to lower-cost funds and is not yet required to incorporate adequate bad debt provisions in the overall cost of credit. This allows them to set their lending rates below the market rates, making it difficult for the private sector to compete and, therefore, suppressing the development of the private mortgage industry. Interest rate subsidies have some major drawbacks apart from stifling private mortgage market development.

 First, they subsidize debt rather than housing directly. A below market interest subsidy encourages people to borrow as much as possible and repay their loans as slowly as possible.  Second, the subsidies increase with inflation when interest rates go up, a poor index for subsidization.  Third, the subsidies are not transparent. Subsidy amounts are hidden and vary with the market rate of capital. It is only through the constant additional government funding to BHBFC that the cost of the subsidies is apparent.

3. Lack of Mortgage Financing: The most serious constraint in doing so is the lack of mortgage financing. One of the largest developers in Dhaka felt, however, that there was sufficient land available for the foreseeable future, but the lack of long-term finance for middle income households would prevent them from expanding a middle income line of housing production.

4. High-Cost Structure of Private Sector: The relatively low savings rate in Bangladesh combined with the existence of high yield government savings instruments that attract most of the household savings makes it necessary for any new private sector housing finance company to access funds from long-term lenders or securities markets, rather than through depository mechanism only.

5. Subsidy Targeting: Another issue is the poor targeting of the existing interest rate subsidy system. Subsidized loans are presently provided to those that could participate in the private market without assistance. Indeed, there is no difference in the income level of recipients, loan amounts and geographical target areas between the private lenders’ and BHBFC’s clients. The objectives of the subsidy scheme should be to assist those that do not qualify for a formal sector mortgage loan without some special assistance and thereby increasing the number of middle income households that can avail themselves of housing finance.

6. Risks for Private Sector: Indeed, long-term housing loans are considered risky in comparison to one year merchandise loans, since these loans contributed in the past to the bad recovery record and bad debt situation that plagues the banking system. The recovery rate of housing sector loans in the banking sector averages approximately 70 percent. The poor recovery rate is due mostly to older loans and recovery exceeds 80 percent on loans disbursed after 1990 (Bangladesh Bank). Default and foreclosure laws are complicated and it takes in excess of 5 years before a property can be repossessed.

BHBFC has access to lower cost funds, which allows it to have lending rates below market, while at the same time it does not incorporate the risks of default and bad loans in the same way private firms would. These factors increase the perceived risk to investors in private housing finance companies.

7. Inaccessibility: The formal housing finance system only provides mortgage loans for a small proportion of newly constructed houses and home purchases. A much larger proportion of households than necessary have to finance housing from savings or build incrementally and at a low standard because upfront finance that would allow them to purchase a higher quality home and pay for it over a longer period is not affordable or inaccessible.

Of course, formal finance is inaccessible for many households in developing countries for other reasons.  These include insecure and undocumented incomes,  A lack of land and housing options for middle and low income households that are acceptable as collateral to banks, and  The high costs and related lack of interest by the banks to work with small clients, to name just a few.

8. Small Composition of Real Estate Loan: The total housing advances amount to only 4 percent of assets. The private banks have the largest proportion of housing related assets (9 percent), and the foreign banks have the least involvement in the sector (2 percent). Credit restrictions, specifying the proportion of deposit funds that could be lent for housing, were only withdrawn in 1988 and after that time investments in the housing sector soared. Over the years, major problems in loan recovery began to plague the housing portfolios and the banks gradually decreased the proportion of advances for housing. In fact the same number of housing accounts is held now as in 1992.

During the liquidity crisis of 1994, when the Bangladesh Bank had to bail out the banking sector, it advised the banks not to lend more than 15 percent of their short-term funds in longterm loans.

9. Weak Capital Market: Capital markets include both debt and equity markets. Debt markets are, however, not well developed and revolve around the commercial banks and DFIs. With the weak position of the NCBs, debt markets play a small role in the housing sector outside of BHBFC. Equity markets, dominated by the Dhaka and Chittagong Stock Exchanges, remain equally weak with an unclear regulatory and supervisory system, inefficient trading, clearing and settlement systems, limited supply of securities and underdeveloped institutional demand (World Bank, 1998). The short-lived boom and bust cycle of 1996 was driven mostly by foreign portfolio investment and new regulations have been put in place to protect investor’s interest and improve the institutional structure. Because of this weak financial system hinders savings and investments, hence economic development. The housing sector, which is highly Finance-dependent, is particularly affected. The troubled banking system cannot provide wholesale or individual long-term funds at an efficient rate for housing finance. Debt markets are not developed and are dominated by government, eliminating another potential source of housing funds. Cleaning up the commercial banking system, strengthening the regulatory and supervisory system for the financial sector and improving and expanding debt markets are of particular concern for the housing finance sector.

10. Less International Exposure: In Bangladesh, housing has not been a priority sector for external and donor funding. Also, the absence of a swap market in Bangladesh makes it difficult for foreign investors to come in because of the exchange rate risk.

11. Reluctance of NCBs Banks: Discussions with the NCBs made it clear that they were reluctant to extend lending to the housing sector. Most only consider housing loans for clients that have other business with them and have the income and assets to support these loans. The second category of borrowers is the bank’s own staff for which special concessionary conditions apply.

12. Government Bureaucracy: Given the bureaucratic nature of the organization and the history of clienteles associated with government-owned banks that serve a predominantly civil servants' clientele,

commercializing the institution will be a difficult task. However, BHBFC has recently initiated another campaign to collect on delinquent loans and it has threatened to repossess properties from long-time non-payers. In the meantime, it remains dependent on government funding for its continued operation.

13. Less Participation of Non-governmental sector: The NGO sector has only been marginally involved in urban housing. The discrepancy between urban land and house prices, and incomes of the below median income groups has made sustainable housing solutions difficult to conceive for that income group.

14. Risks, affordability and mortgage instruments: Little experimentation has taken place to explicitly introduce different mortgage instruments to address the perceived risks in mortgage lending or to make mortgage finance more affordable to middle income households. Also, the pricing of risks and the conditions attached to the different instruments is often unclear. ďƒ˜ Fixed rate mortgages: The FRM is the most common instrument in Bangladesh.

Interest rates are fixed for the life of the loan and so are the periodic payments, irrespective of interest rate movements in the market. It exposes the lender to interest rate risk if unanticipated inflation occurs. ďƒ˜ Graduated Payment Mortgages: These are also fixed rate mortgages, but the repayment schedule has been set up in such a way that early payments are lower and increase periodically by a specified percentage. Some banks have used this type of mortgage in the past to deal with the tilt problem and to make housing loans more affordable. The tilt occurs because of the fact that under a compounded fixed rate interest system, when inflation is anticipated, interest payments are high in the early repayment period, driving up the regular monthly payment over the life of the loan.

The problematic aspect of the GMP is that, by lowering the early payments, there is a period of negative amortization.

15 Difficulties in Private construction finance: Most new construction for the urban formal housing market is in the form of apartment buildings. The predominant way of financing the construction of this type of housing is through landowner and developer self-finance, e.g., by selling part of the land parcel or other land and subscribing the housing development fully before construction starts. Buyers of individual units in multi-family apartments have to put down a 25 percent advance and the unit has to be paid for in a few large installments before the house is completed. This type of financing arrangement is difficult for all but the highest income groups in the absence of mortgage financing. Some large developers have access to short-term construction finance from affiliated private commercial banks. It is, however, difficult to obtain construction finance from the NCBs. Developers do not engage in long-term financing of housing units for their clients directly.

16 Credit risk: Both banks and non-banks are plagued by bad debt. Yet, very little systematic analysis is taking place on the specific causes for mortgage default. Presently, entire geographical and income segments are excluded from mortgage lending because of their high perceived credit risk. However, underwriting methods are very rudimentary and do not include a careful market analysis of the property. Affordability calculations for all types of residential properties are done mostly on the basis of future rental income even when owners are occupying the building. Also, servicing methods are not inductive to stimulate timely payments and there are long lapses before overdue notices are sent out.

Foreclosure procedures take on average five years and clients know that financial institutions will only take them to court in extreme cases. It is, therefore, not known whether a poor payment record is based on client’s inability to pay, the low value of the building relative to the outstanding loan, or on the perception of clients that no action will follow in case of nonpayment.

17 Interest rate calculations: Within the primary mortgage market (and micro-finance market) different types of interest payment calculations are used, which is often confusing to borrowers and increases the difference between government and non-government rate structures. While compounding is the most common way to calculate interest and is used by most of the financial sector, simple interest rates, which lower the effective rate, are used for special loans or customers. For example, BHBFC charges simple interest rates for smaller loans and as an incentive system for special customers, which translate into much lower effective rates. Also, NCBs charge simple rates for special customers, using the same nominal interest rate.

MFIs typically charge a flat rate for the entire loan period. No adjustments are made for principal repayments during the course of the loan. A flat rate therefore has a higher effective rate than the quoted rate. It is used for reasons of simplicity on small loan repayment calculations and because the quoted rate appears low, which has a positive effect on borrowers.

It is not always clear which type of interest rate calculations are used and it is often confusing to inexperienced borrowers who have to compare different costs of credit Also, the NCBs and BHBFC use a simple interest rate as an incentive for good borrowers without clearly calculating how much of a subsidy is provided by moving from compounded to simple interest rates. There is hardly any adjustment made in the rates for different risks or loan terms. Moreover, this lack of standardization will make it more difficult to develop secondary lending facilities at a future 6.6 SWOT Analysis: The critical appreciation of Housing Industry can be done by analyzing its strength, weakness, opportunity, and threats. Salient features of this industry have been summed up in the following SWOT Analysis: 1. Strength:  Expanding market, expanding sales and profitability.  A healthy industry sector with quality business.  Good purchasing power of target customer group.  Govt.’s keen interest to solve housing problem with the rapid increase in urban population.  Open Market Economy, recent Housing Policy etc. might favor substantial growth of housing industry.  Dependability of the major housing companies in the market.

2. Weakness:  Strong competition among the existing players of the industry.  Increased price of construction materials will be difficult to pass on to the customers, because the agreement in respect of price and construction standard is made 2 to 3 years before the actual handing over of the apartments.  The industry as a whole does not follow any standard business rules. So, there remains scope of unethical practices by some of the developers.

3. Opportunity:

 A highly profitable investment opportunity for individuals as well as financial institutions.  A very wide scope is prevailing for foreign investors also.  Urban population is developing favorable attitude towards apartment living. Although the present market of apartment houses is limited within the high income group of the society, there exists opportunity for middle and lower middle income group.

4. Threats:  Political instability and unrest directly or indirectly threatens all the business sectors including housing industry.  Bureaucratic complexities imposed by RAJUK, DESA, WASA, and many other govt. and semi-government agencies.  Cooperation not rendered by National Board of Revenue in relation to the taxation and import facilities (Tax concessions).

The above SWOT analysis shows that the apartment Industry presents more of opportunity than threats. The analysis also manifests that the enormous strength of this sector surpasses its minor weaknesses. Therefore, we can conclude that the apartment business is economically quite viable and highly profitable for investors and financiers.

Prospects of Real Estate Sector in Bangladesh and Rupayan Housing Estate Ltd 7.1 Prospects of Real estate & housing in Government sector.

7.1.1 The Ministry of Housing and Public Works

The Ministry of Housing and Public works is entrusted with the task of carrying out public sector construction activities and looking after urbanization, city development housing settlement aspects throughout the country.

Housing is an important growth sector having backward and forward linkages. Because of ever-increasing demand, the sector the tremendous potentials. A large number of property developers are already active in the private sector.

The state-owned House Building Finance Corporation (HBFC) has been made fully operational for ensuring adequate credit flow to this sector on easy terms. A National Housing policy has been adopted which calls for providing shelter to the poor, the homeless and the needy. The policy stipulates setting up of National Housing Authority and a special Housing Bank.

7. 1. 2 National Housing Authority of Bangladesh: Housing could be generally termed as a habitable shelter but its meaning stretches far from merely a shelter. It is the total living environment including dwelling units, land, the

neighborhood services and utilities needed for the well being of its inhabitants. Housing is one of the basic beings, which provides security, and sense of belonging to the owner. The pre-requisite for health and comfort is proper housing.

Bangladesh, like many other developing countries face an acute shortage of affordable housing both in the urban and rural areas. The housing shortage was estimated in 1991 to be 3.10 million units out of which 2015 million units in rural areas and 0.95 million units in urban areas. The shortage was projected to be 5.0 million by the end of the year 2000. The government is fully aware of the problem and various steps are being undertaken to counter it.

The National Housing authority has been the principal public sector agency engaged in solving the enormous housing problem of the country, particularly for the poor, the low and the middle-income group of people.

Background of Establishment of the National Housing Authority (NHA): The end of the British rule and the partition of the subcontinent resulted in migration of million of Muslim refugees flocked into the four main cities of Bangladesh and started living on vacant government lands in these cities. They erected makeshift houses creating unplanned and unhygienic condition. The influx of these refugees also produced tremendous strain on the existing services and infrastructures. In view of this situation the then government created housing wing under the Works, Power and Irrigation Ministry in 1958.

The government undertook housing programs throughout the country in order to rehabilitate the refugees and the local low and middle-income families in an organized way. The “housing wing� was upgraded to the present Housing and Settlement Directorate in 1971 after successful completion of the refugee rehabilitation program. To ascertain shelter for all by 2000 the Democratic government now formulating National Housing policy 2004, considering the present need of the country. In the light of the National Housing policy, the national Assembly has adopted and approved the National Housing Authority (NHA) Act. 2000. In accordance with the act, Housing and settlement direction (HSD) and deputy Commissioner Settlement (DCS) office have been abolished and a new organization NHA has been formed by merging these two organization. The National Housing authority Act 2000 has been implemented on the 15th July, 2001 through the government notification.

Post liberation housing situation: The liberation of Bangladesh brought about an influx of rural population to the urban areas, Bangladesh has an. As a result, an unhealthy condition was created causing serious threat to the public health and the overall environment of these cities.

The housing and Settlement Directorate implemented housing projects to rehabilitate the low income and to provide housing for the middle income people including the refugees during the pre-liberation era. During the pre-liberation era, HSD took in various housing projects including sites and services and squatter resettlement projects. They were implemented in various urban centers of Dhaka, Chittagong, Rajshahi, Khulna and the districts HQ's.

7. 2 Prospects of reputed real estate & housing company.

Privet sector of real estate & housing company: The large scale private real estate business is flourishing day by day in Bangladesh. This paper is to identify the causes of the increment of the small-scale private real estate business and its impacts on the urbanization pattern of Bangladesh in context of sustainable urban planning. Dhaka the third largest metropolitan and industrial city of Bangladesh. Due to the macroeconomic impact of globalization, the urbanization of the city is suddenly triggered up.

To meet the needs of the increasing housing demand, private real estate companies have come forward with their own initiatives. But there is no national policy guideline for this sector. Consequently, haphazard growth of this business is hindering the harmonic growth of the city. This business is growing in expense of deteriorated living environment, high traffic congestion, high land value and house rent etc. The forthcoming global era of Bangladesh will intensify this problem significantly. This growth is threatening Bangladesh structure plan. Now the question arises whether organizational, managerial, financial, legal and political setups of Bangladesh are strong enough to face these challenges of sustainable urban development under the threat of globalization? Functional cooperation among state, the Civil Society and the Private Sector in the form of sustainable urban governance can solve this problem largely.

Urbanization is an outcome of both population growth and rural-urban migration. As urbanization increases, more and more people are becoming city dwellers. Bangladesh is not any exception to this picture. In Bangladesh, the problem of urbanization is further aggravated by limited land supply in urban areas, lower land utilization and lack of proper planning and land use policy. As globalization increases, the process of urbanization increases. The ever increasing urban population is creating an increasing demand for shelter.

The UN declaration and the constitution of Bangladesh recognize the right of shelter (REHAB, 2003). But being a government of the poor developing country, it is almost impossible on the part the government to ensure housing for all. As public sector failed to ensure their right, people have taken their own initiative to ensure their fundamental need for shelter. This paper is an attempt to observe how private developer and real estate companies are influencing the urbanization pattern with special reference to and to provide some guideline for sustainable development of this sector.

The current trend of urban growth in Bangladesh is about 5-6% per annum. At present 30% of Bangladesh’s population live in urban areas, which will be 35% by the year 2025

(REHAB, 2003). The present estimated population of Bangladesh is about 16 crores and estimated growth rate is 3.8% per annum (USAID, 1999). The Real estate developers are playing the vital role regardless of high, middle, and low-income people since the past two decades in providing the housing provision. Considering this situation, this paper is to identify the role of Small Scale Private Real Estate Entrepreneurs (SSREE) in providing the housing facilities for the growing urban population and how these Sprees are influencing the growth pattern of the city.

During 1970s there were fewer than 5 companies in Bangladesh engaged in this business. In 2008 there were 600 such developers working in Bangladesh around Dhaka, chittagong,sylhet,Bogra coxbazar,kulna areas.

1. East West Property Development (Pvt) Ltd. (An Enterprise of Bashundhara Group) East West Property Development (Pvt) Ltd. (EWPD) is the Flagship Company of Bashundhara Group and was founded in 1987 to cater to the need of growing housing of a high increasing population of Dhaka City. Since inception, EWPD has been doing business faithfully and gas build up profound confidence in public and become market leade3r in Real Estate sector .

EWPD has successfully developed several integrated residential projects adjacent to the capital city . The first and prime project popularly known as “Bashundara� near Baridhara diplomatc zone has been developed on several hundred acres of land . In this project 16 blocks are there and among them 13(A to M) block are already developed in planned and organized way and rest of N,P block are on process to develop and it will take 2 to 3 year to complete the whole project .Around 15000 plots are handed over to the client . The second project known as Savar housing project has beendeveloped at Savar , 30km away from Dhaka City. The third project named as River View has been developed on 2.5thousand acres of land in Hasnabad , Keranigonj situated at the outskirts of Dhaka city to provide well planned housing facilities to the inhabitant of the old town . In this project 7 blocks are there and 3 (A to C ) blocks are already developed and rest of D,E,F,G, blocks are on Process and it sill also take 2 to 3 years to complete the project .

As part of fulfilling commitment for mitigating acute housing problems . EWPD has recently been engaged in developing apartment to cater to the housing needs of a growing middle class in Dhaka City both in Baridhara and River View project. More or less in every developed block we have apartment projects both in Baradhara and River View Project and Few Apartment already Hand over in Baridhara project.

Additionally taking into consideration the future size of the population which will be around 20 million in Dhaka City in 2015, the company is planning to expand its land development operation in the adjacent district of the Dhaka City. Not only that the projects are already developing with organized communication facilities with natural environment but also Considering the demand of 21st century it already developed renowned university like NSU, IUB, school like ISD , Viqarunnessa Girls School , hospital like Apollo , large shopping complex , community centre like Bashundhara Convention Center , Gold gym , park and all those needs that human being expect in their life in Baridhara Project and planning to take initiative in other project .

At Present we are offering a few number of ready plot at the starting site of Baridhara Land Project .

Bashundhara always think better for the country as ensuring fruit-full life for future generation and providing huge employment opportunities as their commitment and will do as the same in future with faithfully and sincerely .

2. EASTERN HOUSING LIMITED Islam Group’s Iconic company Eastern Housing Limited (EHL) was created in 1964 is the oldest and largest pioneering company in the housing sector of Bangladesh . EHL started its activities by undertaking a challenging project of that time , named pallabi Township at Mirpur , Dhaka consists of 1000 villa type independent houses . It has successfully completed satellite township named Banasree , Aftabnagar , Pallabi Phase ll , Niketon , Mohanagar , Demra ,Savar etc. In 1993 it was incorporated as Public Limited Company . From the time of its inception , EHL has been offering multidirectional solutions for housing needs of Dhaka City and was the first company in the Private Sector which pioneered engineering development of land for housing creating ever mew urbanized area for Dhaka City .  Eastern housing Limited have gradually become the pioneer in private housing industry by undertaking project such as : The first apartment concept in Bangladesh at Shidhesswary ( Eastern Housing Apt.) , Dhaka .  The First Centrally Air conditioned Shopping Complex ( Eastern Plaza ) in Bangladesh at Hatirpool , Dhaka .  The first conceptualizing and realizing the neighbourhood housing ( Pallabi Township ) concept in Bangladesh at Pallabi , Dhaka .  The first high rise apartment in Bangladesh at Eskaton (Eastern Tower ) ,Dhaka .

Over the years spanning nearly 50 years, Eastern Housing Limited have developed a share vision and understanding of the needs and requirement of our clients, both present and future.

With the support and expertise of the infrastructure built upon highly professional and dedicated human resources and institutional capacity. EHL are steadily increasing maker share by maintaining growth momentum which the Company hopes to continue in the years ahead. Nevertheless, EHL do recognize the intensity of the present day competitiveness and the fundamental requirements for a change and new image of EHL . To that end in view, its products are becoming more aesthetic in design and ecofriendly which, in turn will reflect the responsiveness of in – house team of architects to the spiritual need of individuals or groups.

3. Ideal Real Estate Ltd. Profile of the company Ideal Real Estate Ltd. Is a fast growing real estate developer company in Bangladesh? The company incorporated on December 2006. The company runs by a well organized team of management expertise, dynamic sales and marketing team, proficient architects, skilled structural engineers and other competent professionals. These are qualities that have made Ideal Real Estate Limited a standout in residential & commercial real estate developer in capital City Dhaka and port city Chittagong . Ideal Real Estate Ltd. Exhibits superior development expertise not just building the project undertakes , but also in completing the planned construction work well within the target time . The company ensures maximization of the expected return for the land owner as well as optimum satisfaction of customers with maintain of proper handover deadline. The company carefully attends to the amenities, landscaping and architectural features that the complement of the working and living environment of every projects.

Mr. Shafiqur Rahman is a first Managing Director of this company . In the long run he is well experienced in the real estate sector and also he is well connected with other business community .

During the inception of the business a large number of projects are signed to develop in very impressive and suitable location in Dhaka and Chittagong . Accordingly construction work is running very swiftly. We are proud to our overall activities for achievement of our ultimate goal and fulfillment of commitment.

4. MISSION ENERGY & PROPERTIES LTD. Mission Energy & Properties Ltd. is one of the paramount establishments of Mission Group engaged in addressing him problems of habitation. Housing problem in Dhaka City has been getting awfully intense, days in and days out. The intensity is caused mainly, among other things by two factors: One is the decreasing of habitable lands caused by the pressure of population and the other is the heavy influx of urbanized population. The Mission as well other allied organizations by their talents, hard work and capital came forward to mitigate this burning problem of life in addition to Governmental effort in this regard. Housing is one of the basic needs of the people. Ours is a densely populated country. In such a situation, all habitable lands are likely to be used up if the super structures are allowed to grow following the outmoded and traditional system while housing problem remains unresolved. Therefore, multistoried apartment concept of today is getting wider acceptance to the urban life – style, with the passage of time, in view of the provision suitable for a cluster of families to live in a single plot of land.

In the light of this modern concept, Mission Group as a partner of nation – building has embarked upon massive planning to construct excellent buildings with built – in safety system in prime locations. So, most of the apartments of the Group have been concentrated in Prime location at Dhaka and Chittagong city. Meanwhile, Mission Group has become the symbol of trust, confidence and dependability to the landowners as well as the customers thanks to the workmanship, precision planning and aesthetic architectural design and lastly the honor to commitment of the Company. The immeasurable confidence the fashionable people have on the Mission Group is amply substantiated when Mission stalls in REHAB fair at home and abroad are seen jam – packed with visitors coupled with instant booking for flats and plots. We declare with immense pleasure that we are already launching our apartment projects to the overwhelming response we have from the landowners and prospective buyers in Chittagong .

The remarkable features of the apartments devised by a group of our highly educated and experienced architects and engineers are as follows:  Sufficient flow of air and light,  Interiors designed with special emphasis on privacy ,  Effective earth – quack control system ,  Durable structural design  All modern amenities We are committed to ensure:  Safety  Quality  Security and  Tranquility 5. RANGS PROPERTIES Expedition Begins Rangs Properties Limited (RPL) is one of the preeminent real estate developers in Bangladesh. In 1996 the company started its expedition with the vision to create difference

and remarkable dwelling space for family and business. Rangs Properties Limited is a venture from country’s one of the prevalent conglomerates, Rangs Group.

Growing up The name of Rangs Properties Limited stands as a giant, playing the vital role of solving the accommodation hitch of Bangladesh along with ‘Creating Lifestyles …` took as its maxim .

A lot of aspiration and appreciation have been earned in quest of developing residential and commercial projects. The brand is now conveying some prestigious image with the name. It has earned the reputation through its cosmic expertise and technical know – how. Over 0.8 million square feet of residential and commercial apartments have been handed over to the valued clients and more than 0.9 million exclusive and luxurious apartments and commercial space are ready to be handed over. Throughout the journey of a decade , the company has built the milestone project ‘Rangs Waterfront` at Gulshan which is a unique and only of its kind at Bangladesh with the features including swimming pool , basket ball court , children playground , gymnasium plus all other amenities for a luxurious apartment complex in condominium style Distinguished Rangs Properties Limited aims to create idealistic surroundings for self contained, independent and distinguished house in a secured and exclusive community. Its goal is to make a comfortable living through fairly spacious, airy, well – lit environment. In planning the sculptures climatic conditions, earthquake resistance, safety exit and security receive top consideration. The difference between Rnags Properties Limited and other real estate businesses are the taste of the apartments, functionality, design and quality. By building remarkable apartments and commercial buildings, it is going to achieve its vision.

Project Location It has projects in the prime areas of Dhaka and Chittagong city and at present we have seventy – five on going and up – coming projects at different locations like Gulshan , Banani , Baridhara , Dhanmodi , lalmatia , Uttara , Wari , Siddeswari , Sir Syed Road and other areas of Dhaka & Chittagong City .

Milestone Projects We are always in belief of variation of our project in size, locations, price, and pattern. We have full commercial buildings like Rnags Anam Plaza , Rangs Nilu Square , Rangs Panorama , Rangs Aracde , residential cum commercial projects like Rangs Taz Tower , Rangs Eskaton Tower Classic , Rangs nmg Tower , high rise buildings like Rangs Tower , Rangs Bhaban (Head Office) , Rangs Water Front and exclusive apartment projects in prime locations of all over the Dhaka City .

6. ASSET Developments & Holdings Limited Organization Profile ASSET Developments & Holdings Limited is a Real Estate company in Bangladesh came into existence as a private limited company in 18 November 1999. It commenced operation in 2000. A customer focused Land Development Company ASSET is mainly engaged in building high class exclusive apartments.

ASSET Developments & Holdings Limited is the leading Real Estate Company in the Bangladesh. In order to get on with the rhythm of the modern world, infrastructure development of the real estate sector should get the priority. It all began in 1999, after its initial years of struggle it launched its products in 2000. The journey continued and barrier after barrier were crossed, challenges were faced and overcome to transform ADHL into what it is at present.

The principal activities of the company are to take high profile land (Land is treated as raw material for real estate business) and to build beautiful & attractive Apartments/Flats and to

sale Apartments/Flats through relationship marketing methods in win-win manner by which ASSET is soundly and smoothly reaching to its optimum corporate goal to make the company an icon or a brand that stands for trustworthiness and loyalty.

1 1. Year of Establishment : 1999 2 2. Name of President and MD : SALIM AKTHER KHAN 3 3. Corporate Management Office : 91, Gulshan Avenue, Dhaka- 1216.

4 4. Number of Head Office : 05 5 5. Business Line : Land Develop and Flat Sale 6 6. Number of Permanent Staff : 2000 7 7. Number of Handed Over Project : 176 8 8. Number of On-going Project : 87 9 9. Number Land Taken Over : 125 10 10. Number Flat Sale upto 2007 : 1937 11 11. Number of Flat Sale upto May 2005 : 934 Objective of the study The present study was planned and undertaken with the following specific objectives: 1 To analyze of progress of the Asset Development & Holdings Ltd. 2 To analyze statistically of its of Market/Demand 3 To analyze effective zone for marketing 4 To analyze effective price for marketing 5 To analyze barrier of marketing 6 To make decision for the cost effective marketing policy and business.

7. Concord real estate & building products Ltd. About Concord Concord Engineers & Construction Ltd. was set up in 1972 as a small engineering and construction firm, it is therefore one of the oldest business houses in the country. In time, Concord has grown to be one of the largest construction conglomerates in Bangladesh.

Concord’s credibility and dedication to quality is well established and has won us some of the most prestigious and technically challenging projects in Bangladesh as well as many awards as recognition for our work. Recently concord was adjudged by a panel of eminent juries as the “Enterprise of the year 2000” in recognition of outstanding leadership quality and as a role model in corporate business.

Concord distanced itself from a Laissez-faire attitude in business and strived all throughout for quality. Concord also continued to acquire advanced knowledge & technology so that better methods may be devised and evolved for the benefit of their clients in the form of quality end products. Some of our well known projects are • The Prime Minister's Secretariat • Zia International Airport • T The National Monument at Savar • he low-rise block of the Sonargaon Pan Pacific Hotel • CIBA -GEIGY Pharmaceutical Plant at Tongi • The 200 bed hospital in Narayanganj • The VVIP Residence at Hare Road • The VVIP Rest House at Testa Barrage Complex • The 24 storey Janata Bank Head Office Building • The administrative building of Bangladesh T&T Board • The head offices of Titas Gas Transmission & Distribution Co. Ltd. • Bangladesh Oil, Gas & Mineral Corporation • Bangladesh Steel and Engineering Corporation

• • • • • • •

The 22 storey Jiban Bima Tower The 20 storey Bangladesh Shilpa Bank Building(BSB) The 20 storey Islamic Development Bank Building in Agargaon The 750 ft Telecom Tower in Singapore Police Plaza Concord Lake City Concord World Trade Centre, Chittagong

Concord Real Estate is the market leader in the luxury apartment sector of Dhaka. Their projects like The Grand President, The Grand Place Concord, Concord Chameli, Lake Front Concord President Park Concord Aeasthetica Concord etc.have set a standard in the up market apartmentsector that unsurpassed.

Concord Real Estate is known for introducing innovative design ideas to all their projects making each one unique.This philosophy is, “ The purchase of an apartment is the investment of a lifetime. Concord wants you to make an informed decision based on in –depth knowledge of the developer, quality of workmanship and investment potential pf the apartmentConcord Real Estate has also developed many high- rise mixed –use projects including shopping malls,office spaces & high rise apartments.

8. Navana real estate ltd. . About Navana Real Estate Ltd. Navana Real Estate Ltd. (NREL) was formed in late 1996 under the Chairmanship of Mr. Shafiul Islam Kamal to cater the boom in Real Estate Development in Bangladesh NREL within a short span of time turned out as one of the most trusted company in this sector and has already been working in various numbers of apartments, commercial and land projects. The motto of NREL is not only to deliver apartment or land ahead of schedule but also to maintain the highest-grade construction quality that has gained trust and respect in customers.

Board of Directors : Mr. Shafiul Islam Kamal - Chairman Mrs. Khaleda Islam - Director Mr. Saiful Islam Shumon - Director Mr. Sajedul Islam - Director Corporate Office : House No. 35, Road No. 9/A (New) Dhanmondi, Dhaka, Bangladesh.

Tel : 9121602 (Hunting).

Fax: 880-2-9118292 Email : info@navana-realestate.com Head Office : Islam Chamber (4th floor) 125/A, Motijheel C/A, Dhaka-1000.

Tel : 9552212, Fax : 9566324.

7.3 Turn over per year & revenue to government:

Policy Implication and Findings by: Rupayan Housing Estate LTD 8.1 Policy implication: Every cloud has a silver lining; this is also true for real estate financing problems in Bangladesh. The following recommendations are nothing but switches to the lights. If these switches are properly put on, the problems of real estate financing can be overcome: Long term finance &Minimum rate of interest by the government & other financial institute Consumers of real estate product are not fever able situation for due to high rated of interest of housing sector. Presently normal interest rate is 14% to 16% of real estate product, at present Bangladesh bank. Declare the 9% interest impose of Semi economy flat up to 1200 Sft. If in positive issue of this sector but this rang of investment are very limited capital 300 crore.

So it may 5 to 10% consumer may achieve this facility .This decision of government is positive sign of real state business. And another issue is term of financing. Where develop country financing in real state sector by long term financing which is normally 25 to 30 years.

But our financial institute and government institute are investing 15 to 18 years installment.

So I thing our government & other financial institute are decided minimum interest and investing long term financing. Then perform of real state and housing and perform well and fever able.

Minimize registration cost for apartment or plot Registration cost is another problem in our real state and housing industries. Presently this registration cost of apartment or plot is nearly 16.50% to 17% which is barrier of apartment or plot purchase and secondary market of real state sector. The country did not making secondary market of real state on housing product due to high cost of re-registration. So government lost huge revenue from this sector.

Where our nearest country India, Pakistan, Sri Lanka’s registration cost is 7 to 9%. So there real state industry is enormous growth and government is achieving huge of revenue from this sector. So my suggestion if registration cost of this sector up to 10%. Then our real state and housing perform better. Manufacturing of low cost apartments (By government) Price of land of very high, cost of construction of apartment is also high. So apartment price of out of range our middle class people who are majority persistence of our urbanization.

Unused vacant land of government which is near to Dhaka and Chittagong city or accusation of targeted land than government manufactured low cost apartment and distribute among the middle class of urban people by long term financing.

Our nearest country India where class one people are uses 600 to 800 sft. But our government can not provide this so people can not trends the habit.

So if our government initiative the step of the system than real state sector and our social class are increased.

1. Well Target of Subsidy: Support to moderate income borrowers to acquire loans through the private financial sector has proven to be most efficient in developed countries. But in Bangladesh, the chance of getting private sector finance is very low. For those households who cannot use the private sector for their housing finance needs, even with incentive programs, special social housing funds or lending mechanisms are used that provide shorter-term and smaller loans, at concessionary rates if necessary, but which are clearly separated from the rest of the housing finance system. Both types of finance subsidies are set up to be efficient, transparent and well targeted to those who cannot participate in the formal housing finance sector without such support.

2. Proliferation of Micro-credit Institutions: The focus for all micro-finance institutions has been on group-based micro credit for small individual ventures of the lowest income groups in rural and to a lesser extent in urban areas, based on the well-documented system of local support committees. The credit-based income generating activities have been evaluated by several international and national organizations.

These have consistently shown that banking for the poor can have positive results, based on debt repayments as an indicator of program effectiveness. So far, housing loans have been a small part of the group-lending system and of the total lending portfolio of the micro-finance institutions. Housing loans have been targeted to the same clients as micro-credit for incomegenerating activities.

Recently, the larger micro-finance institutions have shown an interest in entering the multifamily residential market for moderate and lower income households. PROSHIKA and BRAC have plans to invest in large-scale low-and moderate-income housing developments 30 to 40 km outside of Dhaka. Some projects will receive free government land. The plan is to develop hostel type rental housing for urban workers and small low-cost family apartments for tenant-purchase. The NGOs have access to international funds, which they complement by borrowing and other income sources. Their cheap sources of funds make it possible for them to make long-term investments in social housing. None of these plans, however, have been implemented as yet. The ramifications of NGOs becoming long-term managers and financiers of multi-family low-cost housing developments have not yet been considered in any detail.

3. Competitive Environment: There is not much competition in the housing lending market and most banks offer the same terms for the different client options. All loans are for new house construction only, and

banks only lend for urban housing in secure sub-markets. While in the past a rural house lending program was sponsored by the government through a 3 percent refinancing window at the Bangladesh Bank, this was stopped because of alleged poor recovery rates. The window of opportunity should be made opened so that new Housing finance companies will enter the market. If competition starts, the higher lending rate will be lowered.

4. Structuring Banking Policy: The reluctant behavior of commercial banks regarding lending longer term (more than 5 year) at lower rates to the housing finance companies should be turned down.

5. Alternative Financing: Although deposit mobilizations by Private sector are not satisfactory, there are few long-term cheap funds available in the economy: ďƒ˜ Entrance of Post Savings Bank: With gross deposits in excess of Tk.9, 000 million the Post Savings Bank could be a possible investor in the housing sector. However, the deposits are considered as government revenues and are not kept in separate accounts. In other words, government uses the deposit for its own funding and it is therefore an unlikely source of housing sector funds. ďƒ˜ Participation of Insurance companies: The large public insurance companies presently only invest in the housing sector through the purchase of BHBFC debentures. Most private insurance companies are still relatively small and invest most of their funds in deposit accounts in the commercial banks. However, the equity investment in DBH by the most successful and innovative private sector life and general insurance companies, shows the potential of further linking the private housing finance sector and insurance companies. The Insurance Act sets, of course, restrictions as to the proportion and type of assets insurance companies can invest in: 30 percent in government bonds, 30 percent in government approved securities and 40 percent in government approved investments. The World Bank and IFC have discussed with the government the option to have insurance companies make their own decisions on investments for 25 percent of their funds. Such a change in the Insurance Act would simplify participation by the insurance companies in the housing finance sector, either as shareholders or loan providers. The development of securitization and debt markets will further facilitate diversification of investments by insurance companies and other investors.

6. International Investors: Until recently, housing has not been a priority sector for external and donor funding. Also, the absence of a swap market in Bangladesh makes it difficult for foreign investors to come in because of the exchange rate risk. The recent investment by HDFC and IFC in a private housing finance company may prove a turning point. Other bilateral investment institutions, such as the FMO of the Netherlands, may consider investments and loan guarantees for new private housing finance companies. Such international funding is important for reasons other than providing necessary capital. It can assist, through its loan conditions and technical assistance, in the establishment of a proper policy and regulatory environment for the sector.

7. Alternative ways to subsidy: Alternative ways of subsidizing those households that could, with some assistance, participate in the formal mortgage market, need to be considered. For example, upfront subsidies that could be applied in any public or private financial institution are used in many countries. These can take the form of a direct transfer or allowance or a buy-down mortgage

instrument, whereby an upfront subsidy is put in an escrow account and used to pay part of the monthly installment for the mortgage over a fixed period of time.

In addition, the government could reduce the stamp-duty and administrative cost of mortgage lending to make it more affordable.

8. Forming Strong Capital Market: International agencies have initiated programs to strengthen both debt and equities markets.

9. Introducing New Mortgage Instruments:  Adjustable Rate Mortgages (ARMs): However, lenders seem to feel that if a rate change is needed they can do so even on older loans on their books. In other words, while mortgages are written as fixed rate mortgages, these are in fact adjustable instruments at the discretion of the lender (ARMs). Borrowers are mostly not aware of this provision, however, and it has not been regularly applied. This adjustment feature considerably decreases the interest-rate risk to the lender, however, which should be reflected in the rate structure. An explicit adjustment protocol or index may be useful to consider.  Alternatives of Graduated Mortgage Payments: Alternatives to the GPM, such as a 12-3-balloon mortgage, buy-down mortgages could be considered to make mortgage loans more affordable in the early years of payment, without the negative amortization features.

10. Dealing with Credit Risks: Credit risk has to be dealt with on the balance sheet as well. Adequate systems have to be developed to classify the loans and deal with the bad debt through special provisions. But the matter of regret is that BHBFC has not yet addressed this issue adequately and the nonperforming loans keep compiling on the books.

8.2 Findings Preliminary findings:  Statistics & studies show that in 2000-2015, urban growth rate has been expected to be at an average of 3.7% for Bangladesh. India – one of the most attractive markets for global real estate is expecting 4.9% growth of urbanization  By 2010, Dhaka is estimated to have about 20 million people that show about 55% estimated growth from 2000. With this amount of people Dhaka is estimated to be the 5th largest city in the world by 2015. This fast urbanization needs enough accommodation and housing supply, which is expected to create a huge market for the real estate sector in Bangladesh.  Real estate sector is growing and has tendency of future growth. The GDP share and growth of Real estate and construction is growing. This indicates a hopeful future for this sector.  Comparative scenario among India, Malaysia, USA and other south Asian countries show that Bangladesh real estate market is in good position. This also shows that it has very good opportunity and scope to contribute the country’s development.  Rise in house rent, increasing demand for housing and population, getting easy financing facility, rapid urbanization, inadequacy of land and many other factors are creating huge scope for this sector to grow.  Demand for housing and apartments has shown increasing trend and expected to increase.

 Supply of apartments also has shown rising trend and showing future growth. No. of supplier is also increasing rapidly.  Findings regarding the house financing system  There are insurance and flexible monthly payment opportunities for the apartment buyers and house builders offered by the private sector financiers.  After the withdrawal of credit restriction (specifying the proportion of deposit funds that could be lent for housing) in 1988, investments in housing sector soared.  The enactment of The Financial Institutions Act 1993 opened the door for private housing companies. The Act kept in focus the basic objective of providing housing to people at all strata of the society especially to the low and middle income people and those without home.  We find that the interest rates vary from around 14-16%. BHBFC can provide loans at a lower rate due easy access to funds and a low cost of capital. Among the other institutions, rate is competitive.  The most common tenure of loan or maximum time allowed for loan repayment is 15-20 years. There is a common practice among the institutions regarding the loan amount considering property values. It ranges from 70-80% of property values.  Though BHBFC does not have other charges but it charges inspection fees @ Tk.3 per thousand for the required amount. The other institutions charges 1.51.75% of the sanctioned amount as documentation fees, loan processing fees, application fees, inspection fees etc.

Findings regarding the apartment development business:  In Bangladesh apartment business is a recent phenomenon, although such activities were initiated sometime in 1964. Ispahani group was the pioneer in this sector. But in early 1980s with the inception of Eastern Housing Ltd., the business started flourishing. Now this is a booming sector of the economy.  The principal advantage that has accrued to the government due to the participation of private sector in urban housing is the apparent release of pressure, on its finance and administration.  Throughout the study, some crucial factors have been identified which affect the apartment development in Bangladesh. These have been classified into nine heads: Macro-economic factors, Legal frameworks, Competing housing institutions, Fiscal policies, Cost-benefit factors, Financing opportunities, Infrastructural facilities and Social facilities  The developers have expressed the pinion that the price of apartments will go up by 20-40% due to the fact that the building materials have now become dearer.

Tk.500 would be added to the present rate (per square foot) of the flats in up to six-storey buildings and over Tk.500 to the rate of the ones in the high-rise buildings.  The real estate sector is one of the most attractive sectors for the investor for its high profitability In REHAB Fair 2005 the member organizations state that they are now are earning on an average at 10-15% as the market has become highly competitive  Price of steel, rod, cement is in increasing condition though demand is increasing.

With the rapid urbanization and increase in real estate business, price and demand for rod, cement and steel – these basic of building construction materials are increasing.. The price of cement has increased by 32% this year from 2003 till

now .The price of rod has been increased by a devastating 100% approximately.

For import lack the price for electrical wire has gone up by 100% recently.

Findings regarding the Demand side: Buyers perspective  The majority of the apartment buyers (both male and female) were in the age group of 35-44 and 45-54 years. A considerable number of them were from in the high age group of 55-64 years.  The average number of the family members living in each apartment was 4.39.

But around 70% of them had 4 and 5 members in their families  Higher educated people were the major buyers of the apartment. The preponderance of the higher educated people in apartment living culture in Bangladesh was due to quick acceptance of the new ideas prevailing in by the developed and developing countries.  Service is the major occupation of the vast majority of the apartment buyers. This indicates that people in service in urban areas in both government and private organizations bought apartments. Around 40% of the total apartment buyers were in this group. The second highest profession of the apartment buyers was business.

These two groups of people covered the major portion of buyers that is around 70% of the total samples.  Almost all the buyers (93.3%) used their apartment as their own residences. So it can be concluded that the apartment buyer, buy their apartments for their residence.  It was reported that 58% of the buyers preferred to buy apartment instead of buying land and constructing a house thereon independently for avoiding various troubles involved in buying land and construction work. The second highest (33%) viewed that they bought the apartment for security reason.  Price of apartment is the most important factors for a buyer to select the site of the apartment. Fifty eight percent buyers informed that they bought apartment of a particular site because they got price advantages of the apartment in that area.

Forty two percent respondents replied that they bought their apartment by considering communication facilities.  The survey revealed that 35.% buyers came to know about the project through personal inquisitiveness. The second highest (28.33%) media was mass media which included newspaper, journals and magazines and electronic media etc.  The apartment buyers have selected the apartment companies after considering so many factors, such as reputation of the company, experience of the company in this line, buyers previous experiences about the company, price offered by the company, project location, status of the company either private or public ltd. etc.

Findings regarding the regulatory framework:  The Master Plan (1960) is out of date as a basis for development management.

The Bangladesh National Building Code (1993) which was intended to ensure safety in construction has not been made mandatory. The Building Construction Rule (1984) demands a great deal of information from the applicant, but imposes very few compliance requirements on him.  The procedures involved in the enforcement of law such as taking permission before development and construction were felt to be cumbersome.  It was found that a developer has to apply to eight different authorities including WASA, DESA, Titas, Fire Department, civil aviation authority and ward commissioner for permission, which costs money and time.

 Non-bank financial institutions are regulated under the Financial Institutions Act of 1993. BHBFC and the Grameen Bank have been set up by specific Acts of Parliament, and fall outside of the jurisdiction of these laws.  Monitoring of the NCBs and other state-owned or partly state-owned financial institutions such as the Grameen Bank and BHBFC is done by the Ministry of Finance.

Findings regarding problems of the sectors:  The Developers have to face many problems and the effect goes on the product, price, and above all the demand. Disturbance of toll collectors who are known as ‘Mastans’, lengthy & complicated process in obtaining legal documents and the failure in timely payment of installment by buyers appear to be the major areas of problems.  A main distortion in the savings and debt system is the high rates offered by various government savings plans compared to market rates offered by private deposit taking institutions. The plans have created an inverted yield curve where lower risk savings instruments carry higher returns than higher risk instruments.  The BHBFC has access to lower-cost funds and is not yet required to incorporate adequate bad debt provisions in the overall cost of credit. This allows them to set their lending rates below the market rates, making it difficult for the private sector to compete and, therefore, suppressing the development of the private mortgage industry.  Debt markets are, however, not well developed and revolve around the commercial banks and DFIs. With the weak position of the NCBs, debt markets play a small role in the housing sector outside of BHBFC. The apartment Industry presents more of opportunity than threats. The enormous strength of this sector surpasses its minor weaknesses. We can conclude that the apartment business is economically quite viable and highly profitable for investors and financers.

8.3 Suggestions In a bid to cut housing pressure on Dhaka the government should earmark some areas and develop lands around the capital to build satellite townships. Housing-sector problems will not be resolved unless the supply is increased. Government can develop facilities such as infrastructure and communications to enable private developers to venture into more housing projects. The government has made an ordinance to restrict developers to take up new projects. But it should take some other necessary steps to develop the sector before enforcing the law.

The Government should priorities the development of areas adjoining Dhaka. If future infrastructure and road links are mapped out, developers will have a clear idea about the areas available for development. If the government follows these guidelines, he believes, the number of housing products will increase manifold, as developers will kick-start new projects without hesitation. Builders will be able to invest money if they know about future infrastructure development of the location. The major setback developer’s face is the absence of area demarcations. “No- one knows when and from where new roads will be constructed in a particular area, in the next few years. On the living standards of the general mass in Dhaka, the awful living conditions of Dhaka residents will not improve unless the government shifts a portion of the population out side. Equally, people will only move but when they know that commute to and fro Dhaka will be accessible.

To ensure housing facilities in the capital, the supply of apartment needs to be increased, but there remain some bottlenecks that hinder the expected supply of apartment. We should identify inadequate roads and highways, infrastructure, an absence of integrated plans and high land prices as the main reasons behind the condition.

It can be optimistic that land and apartment prices will fall in the next decade, with infrastructure development taking place outside Dhaka , Development project should not be concentrated upon a few areas in the capital, The price hikes of construction materials, such as rod, brick and cement, are the main contributor to high apartment prices. But high prices of apartments solely to the scarcity of land in the capital.

The out –of-reach apartment prices in Dhaka prompted Concord to venture into the Lack City Concord project, offering apartments at affordable prices. Another Concord project at Khilkhat in Dhaka consists of more than 3,000 apartments, sized between 558 to 1445 square feet.

We should reduce the construction prices to make apartments cheaper instead of making the construction of small flats to keep prices within reach the reach of the mass.

We should use of modern construction technologies is an ideal way to cut construction prices, Most buildings in Bangladesh are built with bricks in walls and partitions- this is our trend, “This is because Brick walls collapse even in moderate earthquakes, wreaking havoc on lives.”

The substitute for bricks is reinforcing blocks, which generally do not collapse in earthquake.

Concord uses such tremor- resilient hollow blocks in their projects.

8.4 Conclusion Real estate & housing sector of Bangladesh’s is a model of efficiency – Real estate & housing sector have yearly turnover taka 1500 corer that directly accounts for 15 percent of the Bangladesh gross domestic product (GDP) and revenue to government about 150 corer per year. Now near about 30 luck people are working in this sector direct and indirect basis which is the major part our economy. Our residential real estate market is also a model of competition providing significant opportunities for aspiring entrepreneurs as well as costefficient mechanisms for Manufacturing and selling the products.

Change in Real estate & housing sector reflects the following paradox: the more things change, the more they stay the same. Real estate firms use the latest technology to provide sellers and buyers with information about properties, but real estate professionals play the same role in facilitating real estate transactions. Changes in technology, the economy and the competitive landscape are transforming the environment for real estate industry. The industry is evolving and creating a wealth of opportunities for all types of Real estate & housing sector. While the future is never certain, real estate professionals’ willingness to adapt and change will help the market participants grow and prosper, which is good for the economy, good for household wealth accumulation and good for every working Bangladeshi family wanting to achieve the dream of homeownership. We found from this reach’s if lets 100% growths from the beginning that 60% of growth achieves from 2000 to 2007. So its grate achieve and performance of this sector.

List of References Paper resources: 1. Prospectus of Rupayan Housing Estate Ltd. 2. Housing Finance and the Economy: Regional Trends, South Asia Perspectives – by, Renu S. Katnad, Executive Director, Housing Development Finance Corporation

(HDFC) – India, June 23, 2004, Brussels in 25th World Congress for International Union for Housing Finance.

3. Increasing Access to Housing for Low Income People in Bangladesh Through Income and Employment Generation – by, Mrs. Sanzida Khanam: Executive Director, Badhan Society (NGO), Access to Services Program of ITDG –Bangladesh, 12, 13, 17 September 2004, World Urban Forum, Barcelona 4. Strengthening the role of Private Sector Housing in Bangladesh EAconomy: the Policy Challenges, Prepared and Presented at Center for Policy Dialogue (CPD) by Dr. Debpriya Bhattacharja on dialog for housing sector in Bangladesh, Novermber 2003 5. Asian City Development Strategies, Fukuoka Conference 2000 6. Housing Finance in Bangladesh: Improving Access to Housing Finance by Middle and Lower Income Groups, by Marja C. Hoek-Smit, Prepared for the Government of Bangladesh, Ministry of Local Government, Rural Development and Co-operatives and UNDP/UNCHS (Habitat), December 1998.

7. Social Intermediation for the Urban poor in Bangladesh, by Dr. Dibalok Singha, Executive Director, Dustha Sasthya Kendra (DSK), DFID Regional Livelihoods Workshop: Reaching the Poor in Asia, May 08-10, 2001.

8. Executive Intelligence Review:” Fannie and Freddie were lenders”: U. S. Real Estate Bubble Nears Its End, by Richard Freeman, June 21, 2002 9. Weber’s Perspective on the City and Culture, Contemporary Urbanization and Bangladesh, by A. I. Mahbub Uddin Ahmed, Professor of Sociology, University of Dhaka.

10. The corporate News Letter of concord group Issue 2/April-June, 2001 11. Let’s drift out of Dhaka- suggestion of Chairman, Concord Group of Companies- to fix the housing crunch- Published in daily Star Net Resources: 12. http://www.indiaproperties.com/link/newsletter/re_news.asp 13. http://www.ibef.org/industry/realestate.aspx 14. http://www.indiaproperties.com/link/newsletter/re_news.asp 15. http://in.mutualfunds.yahoo.com/040706/93/2et5b.html 16. http://rozwat.com/pages/science_fin_re_article002.htm 17. http://www.bangladeshsociology.org/Max%20Weber%20-%20Mahbub%20Ahmed.htm 18. www.Idlc.co 19. www.dbhbd.com 18. Real estate & housing association of Bangladesh (REHAB) 19. www . rehab–bd.com 20. www.google.com 21. www.yahoo.com 22. www.imag.googhe.com 23. www.concordgrup.net 24. www.navana-realestate.com 25. WWW.webbangladesh.com 26. Real estate yellow pages.

Acronyms • BHBFC • IDLC • DBH • NHFIL

Bangladesh House Building Finance Corporation Industrial Development Leasing Company Delta Brac Housing Finance Corporation Ltd. (DBH) National Housing Finance And Investments Limited

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HSBC

:Hong Kong and Sunghai Banking corporation

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SCB

Standard Chartered Bank

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EMI

Equated Monthly Installments

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KDLC

Korean Development Leasing Corporation

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IFC

International Finance Corporation

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AKFED GDP

Aga Khan Fund for Economic Development Gross Domestic Product

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REHAB

The Real Estate & Housing Association of Bangladesh

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RAJUK

Rajdhani Unnayan Kartripakkha

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DCC

Dhaka City Corporation.

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DMDP

Dhaka Metropolitan Development Plan

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UNCHS

United Nations Commission for Human Settlement

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DAP

Detailed Area Plan

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SPZ

Spatial Planning Zones

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UAP

Urban Area Plan

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FAP

Flood Action Plan

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BB

Bangladesh Bank

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NCBs

Nationalized Commercial Banks

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ICB

Investment Corporation of Bangladesh

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BASIC MOF NBFI MLGRDC

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NGO SWOT ARMs GPM ASTM BNBC RCBM CBM

Bank of Small Industries and Commerce Ministry of Finance Non Bank Financial Institution Ministry of Local Government, Rural Development and Co-operatives, Non Govt. Organization strength, weakness, opportunity, and threats.

Adjustable Rate Mortgages Graduated Mortgage Payments American Standards testing materials Bangladesh National Building Code Reinforced Concord Block Masonry Concrete Block Masonry