ECONOMIC SIGNIFICANCE OF REAL ESTATE BUSINESS IN BANGLADESH:
Being one of the three basic needs of a human being, residential real estate and its financing have a dominant role in the national economy particularly for the reasons mentioned below. Firstly, due to our chronic poverty people of our country, except a very significant part, don’t have sufficient income to generate savings after meeting all of their requirements.
Secondly, real estate provides a long-term security for individuals. They also feel more secure to stay in their own house. Moreover, the tangible nature these real estate has always a strong appeal for many people due to the fact that it is one of the most safe kind of investment. Thirdly, after liberalization of Bangladesh, movement of people from rural area to urban areas for better facilities increased tremendously. Consequently, pressure came from housing accommodation to provide the needs of rapidly growing cities, and due to the migration of rural people towards urban areas resulting over crowded condition, increased value of land, shortage of space in the urban areas, high level of rent in the cities etc. People are now more interested to purchase land in the urban areas. Finally, to improve the working ability and the efficiency of work force of the economy, better housing facility is one of the important weapons to motivate. Better housing facility can also be termed as one of the criteria of high standard of living. In the above circumstances importance of constructing adequate number of house can not be exaggerated.
Bangladesh House Building Finance Corporation as the main institutional source of housing finance came into existence in 1973 as the successor of HBFC established by the then central Government of Pakistan in 1952. The main objective of HBFC was to provide financial assistance for construction of new houses, repairing and remodeling of old houses in the cities. On the other hand, the National Commercial Banks (NCBs) are required to extend housing credit facilities up to 5% of their total demands.
FINANCING PATTERN OF REAL ESTATE BUSINESS IN BANGLADESH:
Real Estate forms a significant part of an economy which is understood as assets having fixed location consisting land and buildings plus property rights representing income and income potentials. Real estate resource is defined in terms of its physical characteristics represent the fixed location and physical, legal and economic characteristics. Physical existence represents the fixed location and physical existence having a long duration.
Legal characteristics represent certain legal rights in the property obtainable through purchase or other contractual agreement. And finally, economic characteristics represent its ability to serve the needs of the people, i.e., to generate income in terms of monetary return or direct use. The real estate resources may be classified as residential real estate, commercial real estate, farm and rural real estate. Our interest in the commercial real estate. It goes without saying that the growth of such real estate takes place in the society primarily to meet the accommodation needs of human being. In broader sense the use of such real estate is essential to the members of the society because it provides them shelter; comfort, convenience, privacy, place of work, recreational facilities and other related services.
PROBLEMS OF REAL ESTATE FINANCE IN BANGLADESH:
Bangladesh is the eighth largest country in the world in respect of population. According to the report published in UNDP Human Development Index 1995 Bangladesh ranks 146 among 173 countries that reflect low expectancy, low education attainment and low GDP per capita. There is a great imbalance of population distribution over the country regarding the Division. The population distributions regarding the six divisions are shown in the following table:
The variation is quite uneven being highest in Dhaka. Among the districts Dhaka is the most urbanized district of the country with 29.76% of its population living in the urban area.
The situation of excessive urban population has resulted in very serious housing crises all over the country especially in the capital city. Due to the high rate of population growth and migration of rural people to urban areas the need for residential houses in cities has increased tremendously. The growth of house building on the other hand could not keep pace with the demand in urban areas.
1. In real sector only 1 % of the residential houses are of the permanent type, 15% semi permanent and 84% temporary type, in the urban sector the corresponding figures for permanent, semi permanent and temporary houses were 22%, 24% and 54% respectively.
The growth of the urban population has concentrated around four major cities mainly Dhaka, Chittagong, Rajshahi and Khulna. If the population continues to grow, to provide additional shelter for additional number of people we need more housing units. The various causes including the high growth rate of demand for urban housing units, less affordability of people, lack of government effort and lack of private initiative to construct residential building etc. called institutional finance for housing sector. As a result the real estate business emerged for the growing urban population and turning out the Dhaka city as a Mega city. It will not be so far that Dhaka will be declared as one of the Mega cities in the world.
Real estate as a business in the economy of Bangladesh is a recent phenomenon and mainly concentrated in Dhaka city. As a business real estate is still to be shaped in our county like that of other competitive businesses. Such business is neither governed by any regulations nor getting any facility from the government. The business has certain peculiarities that are not found in other types of business.
PROBLEMS OF REAL ESTATE BUSINESS:
The task of marketing is not an easy one, mainly fro such for such fixed asset, which cannot be replaced, again, now we are living in a very fast changing world. The demand of the people is also
changing frequently and the result is a difficult position for every company to meet the changing customer demand. In case of marketing and other function the companies marketing each department faces the following problems:
Lack of customer faith:
The most difficult job for the marketing executives to create faith on customers mind. They always hesitate to make such purchase decision. They hardly believe the company and its projects for the following reasons-
- There is no direct government supervision in these sectors. So, they feel increase to make purchase from the company.
- There is no proper government policy to guide the business of this sector.
Lack of knowledge of customer regarding house:
So, it takes time to make the customer understand for the marketing personnel.
Failure in Commitment:
Sometimes the company fails to hand over the plot or flat within the specified period for several reasons like shortage in raw materials, legal buildings, delay in preparation of necessary papers etc.
It is another major problem in marketing. Due to political unrest, construction and development works delayed which delay the whole project. For this, the hand over date is also extended. It reduces the goodwill of the company and customer faith.
Natural climate like heavy rainfalls, flood, storm, earthquake, etc; always delayed the project works. So, unfavorable natural calamity is one of the main problems of this business.
Competitors change their policies frequently. For this reasons, change in policy occurs regularly, which involves huge cost.
Government provides no initiative for this business. Which is also considered as another major marketing problem. Through it is a fast growing business it is not yet considered as an industry.
Bureaucratic Retard ness:
Red Taoism in approving plans by the RAJUK and other delays by the responsible authority.
- Miscellaneous: Disturbance of illegal collectors of subscription, corruption, from government and non government bodies.
Lack of implementation of plan:
The National Housing Policy of 1993 proposes a comprehensive approach to both the public and private housing finance system. But unfortunately a well concaved plan, if not implemented is of no use, it doesn’t give any benefit. There is an institution style National has two primary roles. To play, these being, financing the housing finance companies and regulating the housing of these companies.
STEPS TO BE TAKEN TO REMOVE PROBLEM:
The above presentation, analysis and observation certainly give us a direction towards the improvement of the institutional arrangement for housing finance. Since the institutional sources can meet even less than 3% of our urban housing need, to help the individuals and to alleviate the urban housing problems, the following steps may be recommended-
● The should be a sound housing policy keeping in view the need of the middle class and lower meddle class urban people. The credit policy of the financing institutions as well as BHBFC should be redesigned to meet the middle and lower meddle class as the major target group. The maximum ceiling of loan and construction rate per sift should be increased, viable repayment schedule be introduced and initial investment requirement be reduced. The loan policy should be redesigned in such a way that the borrowers can get the sanction and disbursement of adequate amount of loan to complete to house in time. Moreover, the corporation’s function should not be confined within the lending operation rather it should take initiative to construct apartment buildings of different size in different areas of the cities and than allot the apartment on the long term lease basis among the customers who don’t have any house or apartment in the cities. Since the people of our country are of different alternative types of mortgagee for house building lone has become essential to make the access for different groups of house building lone market easy and convenient.
● To alleviate the financial crisis, the corporation should take initiative to raise fund from private investor, domestic, and international financing institutions etc. through the sale of common stock and bonds. The government should also give separate management to allocate fund for BHBFC in its five year plans. To improve the recovery situation the corporation also should strengthen the motivational measures. The corporation should invite the defaulters in the head office and gold discussion with them to identify thei8r problems intensively. The unintentional defaulters might be given some concessions in the from of lower interest rate and time extension. But the international defaulters should be handled strictly. Legal action in the from of auction sale of the mortgage property should be execute for them immediately.
● The nationalized commercial banks and scheduled banks also should redesign their loan policy, particularly in respect to maximize loan amount, repayment period, interest rate etc. Repayment period should from 20 to 26 years. In this respects the BHBFC and other nationalized commercial banks should frame and follow more or less similar policies. What is more important for the nationalize banks is that they should give more emphasis in housing sector as a priority sector like other sector of our economy. There should be specific quota for house building loan to be sanctioned and be disbursed by the commercial bands like in other sector of economy. Moreover, establishment of one or mere house building banks in private sector would help the development of a competitive real estate financial market as well as would help the real estate customer’s access to the financial market to meet their demand for house building loan.
In a world, where a better quality of life is becoming increasingly available to growing numbers of people, The Bengal One Creation Ltd has a vision of bringing these new standards of living to the people of Bangladesh. Having been established at the time of the birth of the nation, it is appropriate that the group reaffirm its commitment to this at the down of the new millennium.
During the past quarter of a century, The Bengal One Creation Ltd has come of age right along with Bangladesh. The Bengal One Creation Ltd has grown to become one of the largest constriction conglomerates in the country-ever expanding, diversifying, setting trends, breaking record and rising standard. Now there are a number of good real estate companies in our country. Before they provide loan on residential or commercial construction of building but now they also invest in land development.
The demand of this type of construction has an increasing trend, which is also support by the huge increase in population but less supply of land. So, real estate has a bring future in our country. Although the residential demand of real estate business fall because of non-maintenance of stipulation by different real estate companies. But the turn to single family from join family will also show on increasing demand of apartment business. Bangladesh government should provide some benefit to these real estate companies to expand their business in large scale so that the country can properly utilize its wasteland and reduce some of its housing problem. By providing a house to member of each in income group it will lessen the inequalities of income distribution in the economy. But the sector itself has to be made strong otherwise, the people the economy and above all the country will be devoid of all its benefits.
1 THL should increase more skilled manpower to do its activities more efficiently, so that many of the employees do not have to take mental pressure to handover the projects in time.
2 Adopting the latest office automation is very important for delivering swift customer service as well as continuing smooth activities.
3 Maintaining internal quality management through training to its employees.
4 Inclusion of more subjects based on the effective design and construction and marketing in the Training courses of the THL Training in order to develop expertise.
5 The authority of THL should give more emphasize on modernization of customer service.
6 It should open a customer care window to update the information about their project’s completion.
7 THL should appoint a sufficient number of women employees to deal with woman clients, professionals or officials & open Women desk to consult with the women because most of the women clients booking their flat for their family.
8 To follow the RAJUK plan for a safe, secured, environmental accommodation. To give the security of apartment buyers that the project will be handover in time and the materials will be used same as the contract is made.
9 THL needs venture capitalist from idle asset holder.
10 To establish and develop a market drives leadership and lays great emphasis on securing of quality business.
11 Through pragmatic and market friendly policies to continue increase in volume of business.
12 Product / Service expansion
13 Provides highest level of satisfaction to customers and appraise feedback by questionnaire.
14 REHAB needs to establish a common market place where buyers both home and abroad will find all products in a single location.
15 Project type, Land area, Consultant, No of apartments, Size of apartment, Total car parking should mentioned specifically.
16 General terms and conditions should be mentioned clearly.
17 The estimated cost and estimated sales revenue should appropriately measured because it will give the idea about pricing that will give revenue and will give the business a clear position.
18 Profit maximization should not be the motto.
19 DAP implementation should be in mind for future generation.
20 To keep in mind the middle class customers and prepare the apartment for them.
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