Real Estate and Construction Industry play an important role for sustainable development of a country. The construction industry is an important sector for physical expansion and economic development of the country. This sector is well linked with human settlements, employment and environment it is recognized that the health of the Real Estate Development sector is the barometer of the national economy.
Real Estate Development in private sector in this country started in pre-liberation days when Eastern Housing Ltd. In the mid-60 undertook land development project known as “Pallabi Project” for housing purpose in the Mirpur area of Dhaka city. Due to the absence of an appropriate urbanization policy, urban growth and urban development is basically Dhaka centered.
Now-a- days the population of Dhaka city has been increased at high rates, but the are has been increased at low rates. There is no magical solution to the present or future housing problem of the city. Government has made lands available for modern housing by earth filling low-laying areas of Dhanmodi, Mhammadpur, Mokhali, Cantonment, Gulshan, Banani, Baridhara, Uttara, Mirpur, etc by his own initiative.
Learning from this experience of Government or utilizing this technology in 80s of the last century various Real Estate Developer companies were established. People want to have their house near their working place. They expect that their loving place will be calm, quiet and peaceful, so looking at demands the people “The Bengal One Creation Ltd.” Has developed several projects on which I worked.
OBJECTIVE OF THE STUDY:
- To describe the present real estate scenarios in Dhaka.
- To diagnose various activities and role of s Real Estate Business in Dhaka.
- To understand about the performance analysis of Real Estate Business in Dhaka.
- To find out the recent problem faced by the Real Estate Developers in Dhaka.
- To identify how the real estate business contribute to solve housing problem.
- To investigate the potentiality of real estate business.
METHODOLOGY OF THE STUDY:
In order to find out the Real state business and measure the customer satisfaction level of private scheduled firm I have used various method to collect and present data. Mainly I used two types of data for this purpose-
1. Primary data
2. Secondary data
This report has been prepared through extensive use of secondary data. Primary it is collected from group of people who are related with this office. The following methods are used in collecting primary data. These are
I have collected data from the executives, officers and clients with the protested and well designed questionnaire.
I have gathered data through personal communication with the officers, executives, managers and clients of the this branch.
I went to every department of four office related this business and observe their activities.
Secondary sources are those which are published or processed materials. I have collected secondary data from the following sources-
LIMITATIONS OF THE REPORT:
When I developed this report, then I had to face some problems, which disrupted the fulfillment of this report. There were several constrains while preparing this report. Only three months were not sufficient to visit all the desks of the division. Some desks were remained unvisited moreover some officers in desk were found non-cooperative. In course of my internship I faced a number of problems, which may be termed as the limitations of the study. These are as follows:
i) I could not spend sufficient time required to make an in-depth study on such an important subject because of office time constraint.
ii) Sometimes it was very difficult to get sufficient help from the employees of The Probashi Palli Ltd due to their limited executive hours.
iii) They did not give us exact information for maintaining their secrecy.
iv) It was very difficult to get the actual information. In many cases, the questionnaire had to be explained elaborately to the respondents.
v) Sufficient records, publications were not available. The constraints narrowed the scope of real analysis.
vi) Sufficient information was not attainable because officers were very busy with their day-to-day work; they could hardly provide enough time.
vii) Last but not least lack of time has also limited the scope for the research work.
HISTORICAL BACKGROUND OF REAL ESTATE BUSINESS IN BANGLADESH:
Real estate business, especially apartment project was started in the late 70s in Dhaka city. Ispahani Group is the pioneer in this sector. But early 80s with the inception of Eastern Housing Limited, the business started flourishing. Now this is a booming sector of the economy, more than 350 real estate developers are now active in this business.
Among the vital reasons behind mushrooming of this business are scarcities of open in the important areas of the city, hazards of purchasing land and constructing building and rapid increase in population. For those reasons people are switching to the developers to get well constructed ready made apartments. Decrease in bank interest also resulted in increase in purchasing apartments as a safe investment. Because price of apartments is increasing day by day and rent of apartment is comparatively higher than rent of other constructed flat. Ease of remitting foreign currency by expatriates also helped this sector to grow at a higher pace.
WHAT IS REAL ESTATE?
In our everyday life, we use real estate in some manner; we make use of real estate resources 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 national wealth. Therefore, the manner in which the resources of this magnitude are used has an important effect on the well bring of our people, the success or failure of business firms and the general prosperity of the country.
The term real estate as commonly used has two meanings- 1) it is a name given to the commodity “reality” which includes 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 conduct 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.
SIGNIFICANCE OF REAL ESTATE IN BANGLADESH
A realistic as well as accurate approach for the assessment of housing demand would be by taking into account the prevailing income distribution available for financing shelters. Professor M. Shahjahan Mina in his recent paper, “Urban Housing Problem in Bangladesh” has shown that there was an unmet demand of 175562 housing unit in 1973 and we would need to replace at 3609813 housing units in 1985. Mr. Giasuddin Ahmed in his recent paper “Housing deficit in Bangladesh.” Has shown that the housing unit would be deficit annually about 50 lacs . If we accept broadly the estimate prepared by Prof. M. Shahjahan Mina and Mr. Giasuddin in Ahmed the question arises as to the strategy, which needs to be adopted to implement a sound housing policy. So from the above scenario we can easily perceive the importance of the real estate developers in our country.
So particularly the main reasons of mushrooming of this business are rapid increase in urban population, scarcity of open space in the important areas of the city, and purchasing land building construction decrease in bank interest rate, rent becoming alternate return from investment.
INCREASING POPULATION GROWTH RATE AND HOUSING NEED:
Bangladesh, the 8th most populated country in the world, is over burden with its huge population and alarming growth rate. It has been projected that total population of Bangladesh would reach 141 million by year 2000 with urban population of 37 million i.e.; 26% of the total population. The total population size of Bangladesh was 111.4 million in 1991 and it stood at 129.25 million in 2001. The population density of the country in the two reference years was 720 and 832 per square kilometer. Bangladesh is one of the most densely populated countries in the world and it is estimated that the population of the Country will nearly double by 2050. The number of households in 2001 was 25.36 million, of which 19.44 million were in rural areas and 5.92 million in urban areas. The average size of a household was 4.8. The male-female ratio was 103.8. In 1991, the child-women ratio was 742 and the dependency ratio 102. The growth rate of the population was much lower than 1% during the period between 1801 and 1931. Records showed a relatively high growth rate in 1941. This could be the result of a gross over enumeration of population pushed politically by both Hindu and Muslim religious groups. Also, there was a negative growth of population during 1941-1951, caused by large-scale migration after the independence of Pakistan. The population growth rate was considerably higher after 1951. The rate was 1.93% during I95I-1961, 2.61% during 1961-1974, 2.35%during1974-1981,and1.48%during1991-2010
1.59% (2002 EST.)
Birth rate: 25.12 births/1,000 population (2010 EST.)
Death rate: 8.47 deaths/1,000 population (2010 EST.)
Net migration rate: -0.75 migrant(s)/1,000 population (2002 EST.)
Source- Population, 1801-2010 (in million)
The growth rate in urban population is higher in Bangladesh compared to Asian less develop region and world standard. The growth in urban population has been concentrated around fore major cities, namely Dhaka, Chittagong, Rajshahi, and Khulna. The situation of excessive urban population was in a very serious housing crisis all over the country, the poor economic situation and income inequality in the country is reflected in the quality of the housing stock. It was estimated that close to half of all housing units in the country (3.3 million in 1993) were made of temporary materials and needed replacement within a 1 to 5 year period. Approximately one third of all houses in urban areas were constructed outside of the formal regulatory system, mostly on land to which the homeowner does not have a formal title. A 1993 survey of Greater Dhaka showed that there were 2,100 slums, which comprised 3 million people.
Table “A” shows some characteristics of the housing sector compiled from different Studies conducted by the Center for Urban Studies.
Housing Sector Characteristics of Bangladesh
Total number of dwelling unit: □ Bangladesh 19,020,489. □ Rural 15,474,566. □Urban 3,545.923
Par capita floor space:□ Bangladesh 54.9 sq.ft □ Rural 53.5 sq.ft □ Urban 62.3 sq.ft
Occupancy level in 1991: □ 5.48 PP/dwelling unit
Proportion permanent structures in 1991: □ Rural 21 percent □Urban 46 percent
Proportion pf rental units in 1993 □ Rural 5% □ Urban 40% □ Dhaka 65%
With a population of approximately 124 million people and a land area of 147,570 square Kilometers, the gross density of the country is around 860 people per square kilometer, amongst the highest in the world. In the older parts of Dhaka there are 500 dwellings per hector and in urban slum areas there are more than 2000 persons per acre in single story Housing. While overall population growth has decreased considerably to 1.6 percent per year, the urban growth rate continues to be high (although decreasing compared to previous decades) and is estimated at approximately 4.2 percent per annum.
Table-1 Rate of household formation by locality, 1960-2010
Source: Population census 2010
The total urban population is estimated at 24 million people or close to 20 percent of the total population. Metropolitan Dhaka is by far the largest urban area with a population of 8 to 10 million people, 30 to 40 percent of the total urban population. Estimates of’ the requirements for housing in urban areas vary from 550,000 units to 300,000 annually for the next twenty years depending on the number of backlog and replacement units incorporated in the estimates. In a survey, an estimate of the requirement for new urban housing based only on new household formation between 1980 and 2000 and showed figures of 200,000 to 300,000 per year. Rural housing requirements for new houses are in the order of 3.5 million annually if a two percent rate of household formation is assumed.
INCREASING NEED FOR HOUSING:
The ever-increasing urban population directly and indirectly creates
Pressure on the existing housing options, which manifests in the form of escalating land prices and increasing house rent.
The need to own a house is predominant in the psyche of most middle and upper income group. To build or acquire a house at DhakaCity is a life long dream for them. Owning a house in DhakaCity provides a sense of security, besides for some people, it is also a status symbol; it provides a sense of achievement and self-fulfillment.
DEMAND FOR HOUSING:
The need for housing is a fact that is seldom questioned. However there is a wide gap between the need and viable demand. It is argued that in an aid dependent country with a per capita income of roughly US S 325 per annum the majority simply cannot afford their own dwelling. Even if they had accessed t0 institutional borrowing. Servicing of’ debt for most of them would not be a viable proposition. Their argument has its merit; however there are still those who would be able to afford the investment. The fact that the increasing demand for housing can be indirectly substantiated by the volume of applications received by RAJUK for plan approval and the number of plans approved between 1991 and 9% .
It should be noted that owing to the escalating cost of land and demand for urban dwelling there is an increasing trend for construction of apartments to spread the land cost per dwelling. Therefore, if the number of units per plan is factored in, there is definitely an increasing trend.
Many individuals view housing as a form of secured long-term investment, which provides steady inflation, adjusted earning. With the price of property increasing perpetually, it also ensures high capital gain in tile long run.
The Real Estate and construction industry plays an important role for sustainable development of’ a country- The construction industry is an important sector for physical and economic development of the country. It provides physical expansion and economic development. On the other hand, living space in the city is one of the fundamental needs of all in habitants. The inability of the development sector to meet the increasing demand of housing led the private sector developers to come into the real estate business.
Real Estate Sector also plays an important role for sustainable development of country’s economy. Through providing for human settlement, generating employment to skilled and un-skilled workers and supporting the backward linkage industries, the privet sector real estate and housing industries in-put to the GDP is around 10%- 12% on average. Contribution of the real estate sector to the government exchequer is more than Tk.500 million per year approximately.
However, due to lack of policy support and regularity measures, this potential sector may face a serious setback in the coming years. Absence of time befitting national housing policy and inappropriate embargoes imposed by the Government is pushing this growing sector into a doldrums.
It is our view that one of the reasons behind this negative scenario is the misunderstanding of this sector by the successive governments. Instead of receiving encouragement and nurturing, this sector has been progressively quashed by regressive policies and lack of coordination between concerned agencies.
Some of the current problems prevailing in the housing sector are listed hereunder along with remedial suggest.
HOUSING STATUS IN THE CITY OF DHAKA:
Housing is an enormous problem for DhakaCity. Only 15% of the 9 million inhabitants of the city own their house. 18% live in flats provided by the employer, 34% in rented accommodations, 18% in slumps and 20% is floating’ about 90% of the dwellings of the city are privately owned. Dhaka is the hub of all sorts of activities and therefore the pressure of human inflow into Dhaka and consequently on housing is ever increasing. The density of population in DhakaCity is about 15,000 people per square mile with substandard facilities and by the year, 2025 population per sq. mile will be nearly 32,000. In that case, the city of Dhaka will be in great distress if proper care is not forthcoming. In 1995, most of the areas in DhakaCity did not have enough supply of water, gas and electricity. Price of land in this city has increased nearly 200 times on an average since 1974. A 1982 survey showed that about 70% of DhakaCity people were lower middle to lower class but only about 20% of the lands was in their possession. Remaining 80% was in the possession of the affluent class. Due to rapid rise in land prices most of the land will remain beyond the purchasing power of the middle and lower class people for all time to come. Annual demand for additional housing units in Dhaka is 100,000 units whereas the total new units built (both in the public and the private sector) annually is between 15,00000,000 and there is a clear gap of about 80,000 units, which is alarming. Swamps of between 10-15 feet depth surround Dhaka and it is highly expensive to construct buildings through filling these low lands. Residential plots within DhakaCity cost between Taka 20-30 million per bigha. On the other hand, the cost of residential flats ranges between 1500-2000 Taka per square feet. Thus, about 60% of the city people are unable to buy either a flat or a piece of land.
TREND OF POPULATION GROWTH IN BANGLADESH:
|Year||Population (in million)||Growth Rate|
TREND OF POPULATION GROWTH IN DHAKACITY:
|Year||Population (in million)||Growth Rate|
SOME POLICY DECISION OF THE REAL ESTATE FIRM:
Real Estate firms had to take certain vital decision in order to better market their products these policy decisions are discussed below:
a) Identifying the location: Perspective buyers of the estate property consider the location before taking a final and improvements are stationary, the surrounding neighborhood or the community in which the property is situated is in a constant state of flux and movement. Changes in the immediate environments have a significant effect upon property values.
In determining the location, the firms under study consider whether the land is situated in nearby residential or non residential area then they evaluate the distance of educational institution, market place or shopping centre, hospital and above all communication network to and from the side. As a whole the firms try to select such a site which can be attractive, by the prospective buyers. Besides these, the firms want to be sure about the genuineness of the ownership right of the land.
Fixed the price of the property:
Fixing the price of the Real Estate property is very complex compared to any other business. The Real Estate firms under the study determine the price in there methods.
Land price + construction + margin is the widely used method of pricing following by the real estate firms in Dhaka city. About 75% of the firms are using this pricing policy. It is to be noted here that land and construction costs is calculated at cost price. That is why the form changes higher margin under this method and that range 75% to 100%.
Land price increased tremendously in Dhaka city. The following table exhibits the increased rate of land price during 1974, 1990 and 2005 in different areas of Dhaka city:
Rate of land price inflation in Dhaka city
Area 1970 1990 2010
Baridhara 25 600 8000
Gulshan 25 600 6000
Banani 25 600 5000
Mohakhali 25 600 5000
Dhanmondi 25 600 5500
Azimpur 17 600 3000
Mohammadpur 25 600 4000
Shantinagar 20 600 4000
DOHS 20 500 5500
Shyamoli 17.75 500 5500
Uttara 20 300 2500
Cantonment 20 300 2500
Kamalpur 17.5 400 4500
Sayedabad 17.5 400 3000
Gendaria 10 400 5000
Bahsabo 2 300 1500
Kalyanpur 17.5 300 1500
Mirpur 10 200 3500
Source: T. M ‘Housing problems and Apartment Development in Dhaka city’.
Ascertaining the cost of construction per square feet including the land price is another method used in fixing the selling price of the apartments. Thus the price of apartment very with its size. At the moment firms using this method have been fund selling the apartment @ tk. 15000-2000 per spare feet. This method is getting popularity and followed by about 17% of the real estate firms. Under this method firms can face the competitive situation effectively.
Price escalation with land and construction is a method followed by only 8% of the firms in Dhaka city. In this method the firm charges relative low percentage of profit.
c) All the real estate firms in Dhaka city take resort to advertisement as a measure of promotion. Newspaper and magazine are the media generally used by the firms. The advertisement cost is very low compared to the total cost involved in the business
PRESENT CONDITION OF REAL ESTATE BUSINESS:
With the passage of time, new concept evolves hence new business formed accordingly. Bangladesh is not an expectation of that. As population grows geometrically, more and more people need shelter to fulfill their basic need. It is an impossible task for the government and general people to solve the task alone. And this need give the birth of real estate business.
During 1970s there were fewer than 5 company engaged in real estate business. In 1988 it become 42 working only in Dhaka and now in 2008 there are more than 320 companies engaged in this business.
Now in Bangladesh real estate is one of the most promising and progressive business trends. Its growth rate is increasing day by day and therefore contribution to GDP is also rise remarkably.
Not so far, in 1980’s the contribution of real estate is GDP were not so remarkable enough to mention. But within 10 year of time, it has charged the situation drastically. In 2006- 2007 real estate developers were working in our country. But in 2008 more than 320 company working in this sector.
Where real estate business had no remarkable contribution to the GDP couple of years ago, now in Bangladesh the contribution of real estate developers to the economy are the following.
REHAB organizes its major annual event, REHAB Housing Fair, each year in Bangladesh for the members, financial institution, building material providers and above all, the potential clients. Due to the political turmoil in the country, REHAB was unable to hold the Housing Fair planned for November 06. However, the grand, yearly event will now be held in the third week of February, 2007. Besides, REHAB had already organized a few Housing Fair in New York and London during the past years. These fairs proved to be vary rewarding for the REHAB members from the business point of view, and these also served to enhance its reputation. With the requesting support and encouragement from its members and other stake holders, REHAB will continue to uphold the sprite with its was conceived that of providing shelters with modern amenities for the citizens of Bangladesh and render social service to our society.
THE SPRITE OF REHAB:
In third world countries, urbanization is an outcome of population growth and inadequate development. Migration of the people from rural areas towards the cities also increases when their means of livelihood gradually diminishes. Bangladesh is one of the least developed countries of the world, where the basic needs of the people are not addressed effectively. At the present, with the constitution of our country being extensively and exhaustively discussed by people at all levels, the crucial issues like shelter for all, which is one of the basic rights of all citizens, still remain on the back bummers. To all intent and purposes it is not possible for the movement alone to ensure shelter for its people. Therefore, the role of the private sector developers becomes critical. In Bangladesh, Real Estate business stared its journey in Dhaka sometime in the late seventies. During this sector, with Eastern Housing and property development leading the way. In 1988 there were 42 such firms in Dhaka and now, in 2007, there are 289 companies dispensing similar service.
REHAB is the only recognize organization for real estate development in Bangladesh. Most of the Developers operating in the country are members of the association. REHAB is a class A member of the FBCCI. In recent years, REHAB has played a pioneering role in drafting the new Building Rule 2006, which has already come into effect since the beginning of this year. The Rule, known as ‘Dhaka Mohan agar Imaret Nirman Bidhimala2006’ was formulated keeping in view the rapid growth of Dhaka city. To this effect, series of meeting and seminars were held and finally the Government was persuaded to approve the formation of the’ Nagar Unnayn Committee’ comprising of experts and officials from all related Government department under the chairmanship of the secretary, Ministry, of Public works. The “Nagar Unnayan Committee” started functioning from December 06. Besides, REHAB has also developed the code of conduct for its members. The code of conduct is a policy guideline to ensure the interest of our members and valued clients so that the name and fame of REHAB continues to flourish in our society.
FORMATION OF REHAB:
With the number of companies increasing gradually, various problems and difficulties concerning the grousing sector cropped up, which required proper attention. To solve these problems and to protect the interests of all property developers, it was necessary to from an association for the unhindered evolution of the real estate sector. Accordingly, in 1991, with only 11 members, the Real Estate Housing Association of Bangladesh was formed. The objective if REHAB was to promote the real estate development in the private in Bangladesh.
REHAB has its own office premises (2100 sft.) in the NationalPlaza situated in a beautiful location just opposite to Pan Pacific Sonargaon Hotel and adjacent to Sundarban Hotel. Address of REHAB Secretariat:
Real Estate Housing Association of Bangladesh (REHAB)
NationalPlaza: 6th Floor, 1/G Free School Street, Sonargaon Road
Dhaka -1205. Bangladesh
REHAB has a strong Secretariat with high professional and technical staffs and outsourcers consultants. Some of the services of REHAB secretariat are outlined below:
● Contribute and participate in the planning and policy making of Housing Sector.
● Development public awareness for highlighting the objective of REHAB is to protect the interest of the customer and development as well.
● To provide support to the Foreign Investment to invest directly in the Real Estate Sector of Bangladesh and in its linkage industries on a joint venture basis.
● Press and publication
● Customer service
● Social welfare
● Conduct seminar and training
● Organize Housing Fairs in Bangladesh and abroad.
SOME EXAMPLES OF HUMANITARIAN ACTIVITIES OF REHAB:
(1) REHAB denotes TK. 1 0, 00,000 to the Prime Minister Relief fund;
(2) REHAB denotes TK. 10, 00,000 to the opposition leader’s relief fund;
(3) REHAB denotes for Tsunami Victims in Sri Lanka.
(4) It contributes a lot to the society;
(5) ” Euro Builders” project is being, implemented by the REHAB with the help of European commission.
(6) REHAB denotes for the professional engineers Training.
(7) It organizes International trade fair.
(8) It carries on some social well-being activities.
(9) It organizes discussion, meeting, seminar and conferences.
(10) REHAB meets the British high commissioner.
Save as provided herein in the regulation contained in form B third Schedule of The Act and Trade Organizations Ordinance 1961 under Section-8 all such amendments incorporated vide Govt. order No. MC/ABA-6/CA-4/20021421 dt. 31.7.2002, shall apply to the Association.
The members of the Association shall consists of persons, firms, companies and corporate bodies engaged in Real Estate Development and Housing Industry who apply to the Association for Membership in the manner herein provided and whose applications are accepted by the Executive Committee.
A) The Association shall have only one class of members called General Members. The Annual Subscription of the members shall be Taka.25, 000 –
B) The Admission Fee to Association for members shall be Taka.25, 000i
C) Every candidate for Membership shall sign and deliver to the General Secretary, duly proposed by a member and seconded by another application in the prescribed Form together with the Admission Fee and the Annual Subscription.
D) The decision of the Executive Committee for or against any candidate for admission as a member of the Association shall be final. The Committee may admit
or decline to admit a candidate as they may in their discretion think fit. The Executive
Committee shall not be bound to give any reason for refusing admission of any
E) A candidate thus elected by the Executive Committee, shall forthwith become a
member of the Association, subject to all rules and regulations of the Association.
F) Members representing firms or other body, whether corporate or not, shall be severally. As well as jointly liable for payment of all subscriptions and dues in respect of their membership.
G) A list of members shall be kept in a register which shall be set forth the names and addresses of the members for the time being and in which all changes in membership from time to time taking place be recorded. The Register shall also show the trade and industry in which they are engaged together with the names of the authorized representatives.
A notice may be served upon any member either personally or by sending it through the Registered Post at such members registered address. Any notice sent by post shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary, course of post.
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.