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REPORT ON REAL ESTATE BUSINESS

Real Estate Business


Real estate is a legal term that encompasses land along with anything
permanently affixed to the land, such as buildings, specifically property
that is fixed in location. Real estate law is the body of regulations and
legal codes which pertain to such matters under a particular
jurisdiction and include things such as commercial and residential real
property transactions. Real estate is often considered synonymous
with real property (sometimes called realty), in contrast with.

Land and anything fixed, immovable, or permanently attached to it


such as appurtenances, buildings, fences, fixtures, improvements,
roads, shrubs and trees (but not growing crops), sewers, structures,
utility systems, and walls. Title to real estate normally includes title to
air rights, mineral rights, and surface rights which can be bought,
leased, sold, or transferred together or separately, also called real
property or realty.

According to the Barron’s Dictionary of Finance, the term Real Estate


refers to the piece of land and all physical property related to it,
including houses, fences, landscaping and all rights related to the air
above and earth below the property. Real estate deals not only with
the architectural design and infrastructure of a building but also with
its finance and potentiality. It is an area that is highly influenced by the
population density, income generation and tastes of the people and
economic growth of a country under different period of time.

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 UN declaration and the constitution of Bangladesh.
But it is very difficult on the part of the government of Bangladesh
alone to ensure housing for all. Here comes the need of private sector
real estate development
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Real Estate in Bangladesh


Dhaka City, born during the Mughal Empire and grown with the British
rule, is expanding rapidly. From the beginning of the 20th Century its
growth and latter development is marked with sheer lack of proper and
far-reaching planning. The impact is now being felt at the beginning of
the new century. Dhaka City is undergoing terrific growth phase
throughout the last two decades.

Real estate business especially apartment projects has started in late


1970s in Dhaka City. But from early '80s the business started to grow
and flourish. In 1990s the industry became a major part of our
economy. In 1988 there were 42 such developers working in Dhaka
and now in 2004 there are about 500 large and small companies
engaged themselves in real estate business.

The initial concept of real estate in Bangladesh evoked probably in the


hand of Eastern Housing Limited by undertaking their first land
development project for housing in Mirpur area of Dhaka city known as
“Pallabi Project”. 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 2009 there are about 558 listed in REHAB
and more than 600 not enlisted companies engaged in this business.
And at present, the concept of real estate is getting expanded not only
around developing apartments but also model cities, shopping malls,
major infrastructure, commercial set-up with elaborate view of high
profit margin.

The population of Dhaka city is increasing day by day. With that


increase in all respect the demand for apartments are also increasing
in a rapid manner. A study conducted by research in 2008, shows that
about 73.3% people do not have any apartments or house in Dhaka
city. Among those people about 26.7% are willing to buy apartments at
that time. And 60.5% of the people who are willing to buy apartments
want some sort of financial assistance. And the rest people were ready
at that time to purchase apartments by their own funds. With the
increase in population in the last two years and fluctuation in bank
interest rate and availability of housing finances, the demand for
apartments must have increased.
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To satisfy the housing need of this huge explosive population Dhaka


has attempted to expand vertically. Particularly in Dhaka this demand
is estimated at 60000 thousand units of real estate apartments
combined with 200000 units of replacement plus backlogs. The
approximate turnover in the real estate sector has been BDT.12.50
million, which contributes revenue of BDT.1 billion to the government.
The real estate developers and builders have already supplied
approximately 5000 units to this sector market in the past 20 years.
The sector now employs 1.6 million of people which include architects,
engineer, management official, direct and indirect labor. According to
the Labor Force Survey (LFS), in 1999-2000, 2.1 per cent of the labor
force was engaged in construction, whereas for 1995-1996 the figure
was 1.8 per cent respectively (CPD, 2003). This sector has a strong
contribution to the development of other forward and backward
linkage sector like furniture, ceramics, consultancy, paints, aluminum,
and many others. This is opening opportunities of large employment
and enhancing revenue of the government.

Housing Condition of Bangladesh


It is often said that the housing industry is a fair barometer of the
country's economy. Invariably, a successful and thriving economy is
represented by a booming real-estate market. A few good examples
are Hong Kong and Singapore in the recent past, and India, China,
Dubai at present.

This "barometer" has also performed pretty accurately in Bangladesh,


or, more specifically, in Dhaka. For certain periods of time over the last
ten years, our economy has been prospering, and during that time the
housing industry has witnessed a boom. But if one is to asses the
present health of our economy, based on the condition of the housing
industry, then it can surely be termed "poor."

In the last five years, the members of the Real Estate and Housing
Association of Bangladesh (Rehab) constructed the following numbers
of apartment units in Dhaka:

• 2003 - 4465 units,


• 2004 - 5075 units,
• 2005 - 5785 units,
• 2006 - 6433 units, and
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• 2007 - 5800 units.

As we can see, the rising trend of growth was suddenly jolted in 2007.
One quarter of the way into 2008, from the unofficial information
available, the situation has deteriorated further.

So why is this important sector of our economy ailing? It directly


employs about 1 million people, contributes about 15% to the
country's GDP, and has provided a lucrative and respectable
employment to the country's engineers and architects, which hitherto
was limited to either poorly paid government jobs or migration to the
Middle East.

Furthermore, the housing industry has been responsible for the setting
up of the numerous factories -- cement, sanitary ware, ceramic tile,
UPVC pipe, brick, electric cable, and aluminium section -- and has
single-handedly revived the fortune of the doomed M.S. rod industry.

The simple answer to the above question is the total apathy of the
successive governments towards this sector. Instead of nurturing of
the housing industry with encouraging polices and incentives, it has
been repeatedly held back by regressive polices.

Implementation of the following suggestions will be


helpful for this ailing sector

• Housing was declared as an industry in 1991. But, to date, it has not


been recognized as an industry, and not been given any benefit. To
give a boost to this ailing sector, the government should extend a 5-
year tax holiday in line with the facility offered to other industries.

Until last year, the income tax on this sector under section 53 FF was a
flat rate of Tk.150/sqm. In the last budget, this was increased to
Tk.250/sqm. This amount is payable even if the company makes a loss.

However, if the company makes a profit of more than Tk.625/sqm,


then even though the law has made no provision, the income tax
authority will impose income tax at 40% on the profit above
Tk.625/sqm. If, under section 53 FF, Tk.250/sqm is the final settlement
of tax liability, on what grounds is the income tax department imposing
taxes beyond the stipulated rate?
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This may force companies to under-declare profits and hence create


black money.

• If housing is an industry, why is it paying electricity, gas, water, and


sewerage charges at the highest rates? For example, the garment
industry pays a flat rate of Tk.3.80 /kwh for electricity but the
housing industry, during construction, is paying Tk.10.60/kwh.
Utility services should be provided to this industry at rates that are
commensurate with other industries.

• Capital goods, plant and machinery can normally be imported by


industries at a low duty tariff. For the housing industry, importing
capital goods such as shuttering materials, props, and overhead
cranes etc. should be accorded the same facility.

Presently, we are practicing archaic methods by using wooden planks


and bamboo props. This is not only expensive but also depletes the
environment of precious trees.

• The housing sector uses many imported items, such wooden doors,
mortise locks, electric switches, waterproofing compounds etc.,
which are all basic raw materials for this industry and should,
therefore, be allowed to be imported at a low import duty rate.

• Cement is one of the main raw materials used in the housing


industry, which local manufacturers are selling at a highly inflated
Tk.350/bag. Imported cement would cost Tk.250/bag. However, the
import duty structure has made it unfeasible to import cement.

The government is penalizing the housing industry in order to provide


protection to the cement manufacturers. The housing industry should
be allowed to import cement as an industrial raw materials at the
lowest import duty rate.

• It is heartening to see that the government has finally woken up to


control the sky-rocketing price of M.S. rod. Many projects were
taken up by the developers when the price of M.S. rod was Tk.45,
000/ton, which has shot up to Tk.75,000/ton now.
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The developer has, in the meantime, sold the apartments on a costing


of Tk.45,000/ton for M.S. rod. How is he going to recover his losses?

It is understood that the government is considering giving subsidy for


this abnormal price hike to contractors who have taken on government
construction projects. Why not extend the same subsidies to the real
estate developers?

• The cost of registration of property in Bangladesh is probably one of


the highest in the world. After paying stamp duty, gain tax and
registration charges, the total amount comes to 15% of the property
value.

This cost should be brought down to 10% maximum. Furthermore,


once this registration cost is paid for the purchase of a particular
apartment, there should be a maximum of 5% registration cost
involved for resale of the apartment. This would also give a fillip to the
secondary market.

• From 1999 up to the fiscal year July 2006 - June 2007, Section 19B
of the Finance Act allowed legitimizing undeclared wealth by
investing in the purchase of apartments. After 1/11, the present
government abolished this provision. This was a big blow to the
housing industry.

The finance advisor said that the provision of not to withdraw in the
Finance Act was morally unacceptable and went against the basic
philosophy of the present government. As responsible citizens we
could not argue with the honorable finance advisor on issues of
morality. However, I did wonder whether it would mean that the said
undeclared wealth would now go into the hands of a real estate
developer in Dubai or Malaysia.

Nevertheless, it was encouraging to note from a recent newspaper


article that the government is now once again considering allowing
undeclared wealth (not ill-gotten wealth) to be invested in industries.
Since housing is an industry, one would hope that it is not exempted
from this policy.

• The Bangladesh Bank allocated Tk.100 crore, available for the fiscal
year 2007-2008, for housing loans for the middle and lower income
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groups. So far, the financial institutions have apparently disbursed


less than 8 percent of the money available for the year.

The terms and conditions for this loan have been made so impractical
that virtually everybody is disqualified from availing it. The authorities
should rationalize the policy so that the middle-income buyer of flats
can easily avail this loan.

Housing is one of the basic rights of every citizen. "Housing for all"
should not merely be an empty political slogan. The government
should create an environment with encouraging policies so that the
housing industry can flourish, and this will also be a great boon for our
national economy.

For the last five years this sector grew impressively and showed a
smooth rising trend.

Years Growth (%)


1994-1995 3.49

1995-1996 3.37

1996-1997 3.55

1997-1998 3.80

1998-1999 3.83

1999-2000 3.85

2000-2001 3.4

2001-2002 3.41

2002-2003 3.52

2003-2004 3.60

2004-2005 3.67

2005-2006 3.62

2006-2007 3.51

2007-2008 3.43

2008-2009 3.53
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Grow th of real estate sector

3.9

3.8

3.7

3.6

3.5

3.4

3.3
0 2 4 6 8 10 12 14 16

Contribution of Real Estate to the Economy of


Bangladesh

The housing sector, which typically represents just small portion of the
total economy, accounted for a large part of the overall growth in the
Bangladesh. Economy in the first half of 2005, and notes that more
than half of the private payroll jobs created since the fall of 2001 were
in housing-related sectors.

New and existing commercial real estate constitute a major source of


economic activity within local communities. Many of these
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contributions can be documented and measured in terms of dollar


value, jobs supported/created and housed, personal earnings
generated, sales and value added, and tax revenues produced.

Contribution to GDP

The comparative scenario of GDP shows a steady 6% growth for Bangladesh.


According to the real estate experts, as GDP of Bangladesh is still below that
of other south Asian countries, Bangladesh has more to grow which can be
fostered by the continuous increase in the share and growth of real estate
sector of the country. This contribution of real estate and construction in GDP
of Bangladesh was 16.20% in 1994-95 which became at 16.69% in 2000-1
and attained 17.22% in 2004-5 compared to India, Bangladesh real estate
sector economy is contributing more to the country’s GDP.

Years 94- 95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 05- 06- 07- 08-
95 96 97 98 99 200 01 02 03 04 05 06 07 08 09
0

Contribut 16. 16. 16. 16. 16. 16. 16. 17. 17. 17. 17. 17. 17. 16. 16.
ion in (%) 20 30 40 60 70 72 79 22 12 17 24 30 28 90 98

But Malaysia, one of the most rapidly developing countries as the share at
15.09% while USA has about 16%. This picture of Malaysia and USA shows
that real estate sector can contribute more to countries GDP. Therefore the
real estate sector in

Higher rate of economic growth leads to increase income to people. With the
economic growth of the country, more people are likely to by economically
able to afford a house with necessary facilities.
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Source: Bangladesh Bureau of Statistics (BBS)-2008

Bangladesh as has huge scope to grow. The persistent increase in the


real estate sector indicates that real estate activities have been rising
which strongly supports more future growth.

So urce : Bang lad e s h bure au of st at is t ics 2 00 8

Huge Investment in Real Estate

Construction industry generates huge formal and informal sector


employment. This fact needs to be remembered more generally while
policy making.

Income redistribution through employment generation, skill


upgrading, favorable financing for low-income housing, capital
spending for large-scale civil engineering works, all contribute to
redistribution of national products downwards (social justice
component). On-the-job skill acquisition frequently leads to further
specialization, both in the construction sector and in serving other
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industrial sectors. Skill generation is thus possible by construction


industry.

Generating Enormous Income

It is a recognized fact that the health of the Real Estate Development


sector is the barometer of the national economy. Housing is indeed
one of the most important priorities of any government Real Estate
sector has delivered over 4500 units of apartments during the last 25
years. During the last five year the average yearly delivery were 2500
units. Now all real estate companies are trying to increase their
apartment delivery rate. Real Estate sector contributes to government
revenues through VAT, registration fee, utility connection fee, etc.
amounting Tk. 12.50 billion per year.

Beholding Backward Linkages

This sector has a strong contribution to the development of other forward and
back ward linkage sector like furniture, ceramics, consultancy, paints,
aluminum, and many others. This is opening opportunities of large
employment and enhancing revenue of the government.

Booming Prospects Of real estate business

The construction sector is directly linked with employment. There are


both formal and informal building firms, who undertake works. In the
period 1985-90, this sector

contributed more than 5.55% in GDP. It is estimated that about 1.77


million man/ year in 1994/95 (according to Fourth Five year plan) were
engaged in this sector. A large number of companies/firms in Dhaka
are engaged in construction activities. Construction industry generates
huge formal and informal sector employment. This fact needs to be
remembered more generally while policy making.
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Bangladesh real estate sector has rebounded and is expected to


achieve an impressive growth of 15 per cent in 2010 thanks to the
government's supportive policy for helping recover the sector even
amid global recession.

To boost the sluggish business hit by global meltdown and political


turmoil, developers have taken a move to set up a common digital
market for plots and flats named as Realbazar by this year to attract
the potential buyers globally

Engineer Tanvireerul Hoq Probal, President of Real Estate and Housing


Association of Bangladesh (REHAB), the apex body of the country's real
estate developers, made the forecast immediately after a successful
housing fair in New York last week.

He said more than 14 thousands Bangladeshi people living in the


different states of the USA visited the 3-day REHAB housing fair held in
New York last week. Developers sold plots and flats worth Taka 156
crore on spot and received order worth Taka 280 crore We did not
expect such a booming business this year that has overshoot our
target. Last year, our sales were much lower than our target - only
Taka 60 crore hit by global recession', Rehab president told BSS
correspondent Md Enamul Haque.

The REHAB president said global recession, political turmoil, higher


prices of raw materials and irrational marketing activities due to
absence of a common market place hit the sector during the last two
years and put down its growth rate to nearly 5 per cent in 2009 from
10 in 2006.

"Now we need a common market place where buyers both at home


and abroad will find all products in a single location. To solve the
problem, the country's first real-time financial information service
Dhakabiz.com has developed a digital market place for plots and flats
named as RealBazar. We will soon start it", said MR Probal

The REHAB executive committee at its last meeting approved the idea
of launching a digital market, Probalsaid "Realbazar will be an all-time
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housing fair for Bangladeshi real estate products. Buyers both at home
and abroad will be able to buy plots and flats in a single platform. This
will push up our sales as well as our growth in 2010", he said.

Based on a ground breaking software, the RealBazar will provide


update information of real estate projects and facilitate online trading
platform to buy or sell plots and flats online. Here buyers from
anywhere will be able to buy any plots or flats without the help of
middle Rehab president said.
"We have no specific market place for real estate products. This
hinders the growth of our sales. If we can successfully introduce the
digital market- RealBazar, our growth will continue to rise in the
coming days", he said.

Present condition of Real Estate & Housing in


Bangladesh
Many studies have been carried out of the urban and rural housing and
services situation and housing delivery systems, in particular by the
Center for Urban Studies in Dhaka. 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 (MHPW, 1993). The table shows some characteristics of the
housing sector compiled from different studies conducted by the
Center for Urban Studies.

HOUSING SITUATION IN BANGLADESH


The housing situation in Bangladesh has never been satisfactory. The
majority of dwelling units are temporary, sub-standard, unsafe and
overcrowded. The ancillary physical, social and economic facilities and
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services essential for the development of healthy and harmonious


community life are highly inadequate both in the urban and rural
areas.

Past patterns of community housing development in the urban areas


were largely concentrated on providing housing plots and community
facilities to upper income-groups and houses for the public servants.
The exception was a special program of low cost housing for displaced
persons. In the private sector profit been the main motivation factor. It
was always been more profitable to build houses for upper income
groups.

As a result we have a large backlog of low- income and middle- income


group housing. The current need is, therefore, to restore the balance in
urban housing development by meeting the needs of the low- income
groups and thereby bring about substantial improvement in the living
conditions of the urban poor. This implies a major emphasis on public
intervention for housing solution of this group.

Traditionally rural housing has been taken care of by the villagers


themselves and the public sector did not play any significant role apart
from providing some services and facilities. Since the enormity of the
rural housing problems cannot be tackled in any appreciable degree
through the public sector due to resource constraints, we can only
make a beginning in the improvement of living conditions in the
villages through private sector

The urban housing sector in Bangladesh is facing acute shortage and


poor state of services. Fast population growth, shortage of land supply,
lack of planning, together with social and environmental problems in
the urban sector make it more unreliable for the urban low to middle
income groups. As a result, only a small proportion of better-off people
can afford and enjoy fairly comfortable to luxury housing, while the
vast majority of the lower income group and the poor are faced with
the problem of living in substandard housing.

The 1991 census records the urban population to be about 22 million


spread over 522 urban centres of Bangladesh. The urban population
represents more than 20% of total population of the country. It is to be
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mentioned here that through the decentralization measures in the


1980s the government tried to reduce the pressure on major cities by
providing growth incentive among 460 Thana (Upazilla) urban centres.
But urban population growth continues and mainly occurs in some
large metropolitan cities such as Dhaka, Chittagong, Khulna and
Rajshahi. These four metropolitan areas account for about half (50%)
of all urban population.

The pattern of new urban population growth is focused on Dhaka and


to a lesser extent on Chittagong in absolute terms. The increasing
demand for land, housing and other urban services in consequences of
urban population growth in all urban areas especially in Dhaka and
Chittagong have added a new dimension to urban housing.

The situation has become worse with the majority of middle-income


groups and lower middle-income group. The small elite class controls
the ownership of more than 80% of the urban land while the majority
(80%) poor have access to less than 20% of the urban land.

The housing condition has deteriorated further as all urban services,


such as sanitation and urban refuge collection, water supply, health
and education facilities have failed to cope with the increasing
demand. The main reason for these bad conditions can be explained
by the fact that there is no comprehensive policy either for housing or
for all other urban service as a whole.

There is no explicit policy, plan to guide or direct either housing or


urban services. Therefore, in order to overcome the present crisis and
to have a better urban life, a comprehensive housing policy should be
implemented.

Table: Housing Sector Characteristics of Bangladesh

1
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2Total number of dwelling units: Bangladesh 19,020,489

Rural 15,474,566

Urban 3,545,923

Per capita floor space: Bangladesh 54.9 sq.ft

Rural 53.5 sq.ft

Urban 62.3 sq.ft

Occupancy level in 1991: 35.48 pp/dwelling unit

4Proportion permanent structures in Rural 21 percent


1991:
6Urban 46 percent
5

Proportion of rental units in 1993: Rural 5%

7 Urban 40%

8Dhaka 65%

Tragically, the recent floods have destroyed more than 900,000


houses, mostly in rural areas, and another 1.3 million houses were
seriously damaged (UNCHS, 1998). Of course, most affected houses
were in the low-income category.

The only detailed figures on the type of housing in urban areas are
available for Dhaka Although the data is old, the situation has not
changed much for the better and it is, therefore, still relevant to
provide a broad picture of the urban housing conditions.

The higher and middle-income groups are housed in either low-rise


single-family houses, or, increasingly, in multi-family apartment
buildings. The lower income households, approximately 70 percent of
the urban households, are housed in a variety of house-types that can
be described as follows:

a. Approximately half of the low-income housing units are in slams,


informal settlements areas that include both private rental and private
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ownership housing, built either on privately owned land or on illegally


occupied public land.

b. Conventional tenement slums (rental and owner occupied) take up


another quarter of the low-income sector. These multi-unit buildings
were originally built to compliance with the code, but are presently
seriously overcrowded and ill maintained. Overcrowding in these
buildings has increased over the last years due to an influx of rural
migrants to work in the expanding garment industry.

c. Other categories of low-income housing include: government


provided squatter resettlement camps, plots of land with basic services
that are provided on a leasehold basis; employee housing consisting
mostly of small apartments in high-rise complexes provided by the
government; squatters who have built makeshift houses on illegally
occupied public or private land; and pavement dwellers.

Table: Dhaka Urban Area Housing Sub-systems by Income Groups


and Land Coverage

Income Approximate Approximate Coverage


Groups/ Proportion of City of City’s Residential
Housing Population (%) Land (%)

Approximate
Sub-system

Upper Income 2 15
Group
28 65
Middle Income
Group

Source: Islam, 1985-86

Recent Experience

• Commercial office buildings


• Residential apartment and condominium buildings
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• Retail shopping centers and malls


• Corporate office and research complexes
• Hotels and casinos
• Restaurants
• Municipal, government, and military properties
• Industrial manufacturing facilities
• Warehouses and distribution centers
• Nursing and rehabilitation centers
• Self-storage facilities
• Movie studios
• Golf courses
• Gas stations
• Utility property

Services

• Purchase price allocation


• Cost segregation
• Fair value, i.e. for financial reporting (SFAS, IFRS)
• Fair market value, i.e. for tax reporting
• Insurable value
• Replacement cost
• “Ad valorem” property tax assessment appeals
• Marital dissolution

Uses

• Income tax reporting


• Financial reporting
• Litigation support
• Expert witness testimony
• Property tax
• Transfer tax
• Mergers & acquisitions
• Insurance

The following is a brief description of the conditions of the real estate


in different location of Bangladesh especially urban real estate and
Dhaka.

• Dhaka
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Dhaka is the capital city of Bangladesh; like any other capital city, it
bears the prestige and focus of the entire country. During 1947, Dhaka
city was only about 50 square miles. Today the picture is far different
by holding an area nearly 650 square miles.

Without any proper planning this area could extend towards south up
to Comilla and towards north up to Myemnsingh. But with the influence
of rapid urbanization and modern lifestyle, this vast area is just filled
up with too many people. The demographic analysis works out the
issues of migration every month from the rural areas tot eh urban
areas as having better opportunities and employment, improved
educational facilities, promising future and other related factors.

The current population of Dhaka city is about 10 million people. The


population accounts for a major share of the total urban population of
Bangladesh. Dhaka is already declared as one of the mostly populated
Mega city out of 20 Mega cities around the globe. After 20 years,
Dhaka will be positioned to 8th in this regard. Asia week designated
Dhaka as the 26th city of Asia. According to the survey conducted by
the Japanese organization Dhaka Metropolitan (DMA) is segregated in
the following proportions

Whereas the appropriate fragmentation according to the civil engineering


plans for land area of a city is as follows:
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Different types of Building

i) Single Family House 36.5%

ii) Duel Family House 5.0%

iii) Flat ( Multiple Family House) 15.5%

iv) Commercial Centers 3.0%

Open Spaces

i) Park 20%

ii) Roads and Highways 20%

Total Area
100%

Another important factor behind the force of Real Estate development


is the large differences among income groups. The census 2001
reflects the situation as:

Class Population (%) Land Held


(%)

Low income Group 14 20

Middle Income Group 24 65

High Income group 2 15

Hence, increasing number of population in limited land with limited


income plays an important role towards the intense growth of Real
Estate Business in Bangladesh. Apart form the government sector,
public sector is now playing a vital role in the urban development
process. Increased vertical growth instead of horizontal growth for
Dhaka city is not only impossible but also impractical with such a high
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burden of population. On the contrary, it saves considerable amount of


land, the distribution of electricity, water, gas and other utility supplies
are relatively easier and cheaper

Chittagong, Rajshahi, Sylhet & Khulna


Port city Chittagong has a population of 3.5 million. It is the 31st city
of Asia. With relatively fewer opportunities the Dhaka, Chittagong is a
highly potential area for real estate development, since it has a
broader and expanding prospect fro tourism and trade. There are
many real Estate developers who are now working in Chittagong as the
per capita income in Chittagong is bit higher than other parts of the
urban areas in Bangladesh and not only that peoples like different
businessmen and people from other professions also want greater and
modern housing facilities.

So new and new apartments and land development projects are also
carrying on by the government and the private real estate housing
sector in Bangladesh in Chittagong and there is rapid improvement in
this also.

Sylhet is already working on a master plan developed and financed by


a London based donor organization for the betterment of overall look.
Behind this some real estate companies are also working in land
developing and apartment building in Rajshahi.
[

In Khulna City Corporation Area, there were 150000 households


according to the census of 1991. The dwelling units in the same year
were 106700. Thus, there was a housing backlog of 8300 units. In
1998, considering 3.3% annual rate of growth in population it was
estimated that there would be 144700 households with 129300
dwelling units with a backlog of about 15000 units.

Considering the similar trend in the growth of households and


associated backlog have been calculated for the year 2000, 2005,
2010, 2015 and 2020 considering 20% replacement of existing housing
units per year throughout the period (KDA, 1998). Thus by the year
2020, Khulna City will require additional 292331 new units for housing.
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KhulnaDevelopment Authority (KDA) and Housing Settlement


Directorate (HSD) are the two major actors in supplying the planned
housing in the form of sites and services .

KDA is the only public sector organization in the city, which is still
continuing its housing scheme. It is estimated that KDA’s ongoing and
upcoming projects altogether will supply over 5474 plots within the
next 3 to 4 years. HSD has not undertaken any housing project after
1960s. However, Khulna division was supposed to get a share of
200,000 housing units under the program entitled “Two million housing
program in Bangladesh” (Hossain, 2000). Nevertheless, due to the idle
situation of the HSD this project’s implementation is under severe
threat now.

There are some private real estate developers in Khulna City who has
developed more than 30 individual housing projects outside the City
Corporation area. It has been found that maximum private housing
schemes do not provide any facilities other than road and mosque.
Housing delivery system of Khulna city is dominated by private
informal sector, like other cities of Bangladesh.

While cooperative housing system was found to be absent. Public


housing sub-systems are providing housing units for the government
employees. Khulna Metropolitan area shows relatively higher level of
urbanization, far above the national average. Rapid urbanization in
Khulna city especially Jessore-Khulna-Mongla Corridor can be attributed
to good accessibility, road-rail network, and commercial industrial
activities. Besides, traditional image of Khulna City as an industrial city
has also influenced the urbanization pattern. The population growth
rate of the Khulna Statistical Metropolitan Area (SMA) was 4.48 at the
year 1991, which was the fourth highest growth rate among the all
other large urban centers of Bangladesh.

Urban and Rural Population Trends & Housing


Requirements in Bangladesh
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,
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amongst the highest in the world. In the older parts of Dhaka there are
500 dwellings per ha 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.

Rate of Household Formation by Locality, 1960-


1991

Locality 1960-73 1973-81 1981-91

Bangladesh 2.1 2.1 2.6

Rural 1.8 1.3 2.0

Urban 6.2 8.9 5.7

Source: Population Census 1991

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. Karim (1993) made 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.

Industry Analysis: Applying Porter’s Model to


the Real Estate Market in Bangladesh
Before analyzing the financial aspects and accounting statements of
any company,

it is important to first analyze the industry that the company belongs


to. Because, many factors of each company is influenced by the
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industry condition and we cannot go deep into the true condition of the
company without basic knowledge about the industry.

We have taken an attempt to assess the profitability of the market


based on the strength of five threats to profitability, which is
mentioned in the porter’s model.

Bargaining power of suppliers

• Number of producers: Number of producers plays a big role in


determining the bargaining power of supplier. As we know, the number
suppliers of the real estate companies are low. So the suppliers have
strong bargaining power.

• Importance of volumes to producers: The real estate companies


buy the land from the land lords usually in at big volume. So in this
case the also the bargaining power of suppliers is high.

• Switching costs for customers: switching cost of customers that is


the real estate company’s switching cost is very low, so it also shows
the same conclusion that the suppliers have low bargaining power.

Bargaining Power of Buyers


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• Ability of buyers to produce: Buyers ability to produce, that is,


building house for their own is comparatively low, so the buyers have
low bargaining power.

• Availability of information to buyers: Now days, it is very easy for


the customers to gather the information regarding real estate market.
So the buyers have more buying power from this perspective.

• Volume of purchase: buyers buy the apartments in low volume. So


again the buyers buying power is relatively lower.

• Buyers know the production costs: The material cost, construction


cost and other related cost information is easily available to the
buyers. So the buyers have advantage in this regard.

• Availability of substitutes: Good substitution of readymade houses


do not exist. It reduces the bargaining power of the buyers.

• Price sensitivity of buyers: The buyers are quite sensitive to the


price of the apartments. So from this view point the buyers have less
bargaining power.

• Strategic importance of the product: Having an own house means


a lot to most of the people. Still it’s not any unavoidable product, it is a
luxurious product. So this factor does not hamper the bargaining power
of the buyers.

• Switching cost: Switching cost of the buyers from one real estate
company to other is not significant. So they can switch easily and it
helps them to retain their bargaining power.

Threat of New Entrants

• Legal barriers to entry: There are so many rules and regulations in


the formation process of real estate companies, and they have to go
through many formalities. So it reduces the opportunity of new
entrance.

• Economies of scale: The existing firms gain economies of scale as


they construct more and more apartments and buildings.

• Initial investments and fixed costs: This sector requires huge


amount of investment as it involves buying lands and constructing
buildings on those.
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• Brand Loyal Customers: There is less scope for the real estate
companies to find loyal customers as very few of them buy houses for
more than one time. So the new entrants can take advantage of it by
grabbing the market share.

• Relationship with the suppliers: The existing companies do not


maintain regular and close relationship with the suppliers of land, but
they have stong relationship with the construction material suppliers.
This factor discourages the new entrants and reduces the risk from
them.

Threat of substitutes

• Availability of good substitution: there’s no good substitution for


this industry. So it does not have threats from the substitution
products.

• Switching costs: As there’s no good substitution, so question doest


arises about the switching cost.

Rivalry among Existing Firms

• Industry growth rate: The industry is still expanding. So companies


face aggressive competition from the rivals.

• Degree of concentration: As the number of companies in the


industry is large and there’s no single dominant company, so the
industry is less concentrated and has more competition among the
companies.

• Degree of differentiation: Though the companies can brig variation


to the architecture of their apartments, it’s difficult to make it far
different from others.

• Barriers to exit the market: as the companies require high volume


of fixed cost, it is difficult for the existing firms to exit. So it increases
the competition to survive.

Demand supply analysis on real estate sector of


Bangladesh
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One of the most important issues that prospective homebuyers should


be aware of while looking to purchase a home is their area’s local real
estate market condition. By understanding the different economic
trends that a real estate market can be at, the prospective homebuyer
will be able to buy a home for a price that is advantageous to

them. Although business cycles affect the purchase of a home in a


number of ways, one of the biggest influences on a home’s price is the
supply and demand in the local real estate market.

Supply and demand is a basic economic principal in which a product’s


price is either positively or negatively affected by the availability of the
product. Consequently, if there is a high demand for a product that is
in low supply, the price of this product will escalate due to market
conditions that will support a higher price. However, if there is low
demand for a product that is in high supply, the price of this product
will decrease due to market conditions that are influenced by the high
availability of this product.

Demand for housing


The main determinants of the demand for housing are demographic.
However other factors like income, price of housing, cost and
availability of credit, consumer preferences, investor preferences, price
of substitutes and price of complements all play a role.

The core demographic variables are population size and population


growth: the more people in the economy, the greater the demand for
housing. But this is an oversimplification. It is necessary to consider
family size, the age composition of the family, the number of first and
second children, net migration (immigration minus emigration), non-
family household formation, the number of double family households,
death rates, divorce rates, and marriages. In housing economics, the
elemental unit of analysis is not the individual as it is in standard
partial equilibrium models. Rather, it is households that demand
housing services: typically one household per house. The size and
demographic composition of households is variable and not entirely
exogenous. It is endogenous to the housing market in the sense that
as the price of housing services increase, household size will tend also
to increase.
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Income is also an important determinant. Empirical measures of the


income elasticity of demand in North America range from 0.5 to 0.9
(De Leeuw, F. 1971). If permanent income elasticity is measured, the
results are a little higher (Kain and Quigley 1975) because transitory
income varies from year-to-year and across individuals so positive
transitory income will tend to cancel out negative transitory income.

Many housing economists use permanent income rather than annual


income because of the high cost of purchasing real estate. For many
people, real estate will be the most costly item they will ever buy.

The price of housing is also an important factor. The price elasticity of


the demand for housing services in North America is estimated as
negative 0.7 by Polinsky and Ellwood (1979), and as negative 0.9 by
Maisel, Burnham, and Austin (1971).

An individual household’s housing demand can be modeled with


standard utility/choice theory. A utility function, such as
U=U(X1,X2,X3,X4,...Xn), can be constructed in which the households
utility is a function of various goods and services (Xs). This will be
subject to a budget constraint such as P1X1+P2X2+...PnXn=Y, where Y
is the households available income and the Ps are the prices for the
various goods and services. The equality indicates that the money
spent on all the goods and services must be equal to the available
income. Because this is unrealistic, the model must be adjusted to
allow for borrowing and/or saving. A measure of wealth, lifetime
income, or permanent income is required. The model must also be
adjusted to account for the heterogeneousness of real estate. This can
be done by deconstructing the utility function. If housing services (X4)
is separated into the components that comprise it (Z1,Z2,Z3,Z4,...Zn),
then the utility function can be rewritten as U=U(X1,X2,X3,
(Z1,Z2,Z3,Z4,...Zn)...Xn) By varying the price of housing services (X4)
and solving for points of optimal utility, that household's demand
schedule for housing services can be constructed. Market demand is
calculated by summing all individual household demands.

Supply of housing
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A customer perusing real estate listings at an agent's office in Linxia


City, China

Housing supply is produced using land, labor, and various inputs such
as electricity and building materials. The quantity of new supply is
determined by the cost of these inputs, the price of the existing stock
of houses, and the technology of production. For a typical single family
dwelling in suburban North America, approximate percentage costs
can be broken down as: acquisition costs 10%, site improvement costs
11%, labour costs 26%, materials costs 31%, finance costs 3%,
administrative costs 15%, and marketing costs 4%. Multi-unit
residential dwellings typically break down as:

acquisition costs 7%, site improvement costs 8%, labour costs 27%,
materials costs 33%, finance costs 4%, administrative costs 17%, and
marketing costs 5%. Public subdivision requirements can increase
development cost by up to 3% depending on the jurisdiction.
Differences in building codes account for about a 2% variation in
development costs. However these subdivision and building code costs
typically increase the market value of the buildings by at least the
amount of their cost outlays. A production function such as Q=f(L,N,M)
can be constructed in which Q is the quantity of houses produced, N is
the amount of labour employed, L is the amount of land used, and M is
the amount of other materials. This production function must, however,
be adjusted to account for the refurbishing and augmentation of
existing buildings. To do this a second production function is
constructed that includes the stock of existing housing, and their ages,
as determinants. The two functions are summed yielding the total
production function. Alternatively an hedonic pricing model can be
regressed.

The long-run price elasticity of supply is quite high. George Fallis


estimates it as 8.2 (Fallis, G. 1985), but in the short run supply tends to
be very price inelastic. Supply price elasticity depends on the elasticity
of substitution and supply restrictions. There is significant
substitutability both between land and materials, and between labour
and materials. In high-value locations, multi-story concrete buildings
are typically built to reduce the amount of expensive land used. As
labour costs increased since the 1950s, new materials and capital
intensive techniques have been employed to reduce the amount of
relatively expensive labour used. However supply restrictions can
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significantly affect substitutability. In particular the lack of supply of


skilled labour

(and labour union requirements), can constrain the substitution from


capital to labour. Land availability can also constrain substitutability if
the area of interest is delineated (that is, the larger the area, the more
suppliers of land, and the more substitution that is possible). Land use
controls such as zoning bylaws can also reduce land substitutability.

The adjustment mechanism

The basic adjustment mechanism is a stock/flow model to reflect the fact that
about 98% the market is existing stock and about 2% is the flow of new
buildings.

In the diagram to the right, the stock of housing supply is presented in


the left panel while the new flow is in the right panel. There are four
steps in the basic adjustment mechanism. First, the initial equilibrium
price (Ro) is determined by the intersection of the supply of existing
housing stock (SH) and the demand for housing (D). This rent is then
translated into value (Vo) via discounting cash flows. Value is
calculated by dividing current period rents by the discount rate, that is,
as a perpetuity. Then value is compared to construction costs (CC) in
order to determine whether profitable opportunities exist for
developers. The intersection of construction costs and the value of
housing services determine the maximum level of new housing starts
(HSo). Finally the amount of housing starts in the current period is
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added to the available stock of housing in the next period. In the next
period, supply curve SH will shift to the right by amount HSo.

By applying this principal of supply and demand to buying a home, it is


easy to see how buying a home during a time of high home availability
as well as low demand will mean that you will be able to buy a home
for a lower price. This is particularly true when comparing asking prices
of homes to a time where local real estate market conditions have low
supply of homes for sale but high demand of people who want to live in
this area. The different points of supply and demand in an area will
have a great influence on the asking price of homes for sale. They will
also affect a variety of other important financial aspects to buying and
owning a home.

National financial trends have an important influence on local real


estate market conditions. During times of economic recession, supply
and demand conditions will generally improve from the point of view of
a prospective homebuyer. Although local real estate markets will
respond differently from each other to a national economic downturn,
generally what will occur is that real estate market conditions will have
a higher supply of homes available for sale than there is buyer
demand. This is because a time of economic recession is also a time of
job instability. Unemployment rates rise during these periods and there
are a number of homebuyers who are forced to sell their home due to
their inability to fulfill the numerous financial obligations that come
with buying a home. For example, annual mortgage payments and
property taxes may become too much of a burden for a homeowner
who sees a window of opportunity in selling their home to acquire
some much needed capital.

Consequently, supply and demand is affected to a great degree by the


state of the national economy. However, more important to the state
of a local area’s supply and demand is the economic makeup of the
area. Certain neighborhoods, particularly wealthy and prestigious
areas of specific cities, will consistently have high demand and little
supply, which will drive up the prices for that area. However, other
neighborhoods and cities, such as Flint, Michigan, are struggling with
their local economy and consequently even a high national expansion
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will not positively affect their real estate market conditions to the same
extent as it effects other areas in the country.

Supply and Demand Factors Affecting the


Real Estate Market in Bangladesh

What factors influence the price of a home? How is the real estate
market impacted by supply and demand principles? Is there a way to
anticipate price increases and decreases for different areas? Let's take
a look at some of these issues.

On any given day, people can easily find articles and news stories
describing an impending bust of the so-called real estate bubble.
Despite this gloomy prediction, many experts believe that the recent
slowdown in housing will be a gradual and modest readjustment rather
than sharp bust or decline. These experts believe that factors that lead
to a sharp decline in the real estate market are just not present in the
current economic outlook. In fact, a recent study by the Joint Center for
Housing Studies at Harvard University noted that “despite the current
cool-down, the long-term outlook for housing is bright.”

The rise and fall of the real estate market is subject to the forces of
supply and demand, and these factors point to stable and positive
growth in the real estate segment.

SUPPLY FACTORS

Limited supply of real estate makes it scarce and usually pushes home
prices up. In contrast, an oversupply of real estate tends to put
downward pressure on home prices. Despite the current slow down in
the real estate market, factors that impact limited supply favor
continued growth in the real estate market. Some of these factors
include:
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1. Builders have readjusted growth plans in regions that have an


undersupply of new housing. Over time, any shortage of inventory is
likely to be depleted and equilibrium achieved between supply and
demand.

2. The less availability of land, as well land use regulations and


associated compliance costs will continue to restrict the supply of new
homes.

DEMAND FACTORS:

Housing located in regions with high demand tend to be more


expensive than homes in regions with low demand. Factors that impact
the demand for housing suggests a favorable long-term housing
outlook. Some of these factors include:

1. No current evidence of significant and across-the-board job losses;


forecasts of relatively low unemployment rates.

2. Long-term increased demand for second homes, vacation homes


and senior housing.

3. Long-term increased demand for entry-level homes by immigrants.

4. Long-term increased demand for entry-level homes by second-


generation.

5. Forecasts that the outflows and inflows of the population in and out
different regions will not significantly impact the overall real estate
housing market.

6. Relative stability in interest rates.

7. Continuation of long-term home appreciation rates.

8. Overall, rising rate of wealth across all age groups.

The current urbanization rate is 5% to 6% and 50% people will be living


in cities by 2025 according to experts. In the Dhaka city from 1991, the
urban population density has increased by about 79% to 2004. It was
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4795 persons/ square kilometers in 1991 and 8573 persons/ square


kilometers in 2004. So it is estimated to be 10026 persons/ square
kilometers in 2009.

Chart Title
140
120
100
80
60
40
20
0
2001

2005
2007
2009

2015

2023

2029

2035
2037

2043
2045
2003

2011
2013

2017
2019
2021

2025
2027

2031
2033

2039
2041
URBAN RURAL Linear (URBAN)

Figure: Increasing trend of urbanization

Huge lift up in urban density and rush of the people to Dhaka city has
created great demand of accommodation and housing services.
Moreover, the real estate developers have started targeting the middle
income groups in the last a few years to sell apartments. As the major
portion of the society is in this group, the demand has got to be high.
According to REHAB, there is a demand of about 60 thousand
residential units plus 2 lacs units of backlogs and replacements every
year.

In summary, the household growth, overall rising incomes and wealth


of the country- all bode well for continued long-term growth in the real
estate market. While the overall housing outlook is favorable,
affordability will continue to be a challenge, as wages, especially in the
lower income levels, have not kept up with housing costs.

Major Sources of Financing


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In Bangladesh the housing finance sector is both underdeveloped and


highly isolated. Formal construction and mortgage is financed by the
banking sector. It requires proof of land ownership or leasehold deeds
and the deposits of title documents as

collateral. This is only used for a small proportion of new house


production and for and even smaller proportion of purchases of
existing houses. According to 1993 ADB survey of home owners of
newly constructed houses, the most important source of housing
finance was household savings (more than one third). Loans from
relatives and friends were the second most common form of finance,
followed by the sale of other parcels of land. Employer and bank loans
were utilized by 13% of new home owners and HBFC loans were only
acquired by 5% all in the higher income brackets.

It is widely acknowledged that new finance systems have to be


developed and some

promising initiatives have been taken. In this section the present


mortgage based

housing finance systems in Bangladesh and government policy


towards the housing finance sector will be discussed.

Construction Finance for Moderate Income Housing

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
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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 (see below). Developers do not
engage in long-

term financing of housing units for their clients directly.

Public construction Finance

The Prime Minister’s Office recently established a Housing Fund called


the

Grihayan Project, which provides low cost funds to NGOs and public
sector developers for the construction of low- to moderate-income
housing schemes. The Housing Fund is administered by an inter-
ministerial committee of 17 members and includes one NGO member
(Proshika). A total of Tk.580 million is available at an interest rate of 1
percent22 for 10 years. The project requires that the borrower on-lends
to lower-income households at a rate of 5 percent, which leaves a
spread of 4 percent for which the developer has to cover all costs,
including loan administration. Indeed the project expects the NGO or
public sector developers to put in their own funds for project
development and management. Therefore, only well funded NGOs can
consider participating in the project. Also, selected agencies have to
have the capacity to act both as developers and long-term mortgage
financiers for the projects.
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Four types of housing solutions are fundable under the project: 1)


small single, tin-roofed rural houses at a maximum cost of Tk.25,000,
2) semi-package rural houses at a maximum cost of Tk.85,000, and, 3)
flats in district towns at a maximum cost of Tk.175,000. Loans for the
first solution are made for ten years, while a fifteen-year term is set for
the two other house types.

Major Mortgage Lenders

The Bangladesh House Building Finance Corporation

The HBFC was established in 1952 to stimulate middle income house


construction for

civil servants in urban areas and Bangladesh HBFC was recognized in


1973 after

independence. While the majority of its clients are still civil servants,
its mandate has

broadened to include all eligible private citizens or citizen groups. It


does not lend to

developers or builders. BHBFC’s main sources of funds are dedicated


government bond issues specifically floated for their programs.
Additional transfers directly from the government budget are
occasionally provided on a limited scale

BHBFC finances three types of housing categories each with their own
construction and financing terms:

• High Cost Housing up to Tk.2.5 million and at a maximum


construction cost of
Tk.900 per sq.ft.
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• Medium Cost Housing up to Tk.1.425 million and a maximum


construction

• cost of Tk.700 to 850 per sq.ft.

• Groups of maximum 10 households (soon to be increased to 20)


that have jointly bought a piece of land can apply for a mortgage
for the construction of their
houses (excluding the land)13. The maximum construction cost is
Tk.500 for the

first floor and Tk.400 for additional floors.

The banking sector

The commercial banks, both public and private, and the specialized
banks are the

only other financial institutions with a considerable proportion of their


combined assets in housing. For the entire banking sector (excluding
the Grameen Bank) the total housing related advances were Tk.17.7
billion at the end of 1997 of which two thirds (or Tk.11.2 billion) were
held by the NCBs. The majority of the accounts held by the banking
sector are individual accounts (approximately 54,000), and only
approximately 1400 loans were made to housing societies.

Outstanding housing sector advances with interest in million


taka (all banks)

Construction Dec. 1995 Dec. 2000 Dec.2005 Dec.2008


loan
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Housing 2338 7548 31127 39584


societies or
companies

Housing 10204 20561 64261 72494


individual

Other than 6297 11458 20847 26984


housing

total 18839 39567 116235 139062

*all banks include national commercial banks, private banks,


foreign banks and specialized banks in Bangladesh

Source: Scheduled Bank Statistics, Bangladesh Bank-2000

Private housing finance companies

In recent years, two housing finance corporations have been registered


as public limited companies, of which one has officially opened its door
for business. As in India several decades ago, efficiently run housing
finance companies may revolutionize formal housing finance in
Bangladesh and their development and growth deserves to been
courage.

Delta Brac Housing Finance Corporation Ltd. (DBH).

After a long period of preparation, DHB was licensed as a Non-Bank


Financial Institution by the Bangladesh Bank and started its operations
in 1997/98. Its initial paid up capital of Tk.200 million was subscribed
by both national and international sponsors as follows:

• Delta Life Insurance Co. Ltd. 25 percent


• BRAC 25 percent
• Green Delta Insurance Co. Ltd. 20 percent
• International Finance Corporation (IFC)17 15 percent
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• Housing Development Finance Corporation Ltd. from India 15


percent.
IFC has also offered 10 year loan guarantees for loans from local banks
up to $2.5

million. HDFC, which is the largest and most successful mortgage


lender in India, offers technical assistance in the initial stage to get the
company off to an efficient start. Management of the company is
young, professional and energetic.

Delta Brac is permitted by government to take deposits and it has


developed a deposit

scheme, offering 11 percent on one year deposits. However, without


an extensive branch network, lack of name recognition and an “un-
level playing field” vis-a-vis savings rates offered by several
government savings schemes, deposits will in the short run not
provides substantial proportion of the working capital. The main
challenge for the new institution is, therefore, to find competitively
priced sources of long-term funds, which is hardest in the early years
of its existence. Once a strong performance record has been
established it should be able to acquire funds at approximately libor
plus 2 percent. The development of a debt market will equally assist in
resource mobilization.

Delta Brac makes loans for the construction of houses, the acquisition
of flats and houses, the extension and improvement of existing
housing and the purchase of housing plots for middle and, in the
medium term, lower income households. It provides both construction
finance and long-term mortgage finance. In the first year 230
individual loans were sanctioned for a total of Tk.208 million, an
average loan size of Tk.900,000. The business plan projects a steady
increase in the number of loans and a simultaneous decrease in the
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average loan size. The maximum loan is Tk.2 million or 80 percent of


the construction cost or 70 percent of the purchase price, whichever is
less. Mortgage loans have a maximum term of 15 years and are
discretionary adjustable rate mortgages.

Present rates are 16.5 percent. For owner-occupied properties monthly


payments cannot exceed 30 percent of household income and in
higher risk cases, third party guarantees are required.

Housing cooperatives and credit unions

Although the co-operative movement is widespread in Bangladesh,


particularly in the

agricultural sector, it has not played a large role in the financing of


housing. Rather

housing cooperatives have been set up as vehicles for joint land


development projects

and purchases of multi-family properties. Cooperatives receive


preferential treatment

concerning the allocation of state land and can access funds from the
co-operative

movement’s apex bank, which receives a large part of its funds from
government.

Members of housing co-operatives belong mostly to the middle income


group. The credit unions, which play a critical role in construction and
mortgage lending in many countries, are presently in disarray and
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insolvent and cannot be looked at for expansion of housing finance for


moderate and lower income households.

Sale of mortgage lending and lending condition for mortgage lenders

Lending institutions Outstanding loans Lending terms

BHBFC Tk. 22201 million 15 years

13% for loans<1

.4 million

15% for loans>1.4


million

p.a. compounded

12months grace
period

LTV ratio 60%

Max loan tk. 2.5


million

Banking sector Tk. 17,700 million 10 years


(exclusive of Grameen
16% p.a. compounded
bank)
LTV ratio 50%

Avg. Loan Tk. 1.5 to


2.5 million

Private housing Tk. 208 million (first 15 years


finance co. year
16.5 p.a. compounded

LTV ratio 80%

Avg. loan tk. 900000

Max loan tk. 2 million


REPORT ON REAL ESTATE BUSINESS

A Source: Scheduled Bank Statistics, Bangladesh Bank-2007

Alternative Sources of Financing

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.

However, there are few long-term cheap funds available in the


economy.

Commercial banks.

At present, the commercial banks are reluctant to lend longer term

(more than 5 year) at lower rates to the housing finance companies


even if they would have the funds to do so.

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.

Insurance companies.

The large public insurance companies presently only invest in the


REPORT ON REAL ESTATE BUSINESS

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
companies19, shows the potential of further linking the private housing
finance sector and insurance companies.

State Provident Fund and other pension funds.

There is a State Provident Fund to which all permanent civil servants (those
who have completed two years of continuous service) contribute ten percent
of their basic salary. Contributors are allowed to borrow against their savings,
including for the purchase of a residential plot or house up to 80 percent of
the outstanding balance in the individual’s account or 36 times the monthly
salary of the person whichever is less.

Micro-finance institutions.

BRAC’s move to enter into a joint venture with Delta Insurance and HDFC
from India to set up Delta Brac Housing (DBH), the first private sector non-
banking housing finance institution in Bangladesh is an interesting and, for
many, unexpected initiative by a MFI.

BRAC sees this not only as a good investment opportunity, but its interest in
this venture was related to the need for housing finance by its staff members:
middle income households that have no access to mortgage loans and cannot
afford to purchase a house. While the major NGO financial institutions and
the Grameen Bank hold investments in office real estate, they have not
participated in the wholesale financing of housing through other financial
institutions.

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
REPORT ON REAL ESTATE BUSINESS

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.

Government Initiatives for Real Estate

Development

Mr. Patteick Geddess made a high profile plan for Dhaka city keeping
in mind its growing tendency in area and population in 1917. It had
never been practically worked out. The result is terrible traffic jam in
Old Dhaka City.

Dhaka structure Plan (1995-2015) and urban Area Plan (1995-2005)


prepared by the foreign consultants is still out of focus Initially
government has imposed some restrictions on developing more than 6
storied residential buildings as well as more than 10 storied
commercial buildings in some places of Dhaka city.

Government authorized organization in this regard are:


REPORT ON REAL ESTATE BUSINESS

RAJUK :Rajdhani Unnayan Katripakkhha


BNBC: Bangladesh National Building Code;
1993
DESA :Dhaka Electric Supply Authority
WASA :Water and Sewerage Authority
PDB: Power Development Board
TITAS Gas Company
City Corporation
Civil Aviation Authority
Fire service Etc.

Any real estate company needs No Objection certificate (NOC) form all
these organization prior to their construction. They also need to
construct according to the set guidelines of Master plan approved by
the RAJUK and BNBC 1993 and by fulfilling the requirements.
Government has also taken initiatives to decentralize land areas
among the rich, middle class and poor families.

The Purbachal Project under RAJUK has already provisioned 337.19


ekor areas for residential inhabitants and 66ekor areas for slam
REPORT ON REAL ESTATE BUSINESS

inhabitants. Uttara model town has also provisioned 40.51 ekor areas
for slam inhabitants out of the total 381.19 ekor areas. Since all
building is made upon land areas, government is also taking
awareness regarding its construction materials and quality of
infrastructure. Environment engineers have already forecasted the risk
of earthquake in Dhaka that may demolish nearly 80% of the buildings
at a quake of 6 Richter scale

Private Initiatives

The importance of the housing sector, both in the context of


Bangladesh economy and the role it has to play to serve the
fundamental human right of shelter, calls for the generation of
awareness as regards various pertinent issues involving the sector.
These include its size and contribution to the economy, market
structure and trends, legal and regulatory framework and associated
challenges. Without adequate information the government cannot
make appropriate policy interventions, investors cannot make efficient
investment decisions and consumers cannot make the best use of their
scarce savings. Thus, availability of more market related information
will define, with greater accuracy, the nature of the future
development required in this sector.

Major Challenges before the Housing Sector In categorizing provision of


shelter as one of the fundamental responsibilities of the state, the
Constitution of the People’s Republic of Bangladesh recognized shelter
to be among the fundamental human rights. The UN Declaration on
Fundamental Rights also reveals that every person has a right to an
adequate standard of living, which includes housing. But making
shelter available to all is increasingly becoming a significant challenge.
Though population growth rate in Bangladesh has platitude at 1.6 per
cent, an increasing expanse of living space at this rate will also be
necessary to accommodate the “demographic momentum”. Statistics
show that Bangladesh will largest city in the world.

A consequence of high rate of in-migration to Dhaka. By the year 2015


Dhaka is projected to need to construct approximately 4 million new
REPORT ON REAL ESTATE BUSINESS

houses annually to meet the future demand of the next twenty years.
Estimates for annual requirements for housing in urban areas vary
from 3 lakh to 5.5 lakh units.

Along with population growth, urbanization is considered in the


keynote as the next most alarming threat to the housing sector. Rather
than being a phenomenon specific to Bangladesh, urbanization has
now become an issue of global concern. The share of urban population
in Asia is 37 per cent at present and is projected to be 45 per cent by
2015. In Bangladesh 25 per cent of the population (some 35 million
people) now live in urban areas; this proportion will be 34 per cent (75
million) by the year 2015. Dhaka, with a total population of 10 million,
is now the 22ndth largest city in the world, where 19 million people will
have to find their house. On the other side, with the continued growth
of population land for agriculture and forest will shrink in tandem. This
calls for high density settlement either in high rises or in small unit low
rise apartments. The area occupied by human settlements and
supportive infrastructure in Bangladesh is quite high at 30 per cent.

Growth in the Real Estate and Housing and the Construction Sector The
growth trends in the construction and the real estate and housing
sector. While comparing the growth of the real estate and housing and
the construction sector with that of GDP it was found that trend growth
in the two sectors for the period FY 1992-2002 was 4.8 and 7.5 per
cent respectively, which is much higher than the trend growth in GDP
of 4.6 per cent for that period. The shares of the real estate and
housing sector and the construction sector in the GDP were quite high
in the year 2002 and accounted for 8.3 and 8.0 per cent respectively.
However, the incremental contributions of these two sectors in the
same year were also considerably high at 6.0 and 12.8 per cent
respectively.

Recent information concerning investment in the housing sector shows


steady growth both in absolute terms and as a percentage of total
private investment and GDP. Private investment in housing and
construction has more than doubled during the Fourth Five Year Plan
period, from Tk 700 crore in 1989-1990 to Tk 1589 crore in 1994-1995.
During the first three years of the Fifth Five Year Plan period the
average investment in housing and construction was Tk 7,642 crore.
As a share of total private investment, private investment in housing
and construction in the 1997-1998 to 1998-1999 period accounted for
REPORT ON REAL ESTATE BUSINESS

47.3 per cent which far exceeded the target of 16.35 per cent for this
period. The proportion of investment in housing and construction in the
national GDP increased from 3.4 percent in FY 1997 to 4.1 per cent in
1999.

The contribution of the real estate sector to the exchequer is a


substantial one. Various revenues like VAT, registration fees, utility
connection fees etc. generated in the real estate sector amount to
about Tk 36 crore per year. Regarding payment of corporate income
tax of the real estate companies no ready information was available.

During the peak years of the early 1990s, over 3,000 apartment units
were built by developers every year. Today around 2000 units are
built, which indicates a 30 per cent drop in output. Beside the general
consequences this slump leads to delayed delivery of apartments by
an average of six months. As regards the characteristics of the housing
sector 19 per cent of the dwelling units are located in urban areas. Per
capita floor space in urban areas is only 62.3 sq ft. About 46.4 per cent
of urban dwellings are made of brick/cement.

Unlike the past fiscal budgets, the government through the FY 2002 -
2003 budget provided a number of incentives to boost the real estate
sector of the country. These measures include exemption of
registration fees on land development, land sale and apartment
transfer which is expected to bring down the overall tax in this sector
to the level of 13.5 per cent, waiving of registration fees in cases
where the apartment is resold within 5 years of buying and halving of
property transfer tax at source. Estimates show that these measures
have saved an average buyer about Tk 5 lakh on a Tk 45 lakh worth
apartment. if tax is paid at a flat rate per square feet of apartment,
unaccounted for funds can be mainstreamed. Reflecting on the
response of the sector to these new measures after a protracted slump
these measures have been able to infuse new hope. Reduced
registration cost and other related costs, which resulted in the recent
increase in the number of apartments which were registered.

REHAB (Real estate and Housing Association of Bangladesh) is


a private organization formed by the private real estate companies in
REPORT ON REAL ESTATE BUSINESS

Bangladesh in 1991 with a view to solve the problems in housing


sectors, to protect the interest of real estate in Bangladesh.
REHAB at a Glance

Name of the : Real Estate


REPORT&Housing Association
ON REAL ESTATE BUSINESS of
Association Bangladesh

Year of : 1991
Establishment

No. of Member in : 11
1991

No. of Member in : 558


2008

No of Apt. units : 56,000 (App.)


Delivered by the
Developer in last
20 years

No. of Apt. units : 5500-6500 Units


Delivered by
REHAB Members
per year (2004)

No. of Plot units : 4500-5500 Units


Delivered by the
Developer per year

Approx. turnover : 1,250 Corer Taka (Tk.12.50 Billion)


per year

Revenue to Govt : 100 Corer Taka (Tk.1.oo Billion)

Direct
Employment-

Architects : 2000 nos

Graduate Engineer : 4000 nos

Diploma Engineer : 10000 nos

Management : 20000 nos


Official

Direct Labour : 12 -14 %


skilled & unskilled
REPORT ON REAL ESTATE BUSINESS

REHAB Profile
Preamble: 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 UN declaration and the constitution of
Bangladesh. But it is very difficult on the part of the government of
Bangladesh alone to ensure housing for all. Here 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 2004 there are
about 250 companies engaged in this business.

Formation of REHAB: With the number of companies increasing


gradually, various problems concerning the housing sector cropped up
requiring early solution. At this stage it was necessary to form a trade
association of the Real Estate developers to protect the overall
interests of the sector. To strengthen the role of real estate sector Real
Estate & Housing Association of Bangladesh (REHAB) was formed with
only 11 members in 1991. The objective of REHAB was to promote
formal private sector Real Estate Development in Bangladesh.

Present Performance: REHAB is the only trade organization of Real


Estate Developers with a current membership of 260 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. The members of REHAB
contribute a large amount of revenue to the Government exchequer in
terms of Registration Cost, Income Tax and Utility Service Charges.

REHAB organizes its most colorful annual event REHAB Housing Fair
REPORT ON REAL ESTATE BUSINESS

each year in Bangladesh for the member developers, financial


institutions and building material providers. It has already successfully
completed three Housing Fairs during 2001, 2002, 2003, 2004 & 2005
at Dhaka Sheraton Hotel Complex. To foster the growth of Real Estate
Sector REHAB plans to organize Housing Fair abroad for the
Bangladeshi individuals who are living different countries of the World
to buy apartment, land and commercial spaces in their home country.
Accordingly, the first - ever Housing Fair abroad organized by REHAB
on August 2004 at Quality Hotel Hempstead, 80 Clinton Street, New
York, USA

Members List:
Membership Name of the Company Logo
No.
427/2008 3-i Builders Ltd. REPORT ON REAL ESTATE BUSINESS

228/2005 A Aabash Moon Bangladesh

343/2006 A1 Housing Ltd

188/2004 Aangina Construction Ttd.

098/2000 ABC Real Estates Limited

271/2005 Abed Holding Ltd.

323/2006 Achiya-Rahman Properties


Development (Pvt.) Ltd.

189/2004 Advanced Development Consultants


Limited

044/1997 Advanced Development


Techonologies Ltd.

022/1995 Agrani Apartment Limited

348/2006 Al-Haj Mostafa Hakim Housing & Real


Estate Ltd.

075/1999 Alam’s Real Estate Limited

243/2005 Alien Properties Ltd

272/2005 Alliance Properties Limited

281/2006 Altamira Homes

212/2004 Amicus Properties & Developments


Limited

070/1998 Amin Mohammad Foundation Ltd.

134/2002 Amin Mohammad Lands Development


Ltd.

379/2007 Ana Holdings Limited

322/2006 Angan Structural Development &


Engineers Ltd

227/2005 Anna Corp. (BD) Ltd.

125/2002 Anwar Landmark Ltd.

152/2003 Anz Properties Limited

168/2003 Apartment Design & Development


(Pvt.) Ltd.
REPORT ON
REAL ESTATE BUSINESS

Problems of Real Estate Business in Bangladesh


In Bangladesh real estate business are facing numerous problems though
many real estate finance companies are joining in the real estate
business. But their service and facilities are not satisfactory always & they
are also facing in continuing their business. so we can divide the problems
of real estate sector from two view point , one from the real estate
business companies another from dwellers view point. These problems are
discussed below.

Land Shortage

Bangladesh is an over populated country & every city or urban area of this
country is very congested. Day by day it is becoming very tough to get a
place to live there .People who are living from their birth in one place or
got land by succession do not want to sell their land to others as a reason
of affection a large portion of land supposed to be occupied to small
portion of people & there are also other people who are not getting a
piece of land to live on. Land ownership in Bangladesh is extremely
asymmetrical and statistics indicate that 70% of urban residents do not
own land while the distribution among 30% is extremely unequal. From
these aspects concept of multi storied building developed. It is a new
experiment for many people to live in apartments and maintain their life
style, thus changing the urban and social fabric from the classic single
storied independent house, to sharing smaller units of space side by side
with numerous other families. Since the beginning of mid-90s, living in
apartment has been alive and well in Dhaka. Dhaka experienced a boom
in apartment development in all residential areas including Paribagh,
Maghbazar, Siddeshwari, Shantinagar, Dhanmondi, Mirpur, Banani, Old
DOHS, new DOHS, Gulshan and Baridhara, to name just a few. More
recently we have seen a resurgence of apartment building in Uttara,
Basundhara, Banashree and Gulshan DOHS and in other areas of the city.

This scenario is also seen in other parts of the country .So we can see that
day by day there is occurring shortage of land all around the country.
Because all these lands available are not really good enough for building
apartments. So Now days builders are in shortage of land & they are filling
canals to create land & building apartments there that has many negative
aspects.
REPORT ON
REAL ESTATE BUSINESS

Commercialization of Residential Area

Residential areas like Mohakhali, Baridhara, Banani DOHS, Gulshan,


Dhanmondi, and Mohammadpur are becoming commercial zone because
of development of bank , financial institutions, industries Some of the
residential areas are hosting private sector educational institutions
and the offices of telecommunication as well as multinational
companies. Kindergarten schools, colleges and universities flourish
Dhanmondi, Gulshan Residential Area. Traffic system of Dhanmondi,
though a planned area, collapsed due to the presence of too many
educational institutions, medical clinics and hospitals.

Increase of Prices of the Raw Materials

The necessary material’s prices are increasing rapidly for the last 5 years.
Because of higher prices of construction materials companies are also
increasing their apartment’s price. According to REHAB the overall costs
of building materials increased by 18 % in the past one year, raising the
construction costs by Tk 110 to Tk 125 per square feet. They are also
monitoring the market price volatility to adjust the price. So, apartment’s
price is increasing & creating problems for the buyers & also for builders
as falling of sells. So high prices of materials for real estate construction is
a great problem for real estate development in Bangladesh.

High interest rate & registration fee

Interest rate on home loan is very high in our country so though there is
high demand for the apartments people are unable to buy it because of
high interest rate. Failure in timely payment of installment by buyers.
Most of the buyers do not make the slot payment for the apartment. They
go for the installment payment, but most of them cannot maintain it
properly. They make their installment payment lately. For this, the
apartment builders have to face a great loss .The registration fee is also
very high. The registration fee is fixed at 21% of the total value of the land
and other miscellaneous charges are 2%.So, higher registration fee &
other related charges are most important problematic issue for both the
land developer and flat builder.
REPORT ON
REAL ESTATE BUSINESS

Problems related to ownership

Sometimes a suitable land can not be occupied by the developers


because of problems related to ownership. Some times there is two or
more owner of a land. As a result the interested buyer can not hand over
the land from legal problems. So we can say that it is also a big problem
for the real-estate companies

Finding the middle ground

Sometimes the negotiation between the landowners & builders may not
be fruitful because of their dual preference; lack of good managerial
skills .The landowner thinks that this offer is not so much beneficial to
them. So they wait for more attractive offers.

High tax rate

High tax rate on the transfer of immovable properties has an adverse


effect on commercial and residential apartment builders. General buyers
often become unwilling to register their apartments in a situation of
higher tax on registration. High rate of tax is de-motivating the buyers of
the real estate in Bangladesh as well as the Land owners, Land developers
and builders also. So the high rate of imposed tax is hampering the
industry a lot and has already tuned into a great problem

Comprehensive land development policy

Lack of comprehensive land policy evenly. The land policy of Government


is not sufficient enough. There is no zoning system of land. In the
perspective of purchasing land, there in no standard price. There may be
several prices of land in the same zone. This will cause an unfair game

Government regulations

Government regulations hindering growth of real estate. Government’s


present policy for the Real Estate is not enough for the growth of this
sector. Lack of proper government regulation real-estate companies &
purchaser of apartments are suffering .They should take more realistic
steps.

How to overcome these problems


REPORT ON
REAL ESTATE BUSINESS

 High and ever increasing price of construction material should be


reduced .Price of cement rod should be reduced .Capital goods,
plant and machinery can normally be imported by other industries
at a low duty tariff. For the housing industry, importing capital
goods such as shuttering materials, props, and overhead cranes etc.
should be accorded the same facility.

 The land policy of Government is not sufficient enough. A


comprehensive land policy should be developed by Government.
They should take more realistic steps.

 High interest rate & registration fee should be reduced. So default


rate will reduce. The registration process also takes a long time to
complete the total registration process. This time consuming
registration process discourages the land developers mostly. So
registration process should be more flexible. By reducing
registration and mutation cost government can encourage people to
register in time and this will increase government revenue earnings

 Government should reduce tax rate Housing was declared as an


industry in 1991. But, to date, it has not been recognized as an
industry, and not been given any benefit. To give a boost to this
ailing sector, the government should extend a 5-year tax holiday in
line with the facility offered to other industries.

 Political instability delays completion of project. The political


stability of our country is very much unstable. So the political
condition must be stable

 RAJUK need to play a vital role here to evaluate and monitor all
building constructions within its jurisdiction. The builders are
building apartments by filling the canals as a shortage of suitable
land for construction. They are building high rise building without
following the building code given by RAJUK to prevent earth quake.
Earth quake from he recent years cautious us that there is a great
possibility to occur a horrible earth quake in our country as Dhaka is
in the first zone to be affected as there are many high rise
REPORT ON
REAL ESTATE BUSINESS

building .The real estate company need to give concern this side
very much as buyers are now becoming concern very much to this
fact.

Company Background
Introduction

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.

Office

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.
Concern

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.
REPORT ON
REAL ESTATE BUSINESS

Twenty-eight residential buildings along with a market are being


completed over there.

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.

Special Step Undertaken By the Company

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 categories of clients.
Rupayan has got housing project in nearby Savar region (Ashulia and
Hemayetpur areas).

Apartments

Rupayan Chowdhury Palace at


Bashundhara

Rupayan Oak Vale at Uttara

Rupayan XANADU at Dhanmondi

Rupayan LAKE SIDE at Dhanmondi

Rupayan LAKE SPRING at


Dhanmondi Ongoing
Projects
Rupayan ANGEL at Shantinagar

Rupayan PRESTIGE at Niketon

Rupayan ACACIA at Dhanmondi

Rupayan NILUFAR at Bashundhara

Rupayan CROWN IMPERIAL at


REPORT ON
REAL ESTATE BUSINESS

Dhanmondi

Rupayan CHANDRALEKHA at
Bashundhara

Rupayan APYLLION at Uttara

Rupayan RANI VILLA at Mirpur

Rupayan UNILODGE at Bashunhara

R. Al-Mujaheedy Arcade at Uttara

Upcoming-Projects

Rupayan Khan Tower at Malibagh



 Rupayan HAQUE CENTER at Baddda
Completed-Projects:

 Rupayan Legend at Gulshan


 Rupayan Garden at Niketon
 Rupayan
Ongoing Projects Castle at
Gulshan
 Rupayan
Garden at
Rupayan KARIM TOWER at Niketon
Kakrail  Rupayan
Pearl at
Gulshan

Commercial Space
Rupayan SHELFORD at
Shemoli

Rupayan TAIYAB PLAZA at


Narayangonj

Rupayan POINT at Lalmatia

Rupayan Trade Centre at


Bangla Motor, Dhaka

Upcoming-
Projects:

Rupayan BHABAN at
Gulshan

Rupayan HUQUE CENTER at


Badda
REPORT ON
REAL ESTATE BUSINESS

SWOT Analysis
Strength

 Rupayan is providing low cost apartment.


 Rupayan completes each and every project timely.
 It offers readymade flat to the customers.
 Prospective buyers’ database
 The company has a good reputation among customers
 Ruapayn, the name of exclusive access to high grade resources
 Wide range product lines
 Rupayan has skilled sales team.
 Rupayan’s product has uniqueness in the eyes of customers.
 High Resale value and rental value

Weakness

 Poor supply of raw materials


 Products are expensive
 Shortage of land mark projects
 Non-membership of Exchange, for which people may not know
properly and rely on the company.

Opportunities

 The caretaker Govt. became threat for the real estate sector of
Bangladesh. But now the elected Govt. has stretched ample
opportunities for the development of this sector.
 Now people will be eager to invest more and more in the flat and
apartment to make the black money white.
 REHAB is also taking many steps to improve the condition of this
sector.
 Rupayan is rectifying in building code.
 Its customer service department is also improving day by day.
 All the data is available in the internet. So customers can choose
their apartment sitting at home.

Threats

 Many new competitors entered in the real estate business. In future


this rate will increase.
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REAL ESTATE BUSINESS

 Many people are not interested to invest in this sector, as it needs


huge amount of investment.
 People also want to avoid tax liability, which rises with the
investment in real estate.
 As sales are not certain and frequent in this sector, Rupayan has a
threat of loss.
 If the company has achieved enough sales revenue and profit, may
be not able to utilized

Participation in REHAB Fair

"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 lower-middle income group to purchase an
abode, owing to high property prices and prolonged payback periods.

Rupayan Housing Estate, one of the leading realtors in Bangladesh, has


come forward with such a housing project that will fulfill the dreams of the
middle and lower-middle class people.

Rupayan Housing Estate Ltd, which, according to the company officials,


has created a huge enthusiasm among customers with its over 800 ready
flats near Dhaka.

Moklesur Rahman, senior manager (marketing and sales) of Rupayan, said


it is a great opportunity for the customers to get a ready flat at reasonable
price.

"During the fair we sold around half of our total flats and we expect to sell
another 100 units tomorrow (today)," he added. 1 [Daily Star news, June o7, 2009]

Realtors are also offering flats and plots outside Dhaka, including some
tourist attractions such as Cox's Bazar and Kuakata.
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Visitors flock to Rupayan Housing Fair at Sonargaon Hotel

The Rupayan Town offers flats of four different sizes ranging from a
minimum of 660 square feet to a maximum of 1,120 square feet at Tk
2,990 per sft. The booking fee is Tk 4.14 lakh. The majority of flat buyers
are coming from Narayanganj, adjacent to the project area, which makes
the company officials optimistic amid the industry's slack sales as a
whole.

According to the Real Estate and Housing Association of Bangladesh, the


sector witnessed a 35 percent drop in sales in the first three months of
2009 as a consequence of the global recession fallout. Rupayan's GM is
upbeat on the company's new project. "A good number of customers who
are living outside Dhaka are keen to buy our flats," Rahman said. He said
the Rupayan Town also attracted foreigners working at the Adamjee
Export Processing Zone (AEPZ). Kwuntoon Apparels, a Korean company at
the AEPZ, bought 28 flats, Rahman added. Rupayan has already built
more than 1,000 flats in different parts of Dhaka city and constructed
some commercial buildings in the city

Financial Performance
GrossProfit Margin

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2003 2004 2005 2006 2007 2008
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Gross profit margin is increasing per year up to 2006. But in 2007 and
2008 the margin was relatively low. As caretaker Govt. charged many
people for corruption, people feared and reduced investment in real
estate sector. This reduces the total sales revenue from apartment and
flat. So the rising trend of margin collapsed in those years.

Operating Profit Margin

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2003 2004 2005 2006 2007 2008

The operating profit margin is increasing every year except 2007 and
2008. As the gross profit margin was lower in those years and the
maintenance cost became higher for the excess unutilized capacity, the
operating profit margin falls too much.

Net Profit Margin

16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2003 2004 2005 2006 2007 2008
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Overall profit margin is in a rising trend. But in 2007 and 2008 the rates
declined. In those years low sales revenue, high maintenance cost and
high financial charge reduced the profit margin.

Time Interest Earned

2.50

2.00

1.50

1.00

0.50

0.00
2003 2004 2005 2006 2007 2008

Every year the ability of Rupayan is increasing to cover the financial


expenses through its operating income. But in 2007 and 2008 the
operating income was significantly lower which causes the time interest
earned ratio lower in those years.

Recommendation
From the above discussion we can recommend the following things

 Establishment and Enforcement of Housing policy.

 Implementation of “Real Estate management ordinance2008”

 Register and regulate the unscrupulous developers

 Follow national building code and earthquake requirement.

 Govt. should ease its regulation towards real estate sector.

 Fiscal financial incentives such as decrease in bank interest rates.

 Tax rate should be reduced in this sector


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 Derestriction of foreign remittance flows that financed this sector.

Conclusion
The government should create an environment with encouraging policies
so that the housing industry can flourish, and this will also be a great boon
for our national economy. This industry can more flourish with the help of
government .So government need to take proper steps & should make
proper policy to develop this industry sector. As our country is a populated
country proper housing planning is needed very much. A peaceful, secure
environment, a planned city is needed and deserved by every human
being & real estate sector can play major role to make this dream true.

Appendix
1. www.rupayangroup.com
2. Daily Star June 7, 2009.
3. Financial Express June 7, 2009
4. New Age Business
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