Problems and Prospects of Real Estate Sector in Bangladesh

Chapter-1

ORIGIN OF THE REPORT

Introduction

Residence is one of the basic needs of human beings. The right to live in one’s own is a fundamental right of people and it is internationally recognized. The demand of housing in urban areas in developing countries like Bangladesh is dramatically increasing due to natural increase and its fast growth rate. Rural people are migrating not only to find jobs but many wealthy people are moving to urban areas like Dhaka city for the fulfillment of their expectations of better of their future generation, and for enjoying the modern facilities of the city life. This has resulted into a serious crisis all over the country especially in the major cities of Bangladesh. In recent time, the private real estate firms have taken initiatives by ensuring maximum uses of land in a planned way. In this system it is possible to accommodate more people in a comparatively small place.

Literature Review

Real estate had made a mark in the very first year of its emergence with leaping to prominence as prime & various locations of the city and in manufacturing quality concrete products that have earned them the distinguished stature they enjoy today.

Dr. Miznur Rahman, in his article “The Real Estate Business in Dhaka City” has tried to analyze the market situation, competition, and customer perceptions about the real estate developers. But in his paper he does not mention how the top ranking real estate companies are gaining competitive advantages, and he does not pass his valuable comments on promotional mix, marketing mix etc. which are very important aspects of marketing in the context of competitive market.

According to the journal of IBS Mr., Shib Shankar Roy attempt to investigate how the private Real Estate sector solving the housing need and to analyze the market situation & perception of customer about the Real Estate marketers. He also concludes that the Real Estate marketers should have appropriate plans for constructing low cost apartment in the peripheral areas of the town. But he does not mention how a company can set their marketing strategy for their apartments.

Mr. Taluckder and others has tried to examine and assess the present of apartment marketing and its future. Now, the business environment has changed to multi-various purposes, such as for business, residence etc. The business activities have not been focused through their paper like the promotional activities, as the problems associated with the business have not yet been highlighted exactly.

Also, the paper does not pin point how to overcome the major barriers of the Real Estate Companies that are being faced by the developers as well as buyers in the context of present competitive market of the apartment marketing. The study suggests that the future apartment building projects should be planned to cater to the needs of the middle-income people. Banks and other financial institutions should extend their assistance to the apartment builders. But they do not mention in their paper that how the problems of the Real Estate Business can be solved. However, they have extended their hands to highlight the various problems by providing information in the arena of Real Estate Business.

 Mr. Belayed and others has attempted to investigate the nature of real estate business, psychological aspect of buyers, and policy decision of the firms. But the study does not highlight the subject in details. For purchasing high involvement product like an apartment, there is various economic and psychological factors influence the buyers purchasing decisions. Also, the study does not suggest what kind of government help and facilities will specifically be effective for growing Real Estate Business. But the study mentions some significant aspects of Real Estate Business like the nature of Real Estate Business, pricing policy etc.

Importance of the study report:

In developing the urban area, Real Estate plays an important role as well as solving housing problem. Now a day’s real estate business in Bangladesh became very much competitive. Competitors are moving very aggressively to achieve their target as well as increase their market share. On the other hand, the customers are become very much aware about the current market of apartments as a result it became very difficult to take decisions. Primary data that are collected and analyzed in this study will be helpful for the decision makers of Advanced Development Technologies Limited.

 Objectives of the study report:

Every study must have its objectives. Again the objectives should be specified and well defined. So the main objective of this study is to analyze the problems and prospects of Real estate sector in Bangladesh.

Bearing the above view in mind, I have notified the following objectives for my research.

1. To identify the problems and prospects of Real estate sector in Bangladesh
2. To analyze the SWOT of real estate company.
3. To analyze the present real estate business situation.
4. To develop project
5. To develop marketing mix & strategy

Scope of the Study report:

Real estate had made a mark in the very first year of its emergence with leaping to prominence as prime & various locations of the city and in manufacturing quality concrete products that have earned them the distinguished stature they enjoy today. Attuned to the rhythms tomorrow, Real Estate business humbly launched its journey to reach to its noble vision to ensure a new standard of living

Methodology:

This paper has reviewed extensively the real estate financing issues providing updated data and literatures considering both developed and developing real estate financing markets along with discussions regarding problems, prospects and some policy implications of this sector in Bangladesh. Information has been sourced from two ways: Primary data and Secondary data.

Secondary data:  Academic journals, white papers, industry portals, government agencies, trade associations, industry news and developments

 Analysis of Data and Information

 Housing finance is defined as the extension of loans to consumers to acquire houses; leasing of houses to the consumers through financial leasing; and extension of loans to consumers where such loans are secured by the houses that the consumer owns. In addition, loans extended to refinance the loans explained in this context are also included in the housing finance.

 Housing Finance Systems in the Developing Countries

Housing finance systems in many developing and emerging economies share several characteristics. First, most housing finance systems are “institutional patchworks” that comprise private sector lenders as well as several government-managed housing finance institutions or programs (Renaud, 1996). From a regional perspective, the mortgage markets in South Asia are small and fragmented with the unorganized sector. Regarding the organized segments, there are distinct commonalities that characterize some of the mortgage markets of South Asia, such as a heavily subsidized monolith-like state run institution, a fledgling private sector catering to the middle and upper income segments and players from the banking sector that provide housing finance as a part of their retail portfolio. The mortgage markets in Sri Lanka, Bangladesh and Pakistan are such archetypes (Karnad, 2004). The residential housing sector of Bangladesh is characterized by a three-tier market. First are those households with the highest disposable income (less than 3 percent of the housing market), able to afford high quality housing in fully serviced neighborhoods, and able to utilize bank financing or specialized housing finance institutions. The second tier is the relatively narrow stratum of middle-income households (represents 12 to 15 per cent of the housing market) that are the main users of specialized housing financial institutions such as Bangladesh House Building Finance Corporation (BHBFC). This group is the major beneficiary of available public subsidies and is composed predominantly of public servants and wage/salary earners of large private companies and public sector corporations. The third and largest of the tiers is the low-income households, for which housing is provided largely by the private sector, often under illegal and unsatisfactory site conditions (ADB, 1995).

 Limitations of the study report :

There are limitations in every research that interrupt the workings of the research. The limitations, which are faced by me in conducting the study, are as follows,

  Time constraints.

  Lack of adequate financial support.

  Unavailability of previous research work.

  Conservativeness of respondents.

CHAPTER-2

Purpose of real estate business

The purpose of our real estate business is, obviously, to earn profit, but the promoters and the equity holders are ware of their commitment to the society to which they belong. A chunk of the profit is kept aside and/or spent for socioeconomic development through trustee and in atomization of art, culture and sports of the country. We want to make a substantive contribution to the society where we operate, to the extent of our separable resources.

Vision of Real Estate. 

 Application of modern information technology in business activities, offering high standard clientele services and proper coordination of business is the core of their vision.

Mission of Real Estate.

With a view to achieving objective of the real estate sector, their sincere and al out efforts stay put unabated. Respected clients and stakeholders are attached to us for our transparency, accountability, social commitments and high quality of clientele service.

Objective of Real Estate.

Bring Modern facilities to the doorstep of general public through diversification of their service. They try to maintain their quality of the product. They try to maintain their commitment to the client.

• Professionalism.
• Transparency.
• Service.

Business goal of Real Estate.

To patronize, sponsor and encourage games and sports, entertainment and other social activities, alongside providing the best services to the clients.

Growth & development of Real Estate.

Real Estate business carried out all traditional functions, which a real estate performs such as installment, discount, festival, offer, trade & commerce & industry. Real estate business earning amount are increasing day by day.

Pricing policy:

Considering the customer’s demand schedule, the cost function, and competitor’s prices the companies set their product’s price. Costs set a floor to the price; and the price of the substitute products provides an orienting point. Customer’s assessment of unique product features establishes the price in the market. Different types of pricing strategies are –

a. Mark up pricing

b. Target returns pricing

c. Perceived value pricing

d. Value pricing

e. Going rate pricing

f. Sealed Bid Pricing

g. Flexible pricing strategy

The existing products of apartment developer are luxurious apartment (Tk 6000 – 6500 and above per sft.), high rising luxurious apartment (Tk 5500 – 6000 per sft.), moderate apartment (Tk 3500 – 4000 per sft.) and high rising moderate apartment (Tk 4000 – 4500 per sft.), commercial building cum apartment, commercial building, super market etc. with this they include car parking & utility charge.

 How to Develop a New Project:

Following is the process of developing new project

Marketing Strategy

The process of planning and executing the pricing, promotion, and distribution of goods, ideas, and services to create exchanges that satisfy individual and organizational goals. Simply, if it doesn’t facilitate a “sale” then it’s not marketing.

Two major aspects of marketing are the recruitment of new customers (acquisition) and the retention and expansion of relationships with existing customers (customer base management or customer relationship management). An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers. Marketing is the process of trading in a market; buying or selling. The taking of merchandise to market. Market also a gathering where people buy and sell. To buy or sell in a market is marketable that which may be sold.

Marketing mix divided into four functional areas:

In marketing process they overcome in four Processes:

1)      Analyzing marketing opportunities

2)      Selecting Target Markets

3)      Developing The Marketing Mix

4)      Managing the Marketing effort

Marketing process and the forces influencing business marketing strategy. As a first step through market segmentation, targeting, and positioning, the company decides which customer it will serve and how. It identifies the total market, then divides it into smaller segments, selects the most promising segments, and focuses on serving and satisfying these segments. Next the organization design a marketing mix made up of factors under its control – product, price, place, and promotion. To find out the best marketing mix and put it into action, then the company engage in marketing analysis, planning, implementation and control. Through these activities, the company watches and adapts to the actors and forces in the marketing environment. Market positioning is so much essential for developing company cause arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the mind of target client.

 Developing the marketing mix according to Real estate business:

Once the real estate has decided on its overall competitive strategy, it is ready to begin planning the details of the marketing mix. The marketing mix consists of everything the firm can do to influence the demand for its product.

Marketing Mix

• Product
• Price
• Place
• Promotion

Product:

Products mean the goods and services combination the offers to the target market. In fact, finding the right product concept is one of the four critical objectives of marketing. Real estate is successful strategic marketer they carefully and completely consider their product options. Marketing Strategies of Real Estate in Bangladesh business made actions and enjoyed a dominant position in the world market and domestic Market. By the 2006’s they had introduced many inventive variations of the Real Estate. However, they completely ignored the streams of independent invention that, together, created the quartz watch action.

 Price:

Price is the amount of money customers have to pay to obtain the product. Real estate has set their pricing strategy to think the different target customer. Pricing mainly determined by location of the project in the country. It’s incredible how few people fail to appreciate this simple truth. A graduate professor in Financial Management taught us several different ways to precisely determine the cost of a product. Out came the calculators. At this real estate, that will cover the cost of taxes, goods sold, manufacturing, overhead, marketing, depreciation, and still provide a net income, which is better than the average in this particular market.

Place: 

Place includes company activities that makes the product available to target customer. Place determined by the company in geographic basis they set their project mainly in urban areas of different location. Real estate marketing their products concentrates on location basis they divide Dhaka city in different location.

 They place their product

• Area on the world map, or country map, or city map.
• Income group
• A common interest
• A common personality
• A common lifestyle
• Occupation
• By intermediaries

Promotion:

Promotion means activities that communicate the merits of the product and persuade target customers to buy it.  The process of buying and selling in a market ultimately, has to promote the entire customer of the target market. Product Quality and characteristic of company their main promotional tools side by side they go for different advertisement, billboard, Fair etc to inform their product feature with prices. They promote their customer that loan facility available, discount in at a time payment, due time Handover swimming pool and other value added services.

 CHAPTER- 3

SCENARIO OF REAL ESTATE SECTOR

Overall Scenario of Real Estate Business in Bangladesh:

Dhaka City, born during the Moghul 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 end of the century. Dhaka City is undergoing terrific growth phase throughout the last two decades. While there are so many real estate developers in the market, there are also very few of them who have maintained the quality, safety and customer preference. It is customary in the country that the first day quality and impression is lost after a while when people start getting a bit of familiarity. This happens due mainly to lack of professionalism. Sometimes the consumers here are in a fix to choose a particular brand out of many. A good number of real estate companies are working under one umbrella association named ‘Real Estate and Housing Association of Bangladesh’ (REHAB). Almost 83 Companies are at present affiliated with this association, while more than 200 companies are working independently. BTI took a leading role in the formation of the industry association and is one of the founder members of the REHAB.

Objectives:
a)         To offer finest apartments in excellent locations to the clients;
b)         To provide sound construction with aesthetic design to the clients;
c)         To install best possible fittings and fixtures;
d)         To satisfy clients by expert-oriented service;
e)         To help solving the residential problem of Dhaka city;
f)         To perform social responsibility for a happy future Market:
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. At present, more than 250 companies are active in business but 95% business is still dominated by of top 10 Companies. Present market is growing at the rate 15%.

Reasons for development of the industry:
The main reasons why real estate business developed in Dhaka city are as follows:
a) Scarcity of open space in the important areas of the city
b) Hazards of purchasing land
c) Hazards of construction of building
d) Rapid increase in population of Dhaka
e) Decrease in the rate of bank interest
f) Price of land and apartments is increasing day by day
g) Rent of the apartments is comparatively higher than the rent of privately constructed flats
h) Open Market Economy. Remittance of foreign currency is very easy
i) Security
j) Service facilities such as garbage disposal, central satellite TV connection, apartments services saves time, roof top facilities, lift and so on.

 CHAPTER – 4

REAL ESTATE STATUS IN MARKET

 Types of market segmentation:
The market of real estate business sector is highly segmented. This segmentation is mainly based on the location, price of the land, and size of the apartments. The segmented areas are:
a) Segmentation – I :Baridhara, Gulshan, Banani, DOHS, Uttara
b) Segmentation – II :Dhanmondi
c) Segmentation – III :Segunbagicha, Shantinagar, Kakrail, Malibagh, Kalabagan
d) Segmentation – IV :Mirpur
e) Segmentation – V :Old Town of Dhaka City
f) Segmentation – VI :(For office building) Motijheel, Dilkusha, Fakirapool DIT h)Extension Road, RK Mission Road, Shahidbagh, Kawran Bazar, Pantha Path etc.

Places in Dhaka city where residential and commercial projects has been congregated:
Dhanmondi; Gulshan; Banani; Eskaton; Siddeshawari; Panthapath; Baridhara; Elephant Road; Mirpur Housing Estate, Mirpur; Dilkusha C/A; Kakrail Rd.; Malibagh; Lalmatia; Indira Road; Pallabi, Mirpur; Old Airport Road; Farmgate; Inner Circular Road; Mohakhali; Ashulia, Savar; Kalikair, Gazipur.

The development projects for apartments and residential purposes range from Duplex Home, Triplex Home, Penthouse, Luxury Home, Furnished Apartment, Unfurnished Apartment, to Condominium and Vacation-Resort Property. Commercial projects includes Industrial Shed, Agro Farm House, Warehouse / Godown, Commercial Space, Industrial space, Office Building, Office Suite, Furnished Office, Commercial Showroom, Exquisite Office, Industrial Park, Factory, Lofts, Shopping Center, etc.

 Real estate competitors in Bangladesh:

Price lists of different companies in different places:

Name of Companies	Gulshan	Banani	Mohammadpur	Mirpur	Dhanmondi	Uttara	Midtown
Rangs Properties	3500				2700	1950 P	1700
GEO Properties ltd	2800 P		1600	1500	2200
ENA Properties					2200	1800	1900
1. Borak Real						2000
2. Nagar Homes						2200
3. AminMohammad	3200			1600	3000		2000
4. South Breege	3500+		2000		3000
5. Navana	3500		1850	1450	3250	1850	2200
6. Oriental	2750		1800		2150	1800	2000
7. Bashgreho				1500		1550	1750
8. Structural (SEL)	3250 P		2000	1650 P	3200	2000	2200
9. Assurance	2750				3000
Name of Companies	Gulshan	Banani	Mohammadpur	Mirpur	Dhanmondi	Uttara	Midtown
1.ANZ Properties					2850	1600
2.Bay	2875 P
3.ADDL						1650
4.Asset	3500					2900
5.Concord	2850-3200				2500		1750
6.Sheltech	3000			1450		1600
7.Mega Builders			1675 P

MAJOR ACTIVITIES

1. Application for allotment of apartments should be made on the prescribed application form duly signed by the applicant along with the earnest money. The company has the right to accept or reject any application without assigning any reason thereto.

2. On acceptance of an application, the company will issue allotment letter to the applicant on which the applicant/allotted shall start making payment as per the schedule of the project. Allotment of apartments is made on first come first serve basis.

3. Payments of earnest money, installments, car park costs, additional works and other charges shall be made by bank draft or pay order directly in the name of the respective company against which the receipts will be issued. Bangladeshis residing abroad may remit payments in foreign exchange by TT or DD in the name of the company.

4. Payments of installments and all other charges are to be made on due dates according to the schedule. The company may issue reminders to the allottee, but notwithstanding the issue of reminders, the allottee must adhere to the schedule to ensure timely completion of construction.

 5. The company may arrange HBFC/Bank loan (if available) for allottees according to the existing rules and regulations of the authority concerned.

 6. Delay in payments beyond the schedule date will make the allottee liable to pay delay charge (amount varies from company to company) for every 30 days on the amount of the payment delayed. If the payment is delayed beyond 60 days the company shall have the right to cancel the allotment. In such an event, the amount paid by the allottee will be refunded after deducting the earnest money and after allotment of the canceled apartment.

 7. Connection fees/charges security deposits and other incidental expenses relating to gas, water, sewerage and electric connections are included in the price of apartments. The company will make those payments directly to the authorities concerned on the allottee’s account.

 8. Limited changes in the specifications, design and/or layout of the apartments and other facilities may be made by the company in larger overall interest or due to unavoidable reasons.

 9. The company may cancel an allotment for non-payment of installments in disregard of reminders and after final intimation to the allottee by registered post at the address given in the application form. 10. The allottee shall be required to execute an agreement with the respective company for safeguarding the interests.

10. The possession of the apartment shall be duly handed over to the allottee on completion and full payment of installments and other charges and dues. Till then the possession will rest with the company. If the project is completed before the stipulated time, the allottee shall have to make full payment before taking possession.

 11. The allottees will become equally divisible undivided and undemarketed shareholders of total acres of the scheduled land of the project in respective apartment. After all the dues and installments are paid by the purchaser according to the requirements and schedule for payment and after the completion of the construction, the vendors shall execute a registered sale deed in favor of the purchaser transferring share of land of the project in the demised apartment.

 12. After taking over of apartment of the project, the allottee (s) must consult the company prior to undertaking any structural or layout changes within the apartment complex. Failure to do so will be at the sole risk of the allottee.

 14. Company shall not be liable if the completion period of the construction of the projects is affected by unavoidable circumstances beyond the control of the company, like natural calamities, political disturbances, strikes and changes in the fiscal policy of the state etc.

 15. For the purpose of effective management and maintenance of the building the purchaser of the apartment shall form and constitute a mutual benefit cooperative society under the Co-operative Society’s Act 1940. The society shall be entrusted with the management and maintenance of the building. The rules, regulations and by laws of the co-operative society relating to management and maintenance of the building shall be binding upon all the purchasers/owners of the apartments.

ADDITIONAL WORK AT THE PERIOD OF PROJECT:

The overall evaluation of a real estate Strengths, Weaknesses, Opportunities and Threats is called SWOT analysis. It involves monitoring the external and internal marketing environment. By reviewing the business strengths, weaknesses, opportunities and threats, can respond to changing market conditions.

 A particular SWOT analysis discloses the following issues for an organization that an organization achieved over the time of its operation by analyzing its both internal and external environment:

   “S”- Strengths

  “W”-Weakness

  “O”-Opportunities

  “T”-Threats

SWOT ANALYSIS OF “Real estate business”:

Strengths:

• Experienced Management.
• Efficient and dedicated employees.
• Good understanding between employees.
• Good relationship with exiting clients.
• Locations of the Projects are good enough.
• High standard of construction quality.

Weaknesses:

• Many prospective clients don’t have any idea about its construction quality.
• Comparatively product’s prices are higher than many companies.
• Lack of promotional activities or advertisements.
• No specific policy following by the employees.

Opportunities:

• The upcoming Projects are in demandable locations.
• Huge number of projects under construction.

Motivation of the sales persons to encourage them for more effective in sell.

• Offer the prospective clients to visit the existing projects to make positive impression.
• In Dhaka, there is no availability of land at the good places so people have to buy flat and real estate can be a good option for the flat buyers

Threats:

• Huge number of competitors & Lack of suitable land.
• National catastrophes.
• Non-availability of funds
• Loss of experience stuff.

CHAPTER – 5

FINANCIAL STATUS

 Financing in Real Estate Company

Status of Real Estate Financing in Bangladesh

McKinney, Jr. (1952) has identified four sources of real estate financing (in order of contribution) during the housing boom in the United States, such as savings and loan associations followed by commercial banks, insurance companies, and mutual savings banks. Edwards, (1964) has also pointed out that savings and loan associations by continue to grow more rapidly than other mortgage lenders, is the dominant force

in the home mortgage markets. In spite of an increasing focus on urban housing and development, informal systems are still the dominant producers in many developing countries – an estimated 60 and 70 per cent of

 Financial limitation

1. If the housing problems are to be more effectively addressed, housing policies, specially financing issues must be taken in consideration. Stronger, more effective enabling strategies must be developed by the public sector to allow housing markets for the various tiers to leverage the activities of the private sector. The National Housing Policy, 1993 focuses on the basic objectives of providing housing to people at all strata, especially to the low and middle income groups and those having no access to housing.

2. The objectives of the subsidy scheme should be to assist those that do not qualify for a formal sector mortgage loan and thereby increasing the number of middle income households that can avail themselves of housing finance. However, we need to keep in mind that subsidized funding for state owned housing finance entities creates distortions in the market place and it should be stopped. Fortunately, for the last few years, BHBFC could not avail any subsidized funding through the government or government guaranteed debt.

3. Real estate loan recovery rate in the public sector is very low and well below that of the commercial banks. While in the past a rural house lending program, sponsored by the government through a 3 per cent refinancing window at the Bangladesh Bank was stopped because of alleged poor recovery rates. The outstanding balance of total loans and advances of the BHBFC on June 30, 2000 was BDT 27,236.97 million, of which classified loans accounted for BDT 8,343.07 million. However, the recovery rate of housing sector loans in the banking sector averages approximately 70 per cent. The poor recovery rate is due mostly to older loans and recovery exceeds 80 per cent on loans disbursed after 1990 (Hoek-Smit, 1998).

4. In order to develop a primary mortgage market, financial assistance to primary mortgage market players (e.g. banks extending housing loans, specialized housing finance originators) through equity participation, loans, credit lines and warehouse lines should be given. Development of standardized and prudent credit underwriting, mortgage origination and servicing standards, and advice on the use of technology to implement such standards.

5. National housing finance systems must prove themselves competitive by mobilizing and allocating capital efficiently. The BHBFC has only made very limited progress in becoming self-sustainable or in reaching lower income households. Since BHBFC does not have additional funding they are not in a position to go for new lending. The prices of mortgaged lands that BHBFC had against their lending 10 to 15 years ago have gone up significantly.

6. Insurance and Trust Acts have not been changed to facilitate lending by long-term investors in the housing sector. Sometimes developers are accused for not properly following the procedures for borrowing money from financial organizations. Three parties get involved in the process – the developer, the landowner from whom the land was leased and the one who buys the apartment.

 Types of loan

In Bangladesh there are 3 (three) Financing Organizations in Private Sector, which are ffering loan facilities for housing and commercial spaces.Classification of Mortgage Loan:

There are four types of mortgage loan which is related crucially to the real estate. They are

      Conventional Mortgage Loan

      Insured Conventional Mortgage Loan

      FHA Insured  Mortgage Loan

      VA Guaranteed Conventional Mortgage Loan

1. Conventional Mortgages: are negotiated between a borrower and lender. From these negotiations, the loan-to-value ratio interest rate (or ARM terms) and the payment-to-income ratio are established.
2. Insured Conventional Mortgage Loan: In many instances, borrower do not have the necessary wealth to make a down payment of 20% of value when purchasing property. However if the income earning ability of the borrower and the location of the property being acquired are satisfactory, lenders may be willing to grant a loan request in excess of 80% of value with a condition that the borrower purchase mortgage insurance against default risk.
3. FHA Mortgage Loan: A Mortgage can be insured by the federal housing administration. Unlike Conventional Insurance which protects the lender against some portion of the potential loan loss.
4. VA Guaranteed Conventional Mortgage Loan: VA stands for Veteran agreement conventional mortgage loan.

Types of Loan Source
Name of the Organization	Corporate Address	Contact Numbers
Delta Brac Housing Finance Corporation Ltd. (DBH) Interest Rate: a) Privileged Clients – 12.50% b) General Clients – 13.00% Website:	Gulshan Head Office Landmark Building (9th Floor), 12-14 Gulshan North C/A Gulshan-2, Dhaka-1212. Motijheel Branch Room # 1101, Sena Kalyan Bhaban (11th Floor) 195 Motijheel C/A, Dhaka-1000.Dhanmondi Branch Pantha Plaza (1ST Floor), 63/A Lake Circus Kalabagan, Dhaka-1205. Chittagong Branch Faruque Chamber (7th Floor), 1403 Seikh Muzib Road Choumuhony, Chittagong.	Gulshan Head Office Phone # 8822374, 9882112 | Fax # 880-2-9882110 E-mail: dbh@deltabrac.comMotijheel Branch Phone # 7111774, 7111778, 9564907, 0171621062 Fax # 880-2-9551536 | E-mail: motijheel@deltabrac.com Dhanmondi Branch Phone # 8130906, 9134211, 9124112, 8117264, 018251216 Fax # 880-2-8117264 | E-mail: dhanmondi@deltabrac.com Chittagong Branch Phone # (031) 711782, 712298, 727885, 0171816672 Fax # 880-31-728202 | E-mail: chittagong@deltabrac.com
Industrial Development Leasing Company of Bangladesh Limited (IDLC) Interest Rate: a) Priority Clients – 12.50% b) General Clients – 13.00% Website:www.idlc.com	Corporate Head Office Hadi Mansion, 2, Dilkusha C/A, GPO Box # 3160 Dhaka-1000.Chittagong Branch Suriya Mansion, 30, Agrabad C/A Chittagong.	Corporate Head Office Phone # 880-2-9560111 | Fax # 880-2-9563620 E-mail: mailbox@idlc.com, housefin@idlc.com Chittagong Branch Phone # (031) 711034, 713742 | Fax # 88-031-715895 E-mail: idlcctg@spnctctg.com
National Housing Finance And Investments Limited Interest Rate: a) Prime Loan/Clients – 12.50% b) General Loan/Clients – 13.00% Website:http://www.nationalhousingfinance.com/	Corporate Head Office National Plaza (7th Floor), 1/G Free School Street Sonargaon Road, Dhaka.Motijheel Branch Chamber Building (6th Floor), 122-124 Motijheel Dhaka-1000.	Corporate Head Office National Plaza (7th Floor), 1/G Free School Street Sonargaon Road, Dhaka. Corporate Head Office Phone # 9669800, 9666281, 9670612-4 | Fax # 880-2-9671016 E-mail: housing@dbn-bd.com,housing@intechworld.net Motijheel Branch Chamber Building (6th Floor), 122-124 Motijheel Dhaka-1000.

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CHAPTER – 6

PROBLEMS & PROSPECTS OF REAL ESTATE IN BANGLADESH

 Problems & prospects of real estate sector in Bangladesh

The Real Estate and Construction Industry plays an important role for sustainable development of a country. In Bangladesh many construction projects are undertaken under development programs. The construction industry is an important sector for physical and economic development of the country. It provides physical expansion and economic development. This sector is well linked with human settlements, employment and environment. In case of Bangladesh it is not actively patronized by the policies of the government. As a result, this sector could not grow under a systematic environment. This paper makes a case study of construction industry of Bangladesh with special emphasis on Real Estate & Housing sector. The paper discusses the pros and cons of the project activities and its various implementation stages. It narrates the experiences and recommends more appropriate realistic strategies, which are both applicable in local and national levels of Bangladesh.

Introduction:
Being one of the most densely populated countries of the world with a huge population, Bangladesh has already surrendered nearly 25% of its land to human settlements and related uses. With the current 30 million urban populations, the share of urban land is about 2 percent of all lands and nearly 10 percent of land under settlements.

Urbanization helps saving land for settlements. This is because of the possibility of higher density. As of today 30 million urban population are squeezed on about 3370 square kilometers (1300 square miles) of land in the country giving a gross density of 8870 persons per square kilometer (23000 persons per square mile) as opposed to about 700 persons per square kilometer (1800 persons per square mile) in rural areas. Thus the urban density is more than 12 times that of the rural density. But urban population will be more than double in the next 20 years and the trend would continue. By the year 2040 Bangladesh would possibly have half of its population (of 200 million or so) in urban areas that would amount to 100 million people in urban areas.

Due to various factors, including absence of an urbanization policy or a human settlement policy, urban growth and urban development in Bangladesh is basically Dhaka oriented. Already 30% of the urban populations of the country are concentrated in Dhaka Mega city region. The trend is continuing or becoming more entrenched. As Dhaka is the Nucleus City of Bangladesh and the focal point of all social, political and economic activities, the current housing situation of Dhaka City is mainly outlined in this paper. The problems and prospects of housing are also discussed in the light of the experiences of some other major cities of the world. The present and future trend of housing development is also discussed with special reference to high land value in Dhaka City. In future there would obviously be a need for higher density of population in both rural and urban areas, more so in urban areas. Density can be increased both horizontally (by more compact arrangement) or vertically through multi-storied development. There is no magical solution to the present or future housing problem of Dhaka City. Different sets of policies need to be implemented both at the national as well as the local levels. Nevertheless in the light of the prevailing high growth rate in population as well as increasing value of land in Dhaka city, it can be easily argued that apartment development should be encouraged in the coming years. Both walk-up as well as high rise developments should be encouraged. Hence the future residents of Dhaka should adapt themselves to apartment living by being more accommodative and tolerant. All of us would prefer to live in a private home with a front lawn and /or a back garden, but since urban land is scarce and expensive, solutions with high rise development need to be considered in a rapid developing city like Dhaka.

Interaction of Urbanization with Population Growth

High population growth and rural-urban migration intensify the problems of urbanization in Bangladesh, as in all developing countries. For Bangladesh the problem is further aggravated by limited land supply in urban areas, lower land utilization and lack of proper policy and planning of land-use. The ever growing urban population is creating an increasing demand for space. This rapid influx of population to the (capital) city results in sky rocketing land prices and provides some stimulus to construction of tall buildings. During the last four decades, metropolitan Dhaka has recorded a phenomenal growth in terms of population and area. Dhaka at present is one of the fastest growing metropolises in the world. After the war of independence of 1971, Dhaka’s provincial capital status was raised to national capital overnight and its population increased manifold in the subsequent decades. The land area and population of Dhaka is usually expressed in terms of two boundaries. One is Dhaka City Corporation (DCC) boundary and the other one is the larger boundary of Rajdhani Unnayan Kartripakkhya (RAJUK). Within DCC limits (with about 520 square kilometer i.e. 200 square mile), there are already over 7 million people and growing possibly at 5.5 percent annually. Gross density is 11,570-13,500 persons per square kilometer (30,000-35,000 persons per square mile). In some parts density of over 38,580 persons per square kilometer (100,000 persons per square mile) exist, with an average of 3 stories for pucca development or one story for kutcha development. But at such high densities, we do not get enough road space or open space or other non-residential space either. Outside DCC, but within RAJUK limits, there are 1008 square kilometers (about 390 square miles), wherein live another 2 to 3 million people. Densities in such areas vary from very high to very low. In fact much of the RAJUK areas, beyond DCC, are not ready for proper urban development yet. There are low lands, liable to annual floods, and to deep flooding during abnormal floods. But urban expansion takes place even in such marginal lands through gradual earth filling.At present the Dhaka metropolitan area consists of the inner city which is almost built up and surrounding areas which are semi-built up. During the period from 1981 to 2000, the greater Dhaka population grew at an average rate of 5.5% from about 3.44 million to 10.0 million. During the same period the built up area increased from 104 sq. km (39% of the city area) to 150 sq. km. (55%). By the year 2015 the expected population of the city is forecasted to be as high as 15.7 million. It is expected that Dhaka will become one of the ten largest cities of the world by the year 2020 with a population as high as 20 million and to make provision for accommodation and comfortable living of this large population, creation of new satellite towns adjacent to the city and also new towns around the cosmopolitan city will be necessary. For this purpose, the area of Gazipur, Kaliakoir, Savar, Tongi, Narayanganj and Keraniganj across the river Buriganga and Purbachal i.e. Yusufgonj under Rupgonj thana of Narayongonj district in between the rivers Balu and Shitalakhya will be taken into consideration.The additional population in the coming decade will add new dimensions to the urban fabric of metropolitan Dhaka. The main reasons for the huge anticipated increase of Dhaka population in the coming decade is due to unbalanced urbanization and presence of primacy in the city size distribution pattern. Compared to other developed and developing countries.

Housing in Dhaka City

Housing conditions of Dhaka City vary greatly between high and low-income groups as well as by area. The gap is obvious between luxurious high income apartments/houses which exist in high-income areas such as Gulshan, Baridhara, Dhanmandi, Uttara areas and poorly constructed temporary housing (Jhupri) with extremely small floor space, very densely located on the lands prone to flood disasters. About 30% of the slum dwellers live in Jhupri, 24% in Chhai, 13% in Tong, 30% in Tin-shed, 2.5% in Semi-pucca and 0.5% in Pucca type of structure. Housing requirements in Dhaka is 218,000 units including dissolution of backlog until 2001 and replacement, wherein the requirements of urban poor is 140,000 units, which share almost two-thirds of the total requirements. In terms of tenure, 54% of the households are on private rental basis while 31% are owned. Only 1.2% is on social housing.It can be pointed out that people from all socio-economic backgrounds in Dhaka are facing housing problem of one type or another. While the urban destitute need rehabilitation, the slum dwellers need slum upgrading. The low-income families are in need of low cost flats or plots and the middle and upper income families are complaining that the cost of a decent plot or a decent flat is going beyond their means. The solution to the problems of these different groups is also different and mainly lies in the hand of the policy makers and the government.

In recent years there has been a new trend of housing development mainly in the private sector. A new type of residential development has come on the scene, which can be broadly termed as apartment development. In most of the cases an individual or a company constructs one or more buildings comprising of several apartments, which are later sold to individual purchasers. This has prompted many individual entrepreneurs to develop apartment buildings resulting in an increased number of real estate companies in the city.

 Housing Access and Affordability

The rapid growth of city population has led to a phenomenal increase in housing demand in the city. The housing market of the city consists of five tenure groups – owner occupied, private rental, rent free, squatters and slums. Physically, housing has extended from makeshift arrangement and permanent houses. Dhaka City has a very high proportion of poor population (65%) and as such affordability of housing is significantly affected by the income distribution. The access of poor to housing is constrained by high land and material prices. In one study (DMDP, 1995), it has been observed that the first quintile of city household has zero affordability to housing; the second quintile can afford Tk. 140 to Tk. 300 per month; the third quintile can afford Tk. 300-400 per month; the fourth quintile of household can afford Tk. 480 to Tk. 600 per month and the fifth quintile of household can afford Tk. 1000-2500 per month. Only 3.85% of household can afford above Tk. 2500. The affordability indices of Dhaka City imply that the govt. has to play the role of both provider and facilitator/enabler for different income groups.

Apartment/Real Estate Development in Dhaka City

Three decades back the city dwellers were reluctant to live in flats while ten years back some one would have thought twice before buying an apartment/flat. But in the last couple of years people have shown an increased interest in owning apartments. As mentioned earlier the main reason is economic due to increased land cost as well as construction cost. There are also other reasons such as reluctance of individuals to spend time and energy in house construction, increased awareness of apartment living, and western influence. As a result apartment-owning is becoming increasingly popular. Moreover the absentee i.e. the wage earners in Middle East and other countries are also a major contributing factor towards the increasing demand for apartments. As a result of increased demand, many apartment builders have appeared in the market in recent years. Twenty years ago there were fewer than five companies in Bangladesh engaged in developing apartments while today there are more than 200 developers. It may be mentioned here that in 1988 there were less than 20 such developers in Dhaka. At present there are 80 such developers working in Dhaka City who are members of REHB. But there are many other companies/individuals engaged in such development in smaller scale and selling apartments to friends and relatives only.

Construction and Development Process

The contribution of construction industry in the Gross Domestic Product (GDP) is significant. Over the last 15 year the Real Estate Development sector has made significant contributions to many sectors of our economy. Since 1985 this sector has created homes for over 12000 families in the metropolitan city. Additionally, thousands of acres of land have been developed into housing estates where lower middle and middle-income families can construct their own dwellings. The fact that many cement manufacturing industries have now been set up in Bangladesh is a reflection of the impetus the Real Estate Development sector has given to our economy. In the last decade many steel mills would have shut down had it not been due to the support of the Real Estate Development sector. Several new mechanized construction material manufacturing industries have recently come up due to the existence of this sector. Today about 200 architects and consulting engineers are directly supported by this sector; over 500 graduate engineers are holding management positions in this sector and almost 2500 diploma engineers are engaged by this sector. 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 Contribution of construction industry may be summarized as:

. 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 industrial sectors. Skill generation is thus possible by construction industry.

· The low-income population, after the provision of shelter and civil infrastructure, feel morally upgraded (direct contribution to labor productivity). It has also been observed that improved dwellings are frequently transformed into some sort of informal economic production units. Improved road systems make commodity outputs of small units more easily accessible. Construction industry thus contributes to higher productivity.

The construction sector directly relates to employment, power and transport sectors. The construction industry is a very labor intensive, providing many jobs for skilled, semi-skilled and unskilled workers both in the formal and informal sectors. The informal sector also employs many people in construction industry. For the migrants from the rural areas the construction industry is a stepping stone to urban life.

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. It is very unfortunate that today the Real Estate Development sector of Bangladesh is in the doldrums. Many construction projects are left incomplete; many people who have invested their money face uncertain future; and many related industries will face the consequence of this depression in the immediate future.It is our view that a part of the reason behind this pathetic scenario is the misunderstanding of this sector by the successive governments. Instead of receiving encouragement and nurturing, this sector has been progressively quashed by regressive government policies. A few examples are listed hereunder: In 1989 the Ministry of Industries declared construction of residential complexes on commercial basis as an industry. However, to-date this notification from the Ministry of Industries is not recognized by the National Board of Revenue. Therefore, this sector is not entitled to any benefit of an industry. Transfer fees stamp duty and registration charges for property in Bangladesh are amongst the highest in the world. In the metropolitan city, a purchaser has to pay approximately 25% of the total value of the property to the government exchequer under different heads for registering the apartment. House Building Finance Corporation is the only government institution dedicated to the financing of homes. Over the last 15 years this institution has been constantly cash starved and has made negligible contribution to the financing of this sector. In Bangladesh there is virtually no financing facility for this sector and almost all procurements are made with 100% equity. Recently some private institutions have entered the housing financing business but the cost of borrowing from these institutions is prohibitive.

Development of High-rise Building

High-rise buildings probably were first constructed in response to the corporate need for increased direct communication and expansion of business operation. Businessmen understood the need for proximity and personal communications and quickly recognized the value of “going vertically up” within a compact business core in the central city. This philosophy has remained, all over the world, despite the extraordinary technical advances made over the last 50 years in both transportation and telecommunications. The corporate world is not the only beneficiary of high-rise development; often other enterprises that serve corporate business or its employees also locate themselves in high-rise structures. Offices for lawyers, accountants and other business related professionals are established in close proximity to the corporations, often being located in the same building. Medical and dental practices open where they can capture and serve office workers as well as the general urban population from a central location. Even where the structure bears a corporate name and was built specifically for a corporate tenant finally ends up catering to various professional and business clients. Today’s high-rise building usually contains a variety of tenants. The city itself benefits from the concentration of business space and business activity that high-rise development generates. Land values are greater in the down town areas of cities and at other prime locations that are highly attractive. In most cities, high-rises have evolved in concentrations, and those concentrations generate the highest tax returns to local government. For example in Chicago, approximately one-third of the city’s real estate tax return comes from the greater downtown area covering less than 7% of the total area of the city. Depending on overall factors, during the last three decades, Dhaka City attempted to expand vertically to meet the problems of urban population explosion, scarcity of land and spiraling land price. High-rise structure also has a positive influence on city form and organization. The tallest building in Dhaka (30 stories) has been constructed at Motijheel for office purpose. High-rise buildings for residential purposes are being seriously considered to provide an answer to urban housing problems. How far this is tenable in context of conditions prevailing in developing countries must be studied in greater depth so that planned growth in high-rise housing construction can be promoted. Because of the great size and height the development of tall buildings usually involves active interaction of public and private decision-makers. Successful public private collaboration usually revitalizes the urban environment. Thus tall building development in the form of office towers, hotels and residential apartment buildings can become a critical part of revitalization in major cities of the world, including Dhaka. In terms of Dhaka it can be seen from the map (Figure 4) that the location of the majority of the high-rise structures are clustered in the business districts and central city areas where land value is highest. The reasons of this development are as follows:

· Easy access
· proximately of supporting facilities of offices.
· Higher rate of return on investment.
· Besides the land value there are other reasons for the construction of high-rise structures to accommodate office staff where land is limited.
We can safely say that high-rise structures in other locations is not suitable or attractive because of· Lack of access, Absence of supporting services, Lower rate of return

Current State of Tall Building in Bangladesh

The history of tall building in Bangladesh is only four decades old. Broadly speaking two types of high-rise buildings are constructed in terms of use type: Institutional buildings including government & commercial office buildings, hotels etc. Residential buildings particularly for middle and high income groups.  The trend that started in 1963 with the construction of 11-storied WAPDA building at Motijheel, the Central Business District (CBD) of the capital city Dhaka has currently gained a tremendous momentum. Although tall buildings are being constructed in few numbers in other cities of the country, almost all the existing and under-construction tall buildings of the country are located in the capital city. In Dhaka, there are about 120 such notable buildings clustered mainly at the Motijheel commercial area and in places like Eskaton, Mohakhali and Banani. If one compares the number of tall buildings in the capital city with the size of the greater Dhaka with a present population of about 10 million, the insignificant proportion of the tall buildings with respect to the overall scenario becomes evident. The growth of tall building in Dhaka City with time has been shown graphically in Figure 5.It is evident from the figure that a steady increase in the number of tall structures has taken place in the recent years. Whereas in the sixties and seventies, on n verge five high rise buildings were constructed in Dhaka City, in the eighties about twenty tall buildings were constructed. Construction of tall structures attained its peak in the nineties, and, in the last five years about 50% of the total present number of all tall buildings of the capital city has been constructed. The trend of going high is still there.

Prospects and Problems of Tall Buildings

It is almost inevitable that high rise construction will increase in future in Bangladesh. In fact, in a fast growing metropolis like Dhaka where, land is scarce and land value is high, there is no other obvious option but to go for tall structures. In a country where expatriate consultants and contractors are being inducted in almost every field of technological activity, it is interesting to note that all the tall buildings in Bangladesh have been planned, designed and constructed by local architects and engineers. But high rise buildings, both commercial and residential; of Bangladesh have already revealed their merits and demerits in the very short time that they have been serving the community. Some of the advantages of tall buildings are given below:

· It increases land-use density leading to proper utilization of inner city land.
· If properly designed and constructed it can increase the user efficiency for both commercial and residential use. It can bring positive effect on city form.
· High-rise buildings and the users that occupy them usually return more revenue (benefits) to local governments than they require in services (costs) from them. This positive cost-benefit ratio is often used as a measure of the attractiveness of a development..  High-rise buildings have established an efficient setting for corporate business enterprise, a significant source of revenue for local government, and a business focus for the entire metropolitan area.

· Residential uses in high-rise have resulted in both success and failure. Tall apartment buildings have successfully fulfilled the needs of upper income and middle income families in different developing countries.

However, in the absence of proper urban planning and design, high rise buildings of Bangladesh are responsible, in many instances, for several problems leading to disadvantages for Dhaka and other city dwellers of Bangladesh. Some of the disadvantages that the existing tall buildings have demonstrated due to ill planning are listed below:

• Ø Unplanned tall structure destroys the harmony in skyline
• Ø It put pressures on utility services like water supply, gas and electricity.
• Ø It increases traffic congestion and parking problem.
• Ø It creates problems of light and ventilation for adjacent small structure.
• Ø Fire fighting problem in the building.
• Ø Problem related to inadequate number of lifts.
• Ø Problems due to inadequate parking space.
• Lack of community space.
• Ø Lack of children’s playground.
• Ø Socio-psychological problem.Besides, Bangladesh is recognized as an earthquake prone country by Bangladesh National Building Code (BNBC, 1993). Seven major earthquakes, magnitude equal to or more than 7.0 on the Richter Scale, had affected today’s Bangladesh during the last 150 years. But housings in Bangladesh seem to be constructed to meet the social demand, not as an earthquake resistant frame building. Mainly the following three unusual structural factors make the new housings in the country very seriously vulnerable to earthquake:
  · Ground and/or first story is appeared to be soft story (car parking story)
  · Frames are unfilled by masonry works supported only by sand-cement mortar
  · In some cases it is observed that beams are appeared to be stronger than columns
  The ground floor of typical six-story buildings and the ground and/or first floor(s) of high rise condominium are appeared to be soft story because these stories are not supplied with proper element such as shear walls and bracing etc. A lesson has repeatedly been learned from many earthquakes that the soft story is one of the most common causes of building failure.
  However, it is understood that in future high-rise building will continue to be a strong urban influence. It is obvious that Dhaka City is going to have a large number of buildings around 15-20 story high, both for office as well as residential purpose. However, building regulations must be maintained to reflect the special needs of these buildings particularly taking into account the traffic problems, fire safety, vulnerability to earthquake and setback rules.

In addition, stricter enforcement of the rules and better quality control during construction need to be introduced. Some of the opportunities of planned growth of Dhaka City, using the experience of other cities, have already been missed during the last three decades. But the high-rise expansion can still be planned to create a better urban habitat, but this will require the concerted action of planners, architects and engineers.

Land Use, Land Use Economy and Land Value

The trend towards construction of tall buildings in Dhaka is very much connected with the very high price of land in the main commercial and business districts. Since land value is very high in inner city areas, population density should be increased by adoption of multi-storied construction. In less developed areas, where commercial value is less, tall buildings are virtually non-existent. The overall picture of the land-use type in Dhaka has been shown in Figure 6. It is evident from the figure that only 39% of the total lands of the capital are in urban use, while 61% has rural or semi-rural use. High-rise buildings are constructed to ensure economical use of land in areas where land is scarce and its cost is high. Individual plot holders can save a lot of land by going in for multi-story buildings. However, the savings in a given sector of land depend on the gross densities in number of dwellings per acre including the land required for common amenities like parks, playground, schools, shops, road etc.

Dhaka has experienced an unprecedented increase in land value since the early seventies. In the past decade Dhaka has mainly developed along the two main axes towards the north of Dhaka. Due to huge increase in the population of Dhaka, the pressure on land for residential use has been very high. Since the sixties until today RAJUK has provided less than ten thousand plots at subsidized rate mainly for the middle and upper income groups. The value of land in Dhaka City, mainly in the central area, has increased at a rate much higher than the increase in cost of living in Dhaka. The price of high-class residential land has increased 100 times (approx.) during the period 1975-2000. In the absence of any proper land value records it is very difficult to compare the land value over the past decades. But Table 1 will provide some idea regarding the increase in land value between 1975 and 2000.

It has been stated that the big real estate companies are mainly responsible for the high price of land in the central area because they pay a much higher price for a good piece of land. It is argued that due to this reason middle and upper middle class families are being unable to buy land in Dhaka.

Area	Amount Tk. / Katha Tk. / Sq. Meter Tk. / Katha Tk. / Sq. Meter 1975, 2000
Baridhara	25,000 373 25,00,000 37,361
Gulshan	25,000 375 22,00,000 32,877
Banani	25,000 375 20,00,000 29,888
Mohakhali R/A	25,000 375 18,00,000 26,900
Dhanmondi	25,000 375 22,00,000 32,877
Azimpur	17,500 261 16,00,000 23,911
Mohammadpur	25,000 375 12,00,000 17,933
Shantinagar	20,000 300 15,00,000 22,417
D. O. H. S.	20,000 300 16,00,000 23,911
Shamoli	17,500 265 10,00,000 14,944
Cantonment Thana	20,000 300 10,00,000 14,944
Kamlapur	17,500 265 8,00,000 11,956
Saidabad	17,500 265 8,00,000 11,956
Gandaria	10,000 150 7,00,000 10,461
Bashaboo	2,000 30 8,00,000 11,956
Kalyanpur	17,500 265 8,00,000 11,956
Mirpur	10,000 150 7,00,000 10,416

 We are of the opinion; however, that Real Estate companies are just one among several reasons for the rise in price as the value of urban land is actually determined and fixed through competition in a complex economic process. Besides, there are other factors, which influence urban land value. These are social values, customs and others. On carefully analyzing the land value trend of Dhaka City and the suburbs for the last thirty years, a number of causes of high land value have been identified as follows:

a) Lack of investment opportunity in other sectors of economy.
b) Rapid urbanization and consequent scarcity of urban land.
c) Uncontrolled land market.
d) Lack of comprehensive land policy.
e) Inappropriate taxation policy.
f) Political instability.
g) High rate of inflation.
h) Land speculation and the role-played by brokers.
i) Land ownership being regarded as a symbol of social prestige.
j) Inflow of foreign remittances earned by Bangladeshis abroad, especially from the Middle East.
k) Land purchase by real estate developers.
Since land value is very high in inner city areas, increasing multi-storied construction will increase the density. Many parcels of inner city land are under utilized or vacant, which should be put to proper use for balanced growth. To achieve these objectives and to minimize the negative effects of high-rise constructions the following recommendations are suggested:

a) Proper rules and regulations for high-rise construction should be formulated and implemented.
b) In case of apartment, exclusive apartment law (condominium law) should be enacted and implemented by RAJUK and other concerned agencies.
c) Zoning law for Dhaka City in terms of use class and height class should be formulated and strictly enforced as per DMDP structure plan and related plans.
d) Particularly in the high cost areas of inner city vacant land tax and punitive tax for very low-rise construction should be enacted.
e) Building rules related to lift, parking and fire fighting should be strictly monitored and enforced by concerned agencies, as per Bangladesh National Building Code 1993.
f) In commercial areas low-rise structures should be totally discouraged by appropriate measures.
g) In high-rise/high density zones, co-ordination between utility agencies should be increased to plan in advance for high capacity utility mains.
However, in the context of Dhaka it is envisaged that in the future years high-rise construction will increase both for commercial buildings and residential development.
Construction Industry and Environment

Once undesirable environmental consequences of the use of a natural resource have been identified, there are two types of control, which can be exercised: control of the supply and control of the demand. Control of supply could be exercised by means of introducing land-use regulations, pricing of the resource and other measures, eliminating indiscriminate exploitation or reducing it to acceptable levels. Demand side controls aimed to restrict or change the nature of the activity. The goal is to reduce or eliminate the demand.

In the case of construction activity, which is acknowledged to be essential for virtually every type of development, an increase rather than a decrease is desirable in all developing countries. There are many ways in which the nature of current construction activity can be changed to make it less environmentally damaging, without reducing the total amount of construction in terms of the built space created or other functions it performs. These include:

– Improving land-use and pollution emission legislation and control
– Pre-construction environmental impact appraisals
– Greater use of demolition and mineral & agricultural wastes in construction.
– Extending the life of and reuse of existing buildings

 Potentialities in Construction Sector

The construction sector has great potentials. The traditionally used building materials are locally produced. Cheap labor, appropriate technologies and easy transportation system have also been a positive catalyst for the advancement of the construction industry.

(a) Building Materials: Locally available traditional raw materials can be used as effective construction materials. The government should publicize information regarding locally available building materials, its high productivity, the locations and accessibility. Local small-scale industries should be encouraged to produce quality-building materials. The Housing and Building Research Institute (HBRI) is encouraged to develop new building materials and techniques with the objectives of reducing costs and imports. On one hand, there is research into alternative and low-cost materials and techniques while on the other land; alternative building materials of indigenous sources like clay tiles get little interest.

(b) Labor Force: Construction industries can create employment opportunities. Institutional training should be facilitated for the unskilled laborers. Special vocational training should be introduced and training made essential for creating highly skilled specialized labor force.

(c) Appropriate and Simple Technology; Building technologies will differ from place to place. Use of appropriate and simple technology is essential to improve construction productivity. In Bangladesh the Local Government Engineering Department (LGED) has developed Low Cost. Reinforced Cement Concrete (RCC) piles, which have cost similar to timber plies. These low cost piles address the deficiencies of the timber piles and also possess additional advantages compared to cast-in-situ and pre-stressed piles. These piles can be used as compaction piles as well as load bearing piles. For small structures, the possibility of application of this pile is immense e.g., in buildings, bridges, culverts etc. The newly evolved RCC pile can be locally produced with relatively simple technology. These piles would provide a much better alternative to the timber piles, which are, at present, being widely used. The Low cost RCC piles will contribute towards better conservation of forest resources and thereby minimize degradation of the environment.

Apartment Development: Problems and Prospects

Apartment development in Dhaka City, as mentioned earlier, has become increasingly popular in recent days and is likely to continue for sometime. It has a number of plus points regarding solving housing problems of the city. But at the same time it has certain demerits. We propose to review critically both the prospects and problems. It may be worthwhile to describe here the types of apartments, which are now being built in Dhaka. Broadly speaking two types of apartment development can be noticed. Firstly, up to G+ 5 story walk up apartments, which are usually RCC frame structure with average fittings and fixtures (e.g. in-situ mosaic, concealed wiring with local fittings, best quality BISF sanitary ware etc.). These flats within the central areas are sold around Tk. 1000 per sq. ft. excluding the cost of parking space. An apartment of this type with an area of 1400 sq. ft. (3 bed rooms, 2 + 1 toilets) and a secured parking space will cost around Tk. 20-25 Lacs. The cost may be slightly higher if the apartment is located in a major road. The second types of development are those apartments in high-rise buildings of more than six stories. But the present trend in Dhaka City is 12-20 stories. The price of such apartments is presently more that Tk. 1300-2000 per sq. ft. plus the cost of parking space ranging from Tk. 1.5 Lac to Tk. 2.0 Lac per parking space in a good location.

Here it has been attempted to identify the major criticisms of apartment development as cited in the media. They are:

i. Economic: Mainly middle and upper income families are purchasing both walks up and high rise apartments. Lower middle and lower income groups can not buy such expensive flats.

ii. Services: In many apartment complex certain services (mainly recreational and community space, open area) are lacking. Problems associated with water supply, fire fighting and fire escape (mainly in high rise apartments), and inadequacy of lift are notable.

iii. Social: It is sometimes argued that high rise building prevents social contact with other neighbors, which can lead to socio-psychological problem.

The above mentioned criticisms can be contradicted on the following grounds:
i. Economic: The private apartment developers are catering for the middle or upper income group and thereby solving the problem partially for that group. This has noting to do with the housing problems of lower income groups. Only government and autonomous agencies can be helpful by subsidizing and/ or extending loans to their employees in apartment construction and/or purchasing. Private sector can only be effective when soft term credit area extended to private developers for constructing apartments at lower cost catering for lower income families.

ii. Services: Services provided are related to the cost of the apartment. In the private sector higher facilities will lead to higher cost which can be prohibitive even for upper middle income families. Lack of open space is entirely due to very high land cost in the good localities. Many associated problems regarding service and design problem can be very effectively tackled with proper institutional and design control. Sometimes these problems only arise in the cases of developers lacking in professional and financial expertise.

iii. Social: This can be minimized by more careful planning and design of high rise apartments. Rather than constructing matchbox type structure more intimate and personal design elements can be incorporated in high rise blocks.

Besides these broad criticisms, many small problems have been identified from the responses by apartment users in different apartment blocks in the city. These are cited below under the following headings:

 a) Planning Problems
i. Inadequate distance from one building to another.
ii. Some parts of the building are always shaded.
iii. Lock of green space.
iv. No relationship between surrounding built forms.
v. No fire escape or fire fighting provisions.
vi. Absence of community space or any playing area for the children.
vii. Exposed gas lines inconveniently situated at the main entry, which may be dangerously hazardous.

viii. Height variation between different closely associated buildings creating privacy problem.

ix. Absence of lifts or inadequate number of lifts.

x. Absence of mail box.

b) Planning and Designing Problems

i. Parking area is paved and totally open and unsecured in many cases.]

ii. Outer view is disturbed by unplanned telephone lines.

iii. Absence of garbage chute or garbage disposal arrangements.

iv. People drying wet clothes inconveniently from verandah or in ground space and spoiling the beauty of the building.

c) Design Problems
i. Ladders are used to approach the roof, which are inconvenient. In some apartments roofs can not be used at all.

ii. Secondary entry is more utilized than the main entry as it exposes the kitchen, or toilets of master bed etc.

iii. Entry to the building is through a dark place, which is not easy to locate.
iv. Entry to the apartment with long corridor which is an improper utilization of space.

v. Lack of proper outlet makes the stagnant air hot and unhealthy.

vi. Dining space is the circulation space with inadequate opening and designed without considering furniture layout.

vii. Privacy problem created between exposed living and dining space.

viii. Staggering stair cases with narrow stairs.

ix. Lack of proper ventilation or light in different rooms of an apartment due to improper planning of rooms.

x. Built-in closet is not functional in terms of sizes, shape and height.

xi. Absence of lightning arrester.

xii. No provision for installation of air-conditions units at later stage.
d) Construction Problems
i. Fitting and finish of toilet fixtures in certain cases are unsatisfactory.
ii. Constructional defect leading to cracks in the floors and walls.
iii. Dampness in external walls and in certain cases in internal walls.
iv. Excessive heats in the top floor due to lack of lime terracing.
For solving the housing problem in Dhaka city the following steps should be considered, some of these stapes are directly related to housing, while others are concerned with different issues having impact upon housing:
a) The growth of Dhaka City needs to be checked. This can be attained by developing small and medium towns through adoption policy of balanced urbanization and decentralization. By generation employment opportunities in these intermediate cities, the migration towards Dhaka can be trapped in those towers.

b) A metropolitan housing policy should be devised in conjunction with overall metropolitan transport and land policies.
c) Provisions of areas for high-rise, low-rise, permanent and semi-permanent structures should be made in the Master plan of Dhaka City. Expensive central city areas should be reserved for high rise developments. In this way the concerned authorities can provide higher capacity infrastructure at an optimum cost.

d) Housing development both in public and private sectors should conform with the development of physical and social infra-structures like roads, electricity, water-supply, sewerage, gas, telephone and the like.

e) Sprawl development of Dhaka City in any direction should be discouraged. Underutilized land within the city limit should be developed and properly utilized.

f) Special schemes for housing the urban poor and destitute by constructing low cost core housing with provision for upgrading on self-help basis should be adopted.

g) The private sector should be encouraged to cater for the upper middle and upper income groups.

h) Walk-up row housing and tenement blocks should be developed both in the private and public sectors to house the lower income groups.

i) Credit facilities for housing development for individuals and institutions should be modified to increase the housing stock.

j) National and municipal policies for high rise development should be formulated.

k) To check the mushroom growth of real estate companies there should be arrangements for scrutinizing the technical, financial and institutional capabilities of prospective companies.

Developing housing sector comprises not only building of houses but also the development of socio-economic infrastructure. In fact, a separate directorate of Real Estate could be established, which will inter link all the concerned agencies, related to house construction such as RAJUK, Dhaka Municipal Corporation, WASA, PDB, Titas and House Building Finance Corporation (HBFC). This will minimize the procedures and formalities associated with house construction.

All future activities of concerned agencies involving land, finance and utilities should be forward-planned under a common framework to increase the efficiency and minimize overlapping of responsibilities. The neglect of the private sector is a fundamental defect in our housing policy. A comprehensive and pragmatic housing policy should be adopted by the government, which will expedite housing developments. The economy of land use should be given top priority in any future housing policy.

A private housing-bank could be set up for financing housing development as in the absence of such a bank; land developers and promoters are very much handicapped. Such a specialized bank to tide over the housing crises deserves serious consideration.

Chapter- 7

CONCLUSION

Residence is one of the basic needs of human beings. The right to live in one’s own is a fundamental right of people and it is internationally recognized. The demand of housing in urban areas in developing countries like Bangladesh is dramatically increasing due to natural increase and its fast growth rate. Rural people are migrating not only to find jobs but many wealthy people are moving to urban areas like Dhaka city for the fulfillment of their expectations of better of their future generation, and for enjoying the modern facilities of the city life. This has resulted into a serious crisis all over the country especially in the major cities of Bangladesh. In recent time, the private real estate firms have taken initiatives by ensuring maximum uses of land in a planned way. In this system it is possible to accommodate more people in a comparatively small place. The Organization has an experienced and educated managing Director. The other directors of the Organization are also young and educated. Their innovative idea will help to create new opportunities for the organization but their creative ideas could not be implemented if the attitude of the employees is not changed. The executives, officers and staffs must be trained to change their negative attitude towards new concept of organization.

During the 12 weeks Dissertation program at almost all the desk have been observed more or less. Gaining knowledge of practical Real Estate business and to compare this practical knowledge with theoretical knowledge. Though all departments and sections are covered in the Dissertation program, it is not possible to go to the depth or each activities of division because of time limitation. So, objectives of this Dissertation program have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objectives the Thesis program.

Recommendations

The construction in Dhaka has multi-faceted roles for sustainable development. It provides the direct means for physical development, expansion, improvement and preservation through maintenance. It is the key sector in city’s development. It provides the direct means for physical expansion, development and improvement. The planning and design component of construction is very vital and it contributes to high productivity. Appropriate planning and design for construction, use of modern equipment, efficient use of building materials, participation of construction actors and effective management are considered important factors for construction industry’s development.

It is understood from the experiences that the construction industry has multidimensional aspects, which include actors’ participation, building materials and equipment, building code and standards, regulations etc. It is also observed that the construction activities are frequently disrupted by the inherent problems. Considering all issues, following broad general recommendations both in the public and private sector should be taken into consideration:

a) Appropriate planning and programming for the construction project would be framed based on the nature of works.

 b) A major concern in the construction industry is the apparent backwardness in the adoption of new construction technologies for the adoption of new construction technologies and practices, which can reduce cost and increase quality.

 c) The authority with help of professionals should formulate general guidelines of building designs. Special attention would be given to prepare appropriate planning rules, building codes etc. based on the character of the area. It will also cover building regulations and related detailing of the building and also cover selection of materials.

d) It has been observed that the construction material and equipment differ from place to place, considering this fact, specialized standards and code should be made.

e) Simple and innovative technologies should be introduced in the construction sector for high productivity. The attention should be given on its acceptability to the construction actors. Affordability to the government as well public enterprises should be taken into consideration.

f) Research and innovation for development should be encouraged. Proper research support and financial support should be provided both in public and private sectors. Even groups of entrepreneurs and individuals should be encouraged by the policies.

g) Research outputs, available materials, energy consumption cost, environmental impacts and other information should be made available to the public through institutions and mass media.

h) Selection of building materials, the consultants are required in conjunction with experienced contractors.

i) Local based building materials as well as cheaper alternative/substitutes should be encouraged.

j) Special financial policies for consultants/contractors financing should be introduced. It would be included: i) reduction of bureaucracy, ii) generous advance payments, iii) risk guaranties etc.

k) Overall management effectiveness is essential for the construction sector. It should be managed on an institutional basis, and the construction actors have contractors, laborers, managers and other related actors as active participants.

l) Adequate legislative support is needed to recognize the construction sector as an important for national development. An extensive and multifold regulation is needed. It should includes civil engineering works, durability of construction outputs, all safety measures including loads, imposed deformations, environmental issues, fire and natural disasters etc.

 m) The establishment of regulations and control procedures is the traditional function of the government. It is needed to recognize the construction industry as an important sector for national development. The regulations and control can contribute a strong positive impact to reduce construction cost, environment hazards, promote greater energy efficiency in building and limit energy consumption and pollution etc.

n) Special attention would be given to protect the physical environment of the project’s site. Existing “Legal action” procedures would be updated in which legal action can be taken against the faulty actors.

The planning and design approach is very important components in the construction sector specially to ensure sustainability. The technology and innovation in the construction industry may reduce construction cost and time, as well as increase safety. New technological innovations, often in conjunction with materials and equipment, should be introduced into several of the disciplines within the construction industry. Such technology also ensures higher productivity, which can bring socio-economic prosperity to the country. The Government sets regulations on construction industry (building code, land use, tendering constructor’s negotiation and environmental regulation) in national and local level. Changes are also sought to improve quality, management efficiency, material flow, and maintain schedules by better organization and controlling of design and production process.

Bibliography

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6.     www.blog.spot.bangladeshi real estate.com 14.11.11
7.     www.rehab.com  16.11.11