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Problems and Prospects of Real EstateSector in BangladeshChapter-1

ORIGIN OF THE REPORT

Introduction

Residence is one of the basic needs of human beings. The right to live in one’s own isa fundamental right of people and it is internationally recognized. The demand ofhousing in urban areas in developing countries like Bangladesh is dramaticallyincreasing due to natural increase and its fast growth rate. Rural people aremigrating not only to find jobs but many wealthy people are moving to urban areas likeDhaka city for the fulfillment of their expectations of better of their futuregeneration, and for enjoying the modern facilities of the city life. This has resultedinto a serious crisis all over the country especially in the major cities ofBangladesh. In recent time, the private real estate firms have taken initiatives byensuring maximum uses of land in a planned way. In this system it is possible toaccommodate 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 toprominence as prime & various locations of the city and in manufacturing qualityconcrete 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 triedto analyze the market situation, competition, and customer perceptions about the realestate developers. But in his paper he does not mention how the top ranking realestate companies are gaining competitive advantages, and he does not pass his valuablecomments on promotional mix, marketing mix etc. which are very important aspects ofmarketing in the context of competitive market.

According to the journal of IBS Mr., Shib Shankar Roy attempt to investigate how theprivate Real Estate sector solving the housing need and to analyze the market

situation & perception of customer about the Real Estate marketers. He also concludesthat the Real Estate marketers should have appropriate plans for constructing low costapartment in the peripheral areas of the town. But he does not mention how a companycan set their marketing strategy for their apartments.

Mr. Taluckder and others has tried to examine and assess the present of apartmentmarketing and its future. Now, the business environment has changed to multi-variouspurposes, such as for business, residence etc. The business activities have not beenfocused through their paper like the promotional activities, as the problemsassociated with the business have not yet been highlighted exactly.

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

 Mr. Belayed and others has attempted to investigate the nature of real estatebusiness, psychological aspect of buyers, and policy decision of the firms. But thestudy does not highlight the subject in details. For purchasing high involvementproduct like an apartment, there is various economic and psychological factorsinfluence the buyers purchasing decisions. Also, the study does not suggest what kindof government help and facilities will specifically be effective for growing RealEstate Business. But the study mentions some significant aspects of Real EstateBusiness 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 solvinghousing problem. Now a day’s real estate business in Bangladesh became very muchcompetitive. Competitors are moving very aggressively to achieve their target as wellas increase their market share. On the other hand, the customers are become very muchaware about the current market of apartments as a result it became very difficult totake decisions. Primary data that are collected and analyzed in this study will behelpful 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 andwell defined. So the main objective of this study is to analyze the problems andprospects of Real estate sector in Bangladesh.

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

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 toprominence as prime & various locations of the city and in manufacturing qualityconcrete products that have earned them the distinguished stature they enjoy today.Attuned to the rhythms tomorrow, Real Estate business humbly launched its journey toreach to its noble vision to ensure a new standard of living

Methodology:

This paper has reviewed extensively the real estate financing issues providing updateddata and literatures considering both developed and developing real estate financingmarkets along with discussions regarding problems, prospects and some policyimplications 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, governmentagencies, 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 loansto consumers where such loans are secured by the houses that the consumer owns. Inaddition, loans extended to refinance the loans explained in this context are alsoincluded in the housing finance.

 Housing Finance Systems in the Developing Countries

Housing finance systems in many developing and emerging economies share severalcharacteristics. First, most housing finance systems are “institutional patchworks”that comprise private sector lenders as well as several government-managed housingfinance institutions or programs (Renaud, 1996). From a regional perspective, themortgage markets in South Asia are small and fragmented with the unorganized sector.Regarding the organized segments, there are distinct commonalities that characterizesome of the mortgage markets of South Asia, such as a heavily subsidized monolith-likestate run institution, a fledgling private sector catering to the middle and upperincome segments and players from the banking sector that provide housing finance as apart of their retail portfolio. The mortgage markets in Sri Lanka, Bangladesh andPakistan are such archetypes (Karnad, 2004). The residential housing sector ofBangladesh is characterized by a three-tier market. First are those households withthe highest disposable income (less than 3 percent of the housing market), able toafford high quality housing in fully serviced neighborhoods, and able to utilize bankfinancing or specialized housing finance institutions. The second tier is therelatively narrow stratum of middle-income households (represents 12 to 15 per cent ofthe housing market) that are the main users of specialized housing financialinstitutions such as Bangladesh House Building Finance Corporation (BHBFC). This group

is the major beneficiary of available public subsidies and is composed predominantlyof public servants and wage/salary earners of large private companies and publicsector 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 andunsatisfactory 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 thepromoters and the equity holders are ware of their commitment to the society to whichthey belong. A chunk of the profit is kept aside and/or spent for socioeconomicdevelopment through trustee and in atomization of art, culture and sports of thecountry. 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 highstandard clientele services and proper coordination of business is the core of theirvision.

Mission of Real Estate.

With a view to achieving objective of the real estate sector, their sincere and al outefforts stay put unabated. Respected clients and stakeholders are attached to us forour transparency, accountability, social commitments and high quality of clienteleservice.

Objective of Real Estate.

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

Professionalism.

Transparency. Service.

Business goal of Real Estate.

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

Growth & development of Real Estate.

Real Estate business carried out all traditional functions, which a real estateperforms 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 pricesthe companies set their product’s price. Costs set a floor to the price; and the priceof the substitute products provides an orienting point. Customer’s assessment ofunique product features establishes the price in the market. Different types ofpricing 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 – 6500and above per sft.), high rising luxurious apartment (Tk 5500 – 6000 per sft.),moderate apartment (Tk 3500 – 4000 per sft.) and high rising moderate apartment (Tk4000 – 4500 per sft.), commercial building cum apartment, commercial building, supermarket 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 ofgoods, ideas, and services to create exchanges that satisfy individual and

organizational goals. Simply, if it doesn’t facilitate a “sale” then it’s notmarketing.

Two major aspects of marketing are the recruitment of new customers (acquisition) andthe retention and expansion of relationships with existing customers (customer basemanagement or customer relationship management). An emerging area of study andpractice concerns internal marketing, or how employees are trained and managed todeliver the brand in a way that positively impacts the acquisition and retention ofcustomers. Marketing is the process of trading in a market; buying or selling. Thetaking of merchandise to market. Market also a gathering where people buy and sell. Tobuy 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 firststep through market segmentation, targeting, and positioning, the company decideswhich customer it will serve and how. It identifies the total market, then divides itinto smaller segments, selects the most promising segments, and focuses on serving andsatisfying these segments. Next the organization design a marketing mix made up offactors under its control – product, price, place, and promotion. To find out the bestmarketing mix and put it into action, then the company engage in marketing analysis,planning, implementation and control. Through these activities, the company watchesand adapts to the actors and forces in the marketing environment. Market positioningis so much essential for developing company cause arranging for a product to occupy aclear, distinctive and desirable place relative to competing products in the mind oftarget client.

 Developing the marketing mix according to Real estate business:

Once the real estate has decided on its overall competitive strategy, it is ready tobegin planning the details of the marketing mix. The marketing mix consists ofeverything 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. Infact, finding the right product concept is one of the four critical objectives ofmarketing. Real estate is successful strategic marketer they carefully and completelyconsider their product options. Marketing Strategies of Real Estate in Bangladeshbusiness made actions and enjoyed a dominant position in the world market and domesticMarket. By the 2006’s they had introduced many inventive variations of the RealEstate. 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 estatehas set their pricing strategy to think the different target customer. Pricing mainlydetermined by location of the project in the country. It’s incredible how few peoplefail to appreciate this simple truth. A graduate professor in Financial Managementtaught us several different ways to precisely determine the cost of a product. Outcame the calculators. At this real estate, that will cover the cost of taxes, goodssold, manufacturing, overhead, marketing, depreciation, and still provide a netincome, 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 inurban areas of different location. Real estate marketing their products concentrateson 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 persuadetarget 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 andcharacteristic of company their main promotional tools side by side they go fordifferent advertisement, billboard, Fair etc to inform their product feature withprices. They promote their customer that loan facility available, discount in at atime 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, isexpanding rapidly. From the beginning of the 20th Century its growth and latterdevelopment is marked with sheer lack of proper and far-reaching planning. The impactis now being felt at the end of the century. Dhaka City is undergoing terrific growthphase throughout the last two decades. While there are so many real estate developersin the market, there are also very few of them who have maintained the quality, safetyand customer preference. It is customary in the country that the first day quality andimpression is lost after a while when people start getting a bit of familiarity. Thishappens due mainly to lack of professionalism. Sometimes the consumers here are in afix to choose a particular brand out of many. A good number of real estate companiesare working under one umbrella association named ‘Real Estate and Housing Associationof Bangladesh’ (REHAB). Almost 83 Companies are at present affiliated with thisassociation, while more than 200 companies are working independently. BTI took aleading role in the formation of the industry association and is one of the foundermembers 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 DhakaCity. But from early ’80s the business started to grow and flourish. At present, morethan 250 companies are active in business but 95% business is still dominated by oftop 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 cityb) Hazards of purchasing landc) Hazards of construction of buildingd) Rapid increase in population of Dhakae) Decrease in the rate of bank interestf) Price of land and apartments is increasing day by dayg) Rent of the apartments is comparatively higher than the rent of privatelyconstructed flatsh) Open Market Economy. Remittance of foreign currency is very easyi) Securityj) 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 ismainly based on the location, price of the land, and size of the apartments. The

segmented areas are:a) Segmentation – I :Baridhara, Gulshan, Banani, DOHS, Uttarab) Segmentation – II :Dhanmondic) Segmentation – III :Segunbagicha, Shantinagar, Kakrail, Malibagh, Kalabagand) Segmentation – IV :Mirpure) Segmentation – V :Old Town of Dhaka Cityf) Segmentation – VI :(For office building) Motijheel, Dilkusha, Fakirapool DITh)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; ElephantRoad; 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 DuplexHome, Triplex Home, Penthouse, Luxury Home, Furnished Apartment, UnfurnishedApartment, to Condominium and Vacation-Resort Property. Commercial projects includesIndustrial Shed, Agro Farm House, Warehouse / Godown, Commercial Space, Industrialspace, Office Building, Office Suite, Furnished Office, Commercial Showroom, ExquisiteOffice, Industrial Park, Factory, Lofts, Shopping Center, etc.

 Real estate competitors in Bangladesh:

Price lists of different companies in different places:

Name ofCompanies

Gulshan Banani Mohammadpur Mirpur Dhanmondi Uttara Midtown

Rangs Properties 3500 2700 1950 P 1700GEO Properties ltd

2800 P 1600 1500 2200

ENA Properties  2200 1800 19001. Borak Real 20002. Nagar Homes 22003. AminMohammad 3200 1600 3000 20004. South Breege 3500+ 2000 30005. Navana 3500 1850 1450 3250 1850 22006. Oriental 2750 1800 2150 1800 20007. Bashgreho 1500 1550 17508. Structural (SEL)

3250 P 2000 1650 P 3200 2000 2200

9. Assurance 2750 3000Name of

CompaniesGulshan Banani Mohammadpur Mirpur Dhanmondi Uttara Midtown

1.ANZ Properties 2850 16002.Bay 2875 P3.ADDL 16504.Asset 3500 29005.Concord 2850- 2500 1750

32006.Sheltech 3000 1450 16007.Mega Builders 1675 P

MAJOR ACTIVITIES

1. Application for allotment of apartments should be made on the prescribedapplication form duly signed by the applicant along with the earnest money. Thecompany has the right to accept or reject any application without assigning any reasonthereto.

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

3. Payments of earnest money, installments, car park costs, additional works and othercharges shall be made by bank draft or pay order directly in the name of therespective company against which the receipts will be issued. Bangladeshis residingabroad 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 datesaccording to the schedule. The company may issue reminders to the allottee, butnotwithstanding the issue of reminders, the allottee must adhere to the schedule toensure timely completion of construction.

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

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

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

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

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

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

 11. The allottees will become equally divisible undivided and undemarketedshareholders of total acres of the scheduled land of the project in respectiveapartment. After all the dues and installments are paid by the purchaser according tothe requirements and schedule for payment and after the completion of theconstruction, the vendors shall execute a registered sale deed in favor of thepurchaser 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 thecompany prior to undertaking any structural or layout changes within the apartmentcomplex. 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 theprojects is affected by unavoidable circumstances beyond the control of the company,like natural calamities, political disturbances, strikes and changes in the fiscalpolicy of the state etc.

 15. For the purpose of effective management and maintenance of the building thepurchaser of the apartment shall form and constitute a mutual benefit cooperativesociety under the Co-operative Society’s Act 1940. The society shall be entrusted withthe management and maintenance of the building. The rules, regulations and by laws ofthe co-operative society relating to management and maintenance of the building shallbe 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 andThreats is called SWOT analysis. It involves monitoring the external and internalmarketing environment. By reviewing the business strengths, weaknesses, opportunitiesand threats, can respond to changing market conditions.

 A particular SWOT analysis discloses the following issues for an organization that anorganization achieved over the time of its operation by analyzing its both internaland 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 positiveimpression.

In Dhaka, there is no availability of land at the good places so people have tobuy 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 ofcontribution) during the housing boom in the United States, such as savings and loanassociations followed by commercial banks, insurance companies, and mutual savingsbanks. Edwards, (1964) has also pointed out that savings and loan associations bycontinue 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 anddevelopment, informal systems are still the dominant producers in many developingcountries – 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 effectiveenabling strategies must be developed by the public sector to allow housing marketsfor the various tiers to leverage the activities of the private sector. The NationalHousing Policy, 1993 focuses on the basic objectives of providing housing to people atall strata, especially to the low and middle income groups and those having no accessto housing.

2. The objectives of the subsidy scheme should be to assist those that do not qualifyfor a formal sector mortgage loan and thereby increasing the number of middle incomehouseholds that can avail themselves of housing finance. However, we need to keep inmind that subsidized funding for state owned housing finance entities createsdistortions in the market place and it should be stopped. Fortunately, for the lastfew years, BHBFC could not avail any subsidized funding through the government orgovernment guaranteed debt.

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

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

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

6. Insurance and Trust Acts have not been changed to facilitate lending by long-terminvestors in the housing sector. Sometimes developers are accused for not properlyfollowing the procedures for borrowing money from financial organizations. Threeparties get involved in the process – the developer, the landowner from whom the landwas leased and the one who buys the apartment.

 Types of loan

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

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 thesenegotiations, the loan-to-value ratio interest rate (or ARM terms) and thepayment-to-income ratio are established.

2. Insured Conventional Mortgage Loan: In many instances, borrower do not have thenecessary wealth to make a down payment of 20% of value when purchasingproperty. However if the income earning ability of the borrower and the locationof the property being acquired are satisfactory, lenders may be willing to granta loan request in excess of 80% of value with a condition that the borrowerpurchase mortgage insurance against default risk.

3. FHA Mortgage Loan: A Mortgage can be insured by the federal housingadministration. Unlike Conventional Insurance which protects the lender againstsome portion of the potential loan loss.

4. VA Guaranteed Conventional Mortgage Loan: VA stands for Veteran agreementconventional mortgage loan.

Types of Loan SourceName of the Organization

 

Corporate Address 

Contact Numbers

 Delta Brac HousingFinance Corporation Ltd.(DBH)

Interest Rate:a) Privileged Clients – 12.50%b) General Clients – 13.00% Website:

Gulshan Head OfficeLandmark Building(9th Floor),12-14 Gulshan North C/AGulshan-2, Dhaka-1212.Motijheel BranchRoom # 1101,Sena Kalyan Bhaban (11th Floor)195 Motijheel C/A, Dhaka-1000.Dhanmondi Branch

Gulshan Head OfficePhone # 8822374, 9882112 | Fax # 880-2-9882110E-mail: dbh@deltabrac.comMotijheel BranchPhone # 7111774, 7111778, 9564907, 0171621062Fax # 880-2-9551536 | E-mail:motijheel@deltabrac.com

Dhanmondi BranchPhone # 8130906, 9134211, 9124112, 8117264, 018251216Fax # 880-2-8117264 | E-mail:dhanmondi@deltabrac.com

Pantha Plaza (1STFloor),63/A Lake CircusKalabagan, Dhaka-1205.Chittagong BranchFaruque Chamber (7th Floor),1403 Seikh Muzib RoadChoumuhony, Chittagong.

dhanmondi@deltabrac.com

Chittagong BranchPhone # (031) 711782, 712298,727885, 0171816672Fax # 880-31-728202 | E-mail:chittagong@deltabrac.com

Industrial Development LeasingCompany of Bangladesh Limited(IDLC)

Interest Rate:a) Priority Clients – 12.50%b) General Clients – 13.00% Website:www.idlc.com

Corporate Head OfficeHadi Mansion, 2, Dilkusha C/A,GPO Box # 3160Dhaka-1000.Chittagong BranchSuriya Mansion, 30, Agrabad C/AChittagong.

Corporate Head OfficePhone # 880-2-9560111 | Fax #880-2-9563620E-mail: mailbox@idlc.com, housefin@idlc.comChittagong BranchPhone # (031) 711034, 713742 | Fax # 88-031-715895E-mail: idlcctg@spnctctg.com

National Housing FinanceAnd Investments Limited

Interest Rate:a) Prime Loan/Clients – 12.50%b) General Loan/Clients – 13.00% Website:http://www.nationalhousingfinance.com/

Corporate Head OfficeNational Plaza (7th Floor),1/G Free School StreetSonargaon Road, Dhaka.Motijheel BranchChamber Building (6th Floor),122-124 MotijheelDhaka-1000.

Corporate Head OfficeNational Plaza (7th Floor),1/G Free School StreetSonargaon Road, Dhaka.Corporate Head OfficePhone # 9669800, 9666281, 9670612-4 | Fax # 880-2-9671016E-mail: housing@dbn-bd.com,housing@intechworld.netMotijheel BranchChamber Building (6th Floor),122-124 MotijheelDhaka-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 sustainabledevelopment of a country. In Bangladesh many construction projects are undertakenunder development programs. The construction industry is an important sector forphysical and economic development of the country. It provides physical expansion andeconomic development. This sector is well linked with human settlements, employment

and environment. In case of Bangladesh it is not actively patronized by the policiesof the government. As a result, this sector could not grow under a systematicenvironment. This paper makes a case study of construction industry of Bangladesh withspecial emphasis on Real Estate & Housing sector. The paper discusses the pros andcons of the project activities and its various implementation stages. It narrates theexperiences and recommends more appropriate realistic strategies, which are bothapplicable 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 andrelated uses. With the current 30 million urban populations, the share of urban landis 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 ofhigher density. As of today 30 million urban population are squeezed on about 3370square kilometers (1300 square miles) of land in the country giving a gross density of8870 persons per square kilometer (23000 persons per square mile) as opposed to about700 persons per square kilometer (1800 persons per square mile) in rural areas. Thusthe urban density is more than 12 times that of the rural density. But urbanpopulation 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 millionor 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 humansettlement policy, urban growth and urban development in Bangladesh is basically Dhakaoriented. Already 30% of the urban populations of the country are concentrated inDhaka Mega city region. The trend is continuing or becoming more entrenched. As Dhakais the Nucleus City of Bangladesh and the focal point of all social, political andeconomic activities, the current housing situation of Dhaka City is mainly outlined inthis paper. The problems and prospects of housing are also discussed in the light ofthe experiences of some other major cities of the world. The present and future trendof housing development is also discussed with special reference to high land value inDhaka City. In future there would obviously be a need for higher density of populationin both rural and urban areas, more so in urban areas. Density can be increased bothhorizontally (by more compact arrangement) or vertically through multi-storieddevelopment. There is no magical solution to the present or future housing problem ofDhaka City. Different sets of policies need to be implemented both at the national aswell as the local levels. Nevertheless in the light of the prevailing high growth ratein population as well as increasing value of land in Dhaka city, it can be easilyargued 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 residentsof Dhaka should adapt themselves to apartment living by being more accommodative andtolerant. All of us would prefer to live in a private home with a front lawn and /or aback garden, but since urban land is scarce and expensive, solutions with high risedevelopment 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 ofurbanization in Bangladesh, as in all developing countries. For Bangladesh the problemis 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 populationis 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 toconstruction of tall buildings. During the last four decades, metropolitan Dhaka hasrecorded a phenomenal growth in terms of population and area. Dhaka at present is oneof the fastest growing metropolises in the world. After the war of independence of1971, Dhaka’s provincial capital status was raised to national capital overnight andits population increased manifold in the subsequent decades. The land area andpopulation of Dhaka is usually expressed in terms of two boundaries. One is Dhaka CityCorporation (DCC) boundary and the other one is the larger boundary of RajdhaniUnnayan 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 5.5percent 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 persquare kilometer (100,000 persons per square mile) exist, with an average of 3 storiesfor 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 390square miles), wherein live another 2 to 3 million people. Densities in such areasvary from very high to very low. In fact much of the RAJUK areas, beyond DCC, are notready 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 insuch marginal lands through gradual earth filling.At present the Dhaka metropolitanarea consists of the inner city which is almost built up and surrounding areas whichare semi-built up. During the period from 1981 to 2000, the greater Dhaka populationgrew at an average rate of 5.5% from about 3.44 million to 10.0 million. During thesame period the built up area increased from 104 sq. km (39% of the city area) to 150sq. km. (55%). By the year 2015 the expected population of the city is forecasted tobe as high as 15.7 million. It is expected that Dhaka will become one of the tenlargest cities of the world by the year 2020 with a population as high as 20 millionand to make provision for accommodation and comfortable living of this largepopulation, creation of new satellite towns adjacent to the city and also new townsaround the cosmopolitan city will be necessary. For this purpose, the area of Gazipur,Kaliakoir, Savar, Tongi, Narayanganj and Keraniganj across the river Buriganga andPurbachal i.e. Yusufgonj under Rupgonj thana of Narayongonj district in between therivers Balu and Shitalakhya will be taken into consideration.The additional populationin the coming decade will add new dimensions to the urban fabric of metropolitanDhaka. The main reasons for the huge anticipated increase of Dhaka population in thecoming decade is due to unbalanced urbanization and presence of primacy in the citysize 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 aswell as by area. The gap is obvious between luxurious high income apartments/houseswhich exist in high-income areas such as Gulshan, Baridhara, Dhanmandi, Uttara areasand poorly constructed temporary housing (Jhupri) with extremely small floor space,very densely located on the lands prone to flood disasters. About 30% of the slumdwellers 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 218,000units including dissolution of backlog until 2001 and replacement, wherein therequirements 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 rentalbasis while 31% are owned. Only 1.2% is on social housing.It can be pointed out thatpeople from all socio-economic backgrounds in Dhaka are facing housing problem of onetype or another. While the urban destitute need rehabilitation, the slum dwellers needslum upgrading. The low-income families are in need of low cost flats or plots and themiddle and upper income families are complaining that the cost of a decent plot or adecent flat is going beyond their means. The solution to the problems of thesedifferent groups is also different and mainly lies in the hand of the policy makersand the government.

In recent years there has been a new trend of housing development mainly in theprivate sector. A new type of residential development has come on the scene, which canbe broadly termed as apartment development. In most of the cases an individual or acompany constructs one or more buildings comprising of several apartments, which arelater sold to individual purchasers. This has prompted many individual entrepreneursto develop apartment buildings resulting in an increased number of real estatecompanies in the city.

 Housing Access and Affordability

The rapid growth of city population has led to a phenomenal increase in housing demandin the city. The housing market of the city consists of five tenure groups – owneroccupied, private rental, rent free, squatters and slums. Physically, housing hasextended from makeshift arrangement and permanent houses. Dhaka City has a very highproportion of poor population (65%) and as such affordability of housing issignificantly affected by the income distribution. The access of poor to housing isconstrained by high land and material prices. In one study (DMDP, 1995), it has beenobserved 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 canafford Tk. 300-400 per month; the fourth quintile of household can afford Tk. 480 toTk. 600 per month and the fifth quintile of household can afford Tk. 1000-2500 permonth. Only 3.85% of household can afford above Tk. 2500. The affordability indices ofDhaka City imply that the govt. has to play the role of both provider andfacilitator/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 yearsback some one would have thought twice before buying an apartment/flat. But in thelast couple of years people have shown an increased interest in owning apartments. Asmentioned earlier the main reason is economic due to increased land cost as well asconstruction cost. There are also other reasons such as reluctance of individuals tospend 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 arealso a major contributing factor towards the increasing demand for apartments. As aresult of increased demand, many apartment builders have appeared in the market inrecent years. Twenty years ago there were fewer than five companies in Bangladeshengaged in developing apartments while today there are more than 200 developers. Itmay 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 smallerscale and selling apartments to friends and relatives only.

Construction and Development Process

The contribution of construction industry in the Gross Domestic Product (GDP) issignificant. Over the last 15 year the Real Estate Development sector has madesignificant contributions to many sectors of our economy. Since 1985 this sector hascreated homes for over 12000 families in the metropolitan city. Additionally,thousands of acres of land have been developed into housing estates where lower middleand middle-income families can construct their own dwellings. The fact that manycement manufacturing industries have now been set up in Bangladesh is a reflection ofthe impetus the Real Estate Development sector has given to our economy. In the lastdecade many steel mills would have shut down had it not been due to the support of theReal Estate Development sector. Several new mechanized construction materialmanufacturing industries have recently come up due to the existence of this sector.Today about 200 architects and consulting engineers are directly supported by thissector; over 500 graduate engineers are holding management positions in this sectorand almost 2500 diploma engineers are engaged by this sector. The construction sectoris 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% inGDP. It is estimated that about 1.77 million man/ year in 1994/95 (according to FourthFive year plan) were engaged in this sector. A large number of companies/firms inDhaka are engaged in construction activities Contribution of construction industry maybe summarized as:

. Construction industry generates huge formal and informal sector employment. Thisfact needs to be remembered more generally while policy making.

· Income redistribution through employment generation, skill upgrading, favorablefinancing for low-income housing, capital spending for large-scale civil engineeringworks, all contribute to redistribution of national products downwards (social justicecomponent).

· On-the-job skill acquisition frequently leads to further specialization, both in theconstruction sector and in serving other industrial sectors. Skill generation is thuspossible 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 beenobserved that improved dwellings are frequently transformed into some sort of informaleconomic production units. Improved road systems make commodity outputs of small unitsmore 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. Theinformal sector also employs many people in construction industry. For the migrantsfrom 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 thebarometer of the national economy. Housing is indeed one of the most importantpriorities of any government. It is very unfortunate that today the Real EstateDevelopment sector of Bangladesh is in the doldrums. Many construction projects areleft incomplete; many people who have invested their money face uncertain future; andmany related industries will face the consequence of this depression in the immediatefuture.It is our view that a part of the reason behind this pathetic scenario is themisunderstanding of this sector by the successive governments. Instead of receivingencouragement and nurturing, this sector has been progressively quashed by regressivegovernment policies. A few examples are listed hereunder: In 1989 the Ministry ofIndustries declared construction of residential complexes on commercial basis as anindustry. However, to-date this notification from the Ministry of Industries is notrecognized by the National Board of Revenue. Therefore, this sector is not entitled toany benefit of an industry. Transfer fees stamp duty and registration charges forproperty 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 thegovernment exchequer under different heads for registering the apartment. HouseBuilding Finance Corporation is the only government institution dedicated to thefinancing of homes. Over the last 15 years this institution has been constantly cashstarved and has made negligible contribution to the financing of this sector. InBangladesh there is virtually no financing facility for this sector and almost allprocurements are made with 100% equity. Recently some private institutions haveentered the housing financing business but the cost of borrowing from theseinstitutions is prohibitive.

Development of High-rise Building

High-rise buildings probably were first constructed in response to the corporate needfor increased direct communication and expansion of business operation. Businessmenunderstood the need for proximity and personal communications and quickly recognizedthe 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 technicaladvances made over the last 50 years in both transportation and telecommunications.The corporate world is not the only beneficiary of high-rise development; often otherenterprises that serve corporate business or its employees also locate themselves inhigh-rise structures. Offices for lawyers, accountants and other business relatedprofessionals are established in close proximity to the corporations, often beinglocated in the same building. Medical and dental practices open where they can captureand serve office workers as well as the general urban population from a centrallocation. Even where the structure bears a corporate name and was built specificallyfor a corporate tenant finally ends up catering to various professional and businessclients. Today’s high-rise building usually contains a variety of tenants. The cityitself benefits from the concentration of business space and business activity thathigh-rise development generates. Land values are greater in the down town areas ofcities and at other prime locations that are highly attractive. In most cities, high-rises have evolved in concentrations, and those concentrations generate the highesttax returns to local government. For example in Chicago, approximately one-third ofthe city’s real estate tax return comes from the greater downtown area covering lessthan 7% of the total area of the city. Depending on overall factors, during the lastthree decades, Dhaka City attempted to expand vertically to meet the problems of urbanpopulation explosion, scarcity of land and spiraling land price. High-rise structurealso 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-risebuildings for residential purposes are being seriously considered to provide an answerto urban housing problems. How far this is tenable in context of conditions prevailingin developing countries must be studied in greater depth so that planned growth inhigh-rise housing construction can be promoted. Because of the great size and heightthe development of tall buildings usually involves active interaction of public andprivate decision-makers. Successful public private collaboration usually revitalizesthe urban environment. Thus tall building development in the form of office towers,hotels and residential apartment buildings can become a critical part ofrevitalization in major cities of the world, including Dhaka. In terms of Dhaka it canbe seen from the map (Figure 4) that the location of the majority of the high-risestructures are clustered in the business districts and central city areas where landvalue 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-risestructures to accommodate office staff where land is limited.We can safely say that high-rise structures in other locations is not suitable orattractive because of· Lack of access, Absence of supporting services, Lower rate ofreturn

Current State of Tall Building in Bangladesh

The history of tall building in Bangladesh is only four decades old. Broadly speakingtwo types of high-rise buildings are constructed in terms of use type: Institutionalbuildings including government & commercial office buildings, hotels etc. Residentialbuildings particularly for middle and high income groups.  The trend that started in1963 with the construction of 11-storied WAPDA building at Motijheel, the CentralBusiness District (CBD) of the capital city Dhaka has currently gained a tremendousmomentum. Although tall buildings are being constructed in few numbers in other citiesof the country, almost all the existing and under-construction tall buildings of thecountry are located in the capital city. In Dhaka, there are about 120 such notablebuildings clustered mainly at the Motijheel commercial area and in places likeEskaton, Mohakhali and Banani. If one compares the number of tall buildings in thecapital city with the size of the greater Dhaka with a present population of about 10million, the insignificant proportion of the tall buildings with respect to theoverall scenario becomes evident. The growth of tall building in Dhaka City with timehas been shown graphically in Figure 5.It is evident from the figure that a steadyincrease in the number of tall structures has taken place in the recent years. Whereasin the sixties and seventies, on n verge five high rise buildings were constructed inDhaka City, in the eighties about twenty tall buildings were constructed. Constructionof tall structures attained its peak in the nineties, and, in the last five yearsabout 50% of the total present number of all tall buildings of the capital city hasbeen 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 inBangladesh. In fact, in a fast growing metropolis like Dhaka where, land is scarce andland 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 almostevery field of technological activity, it is interesting to note that all the tallbuildings in Bangladesh have been planned, designed and constructed by localarchitects and engineers. But high rise buildings, both commercial and residential; ofBangladesh have already revealed their merits and demerits in the very short time thatthey have been serving the community. Some of the advantages of tall buildings aregiven 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 bothcommercial 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. Thispositive cost-benefit ratio is often used as a measure of the attractiveness of adevelopment..  High-rise buildings have established an efficient setting for corporatebusiness enterprise, a significant source of revenue for local government, and abusiness focus for the entire metropolitan area.

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

However, in the absence of proper urban planning and design, high rise buildings ofBangladesh are responsible, in many instances, for several problems leading todisadvantages for Dhaka and other city dwellers of Bangladesh. Some of thedisadvantages that the existing tall buildings have demonstrated due to ill planningare 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 majorearthquakes, magnitude equal to or more than 7.0 on the Richter Scale, hadaffected today’s Bangladesh during the last 150 years. But housings inBangladesh seem to be constructed to meet the social demand, not as anearthquake resistant frame building. Mainly the following three unusualstructural factors make the new housings in the country very seriouslyvulnerable 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 thancolumnsThe ground floor of typical six-story buildings and the ground and/or firstfloor(s) of high rise condominium are appeared to be soft story because thesestories are not supplied with proper element such as shear walls and bracing

etc. A lesson has repeatedly been learned from many earthquakes that the softstory is one of the most common causes of building failure.However, it is understood that in future high-rise building will continue to bea strong urban influence. It is obvious that Dhaka City is going to have a largenumber of buildings around 15-20 story high, both for office as well asresidential purpose. However, building regulations must be maintained to reflectthe special needs of these buildings particularly taking into account thetraffic problems, fire safety, vulnerability to earthquake and setback rules.

In addition, stricter enforcement of the rules and better quality control duringconstruction need to be introduced. Some of the opportunities of planned growth ofDhaka City, using the experience of other cities, have already been missed during thelast three decades. But the high-rise expansion can still be planned to create abetter 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 withthe very high price of land in the main commercial and business districts. Since landvalue is very high in inner city areas, population density should be increased byadoption of multi-storied construction. In less developed areas, where commercialvalue is less, tall buildings are virtually non-existent. The overall picture of theland-use type in Dhaka has been shown in Figure 6. It is evident from the figure thatonly 39% of the total lands of the capital are in urban use, while 61% has rural orsemi-rural use. High-rise buildings are constructed to ensure economical use of landin areas where land is scarce and its cost is high. Individual plot holders can save alot of land by going in for multi-story buildings. However, the savings in a givensector of land depend on the gross densities in number of dwellings per acre includingthe land required for common amenities like parks, playground, schools, shops, roadetc.

Dhaka has experienced an unprecedented increase in land value since the earlyseventies. In the past decade Dhaka has mainly developed along the two main axestowards the north of Dhaka. Due to huge increase in the population of Dhaka, thepressure on land for residential use has been very high. Since the sixties until todayRAJUK has provided less than ten thousand plots at subsidized rate mainly for themiddle and upper income groups. The value of land in Dhaka City, mainly in the centralarea, has increased at a rate much higher than the increase in cost of living inDhaka. 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 isvery difficult to compare the land value over the past decades. But Table 1 willprovide 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 thehigh price of land in the central area because they pay a much higher price for a goodpiece of land. It is argued that due to this reason middle and upper middle classfamilies are being unable to buy land in Dhaka.

Area Amount Tk. / Katha Tk. / Sq. Meter Tk. /Katha Tk. / Sq. Meter 1975, 2000

Baridhara 25,000373

25,00,00037,361

Gulshan 25,000375

22,00,00032,877

Banani 25,000375

20,00,00029,888

Mohakhali R/A 25,000375

18,00,00026,900

Dhanmondi 25,000375

22,00,00032,877

Azimpur 17,500261

16,00,00023,911

Mohammadpur 25,000375

12,00,00017,933

Shantinagar 20,000300

15,00,00022,417

D. O. H. S. 20,000300

16,00,00023,911

Shamoli 17,500265

10,00,00014,944

Cantonment Thana 20,000300

10,00,00014,944

Kamlapur 17,500265

8,00,00011,956

Saidabad 17,500265

8,00,000

11,956Gandaria 10,000

1507,00,00010,461

Bashaboo 2,00030

8,00,00011,956

Kalyanpur 17,500265

8,00,00011,956

Mirpur 10,000150

7,00,00010,416

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

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 theMiddle East.k) Land purchase by real estate developers.Since land value is very high in inner city areas, increasing multi-storiedconstruction will increase the density. Many parcels of inner city land are underutilized or vacant, which should be put to proper use for balanced growth. To achievethese objectives and to minimize the negative effects of high-rise constructions thefollowing recommendations are suggested:

a) Proper rules and regulations for high-rise construction should be formulated andimplemented.b) In case of apartment, exclusive apartment law (condominium law) should be enactedand implemented by RAJUK and other concerned agencies.c) Zoning law for Dhaka City in terms of use class and height class should beformulated 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 strictlymonitored and enforced by concerned agencies, as per Bangladesh National Building Code1993.f) In commercial areas low-rise structures should be totally discouraged byappropriate measures.g) In high-rise/high density zones, co-ordination between utility agencies should beincreased to plan in advance for high capacity utility mains.However, in the context of Dhaka it is envisaged that in the future years high-riseconstruction 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 beenidentified, there are two types of control, which can be exercised: control of thesupply and control of the demand. Control of supply could be exercised by means ofintroducing land-use regulations, pricing of the resource and other measures,eliminating indiscriminate exploitation or reducing it to acceptable levels. Demandside controls aimed to restrict or change the nature of the activity. The goal is toreduce or eliminate the demand.

In the case of construction activity, which is acknowledged to be essential forvirtually every type of development, an increase rather than a decrease is desirablein all developing countries. There are many ways in which the nature of currentconstruction activity can be changed to make it less environmentally damaging, withoutreducing the total amount of construction in terms of the built space created or otherfunctions 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 buildingmaterials are locally produced. Cheap labor, appropriate technologies and easytransportation system have also been a positive catalyst for the advancement of theconstruction industry.

(a) Building Materials: Locally available traditional raw materials can be used aseffective construction materials. The government should publicize informationregarding locally available building materials, its high productivity, the locationsand accessibility. Local small-scale industries should be encouraged to producequality-building materials. The Housing and Building Research Institute (HBRI) isencouraged to develop new building materials and techniques with the objectives ofreducing costs and imports. On one hand, there is research into alternative and low-cost materials and techniques while on the other land; alternative building materialsof 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 creatinghighly skilled specialized labor force.

(c) Appropriate and Simple Technology; Building technologies will differ from place toplace. Use of appropriate and simple technology is essential to improve constructionproductivity. In Bangladesh the Local Government Engineering Department (LGED) hasdeveloped Low Cost. Reinforced Cement Concrete (RCC) piles, which have cost similar totimber plies. These low cost piles address the deficiencies of the timber piles andalso 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 smallstructures, 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 withrelatively simple technology. These piles would provide a much better alternative tothe timber piles, which are, at present, being widely used. The Low cost RCC pileswill contribute towards better conservation of forest resources and thereby minimizedegradation of the environment.

Apartment Development: Problems and Prospects

Apartment development in Dhaka City, as mentioned earlier, has become increasinglypopular in recent days and is likely to continue for sometime. It has a number of pluspoints regarding solving housing problems of the city. But at the same time it hascertain demerits. We propose to review critically both the prospects and problems. Itmay be worthwhile to describe here the types of apartments, which are now being builtin 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 withaverage fittings and fixtures (e.g. in-situ mosaic, concealed wiring with localfittings, best quality BISF sanitary ware etc.). These flats within the central areasare sold around Tk. 1000 per sq. ft. excluding the cost of parking space. An apartmentof this type with an area of 1400 sq. ft. (3 bed rooms, 2 + 1 toilets) and a securedparking space will cost around Tk. 20-25 Lacs. The cost may be slightly higher if theapartment is located in a major road. The second types of development are thoseapartments in high-rise buildings of more than six stories. But the present trend inDhaka 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 developmentas cited in the media. They are:

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

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

iii. Social: It is sometimes argued that high rise building prevents social contactwith 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 upperincome group and thereby solving the problem partially for that group. This has notingto do with the housing problems of lower income groups. Only government and autonomousagencies can be helpful by subsidizing and/ or extending loans to their employees inapartment construction and/or purchasing. Private sector can only be effective whensoft term credit area extended to private developers for constructing apartments atlower cost catering for lower income families.

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

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

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

 a) Planning Problemsi. 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 bedangerously hazardous.

viii. Height variation between different closely associated buildings creating privacyproblem.

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 andspoiling the beauty of the building.

c) Design Problemsi. Ladders are used to approach the roof, which are inconvenient. In some apartmentsroofs can not be used at all.

ii. Secondary entry is more utilized than the main entry as it exposes the kitchen, ortoilets 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 ofspace.

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

vi. Dining space is the circulation space with inadequate opening and designed withoutconsidering 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 toimproper 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 Problemsi. 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 beconsidered, some of these stapes are directly related to housing, while others areconcerned with different issues having impact upon housing:a) The growth of Dhaka City needs to be checked. This can be attained by developingsmall and medium towns through adoption policy of balanced urbanization anddecentralization. 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 overallmetropolitan transport and land policies.c) Provisions of areas for high-rise, low-rise, permanent and semi-permanentstructures should be made in the Master plan of Dhaka City. Expensive central cityareas should be reserved for high rise developments. In this way the concernedauthorities can provide higher capacity infrastructure at an optimum cost.

d) Housing development both in public and private sectors should conform with thedevelopment 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 costcore 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 upperincome groups.

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

i) Credit facilities for housing development for individuals and institutions shouldbe 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 arrangementsfor scrutinizing the technical, financial and institutional capabilities ofprospective companies.

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

All future activities of concerned agencies involving land, finance and utilitiesshould be forward-planned under a common framework to increase the efficiency andminimize overlapping of responsibilities. The neglect of the private sector is afundamental defect in our housing policy. A comprehensive and pragmatic housing policyshould be adopted by the government, which will expedite housing developments. Theeconomy 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 theabsence of such a bank; land developers and promoters are very much handicapped. Sucha 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 isa fundamental right of people and it is internationally recognized. The demand ofhousing in urban areas in developing countries like Bangladesh is dramaticallyincreasing 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 likeDhaka city for the fulfillment of their expectations of better of their futuregeneration, and for enjoying the modern facilities of the city life. This has resultedinto a serious crisis all over the country especially in the major cities ofBangladesh. In recent time, the private real estate firms have taken initiatives byensuring maximum uses of land in a planned way. In this system it is possible toaccommodate more people in a comparatively small place. The Organization has anexperienced and educated managing Director. The other directors of the Organizationare also young and educated. Their innovative idea will help to create newopportunities for the organization but their creative ideas could not be implementedif the attitude of the employees is not changed. The executives, officers and staffsmust 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 observedmore or less. Gaining knowledge of practical Real Estate business and to compare thispractical knowledge with theoretical knowledge. Though all departments and sectionsare covered in the Dissertation program, it is not possible to go to the depth or eachactivities of division because of time limitation. So, objectives of this Dissertationprogram have not been fulfilled with complete satisfaction. However, highest efforthas been given to achieve the objectives the Thesis program.

Recommendations

The construction in Dhaka has multi-faceted roles for sustainable development. Itprovides the direct means for physical development, expansion, improvement andpreservation through maintenance. It is the key sector in city’s development. Itprovides the direct means for physical expansion, development and improvement. Theplanning and design component of construction is very vital and it contributes to highproductivity. Appropriate planning and design for construction, use of modernequipment, efficient use of building materials, participation of construction actorsand effective management are considered important factors for construction industry’sdevelopment.

It is understood from the experiences that the construction industry hasmultidimensional aspects, which include actors’ participation, building materials andequipment, building code and standards, regulations etc. It is also observed that theconstruction activities are frequently disrupted by the inherent problems. Consideringall issues, following broad general recommendations both in the public and privatesector should be taken into consideration:

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

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

 c) The authority with help of professionals should formulate general guidelines ofbuilding designs. Special attention would be given to prepare appropriate planningrules, 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 ofmaterials.

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

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

f) Research and innovation for development should be encouraged. Proper researchsupport 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, environmentalimpacts and other information should be made available to the public throughinstitutions and mass media.

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

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

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

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

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

 m) The establishment of regulations and control procedures is the traditionalfunction of the government. It is needed to recognize the construction industry as animportant sector for national development. The regulations and control can contributea strong positive impact to reduce construction cost, environment hazards, promotegreater energy efficiency in building and limit energy consumption and pollution etc.

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

The planning and design approach is very important components in the constructionsector specially to ensure sustainability. The technology and innovation in the

construction industry may reduce construction cost and time, as well as increasesafety. New technological innovations, often in conjunction with materials andequipment, should be introduced into several of the disciplines within theconstruction industry. Such technology also ensures higher productivity, which canbring socio-economic prosperity to the country. The Government sets regulations onconstruction industry (building code, land use, tendering constructor’s negotiationand environmental regulation) in national and local level. Changes are also sought toimprove quality, management efficiency, material flow, and maintain schedules bybetter organization and controlling of design and production process.

Bibliography

1.     Reference book(marketing related) 27.10.112.     News paper & magazine  6.11.113.     www.google.com  8.11.114.     www.wikipedia.com  9.11.115.     www.encyclopedia.com  11.11.116.     www.blog.spot.bangladeshi real estate.com 14.11.117.     www.rehab.com  16.11.11

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