Marketing Practice of the Real Estate

Industry in Dhaka City

INTRODUCTION

1.1 Origin of the Report

Project paper is a prerequisite for acquiring B.Sc. Agribusiness Management.
Before completion of the degree, a student must prepare Project Paper. As the
classroom discussion alone cannot make a student perfect in handling the real
business situation, therefore it is an opportunity for the students to know about
real life situation through this program.
Project Paper on Marketing Practice of real estate business in
Dhaka city is prepared by Md. Sajeb individually under the supervision and
guidance of Professor, Zulfikar Ahmed Reza, Dept. of Agricultural Statistics and
ENA Properties to meet the requirement of Project Paper.
1.2 Objectives

Marketing Practice of the Real

Estate Industry in Dhaka City.
The major objective is to analyze the

The specific objectives are as follows:

To explore the industry overview and its business arena.

To analyze the growth of the real estate business in Dhaka city.
To analyze the macro and micro-environment of a real estate business
company names as the ENA Properties Ltd.
To analyze the marketing strategies of the ENA Properties Ltd.
To know the terms and conditions of real estate service.
To make some recommendations and conclusion to further the development
of real estate business in Dhaka City.

1.3 Scope of the Report

The study would focus on the following areas:
The study focused mainly in Dhaka area.
The study was conducted from 10 Dec. 2011 to 29 Feb 2012.
1.4 Sources of Information
Information collected to furnish this report from secondary sources. Secondary
data has been collected from the various publications, internet, previous research
report on this topic etc.
1.5 Methodology
The study required a systematic procedure from selection of the topic to final
report preparation. To perform the study data sources had been identified and
collected, they were classified, analyzed, interpreted and presented in a
systematic manner and key points are to be found out. This overall process of
methodology is given in the following page in the form of flowchart that has been
followed in the study:

Identifying Data Sources

Selection of the Topic

Collection of Data

Classification, Analysis, Interpretation and Presentation of Data

Findings of the Study

Final Report Preparation

Figure: Flow chart of methodology

A. Selection of the topic: The topic selected for the Project was assigned by
the company supervisor. Before assigning the job it was discussed just to
help to prepare a well-organized internship report.
B. Identifying data sources: Essential data sources as secondary data were
identified which was needed to complete and workout the study. To meet
up the need of data primary data are used and the study also required
interviewing the officials and staffs where necessary.
C. Collection of data: Primary data are collected through 100% physical
inspection as there is no provision and scope for using sampling
technique. Questionnaire preparation is also required to collect the data.
D. Classification, analysis, interpretation and presentation of data: To classify,
analyze, interpret and presentation of data here is used some arithmetic
and graphical tools to understand them clearly.
E. Findings of the study: After scrutinizing the data problems of the study are
pointed out and they are shown under concerned heads.
Recommendations are suggested thereafter to overcome the problems.
F. Finally report has been prepared and printed,
Research design: Descriptive study was followed in the study.
1.6 Limitations
Through I tried level best to produce a comprehensive and well-organized report
on Marketing Practice of the Real Estate Industry in

Dhaka City. Some limitations were yet present there.

i.
ii.
iii.

A period of twelve week was not sufficient to collect and understand

the insights of credit information policy.
Due to some confidentially more data from financial institutions could
not be disclosed.
Some of the factor just discussed but not analyzed in details due to
time constraints.

2.0 Reseal Estate business Industry of Bangladesh:

HOUSING SECTOR IN DHAKA CITY

2.1 Housing Status of Dhaka City:

Housing is an enormous problem for Dhaka City. Only 15% of the 14 million
inhabitants of the city own their house, 18% live in flats provided by the employer,
34% in rented accommodations, 18% in slumps and 20% is floating. About 90%
of the dwellings of the corer are privately owned. Dhaka is the hub of all sorts of
activities and therefore the pressure of human inflow into Dhaka and
consequently on housing is ever increasing. The density of population in Dhaka
City is about 16000 people per square mile with substandard facilities and by the
year 2025 population per square will be nearly 32000 in that case the city Dhaka
will be in great distress if proper care is absent. Already in 1995 most of the
areas in Dhaka city didnt have enough supply of water, gas and electricity. Price
of land in this city has increased nearly 200 times on an average since 1974.
In 1982 survey showed that about 70% of Dhaka city people were lower middle
to lower class but only about 20% of the land were in their position. Remaining
80% was in the possession of the affluent class people. Due to rapid rise in land
price most of the land will remain beyond the purchasing power of the middle and
lower class people for all time to come. Annual demand for additional housing
units in Dhaka is 150000 whereas the total new units built (both in the public and
private sector) annually is between 20000 and 25000 and there is a clear gap of
about 100000 units, which is alarming.
Swamps of between 10-15 feet depth surround Dhaka and it is highly expensive
to construct buildings through filling these low lands. The cost of filling of one
Bigha of low land is between Tk.2.20 to Tk.10.5 million. Residential plots within
Dhaka city cost between taka Tk.10 to Tk.100 million per Bigha. On the other
hand the cost of residential flats ranges between Tk.2,500 to Tk.6,000 per square
feet. Thus about 60% of the city people are unable either a flat or piece of land.

3.1 The National Housing Policy 1993:

The National Housing Policy, 1993 and the ADBs Housing sector Institutional
Strengthening project strongly advocate the establishment of private sector
house building institutions, be they either mortgage banks or house-building
societies.

The Housing policy sets out the following amongst its objectives:
1 Mobilize resources for housing by developing suitable financial institution.
2 Develop institutional and legal frameworks to facilitate the operation of
house building finance companies.
3 Develop new strategies and undertake revision of the policy from time to
time to cope with the emerging housing needs in the country.
4 Develop a property tax base to promote housing.
5 Provide fiscal incentives to promote individual and private sector
investment in housing.
6 Mobilize additional funds for house building activities from households and
enterprise.
It can be concluded from the foregoing sections that the governments chase role
for the future is to be a catalyst for private sector investment in housing.

3.2 Industry Characteristics:

Market is largely untapped, Residential units could be constructed for wider
section of the population if the long term loans needed to finance them were
readily obtainable. Once institutional funds are made available the major
developers are likely to focus their activities on smaller-sized flats for middle
class people.
During the last decade real estate sector has had tremendous progress. The
reasons behind flourishing this business are manifold. Among them scarcity of
open space in the city, rapid increase in population, hazard of buying land and
construction building on own can be mentioned. A recent development in the
economy has changed the scenario dramatically. Wage earners are the major
clients of apartment in Dhaka. Since remittance of foreign currency is now easier
than before they can buy apartment.
Real estate business, especially apartment projects, was started in late 1970s in
Dhaka city. Ispahni group is the pioneer in this sector. But in early 1980s, with the
inception of Eastern Housing Ltd, the business started flourishing. Now this is a
booming sector of the economy. More than 750 real estate developers are now
active in this business.
Construction cost is very high construction industry of Bangladesh is small and at
an early stage of development. The country is heavily dependent upon the
importation of building materials, such as cement, sanitary wares, electrical
equipment and other materials. Other than Brick and labor, almost all materials
used in building a house are imported. Due to the high cost of imported building
materials, the cost of construction becomes rather becomes rather high and is
beyond the affordability of low-income groups.

3.3 Industry Outlook:

The total urban and rural housing requirements have been determined from the
following three elements.
1 Projected population growth through natural growth and with an
adjustment for inward or outward migration.
2 Replacement of existing dwellings due to there limited life span.
3 An estimate of the existing shortfall of dwellings due to homelessness and
sharing of dwellings.
Using this methodology it has been calculated that the annual housing need, till
the turn of the century in urban areas to be 658,000 and rural areas to be
2,672,000 dwellings.
Compared to increasing demand for housing supply is not increasing adequately
at all. Possibility of setting up new housing finance company in near future is low.
Presently rate of interest of House Building Finance Corporation (HBFC) charged
on house loan compared to commercial rate. The national Housing Policy 1993
indicates that the House Building Finance Corporation (HBFC) will be permitted
to rely on government-subsidized funds indefinitely. The House Building Finance
Corporation (HBFC) will consequently have to look to the marketplace for its
funding requirements. This would force it to bring its lending rates in line with
commercial interest rates. Thus House Building Finance Corporation (HBFC)
posses little threat to private housing finance companies.

HISTORY OF EXPANSION OF DHAKA CITY

4.1 History of real estate sector in Dhaka city

1
2

3
4
5
6

During 1970s there were fewer than 5 companies in Bangladesh engaged

in this business.
Real estate business especially apartment projects has started in late
1970s in Dhaka City. But from early 1980s the business started to grow
and flourish. At present, more than 700 companies are active in business
bur 80% business is still dominated by of top 20 companies.
In 1988 there were 42 such developers working in Dhaka city.
From the early 1980s the business has started to flourish and in 1990s it
reached its highest point.
During the period of 1992 to 1994 there was slight downfall in real estate
sector. But in last decade this sector was again showing.
To meet the ever-increasing housing requirement, private real estate
companies emerged and the number of real estate companies.
6

7
8
9

Now in 2009 there are about 507 companies engaged in this business in
Dhaka and some other cities.
At one time it was necessary to from a trade association to strengthen the
role of real estate sector and ensure the ethical practice in construction.
In 1991 Real Estate and Housing Association of Bangladesh (REHAB)
was formed with only 11 members. At present there are 507 members of
REHAB.

4.2 Urbanization and development of housing in Dhaka city

1
2

3
4
5

As the population of Bangladesh as well as Dhaka city is increasing, the

need for housing is also increasing.
The government cannot provide adequate housing facilities for the everincreasing population. As a result private sector housing developers
emerged. Private developers are providing a small part of the housing
requirements.
For the ever-increasing population in Dhaka City, at least 50000 housing
units are required every year in Dhaka City.
Private developers are providing only 5000-6000 dwelling units per year in
Dhaka City. The rest of the houses are being built by individual efforts.
As individuals who do not often engage professionals in construction
process are constructing most of the buildings, they lack proper
implementation of building codes.

4.3 Trend population growth in Dhaka City

Year
1974
1981
1991
2001
2005
2006
2007
2008

Populatio Growth
n
Rate
(In million)
1.68
3.43
7.53%
6.90
6.55%
9.90
5.66%
10.28
6.67%

Source: Statistical year Book of Bangladesh 2005

ANALYSIS OF REAL-ESTATE BUSINESS

Real estate business, especially apartment projects started in Dhaka city in the
late 1970s. Ispahani group was the pioneer in this sector. But the
business started flourishing with the inception of Eastern Housing
Limited in the early 1980s now it is in transition to maturity of life cycle.
More than 700 real estate developers are active in this business
throughout the country. The growth rate of real estate business is 15%.
This sector is considered as a booming one in the economy of
Bangladesh.

5.1 Market Segmentation:

The total market of the real estate business is highly segmented. The
segmentation of the market is mainly based on location and price of land and
apartment size. According to these criteria the total market of the real estate
business in Dhaka City is divided into five zones. These zones are as follows:
Zone 1: Gulshan, Baridhara, Banani.
Zone 2: Dhanmondi, Lalmatia.
Zone 3: Eskaton, Moghbazar, Shiddhshwari, Kakrial, Palton.
Zone 4: Mohammadpur, shyamoli, Mirpur.
Zone 5: Old part of Dhaka.

5.2 Existing products:

The existing products of apartment developers are:
1
2
3
4
5
6
7

Luxurious apartment (Tk.8,000-12,000per sft.)

High rising luxurious apartment (Tk.5,000-6,000per sft.)
Moderate apartment (Tk.4000-4,800 per sft.)
High rising moderate apartment (Tk.3,500-4,000per sft.)
Duplex apartment (Tk.10,000-20,000per sft.)
Commercial building (Tk.10,000-25,000per sft.)
Super market, commercial building, land development etc.

5.3 Reasons behind the growth of the Industry:

The main reasons of mushrooming of this business are rapid increase in urban
population, scarcity of open space in the important areas of the city, and
purchasing land building construction decrease in bank interest rate, rent be
coming alternate from investment for many including the expatriates studying
remittance.

Customers:
Business people, senior doctors, pilots, personnel of multinational companies,
top and mid level managers of large companies or group of companies, people
living abroad, government service holders, senior professors of universities, may
be illegal money holders, industrialists, police officers, defense professionals etc.

Degree of vertical integration:

A very few company has the backward or forward linkage.

Ease of Entry or Exit:

Moderate entry barriers exist in the form of capital requirements to construct a
new project of minimum efficient size (cost equals Tk.0.1 crore), moderate exit
barriers also in respect of heavy amount of invested capital.

Technology/innovation:
Construction technology is standard and changes have been slow; smallest
changes are occurring in products about 3-4 newly formulated specialty features
are being introduced annually.

Product characteristics:
Standardized; the apartments of different producers are essentially features are
identical (buyers perceive little real difference from seller to seller.)

Economies of scale:
The construction cost is almost same for both luxurious and high-rising building;
on the other hand the price of land is increasing at a very rate.

Capital utilization:
Construction efficiency is highest between 90-100 percent of rated capacity;
between 60-70 percent utilization, unit costs run significantly higher.

Profitability:
The gross profit margin is 30% on average and net profit is 18% on average of
the total investment for each project.

Capital Requirement:
Fairly high; big requirements make investment decision critical; creates a
moderate barrier to entry and exit into the business.

5.4 Dominant Economic Characteristics of the Business

Environment:
Dominant economic characteristics are described below:
1
2
3
4
5

Market size: Tk.10,000 million volume 5000 units per annum.

Scope of Competitive Rivalry: primarily local and regional.
Market growth rate: approximately 15%.
Stage in Life cycle: a transition towards the maturity.
Number of companies in the business: about 263companies and their
market shares range from a low of 1% to a high of 15%.

5.5 Major Organizations in the Business

Table 1 shows that 87.50% of the prominent organizations have started their
operations since 1980s and legal of 87.50% companies are private limited.
Management structures of 62.50% companies are unstructured while 25% are
semi-structured and 12.50% are structured. 10.05% of the companies have
handed over at least one project and have four more under construction. The
profit margins of the companys are in average 20%. It was observed in the study
that 100% of the companys concentrate on market segment one, 87.05%, on
segment two, 62.00% on segment three, 12.50% on the segment four, 25.00%
on segment five and 37.5% on segment six.
Table-1: Comparative Position of the Major Organizations:
Name of Commenceme
the Org. nt of Business
EHL
BTI
PDL
EDDL
CCL
AMF
ADTL
EPL

1980
1982
1983
1988
1989
1992
1995
1998

Legal
Status

Profit
margin

Complete
d project

Pub.Ltd.
Pvt. Ltd.
Pvt. Ltd.
Pvt. Ltd.
Pvt. Ltd.
Pvt. Ltd.
Pvt. Ltd.
Pvt. Ltd.

22%
32%
18%
26%
29%
24%
25%
30%

92
29
22
12
21
6
3
16

On
going
project
47
11
8
9
16
10
16
18

10

Findings:
5.6 SWOT Analysis of some real estate company
Strength criteria:
1
2
3
4
5
6
7
8
9
10
11
12
13

Brooder product line.

Well conceived functional area strategies
A distinctive competence.
Adequate financial resources
Good competitive skills
Cost advantage
Well through of buyers.
An acknowledged market leader.
Better advertising campaign.
Product innovation skills.
Proven management.
Ahead on experience curve.
Better construction capability.

Weakness Criteria:
1

Poor construction

Obsolete facilities

Falling behind in R & D

Higher unit cost relative to competitors

Plagued with internal operating problem.

Too narrow a product line.

Weak market image.

Weak supply resources of raw materials.

Average marketing skills.

Opportunity criteria:
1

Enter new market

Expand product line

11

Diversity into related products

Vertical integration

Faster market growth

Serve additional customer group

Complacency among rival firms.

Threat Criteria:
1

Entry of lower cost foreign competitors

Growing Bargaining power of customers

Changing in buyer need& tastes

Adverse shift in foreign exchange rate.

TABLE: Comparative SOWT Analysis of some selected companies:

SWOT/com
p
Strength
Weakness
Opportunity
Threat

BTI

UDD

AMF

PDTL

EHL

ADTL

CCL

EPL

76.92
66.67
57.14
66.67

30.77
66.67
57.14
83.33

53.85
55.56
71.43
66.67

38.46
55.56
71.23
83.33

38.23
55.56
71.43
66.67

69.23
55.56
100.00
50.00

61.54
44.44
71.43
50.00

70.15
56.52
89.00
50.00

According to the above criteria of SWOT Building Technology and Ideas Ltd.
(BTI) has the followed by ADTL, EPL, CCL. AMF, EDDL, PDL, EHL, and UDD
respect while Concord condominium Ltd. (CCL) has the lowest weakness
followed by BTI, AMF, EHL, ADTL, EPL, EDDL, and PDL respectively. At the
same time major opportunities of the market are in front of Advanced
Development Ltd. (ADTL) followed by CCL, AMF, BTI, EDDL, EHL, PDL and EPL
respectively.

12

The Macro Environment:

Procedure of the Real Estate Business

6.1 Marketing Aspects:

1
2
3
4
5
6
7
8
9

Here, concentration is given an understanding on:

Type of promotional media.
Reasons for using specific promotional media.
Number of promotional executive/ staffs.
Ways of undertaking promotional activities.
Use of advertising agency.
Undertaking promotional activities.
Use of advertising agency.
Solution of the problems.
Nature of the clients.

6.2 Construction Aspect

Construction Aspect are display in the follow way:
Pre Construction Activities:
1
2
3
4
5
6

Ways of land acquire

Site selection criteria
Acquire of land
Make the structure of the project
Design of the project
Approval of the RAJUK

Construction Activities:
7
8
9
10
11

Material procurement procedures

Use of machinery/ equipment
Pattern of sub contract
Activities give out to sub contractors
Interior design of the project

The study reveled that most of the developers procure building materials by local
cash purchase and they use their own machinery and equipment.57.14%
13

developers give sub-contracts of their activities. 71.43% developers confess

about problems in construction period. Most of the developers acquire land for
the project by direct purchase getting approach form the owners of the land.

7.0 FINANCIAL ASPECT OF REAL ESTATE SECTOR

Real estate sector is highly related with financing. The financial aspect of this
sector reveals that there are some developments at the real estate or housing
financing in the recent years but not in a phenomenon which can be showed as
the satisfactory one. Compare to developed countries even some developing
countries like India, we are going behind in case of institutional help for housing
or real estate financing, so intense demand of the housing sector some times
falls below the expectation level. Here the housing finance has been discussed in
a little bit detailed fashion so that the growth of the real estate sector can be
predicted and some recommendations can be shown.

7.1 Current Trends In Real Estate/ Housing Finance

Over the last few decades, comprehensive studies of housing markets and
housing finance systems across the world have created a shared body of
knowledge on what constitute effective and non-effective housing policies and
housing market regulations. In particular, programs to finance social housing are
perceived differently today than a few decades ago, both in developing countries
and advanced economies. The focus is on creating well- functioning housing
markets and the expansion of a safe and sound housing finance system.
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 governmentmanaged housing finance institutions or programs, in the form of special
government housing banks or special housing funds capitalized by payroll
taxes. These institutions stifle competition in the financial system because of their
access to low-cost government funds and prevent innovations in the way housing
finance is provided. In most countries these programs are dominated by special
interests, and allocation of funds to either private borrowers or construction firms
no longer focuses on disadvantaged groups. The private banks do not consider
long-term lending for housing a priority because of the associated risks in nonintegrated financial systems and the predominance of government finance
programs catering to the same professional middle class to which the financial
sector might want to extend their services.
Second, many government programs use interest-rate subsidies on fixed-rate
long-term mortgages which have some negative characteristics: 1) the funding
and cost of special government lending programs to the economy is nontransparent, i.e., it is not on the budget and increases with inflation; 2) the
subsidized interest-rate programs stimulate debt acquisition rather than savings,
in other words the more one borrows, the higher ones subsidy.
14

As a consequence, the formal housing finance system only provides mortgage

loans for a small proportion of newly constructed houses and home purchases. A
much larger proportion of households than necessary have to finance housing
from savings or build incrementally and at a low standard because upfront
finance that would allow them to purchase a higher quality home and pay for it
over a longer period is not affordable or inaccessible. Of course, formal finance is
inaccessible for many households in developing countries for other reasons.
These include insecure and undocumented incomes, a lack of land and housing
options for middle and low income households that are acceptable as collateral
to banks, and the high costs and related lack of interest by the banks to work with
small clients, to name just a few.

7.2.0 Finance Systems in Real Estate/Housing Finance

1. MORTGAGE FINANCE
The housing finance sector in Bangladesh is both underdeveloped and highly
segregated. Formal construction and mortgage finance by the banking sector,
which requires proof of land ownership or leasehold deeds and the deposit of title
documents as collateral, is only used for a small proportion of new house
production and for an even smaller proportion of purchases of existing houses.
The 1993 ADB survey of homeowners of newly constructed houses showed that
the most important source of housing finance was household savings (more than
one third). Loans from relatives and friends were the second most common form
of finance, followed by the sale of other parcels of land. Employer and bank loans
(including Grameen Bank loans, see below) were utilized by 13 percent of new
home-owners and HBFC loans were only acquired by 5 percent, all in the higher
income brackets. Rotating credit institutions were not mentioned and are,
therefore assumed not to play a significant role in house construction.
It is widely acknowledged that new finance systems have to be developed and
some promising initiatives have been taken. Here discussed about the present
mortgage-based housing finance systems in Bangladesh and government policy
towards the housing finance sector.
A. Construction Finance for Moderate Income Housing

Private construction finance

Most new construction for the urban formal housing market is in the form of
apartment buildings. The predominant way of financing the construction of this
type of housing is through landowner and developer self-finance, e.g., by selling
part of the land parcel or other land and subscribing the housing development
15

fully before construction starts. Buyers of individual units in multi-family

apartments have to put down a 25 percent advance and the unit has to be paid
for in a few large installments before the house is completed. This type of
financing arrangement is difficult for all but the highest income groups in the
absence of mortgage financing. Some large developers have access to shortterm construction finance from affiliated private commercial banks. It is, however,
difficult to obtain construction finance from the NCBs (see below). Developers do
not engage in long-term financing of housing units for their clients directly.

Public construction finance

After the failed attempt to stimulate BHBFC to lend for lower cost housing
developments (see below), the Prime Ministers Office recently established a
Housing Fund called the Grihayan Project, which provides low cost funds to
NGOs and public sector developers for the construction of low- to moderateincome housing schemes. The Housing Fund is administered by an interministerial committee of 17 members and includes one NGO member (Proshika).
A total of Tk.580 million is available at an interest rate of 1 percent for 10 years.
The project requires that the borrower on-lends to lower-income households at a
rate of 5 percent, which leaves a spread of 4 percent for which the developer has
to cover all costs, including loan administration. Indeed the project expects the
NGO or public sector developers to put in their own funds for project
development and management. Therefore, only well funded NGOs can consider
participating in the project. Also, selected agencies have to have the capacity to
act both as developers and long-term mortgage financiers for the projects.
B. Major Mortgage Lenders

The Bangladesh House Building Finance Corporation

The HBFC was established in 1952 to stimulate middle income house

construction for civil servants in urban areas and Bangladesh HBFC was
recognized in 1973 after independence. While the majority of its clients are still
civil servants, its mandate has broadened to include all eligible private citizens or
citizen groups. It does not lend to developers or builders.
In 1995/96 BHBFCs total assets were Tk.26,218 million of which Tk.22,201 were
outstanding loans and advances. Authorized capital is Tk.1,100 million with
Tk.973 million paid up. BHBFCs main sources of funds are dedicated
government bond issues specifically floated for their programs. Additional
transfers directly from the government budget are occasionally provided on a
limited scale. The interest rate on the debentures differs and the most recent
16

ones were 8 percent for 7 to 8 years. Previous bond issues ranged from 2 to
6.5%.
BHBFC has to operate on a commercial basis and sets its interest rates in
accordance to its costs of funds and operating costs. Its net profit has steadily
increased since the late eighties and since 1993/94 its profits have exceeded its
total expenditures. However, its loan recovery performance is poor and well
below that of the commercial banks. Its recovery on current loans is 86 percent
(of number of loans), but the cumulative recovery is only 44 percent. No
classification system of loans is in place. Indeed, the financial statements do not
include adequate loan loss provisions or reflect the low collection of accrued
interest. BHBFC does not do its own servicing. It uses one of the National
commercial bank (NCB)s, the Sonali Bank, and its branch network for that
purpose. The main office of Jonata Bank in Dhaka, another state owned
commercial bank, sells the applications at a fee of Tk.400 to 500.
BHBFC operates presently only in carefully targeted, higher quality housing submarkets in Dhaka, and on a very limited scale in Chittagong and Rajshahi (which
received 9.4 percent and 3.1 percent of disbursed funds in 1995/96 respectively).
Poor repayment experience in other urban areas was the reason to concentrate
on Dhaka. It has financed 125.000 units since its inception, of which more than
30,000 since 1992, mostly for higher income households.

The banking sector

The commercial banks, both public and private, and the specialized banks are
the only other financial institutions with a considerable proportion of their
combined assets in housing. For the entire banking sector (excluding the
Grameen Bank) the total housing related advances were Tk.17.7 billion at the
end of 1997 of which two thirds (or Tk.11.2 billion) were held by the NCBs. The
majority of the accounts held by the banking sector are individual accounts
(approximately 54,000), and only approximately 1400 loans were made to
housing societies.
Table: Outstanding Housing Sector Advances with Interest in Million Taka
(All banks):
Construction Loan
Housing
Societies/Companies
Housing Individual
Other than Housing
Total

Dec. 95 Dec. 96 Dec. 97

2,338
967
4,138
10,204
6,297
18,839

13,183
7,018
21,167

13,552
6,837
24,528
17

* All banks include: Nationalized Commercial Banks, Private Banks, Foreign

Banks and Specialized Banks in Bangladesh.
Table: Outstanding Housing Sector Advances with Interest in Million Taka
Nationalized Commercial Banks:
Construction Loan
Housing
Societies/Companies
Housing Individual
Other than Housing
Total

Dec. 95 Dec. 96 Dec. 97

1,296
297
1,119
8,026
1,324
10,646

10,732
14,848
12,514

10,084
2,338
13,540

Source:

Scheduled Banks Statistics, Bangladesh Banks, 1997.

The total housing advances amount to only 4 percent of assets. The private
banks have the largest proportion of housing related assets (9 percent), and the
foreign banks have the least involvement in the sector (2 percent). Credit
restrictions, specifying the proportion of deposit funds that could be lent for
housing, were only withdrawn in 1988 and after that time investments in the
housing sector soared. Over the years, major problems in loan recovery began to
plague the housing portfolios and the banks gradually decreased the proportion
of advances for housing. In fact the same number of housing accounts are held
now as in 1992. During the liquidity crisis of 1994, when the Bangladesh Bank
had to bail out the banking sector, it advised the banks not to lend more than 15
percent of their short-term funds in long-term loans.
Private housing finance companies
In recent years, two housing finance corporations have been registered as public
limited companies, of which one has officially opened its door for business. As in
India several decades ago, efficiently run housing finance companies may
revolutionize formal housing finance in Bangladesh and their development and
growth deserves to be encouraged. Here discussed the first operating company.
Delta BRAC Housing Finance Corporation Ltd. (DBH).
After a long period of preparation, DBH was licensed as a Non-Bank Financial
Institution by the Bangladesh Bank and started its operations in 1997/98. Its
initial paid up capital of Tk.200 million was subscribed by both national and
international sponsors as follows:
1 Delta Life Insurance Co. Ltd. 25 percent
2 BRAC 25 percent
3 Green Delta Insurance Co. Ltd. 20 percent
4 International Finance Corporation (IFC) 15 percent
18

5 Housing Development Finance Corporation Ltd. from India 15 percent.

IFC has also offered 10 year loan guarantees for loans from local banks up to
$2.5 million. HDFC, which is the largest and most successful mortgage lender in
India, offers technical assistance in the initial stage to get the company off to an
efficient start. Management of the company is young, professional and energetic.
Initially it was difficult to find local investors in the company since the housing
sector in the country, dominated by the BHBFC, does not have a strong
repayment track record. Moreover, new housing finance companies have to
compete with BHBFC for the same higher income market niche, at least initially.
BHBFC has access to lower cost funds, which allows it to have lending rates
below market, while at the same time it does not incorporate the risks of default
and bad loans in the same way private firms would. These factors increase the
perceived risk to investors in private housing finance companies.
Delta BRAC is permitted by government to take deposits and it has developed a
deposit scheme, offering 11 percent on one year deposits. However, without an
extensive branch network, lack of name recognition and an un-level playing
field vis-a-vis savings rates offered by several government savings schemes,
deposits will in the short run not provide a substantial proportion of the working
capital. The main challenge for the new institution is, therefore, to find
competitively priced sources of long-term funds, which is hardest in the early
years of its existence. Once a strong performance record has been established it
should be able to acquire funds at approximately labor plus 2 percent. The
development of a debt market will equally assist in resource mobilization.
Delta BRAC makes loans for the construction of houses, the acquisition of flats
and houses, the extension and improvement of existing housing and the
purchase of housing plots for middle and, in the medium term, lower income
households. It provides both construction finance and long-term mortgage
finance. In the first year 230 individual loans were sanctioned for a total of Tk.208
million, an average loan size of Tk.900,000. The business plan projects a steady
increase in the number of loans and a simultaneous decrease in the average
loan size. The maximum loan is Tk.2 million or 80 percent of the construction
cost or 70 percent of the purchase price, whichever is less. Mortgage loans have
a maximum term of 15 years and are discretionary adjustable rate mortgages.
Present rates are 16.5 percent. For owner-occupied properties monthly
payments cannot exceed 30 percent of household income and in higher risk
cases, third party guarantees are required.
Housing cooperatives and credit unions
Although the co-operative movement is widespread in Bangladesh, particularly in
the agricultural sector, it has not played a large role in the financing of housing.
Rather housing cooperatives have been set up as vehicles for joint land
19

development projects and purchases of multi-family properties. Cooperatives

receive preferential treatment concerning the allocation of state land and can
access funds from the co-operative movements apex bank, which receives a
large part of its funds from government.
The credit unions, which play a critical role in construction and mortgage lending
in many countries, are presently in disarray and insolvent and cannot be looked
at for expansion of housing finance for moderate and lower income households.
Below table summarizes the outstanding advances and lending terms for
mortgage loans by the public and private sector lending institutions in
Bangladesh. It shows the small size of the sector relative to GDP, the large loan
amounts which are affordable only by the highest income levels, and the
structure of interest rates.
Table: Scale of Mortgage Lending and Lending Conditions by Mortgage
Lenders :

Lending Institution

Outstanding Housing
Loans

Lending Terms

BHBFC

Tk.22,201 million

15 years
13% for loans <1.4
million
15% for loans >1.4
million
12
months
period

grace

LTV ratio 60%

Max.
million
Banking Sector
Grameen Bank)

(exclusive Tk.17,700 million

loan

Tk.2.5

10 years
16% p.a. compounded
LTV ratio 50%
Av.Loan Tk.1.5 to 2.5
million

20

Private Housing Finance Co.

Tk.208
year)

million

(first 15 years
16.5%,
compounded

p.a.,

LTV ratio 80%

Av. Loan Tk.900,000
Max. loan Tk.2 million
C. Potential Investors in the Mortgage Finance Sector.
The relatively low savings rate in Bangladesh combined with the existence of
high yield government savings instruments that attract most of the household
savings makes it necessary for any new private sector housing finance company
to access funds from long-term lenders or securities markets, rather than through
depository mechanism only. However, there are few long-term cheap funds
available in the economy. A brief review of some potential wholesale investors or
lenders has been given in the below:
Commercial banks.
At present, the commercial banks are reluctant to lend longer term (more than 5
year) at lower rates to the housing finance companies even if they would have
the funds to do so.
Post Savings Bank.
With gross deposits in excess of Tk.9,000 million the Post Savings Bank could be
a possible investor in the housing sector. However, the deposits are considered
as government revenues and are not kept in separate accounts. In other words,
government uses the deposit for its own funding and it is therefore an unlikely
source of housing sector funds.
Insurance companies.
The large public insurance companies presently only invest in the housing sector
through the purchase of BHBFC debentures. Most private insurance companies
are still relatively small and invest most of their funds in deposit accounts in the
commercial banks. However, the equity investment in DBH by the most
successful and innovative private sector life and general insurance companies 1,
shows the potential of further linking the private housing finance sector and
insurance companies. The Insurance Act sets, of course, restrictions as to the
proportion and type of assets insurance companies can invest in: 30 percent in
government bonds, 30 percent in government approved securities and 40
percent in government approved investments.
1

21

State Provident Fund and other pension funds .

There is a State Provident Fund to which all permanent civil servants (those who
have completed two years of continuous service) contribute ten percent of their
basic salary. Contributors are allowed to borrow against their savings, including
for the purchase of a residential plot or house up to 80 percent of the outstanding
balance in the individuals account or 36 times the monthly salary of the person
whichever is less. There are several smaller public and private pension funds.
Most are not paid up presently and pay out pensions from current income. It was,
therefore, impossible for this study to evaluate the financial status of the state
and other pension funds and we cannot speculate on their potential role in the
housing sector.
Micro-finance institutions.
BRACs move to enter into a joint venture with Delta Insurance and HDFC from
India to set up Delta BRAC Housing (DBH), the first private sector non-banking
housing finance institution in Bangladesh is an interesting and, for many,
unexpected initiative by a MFI. BRAC sees this not only as a good investment
opportunity, but its interest in this venture was related to the need for housing
finance by its staff members: middle income households that have no access to
mortgage loans and cannot afford to purchase a house. While the major NGO
financial institutions and the Grameen Bank hold investments in office real
estate.
International investors.
Until recently, housing has not been a priority sector for external and donor
funding. Also, the absence of a swap market in Bangladesh makes it difficult for
foreign investors to come in because of the exchange rate risk. The recent
investment by HDFC and IFC in a private housing finance company may prove a
turning point. Other bilateral investment institutions, such as the FMO of the
Netherlands, may consider investments and loan guarantees for new private
housing finance companies. Such international funding is important for reasons
other than providing necessary capital. It can assist, through its loan conditions
and technical assistance, in the establishment of a proper policy and regulatory
environment for the sector.
D. Government Policy towards the Housing Finance Sector
The National Housing Policy of December 1993 recognizes that formal sector
finance is only accessible to a small proportion of the population. It proposes a
comprehensive approach to improve the public and private housing finance
systems. It emphasizes a private sector approach to housing finance and the
need to establish new private sector housing finance institutions. Some of the
main objectives stipulated in the policy are 1) resource mobilization through
tapping household savings for both public and private sector housing finance
institutions; 2) the establishment of a Low Income Housing Fund from which new
22

financial institutions and NGOs could acquire funds for on-lending to low income
households, community groups etc. This idea was proposed in the ADB draft
report on institutional strengthening for the housing sector (1993); 3) increasing
the proportion of funds from insurance companies, unit trusts, commercial banks
and other financial institutions to be allocated to housing and providing other
incentives for these institutions to increase their role in the housing finance
sector; 4) reforming the BHBFC into a self-sustaining premier housing finance
institution; 5) introducing a secondary mortgage system in order to attract funds
from a wider range of investors.
E. Main Issues in Expanding the Formal Housing Finance System
The general weaknesses of the financial sector have of course a negative impact
on long-term lending for housing. These have been detailed above. Here some
issues have been discussed which specifically deal with housing finance

Distortions in the savings rates and resource mobilization

A main distortion in the savings and debt system is the high rates offered by
various government savings plans compared to market rates offered by private
deposit taking institutions.2 The plans have created an inverted yield curve where
lower risk savings instruments carry higher returns than higher risk instruments.
These distortions make it difficult for private sector institutions to raise household
funds and hinder financial market development. Indeed, it is unlikely that the
bond market will develop within this financial market structure. Long-term lending
operations such as housing finance are particularly affected by the difficulty of
raising long-term funds in the domestic financial market.

Interest rate subsidies

The BHBFC has access to lower-cost funds and is not yet required to incorporate
adequate bad debt provisions in the overall cost of credit. This allows them to set
their lending rates below the market rates, making it difficult for the private sector
to compete and, therefore, suppressing the development of the private mortgage
industry.
Interest rate subsidies have some major drawbacks apart from stifling private
mortgage market development. First, they subsidize debt rather than housing
directly. A below market interest subsidy encourages people to borrow as much
as possible and repay their loans as slowly as possible. Second, the subsidies
increase with inflation when interest rates go up, a poor index for subsidization.
2

23

Third, the subsidies are not transparent. Subsidy amounts are hidden and vary
with the market rate of capital. It is only through the constant additional
government funding to BHBFC that the cost of the subsidies is apparent.
Alternative ways of subsidizing those households that could, with some
assistance, participate in the formal mortgage market, need to be considered.
For example, upfront subsidies that could be applied in any public or private
financial institution are used in many countries. These can take the form of a
direct transfer or allowance or a buy-down mortgage instrument, whereby an
upfront subsidy is put in an escrow account and used to pay part of the monthly
installment for the mortgage over a fixed period of time. In addition, the
government could reduce the stamp-duty and administrative cost of mortgage
lending to make it more affordable.

Subsidy targeting

The second issue is the poor targeting of the existing interest rate subsidy
system. Subsidized loans are presently provided to those that could participate in
the private market without assistance. Indeed, there is no difference in the
income level of recipients, loan amounts and geographical target areas between
the private lenders and BHBFCs clients. The objectives of the subsidy scheme
should be to assist those that do not qualify for a formal sector mortgage loan
without some special assistance and thereby increasing the number of middle
income households that can avail themselves of housing finance. The BHBFC
ought to re-orient their assistance program to that group of beneficiaries. This
would not only mean focusing on a different income group and other locations
within and outside of Dhaka, but also providing other types of assistance to
households not used to dealing with the plethora of requirements of underwriting
and mortgage repayments.

Risks, affordability and mortgage instruments

Little experimentation has taken place to explicitly introduce different mortgage

instruments to address the perceived risks in mortgage lending or to make
mortgage finance more affordable to middle income households. Also, the pricing
of risks and the conditions attached to the different instruments is often unclear.
7.2.1 Fixed rate mortgages:
The FRM is the most common instrument in Bangladesh. Interest rates are fixed
for the life of the loan and so are the periodic payments, irrespective of interest
rate movements in the market. It exposes the lender to interest rate risk if
unanticipated inflation occurs. However, lenders seem to feel that if a rate
change is needed they can do so even on older loans on their books. In other
words, while mortgages are written as fixed rate mortgages, these are in fact
adjustable instruments at the discretion of the lender. Borrowers are mostly not
24

aware of this provision, however, and it has not been regularly applied. This
adjustment feature considerably decreases the interest-rate risk to the lender,
however, which should be reflected in the rate structure. An explicit adjustment
protocol or index may be useful to consider.

Graduated Payment Mortgages.

These are also fixed rate mortgages, but the repayment schedule has been set
up in such a way that early payments are lower and increase periodically by a
specified percentage. Some banks have used this type of mortgage in the past to

25

Dealing with credit risk

Both banks and non-banks are plagued by bad debt. Yet, very little systematic
analysis is taking place on the specific causes for mortgage default. Presently,
entire geographical and income segments are excluded from mortgage lending
because of their high perceived credit risk. However, underwriting methods are
very rudimentary and do not include a careful market analysis of the property.
Affordability calculations for all types of residential properties are done mostly on
the basis of future rental income even when owners are occupying the building.
Also, servicing methods are not inductive to stimulate timely payments and there
are long lapses before overdue notices are send out 3Foreclosure procedures
take on average five years and clients know that financial institutions will only
take them to court in extreme cases. It is, therefore, not known whether a poor
payment record is based on clients inability to pay, the low value of the building
relative to the outstanding loan, or on the perception of clients that no action will
follow in case of non-payment.

Interest rate calculations

Within the primary mortgage market (and micro-finance market) different types of
interest payment calculations are used, which is often confusing to borrowers
and increases the difference between government and non-government rate
structures. While compounding is the most common way to calculate interest and
is used by most of the financial sector, simple interest rates, which lower the
effective rate, are used for special loans or customers. For example, BHBFC
charges simple interest rates for smaller loans and as an incentive system for
special customers, which translate into much lower effective rates. Also, NCBs
charge simple rates for special customers, using the same nominal interest rate.
MFIs typically charge a flat rate for the entire loan period. No adjustments are
made for principal repayments during the course of the loan. A flat rate therefore
has a higher effective rate than the quoted rate. It is used for reasons of
simplicity on small loan repayment calculations and because the quoted rate
appears low, which has a positive effect on borrowers. It is not always clear
which type of interest rate calculations are used and it is often confusing to
inexperienced borrowers who have to compare different costs of credit Also, the
NCBs and BHBFC use a simple interest rate as an incentive for good borrowers
without clearly calculating how much of a subsidy is provided by moving from
compounded to simple interest rates. There is hardly any adjustment made in the
rates for different risks or loan terms. Moreover, this lack of standardization will
make it more difficult to develop secondary lending facilities at a future time
7.2.2. Alternative Housing Finance Systems
3

26

Several micro-finance institutions provide long and short-term credit for housing
without a mortgage contract based on collateral. In other words, the financial
institution does not require documents of ownership of the land and the house as
collateral for issuing a loan. Loans are made on the bases of established
membership in lending programs and a sound track record of repayments on
previous loans. Group pressure and mutual support are used as guarantees for
loan repayment. There is no recourse by the financial institution in the case of
non-payment other than the persuasive and legal ways to recover the loan and
future exclusion of the borrower from the credit program. The MFIs have no right
to sell the property. Housing loans are typically based on the same underwriting
and repayment structure used for the micro-credit income generating programs
for rural and urban poverty groups. The Grameen Bank has the largest housing
loan portfolio of this nature, but other MFIs carry housing loan portfolios as well,
with different levels of success. Several micro-finance lenders are interested in
expanding into housing. Here discussed the largest micro-finance institutions and
their housing loan programs below. These four MFIs dominate the micro-finance
sector in Bangladesh and have an outreach of 6.3 million clients (1997)
A. Main Micro-Finance Housing Lenders
Grameen Bank.
The Grameen Bank was established in 1983 under the Grameen Bank
Ordinance, to provide non-collateral- based credit to the rural landless poor, in
particular women, for income-generating activities. Its charter prevents it from
working in urban areas. It established the system of small group-based lending
for groups of approximately 5 members, whereby the individuals continued
access to credit is related to the repayments made by the entire group. An
integral part of the credit program is that members have to save in group-funds,
savings accounts and emergency funds. These savings can, however, not simply
be retrieved when the individual requires money; group and institutional
requirements have to be adhered to. Another characteristic of the credit program
is that extensive social development and technical assistance support is provided
to the borrowers. These lending and savings systems have been effective in
keeping down default rates and dropouts, and increased the savings rate among
the rural poor.
The Grameen Bank has more than 1100 branches and approximately 2.3 million
members (mostly women) in close to 40,000 villages. The total loan amount
disbursed since its inception and until July 1998 was close to Tk.100 billion, with
a recovery rate of 97 percent. The average loan size is $180. Total savings are
Tk.25.14 billion (12/97), with Tk.808 million outstanding. Its financial margins
(excluding grants) were 8 to 8.5 percent in the early 1990s.The Moderate
Housing Loan program was established in 1984 with a current loan maximum of
Tk.25,000. After the floods of 1987 a Basic Housing Loan was introduced which
27

presently hs a loan maximum of Tk.12,000. It is targeted to the poorest rural

households, similar to the income generating credit. This program has remained
the most popular among the target population. There is also a loan program for
the purchase of small parcels of land and a fourth one for the repair of houses.
For loans above Tk.12,000 specific criteria are followed:
1 Only well-established and functioning GB branches are allowed to disburse
housing loans.
2 Centers or groups that are interested in setting up model villages are given
preference over individual or scatter site housing.
3 Within groups the most deserving members that do not have their own
house are preferred.
4 Only groups and individuals that have successfully participated in earlier
credit programs can receive a housing loan, the idea being that the housing
loan has to be repaid out of the income raised by earlier income generating
ventures.
The demand for housing loans has increased over time. The housing loan
programs were funded by grant money from several foreign donors. The Basic
Housing Loan program developed a house design of a one-roomed house of 5.8
by 3.5m, with 4 cement pillar, corrugated iron roofing and a wooden frame. Each
house has a sanitary latrine with 4 to 5 rings. The pillars and sanitary ring
components are provided in kind as an integral part of the loan.
A total of Tk.6,714 million in housing loans had been disbursed until July 1998 for
446,237 loans of which 92 percent to women. Housing loans formed only 4
percent of total loan disbursement in 1997. This figure gradually declined since
1993 when it was 10.5 percent. The average loan size is Tk.15,000. According to
the GB the repayments on housing loans were excellent until the floods of
July/August 1998, when many houses were washed away or damaged and
households found themselves without sources of income. Savings programs
were not sufficient to guarantee continued repayments on the long-term loans or
could not be accessed by the borrowers and defaults allegedly rose to
approximately 50 percent. Earlier evaluations showed that housing loans had a
poorer repayment record than income generating loans,
Proshika
Proshika is one of the largest national NGOs involved in micro-credit. It was
established in 1976 and focuses on education, organization and income
generating activities for hard-core urban and rural poverty groups. In addition it
has an environmental protection program. Proshika works with over 1.5 million
members, organized in close to 75,000 groups. Like the other micro-finance
lenders Proshika tries to become less dependent on donor funds. Presently, soft
loans and grants from donors, either directly or through PKSF (see above),
28

account for 43 percent of its funds, while members bring in close to 30 percent.
Proshika started its urban program in 1990. It includes a component that focuses
on the improvement of water, sanitation and electricity for the urban poor, in
targeted squatter areas.
Proshika started a housing program for rural areas in 1988 and has provided
assistance for the construction of more than 30,000 houses to date. The total
amount disbursed for housing is Tk.193 million. Housing loans are based within
the group and the group selects the member most deserving of a housing loan
under strict allocation rules; i.e., only three housing loans per year per group,
housing loans can only be provided to groups that are at least three years in
existence. Loans have a maximum of Tk.10,000 with an equity contribution of
Tk.1000. Loans carry a 5 percent flat interest rate (reduced from 10 percent
because of affordability reasons).
BRAC
BRAC was established in 1972 as a relief organization to resettle households
after the liberation war. In 1976, it started focusing on the improvement of the
living conditions of the landless rural people through a system of village
organizations, savings programs and micro-credit. It has approximately the same
number of members as the Grameen Bank and a total cumulative disbursement
of Tk.21,585 million. It is a professionally run organization with major investments
in real estate.
BRACs urban program began in 1991 and focused on education for city children.
It is now proposing to extend its urban work to economic development, health, in
particular water and sanitation, and other services.
The housing loans program started after the flood of 1988 and focused on the
same rural poverty group. Only members who successfully repaid an income
generation loan and saved for 6 months an equivalent amount to the monthly
repayments for a housing loan, are eligible. The loans are smaller than those
provided by the Grameen Bank and Proshika and have a maximum of Tk.8,000.
Interest rates on housing loans are 5 percent and the repayment period is 3
years. Housing loans were only 2.25 percent of the total loan disbursements at
the end of 1997 (BRAC 1997).
BRAC is considering to establish a moderate-income rural housing loan program
with loans up to Tk.20,000. It is at the same time concerned to move into this
market in view of the massive defaults that plagued the housing portfolio of the
Grameen Bank after the recent floods.
ASA
29

ASA is another professionally managed NGO micro-finance institution with a very

strong track record of the quality of its loan portfolio and its overall lean
operational structure. It has a total of 1.4 million borrowers and savers and has a
disbursed Tk.8,320 million in loans and accumulated Tk.720 million in savings
since its lending program started in 1991. Consistent recovery rates of 99
percent have been achieved and the recent floods only had a minimal impact on
loan recovery because of the strong savings program that allows borrowers to
use their savings during bad times. ASA tries not to be overly dependent on
donor grants and soft loans and, presently, close to half (47 percent) of their
funds comes from members savings, 35 percent from borrowing and only 5
percent from donor grants. Its profit margin is 3 to 4 percent.
ASA runs both rural and urban micro-credit programs and has a total of 750
branches of which 90 are in urban areas. Recovery rates are the same in urban
and rural areas. In order to save on operational costs it does not work with small
groups or group-based loans like the Grameen Bank, Proshika and BRAC. Each
branch needs to become financially self-sustainable and requires a minimum of
300 to 350 clients per worker.
Its average loan for income generating activities is $150, which is repaid in 50
weekly installments on a 12.5 percent flat rate (approximately 23 to 24 percent
compounded per year). ASA started a rural housing credit program in 1989/90.
Loans with a maximum of Tk.9000 were issued at a flat rate of 10 percent. It
issued about 2000 to 3000 loans but it did not have satisfactory results as far as
repayment is concerned. The target groups for its lending programs are poverty
groups that earn less than Tk.2000 in rural and less than Tk.3000 in urban areas
and these groups can only afford to repay Tk.25 per week for their micro-credit.
ASAs management considers housing loans to the lowest income group
unfeasible and intends to target the rural middle class farmers for that lending
activity in the future. Interestingly, a sizable group of borrowers (close to 15
percent) use part of the income-generating loans they receive for other purposes
such as the improvement of their homes, even though that is explicitly forbidden.
This is an indication that the demand for housing loans is large.
B. Critical features of the micro-finance housing loans
Scope and scale
Housing loans form only a small proportion of the MFIs total loan portfolio (never
more than a few percent), and have only been available to rural landless
borrowers, the majority of which are women. A total of approximately 700,000
housing loans have been issued since the programs started in the 1970s and
1980s. No urban housing lending programs exist.

30

Loan terms
Equity requirements, interest rates and loan periods vary widely. Flat interest
rates range from 5 to 10 percent. The term varies from 6 years for Proshika to 15
years with GB. Where repayment amounts are fixed but loan amounts vary, the
term is dependent on the loan amount. The 15-year loan issued by the Grameen
Bank is the longest and is considered too long by the other MFIs for the rural
poor to carry. GB may reconsider the period after their recent high default
experience on their housing loan portfolio. The housing loans have simple
application and approval procedures and assistance is provided with the design
and purchase of cheap and appropriate building materials.
Targeted Households
Housing loans are considered social sector loans and are provided to the most
deserving members of rural groups, those without land and shelter. All MFIs
require a track record of successful loan repayment of an income-generating loan
or a simultaneous loan for income generating activities that would guarantee the
repayment of the housing loan. However, the size of the housing loans and the
related repayment obligations and period is least suitable for this rural lowincome group (although these clients are not the hard-core poor either).
There is a growing awareness among some of the micro-finance institutions that
there is a need to differentiate among subgroups of rural and urban poor that
have different needs for credit, including housing credit. Several MFIs are
interested in expanding micro-finance to small individual entrepreneurs to set up
businesses and move to another level of economic development than possible
with micro-credit for individual income-generating activities. Similarly, housing
loans could be targeted to those who have established more secure incomes and
can more easily afford market rate payments, rather than to the poorest
households alone. This would allow the expansion of the housing programs
considerably and reduce their risk.
Internal cross subsidies
All housing loans carry a lower rate than income-generating loans and are
internally cross-subsidized within the MFI. There are several related reasons for
this cross-subsidization: first, housing is considered a social good and a basic
need worthy of subsidization; second, without subsidization the rural poor would
not be able to afford a housing loan. However, if housing lending programs are
targeted to those who have established a solid income base established through
previous micro-credit and micro-finance programs, such deep cross-subsidization
would not be necessary and more rural households could be assisted with
housing loans.
Credit risk
31

The micro-finance sector does not use a mortgage instrument for its housing
loans. Land titles are cumbersome and costly to get and many households live
on land that is not legally theirs. Loans are collateral free and lenders do not
have recourse in case of delinquency. Foreclosing on a housing loan and
repossessing the house would, in any case, be a theoretical option only. In rural
areas the market for houses of delinquent households would be non-existent.
Security is provided by group support and social pressure on the borrower to pay
and the threat of future sanctions when additional credit is sought. Some past
programs have used a chattel mortgage, which secures the loan through a claim
on the house only (instead of on the land and the house).
Housing loan portfolios have a slightly higher level of default than the incomegenerating loans, although defaults are generally much lower than in the private
mortgage sector. Defaults are due mostly to inability to pay, rather than to low
equity in the house or lax recovery systems (which are the main causes of
default in the formal housing finance sector). Also, the recent floods have
emphasized again that rural housing loans are exposed to systemic risks of
default when floods or cyclones strike the country. Under the present crosssubsidy system, the higher risk on the housing loans is perversely reflected in the
interest rate structure of MFIs which applies lower rates to these loans than to
the regular micro-credit loans. In addition, savings schemes attached to the
micro-credit loans are too small to act as a buffer in case of payment problems
for housing loans, and, for most of the programs, savings cannot be accessed
when needed to bridge a difficult period in a households life cycle or deal with
natural catastrophes.
Housing solutions
Loans are only provided for new home construction, mostly for specific house
designs. Only GB has a small loan program for rehabilitation or extension of
houses. Yet many households use part of their income-generating loans for
housing improvement, even though that is explicitly forbidden. An extension of
housing loan programs to cover housing rehabilitation may be a worthwhile
option.
None of the MFIs have an urban housing loan program, not even for small towns.
This rural focus is related to the overall orientation of MFIs towards rural poverty
alleviation (e.g. the GB is not allowed to lend in urban areas). But even for MFIs
working in urban areas, the housing sector is too big a challenge, because of the
high cost of new housing in relation to incomes, particularly if land costs are
included. Also, there is a perception that the greater mobility of the urban
population poses a higher credit risk for longer-term credit such as housing
credit. However, ASA, for example has successfully run credit programs for urban
households, even without the rigid group structure utilized by other MFIs as a
guarantee for repayment.
7.3.0 Investment status in real estate sector:
32

The real estate sector is at present creating employment for about one million
people who are directly or indirectly involved in the sector. According to the Labor
Force Survey (LFS), in 1999-2000, 2.1 per cent of the labor force was engaged
in construction, whereas for 1995-1996 the figure was 1.8 per cent respectively
(CPD, 2003).
Recent information concerning investment in the housing sector shows steady
growth both in absolute terms and as a percentage of total private investment
and GDP. Private investment in housing and construction has more than doubled
during the Fourth Five Year Plan period, from US$ 11.66 million in 1989-1990 to
US$ 264.83 million in 1994-1995. During the first three years of the Fifth Five
Year Plan period, the average investment in housing and construction was US$
1273.65 million. As a share of total private investment, private investment in
housing and construction in the 1997-1998 to 1998-1999 period accounted for
47.3 per cent which far exceeded the target of 16.35 per cent for this period. The
proportion of investment in housing and construction in the national GDP
increased from 3.4 percent in FY 1997 to 4.1 per cent in 1999 (CPD, 2003) 4.
Various revenues like VAT (Value Added Tax), registration fees, utility connection
fees etc. generated in the real estate sector amount to about US$ 6 million per
year. During the peak years of the early 1990s, over 3,000 apartment units were
built by developers every year. Today around 2000 units are built, which indicates
a 30 per cent drop in output (CPD, 2003).
About 19 per cent of the dwelling units are located in urban areas. Per capita
floor space in urban areas is only 62.3 sq ft. About 46.4 per cent of urban
dwellings are made of brick/cement. From the early 1980s the business started
to flourish and showed robust growth. At present, more than 250 companies are
active in the real estate business in the country (CPD, 2003).
There has been a new trend of housing development mainly in the private sector
in the mid eighties. This new type of residential development can be broadly
termed as apartment development. In most of the cases, an individual or a
company constructs buildings comprising of several apartments, which are later
sold to individual purchaser. This has prompted many individual entrepreneurs to
develop apartment buildings resulting in an increased number of real estate
companies in the city.

The Micro Environment:

4

33

8.1 Residential Project

Twenty years back the city dwellers were reluctant to live in flats while ten years
back some one would have thought twice before buying an apartment. But in the
last couple of years people have shown an increased interest in owning
apartments. The main reason is economic due to increased land cost as well
construction cost. There are also other reasons such as reluctance of individuals
to spend time and energy in house construction, unavailability of land at suitable
location etc.

8.2 Locations of Residential Projects

Dhanmondi appears to be the most preferred locality for residential projects.
Gulshan appear to be the second highest preferred locality. Other important
localities where residential projects have been undertaken are Uttara, Banani,
Baridhara, DOHS, Mohakhali, Mirpur, Shamoly, Kallanpur, Mohammadpur,
Lalmatia, Kalabagan, Shantinagar, Segunbagicha, Malibagh, Maghbazar,
Siddeswari, Purana Paltan, Fakirapool Paribag, New Eskaton and New Baily
Road. Now projects are undertaken out side the Dhaka City mostly in Chittagong,
Shylet, Comilla, Bogra districts. These are shown on the following table;
Table -4.1: Locations of Projects in Dhaka city:
Location

Project

Apartment
18,140
12,100
10,085
2,980
5,336
4,888
3,068
1440
2,092

Avg. No. of Apt.

Per Project
20
22
16
12
29
50
54
18
44

Avg. size of
Apt. (Sft)
2164
2342
1383
1969
1096
1722
1344
1254
1508

Dhanmondi, Rayer Bazar, Zigatola

Gulshan, Niketon
Uttara
Banani
Mirpur, Shamoly, Kallanpur
Baridhara, DOHS, Mohakhali
Mohammadpur
Lalmatia
Segunbagicha, Malibagh,
Maghbazar
Kalabagan, Green Rd, Elephant Rd
Shantinagar
Purana Paltan, Fakirapool
Siddeswari, Baily Road
New Eskatan, Paribagh
Total

907
550
630
235
184
88
57
80
46
73
28
16
20
14
2,240

2,064
759
828
798
595
49703

28
26
52
40
42
22

1440
1560
1480
1517
1555
1752

Source: REHAB - 2008

34

Table -4.2: Projects outside Dhaka City:

Location

Project

Apartment

42
4
3
2
51

1,974
512
105
72
2663

Chittagong
Shylet
Bogra
Comilla
Total

Avg. No. of Apt.

Per Project
47
78
35
36
52

Avg. size of
Apt. (Sft)
1620
1284
1180
1230
1528

Source: REHAB - 2008

8.3 Facilities Provided in Residential Projects:

Security guards, Car parking, Reception, Intercom and lift appear to be the most
common facilities provided by every Developer. Other quite common facilities
provided in Residential Projects are Generator, Fire escape, Security alarms, Fire
extinguisher, Common area maintenance, Garden, Community center, Garbage
chute, Childrens play area and Common prayer room. The survey findings on
facilities provided by the developers are shown on the following table;
Table-4.3: Facilities Provided in Residential Projects
Facilities
Security Guards
Car Parking
Reception
Lift
Intercom
Fire alarm system
Fire escape
Fire extinguisher
Generator
Security alarm
Garbage chute
Garden
Community center
Childrens play area
Common prayer room
Common area maintenance

% of developers who provide the facilities

100.0
100.0
100.0
100.0
97.1
38.6
71.4
37.1
90.0
38.0
27.1
30.0
30.0
25.7
21.4
35.7

Note: The table is based on the survey findings.

8.4 Factors considered crucial for success of Residential Project:

35

Location of the Residential Project is considered as the most crucial factor for the
success of Residential project, followed by social and natural environment of
project area, Price of apartment, Marketing efforts, Planning of the project,
Architectural design, Quality of works and Management of the project. The
following table identifies the crucial factors:
Table-4.4: Factors considered crucial for success of Residential Project
Factors
Location of the Residential Project
Environment
Price of apartment
Good Road Communication
Marketing efforts
Goodwill Integrity of Developers
Quality of works
Planning of the project
Architectural design
Management of the project
Timely Completion of Project
Security/ Safety Provision
Facilities in Residential project
Position of Land in locality
Cost of the Project
Timely Collection of Installments
Size of Apartment
Financial Strength of Developers
Technical competency
Timely Sale of Apartments

% of respondents
61.4
54.2
51.4
42.9
34.3
30.0
28.6
27.1
27.1
20.0
17.1
15.7
14.3
14.3
14.3
12.9
11.4
8.6
5.7
4.3

Note: The table is based on the survey findings.

8.5 Time required for completion of Residential project:

Average time required for completion of Residential project is 24months.
Table-4.5: Time required for completion of Residential project
Time required for completion
12 months
18 months
22 months
24 months
28 months
30 months
36 months
48 months

Percent
1.4
10.0
1.4
64.3
11.4
8.6
1.4
1.4

8.6 Factors influencing purchase decision:

36

Location of the apartment project appears to be the most influencing factor in

purchase decision of buyers followed by Price and Size of apartment as can be
seen from the following table:
Table-4.7: Factors influencing purchase decision
Factors
Location of the apartment project
Price of Apartment
Floor space/ size of apartment
Surroundings of project area
Architectural design
Security of investment (integrity
Developer)
Reputation/ reliability of Developers
Features & Facilities in apartment
Others

of

% of respondents
87.1
74.3
62.9
55.7
52.9
48.6
37.1
32.9
4.3

Note: The table is based on the survey findings.

8.7 Selling Price of Apartment

Real Estate private companies are now constructing apartment buildings on joint
venture basis with the landowner and selling these apartments to the buyers. The
following table will give a location wise picture of per sft apartment selling price in
some prime locations of Dhaka.
Table-4.8 Selling Price of Apartment

Location
Dhanmondi
Siddeswari
Shyamoli
Mohammadpur
Green Road
Elephant Road
Lalmatia
Santinagar

Selling price
(Tk/Sft)
3500-5000
1900-2400
1700-2200
2400-2900
2200-2500
2200-2500
2400-2600
1900-2400

Location
Uttara
Gulshan
Neketon
Baridhara
Banani
Mirpur
Segunbagicha
Palton

Selling price
(Tk/Sft)
2500-3500
3500-5000
2500-3000
3500-4500
2000-2500
1400-1600
2000-2200
2000-2200

Source: REHAB

CURRENT POSITION OF REAL ESTATE SECTOR

37

9.1 Real Estate sector at a glance

* Number of units Delivered by the
Developer in last 20 years (1985 -2004)
*Number of units Delivered by REHAB
Members per year (2004)
:
* Number of Plot units Delivered by the
Developer per year
* Approx. turnover per year
:
billion)
* Revenue to Govt.
:
*Contribution to GDP
* Approx. turnover next 6 years
:
(122.82billion)
* Approx. revenue to Govt. next 6 years :

50,000 (App.)

5000-6000 Units.
:
4000-5000 Units.
1,250 Crore Taka. (Tk.12.50
100 Crore Taka. (Tk.1.00 billion)
:
12% - 14%
12,282,000crore taka
1,000 crore taka (10billion)

9.2 Apartment Delivery in Last 20 Years by REHAB Members

Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Number of Units
325
420
662
840
1,275
1,540
1,140
1,530
1,850
2,298
2,320
2,430
2,684
2,840
3,298
3,620
3,930
4,172
4,465
5,074

Growth Rate
29%
58%
27%
52%
21%
39%
-29%
21%
24%
01%
05%
10%
06%
16%
10%
09%
06%
07%
14%

2006
2007
2008
Total
Source: REHAB, 2008

9.3 Reason behind the Boom of Real Estate Sector in Bangladesh

38

1
2
3
4
5
6
7
8

The family structure is undergoing some qualitative and quantitative

changes. The families have become small and joint families are facing
extinction.
The commercialization and rapid urbanization has resulted into break
down of traditional large families into nucleated ones
The apparently charming and powerful Western Culture
Reluctance of individuals to spend time and energy in building
construction
Unavailability of land at suitable location
The high land value in Dhaka discourages people to buy vacant land for
construction buildings.
The Real Estate companies are providing quality services, which in turn
influencing people to rely on developers.
The absentee buyers i.e. the wage earners in foreign countries are a
major contribution factor towards the increasing demand for apartments.

10.0. Literature Review:

Defination of Marketing:
Marketing is the process by which companies create value for customers and
build strong customer relationship in order to capture value from customer in
return.(kotler, 2006)

Marketing Mix:
The set of controllable tactical marketing tools- product, price, place and
promotion that the organization blends to produce it wants in the target market.
The many possibilities can be controlled into four groups of variables known as
the four Ps: Product, Price, Promotion and Place.

39

Product
Quality
Features
Sizes
Services
Returns

Price
Discounts
Payments
Services fees

Target
customers

Promotion
Advertising
Sales
promotion
Public relation

Intended
Positioning

Place(Distribution)
Locations
Assortments
Logistics

Fig: The 4 Ps of the marketing mix in Real Estate business

Product: Means the goods and services combination the company offers to the
target market. In that case constructed buildings are the products.

Price: It is the amount of money customers have to pay to obtain the products.
Place (Distribution): It includes companies activities that make the product
available to target consumers.

Promotion:

It means different promotional activities company takes to

introduce their products.

10.1. Marketing Practice of real estate business in Dhaka city:

ENA properties Ltd.
ENA PROPERTIES LTD. is an engineering firm. It provides services of
40

construction work, architectural consulting, structural consulting, interior

designing and landscape designing. It is a team of qualified and dedicated young
professionals who have developed special skill incorporating computer aided
technologies in the field of civil construction works and different interior works.
The member of ENA PROPERTIES LTD. has started its journey as proprietorship
firm which was established in September 9, 1998. With efficient and effective
team activities the firm was able to raise its shoulder to the segment of
professional and skill engineering.
Educational and technical know-how of the key members of the organization and
the supporting staff allows the company to provide a wide range of services. The
company is proud enough to declare itself as an efficient company.
The firm provides services in the following arena:
A. Design, supervision and construction of all types of commercial, corporate &
residential projects.
B. Structural design of different types of building.
C. Design & supervision of electromechanical system, (plumbing, sanitary,
Electrical, fire fighting, signaling, close circuit TV system, Music system etc.)
D. Design & supervision of all types of interior spaces in Turnkey basis.
E. Design & supervision of computer networking system
F. Design & supervision of ceiling & flooring system
The firm has the following three major departments

Architectural
Structural
General Engineering Department

Each department is headed by a director of the firm and has highly efficient staff
with expertise in various branches of engineering, architecture & planning. A
close liaison is maintained at all levels between the departments to ensure coordination of the work of the participating department. Sufficient flexibility is
maintained so that one department can draw on the personnel & services of
another department according to necessity. The company maintains rather large
field staff for various types of engineering surveys, socioeconomic survey &
construction supervision. The drafting & reproduction section is also very well
equipped and is staffed by highly skilled personnel.

10.2. Office Location and space:

The office is located at House # 30, Road # 9/A, Dhanmondi R/A, Dhaka-1209

41

10.3. Mission and Vision of the organization:

ENA PROPERTIES LTD. is serving different segments of government and non
government organizations for the years with diversified modern techniques. The
firm is carrying a good reputation over its clients for its professionalism,
hardworking attitude, devotion and valuating the commitments. The team of this
firm is well educated, technically and financially solvent. The company has setup
the following mission and vision statement:
Mission Statement:
To promote high quality and effective consultancy, supervision & construction
services for the different segments of the society by using modern and cost
effective technology.
Vision Statement:
To be the leading multinational consultancy, supervision and construction
company with that vision the firm has started its journey and so far progressed
faster in its way. Carefully observing the following matters the company has
taken different concurrent steps which are really helping them to move to a new
dimension.
a.

Technologically ENA PROPERTIES LTD. has been very sound

since the very beginning. They were fully concerned that
engineering is a matter of applying the knowledge properly and
accurately in the real field with numbers of real situations where
decision must be made carefully with keen observation and
acceptability by the surrounding periphery. To work effectively and
efficiently is the motto of the firm.

b.

ENA PROPERTIES LTD. believes in the professionalism and team

work. Its committed professional team with consciousness and
awareness even on many overriding aspects of economy, social,
environmental etc is trying to give the best benefit to their clients.
Client satisfaction is the most expected element of the firm in
addition to their careful attention toward function, economy and
mossy aesthetics of architecture.

c.

A new generation of architects and engineers, we possibly hope and

expect to emerge out of the process confidently. By the help of the
expertise of a qualified and knowledgeable team of professional
and through constant collaboration and co- ordination with the
42

associates, the establishments professional services now cover

both engineering at the same time architectural expertise which is
demanded by the total concept of modern building, environmental
design and planning project which bring totality and a unified whole.
The firm has the intention to establish instances of quality design
and thoroughness of details and also innovating and eventual
grooming maturity of the younger Engineers and Architects at the
same time other professionals like Planners, Management
consultants etc. in the cradle of this organization so that this may
contribute towards raising professional standards and the
profession as a whole.

10.4 Corporate Office & Top Management

The headquarters of ENA Properties Limited is located at Dhanmondi in Dhaka,
the capital city of Bangladesh. Engr. Md. Enamul Haque the founder of ENA
Properties Limited was a hands-on entrepreneurial manager who, despite an
extensive national and international travel schedule, maintains close contact with
Dhanmondi staffs, from executive to lower level employees. Engr. Md. Enamul
Haque continued to work twelve hours per day, seven days a week schedule
devoted to eliminating the problem of decent living within the country.
About 166 full time staffs are working in different projects under the organization.
The parent organization often provides training, technical support, architectural
manuals, floor plan, information service and occasionally some financial support.
Of great importance to ENA Properties Limited are the direct media, marketing
and sales operation managed from Dhanmondi. The experienced marketing
personnel are gradually expanding the market by adopting various flexible
strategic plans considering the situation.
With the fast increasing problem of Bangladesh housing problem has occupied
number one problem in the country. Within the small scale of ability, company
mission and vision has reached its goal due to the sincere and arduous efforts of
all classes of people related to it. This process will be continued for the day to
come.

Business Areas
ENA Properties Limited is a provider of apartment, shop, office space, rental
service and security service for specific client segments. ENA Properties Limited
43

also provides architectural solution for building design and logistic solution for
construction.
ENA Properties Limited selected client, sectors include top-level management
personnel of national and multinational companies, small business enterprise,
government employees, NGOs, distribution and others. ENA Properties Limited
segmented the client groups on the basis of social structure. ENA Properties
Limited provides its client exclusive apartments, rental service, and security
service.
ENA Properties Limited corporate structure, based on its business areas, has
been developed and the focus of the companys strategy has been directed to
the management of logistic chains and technical information as well as the
supply of construction related raw materials.
Personnel
At the end of the financial period year 2008, the group employed 285 persons of
whom 164 were working in the companys headquarters. The average number of
personnel was 230 during the period.
Board of Directors, CEO & the Corporate Management
ENA Properties Limited Board of Directors has two members. Engr. Md. Enamul
Haque acts as President and another member is Director Mrs. Tohura Haque.
ENA Properties Limited corporate management group companies president/
CEO Engr. Md. Enamul Haque, Deputy Managing Director Dr. Mosleah Uddin,
Director (P&D & Land) Mominul Islam Shangram, Assistant General Manager
(Accounts & Finance) Abu Sadek Bepari, Director (Construction &
Development) Mr. S. S. Alam, Head of Design Mr. Asif Ridwan & Head of
Purchase Md. Harun-Ur-Rashid.
Auditors
The companys auditor is authorized Chartered Accountants, Kazi Zahir Khan &
Co, 67/4, Pioneer Road, Kakrail, Dhaka-1000.
The Boards Proposal for Profit Distribution

44

The Board of Directors propose to the annual general meeting to be covered on

31st July, 2008 that the profit for the financial period will be added in the retained
earning and that no dividend for the financial period shall be distributed.
Capital Stock & Shares
On June 30, 1999 according to ENA Properties Limited Articles of Association,
authorized share capital was BDT 10,000,000.00 (ten million) only and paid up
capital was BDT100,000.00 (one lac) only. At present (on June 30, 2008) the
authorized share capital is BDT 200,000,000.00 (two hundred million) only and
paid up capital was BDT 50,000,000.00 (fifty million) only as per Memorandum
and Articles of Association. With in these limits, capital stock can be increased or
decreased with out changing the Articles of Association. The nominal value of the
share is BDT 100.00. As the company is private limited, the company share
should not be sold on capital market. The percentage of share may be increased
within the member of the BOD level of the company. The issued share capital is
500000shares @ BDT 100.00. The paid up capital amount is now BDT
50,000,000.00 as stated in the Articles of Association.
Outlook for the Future
The company is expected to continue its growth and internationalization
profitability. The selected target market was segmented geographically. The
segmented markets are Dhaka capital city of Bangladesh, and other divisional
city i.e. Chattagong, Khulna, Rajshahi, Sylhet, and Barishal. In the financial year
2008, the growth of the Groups net sales is expected to exceed that of its line of
business. The groups relative profitability as indicated by its operating profit is
expected to increase clearly from the financial year 2007.

S.N

01.

02.

Name & Address

Engr. Md. Enamul Haque
House # 30, Road # 9/A,
Dhanmondi R/A,
Dhaka-1209.
Mrs. Tohura Haque
House # 30, Road # 9/A,
Dhanmondi R/A,
Dhaka-1209.

Fathers/Husbands
Name
Late Emaratulla Mondal

Engr.
Haque

Md.

Enamul

Status

Managing Director

Director

Ownership Schedule with % Breakdown

45

S.N

01.

02.

Name & Address

Fathers/Husbands
Name

Engr. Md. Enamul

Haque
House # 30, Road #
9/A
Dhanmondi R/A
Dhaka-1209.

Late Emaratulla Mondal

Mrs. Tohura Haque

House # 30, Road # Engr. Md. Enamul
9/A,
Haque
Dhanmondi R/A,
Dhaka-1209.

Status

Share %

Managing
Director

80 %

Director

20 %

Management and Key Employee Information:

Name
Engr. Md.
Enamul
Haque

Position
in the
Firm
Managi
ng
Director

Age
41

B. Sc in
Civil
Engineeri
ng), MBA

HSC

Experie
nce
(Years)
15

10

Involvement in
other
Business
Saleha
Emarat Cold
Storage Ltd.
Saleha
Emarat
Agricultural
Industries Ltd.
ENA Building
Product Ltd.

Successio
n
Information
Ms. Tanzia
Farhana
Haque

Saleha Emarat Cold

Storage Ltd.
Saleha Emarat
Agricultural Industries
Ltd.
ENA Building Product
Ltd.
Not applicable

Ms. Tanzia
Farhana Haque

Mr.
Ehtesham
ul Haque

Mrs.
Tohura
Haque

Director

Dr. Mosleh
Uddin

Executi
ve
Director

43

M.D
(A.M)

10

N. H Khan

Auditor
&
Consult
ant
Financi

65

FCA

35

Kazi Zahir Khan & Co.

Not applicable

58

MBA,

28

SELTA Associates

Not applicable

M. A. Ullah

42

Educatio
n

Mr. Ehteshamul
Haque

Not applicable

46

Mr. M.
Mominul
Islam
Mr. Abu
Sadek
Bepari
Sultan
Ahmed
Palash
Mr. SS
Alam

Mr. Asif
Ridwan
Director
Khan
(Construction)
Md. HarunUr-Rashid

al
Advisor
GM
(P & D)

FCMA
37

M.Com

10

Not applicable

Not applicable

AGM
(A&F)

33

M.Com

Not applicable

Not applicable

Manag
er
(Financ
e)
Director
(C&D)

29

M.Com
MBA

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Not applicable

Head of
Design
Head of
Purcha
se

Managing Director
42
B Sc in
15
&
Civil
CEO
Engineeri
ng
35
B. Sc
8
(Architect
ure)
37
MBA
10

Director (Planning
Not applicable

&Not applicable
Development)

LAND
CONSTRUCTIONOffice
Corporate
Location of the Company

Telephone
ARCHITECT & DESIGN

PURCHASE
ENA Properties Limited
House # 30, Road # 9/A,
Dhanmondi
Zip: 1209.
Information R/A,
& Technology
Dhaka, Bangladesh.
HUMAN RESOURCE MANANAGEMENT
88-02-811-1442,
88-02-911-2148,
&
ADMINISTRATION
88-02-911-7636, 88-02-815-1280,

Fax

88-02-812-8637
MARKETING

E-mail
Web site
STRUCTURAL DESIGN

ena@dhaka.net
www.enagroup-bd.net
SALES
ACCOUNTS
FINANCE

ELECTRICAL DESIGN

47

AUDITNG
CUSTOMER SERVICE

48

10.5 Managing Director

The managing director has been selected with the full consent of other members.
He is in the full in-charge of any contingency and implementation of the
decisions of the board of directors through the office staffs. He is also
responsible to see that all the marketing objectives and the
commitments to the customers are properly fulfilled. Moreover, he is
also responsible to inform the board of directors all the relevant
information about the business performance, present stand and the
need of the business. He is also guiding the office mangers time to time
in performing his duties and maintaining the committed quality.
10.6 Deputy Managing Director
He sometimes acts as the Managing Director of the company when the
Managing Director is absent. He is monitoring the day to day activities of the
employees. His prime responsibility is to promote the business and as well as to
coordinate the programs of the business.
10.7 Director of construction
He is solely responsible of running the daily operations. His responsibility
includes managing the overall operation, technical supervision and
implementation of the project.
10.8 Director Planning and Development
His responsibility is controlling all units in case of extra ordinary situation,
deciding on petty cash disbursement. He has to submit the daily cash,
Profit and Loss and overall company financial condition to the
managing director. Another major responsibility of him is to maintain the
accounts of the organization. He consults the managing director in any
case of extraordinary situation.

49

10.9 Human Resource Inventory

Human resource available in ENA Properties Ltd. is shown below:

SL
NO

NO
POSTION

OF

POSITION

1
2
3
4

AT EPL
ARCHITECT
2
DIP. ARCHITECT
2
STRUCTURAL ENGINEER
1
SENIOR
ELECTRICAL 1

5
6

ENGINEER
DIP. ELECTRICAL ENGINEER 2
SITE
ENGINEER 1

7
8
9

(ELECTRICAL)
SITE ENGINEER (CIVIL)
8
CAD OPERATOR
1
COST
ESTIMATE
AND 1

10
11
12
13
14
15
16
17
18

QUANTITY SUPERVISOR
SYSTEM ANALYST
MARKETING MANAGER
SALES OFFICER
PROGRAMMER
GRAPHIC DESIGNER
DATA ENTRY OPERATOR
CUSTOMER SERVICE
LAND DEPARTMENT
ACCOUNTS DEPARTMENT

1
1
3
1
2
1
2
2
4

19
20
21
22
23

FINANCE DEPARTMENT
AUDIT DEPARTMENT
IT DEPARTMENT
LOGISTIC DEPARTMENT
PURCHASE DEPARTMENT

2
2
4
2
4

10.10 Financial capabilities

50

ENA PROPERTIES LTD. is financially sound, solvent, and capable to execute

projects with a range of investment of 1 crores taka. It has the facility to draw any
amount of credit from the Bank against specific work order.
ENA Properties Ltd has its current account at Shajalal Islami Bank Limited at
Satmasjid Road Branch, Dhaka.

ENA Properties Ltd has its current account at The Hong Kong and Shanghai
Bank Limited(HSBC Bank) at Dhanmondi Branch, Dhaka.

51

SEGMENTATION STRATEGY FOR APARTMENT MARKET

This segment identify the existing situation of real estate industry and the present
market position of ENA Properties Limited and on the basis of the study some policy
recommendation have been mode for its better performance by utilization its marketing
potential as a market challenger.

11.1 Target of the customer:

ENA Properties Limited targets the market on the basis of social class. It concentrates
on the on the middle class market. It has been found that segmenting market on the
basis of social class may provide several benefits:
Three kind of customer of ENA Properties Limited
1
2
3

Upper middle class.

Middle middles class.
Lower middle class.

There is a growing tendency in the middle class customer market to buy and live in the
apartments. It is more profitable to sell apartments to the upper class.

11.2 Target market Analysis:

Every company tries to predict the demand of its target market and then sets their
goals. ENA Properties Limited predicts the following:
1 Total demand for apartments of ENA Properties Limited is approximately 20%
every year.
2 Currently around 400 apartments are constructed and offer for sale every year.
The company generally builds apartments in the prime areas of Dhaka City. This is due
to the demand of the prospective customers. Its clients generally want to purchase
apartments in prime areas.

52

11.3 Occupational of the target Market:

The clients of the ENA Properties Limited have the following occupational
characteristics.
Table- showing occupational status of the clients
Occupation
Doctors
Engineers
Businessmen
Govt. Employees
Expatriates

% of total T.M.
15
15
35
15
20

The above shows the occupational status of the target market of ENA Properties
Limited. Among the customers of ENA Properties Limited as many as thirty five
percent customers are businessmen. Expertise rank second in terms of
occupational status of the target market of ENA Properties Limited.

11.4 Target Market Behavior:

Product Differentiation:
ENA Properties can differentiate its product on the basis of product features; Producer
differentiations have some dimension, which is described below:
Features:
Features are characteristics that supplement the products basis function. ENA
Properties Limited can offer new and additional features in its products and thereby
differentiate with other companies products. For example, 24-hour lift facility, central airconditioning can be some of the features that will attract the buyers of apartment.
Performance Quality:
Performance quality refers to the level at which the products primary characteristics
operate. ENA Properties Limited must ensure that its apartments have higher value than
others.

53

Reliability:
Reliability is a measure of the probability that a product will not malfunction or fail within
a specified time limit. This is an important factor for ENA Properties Limited singe
customers want to avoid the high cost of product breakdown and repair time. ENA
Properties Limited should build apartments in the way that customer can have high
reliability.
Style:
Style describes the product look and feel to the buyer. Buyers are willing to pay a
premium price for products that are attractively style. ENA Properties Limited can
develop its product in a way that creates a sophisticated image to the customers.
Design:
Design is the totality of features that affect how a product looks and functions in terms in
terms of customer requirements. Design is particularly important in making and
marketing durable equipment and services. ENA Properties Limited should develop a
distinctive design patterns for its apartment projects.
Service Differentiation:
In addition to differentiating its physical product, a firm can differentiate its product in
terms of services. ENA Properties Limited can consider the following service
differentiation.
Ordering Ease:
Ordering ease refers to how easy it is for the customers to place an order with the
company. If necessary, ENA Properties Limited should send its marketing executives to
the offices of residences of the customers for getting sales orders.
Delivery:
Delivery refers to how well and quickly the product or service is delivered to the
customers. It includes the speed, accuracy and care attending the delivery process.
ENA Properties Limited must have some better position in these matters.
Customer counseling:
Customer counseling refers to data, information systems and advising services that the
seller offers free or for a price. ENA Properties Limited must offer these things to the
customers and in the way customers can differentiate its product.
Maintenance and Repair:
It refers to the companys service program for helping customers keep their purchased
products in good condition. After sales service, thus, play an important factor in
54

differentiating a product. Many apartment builders provide very limited maintenance

and repair services in Bangladesh. So ENA Properties limited must have some good
maintenance and repair service.
Personnel differentiation:
Companies can gain a strong competitive advantage over their competitors through
hiring and training. Having a dedicated and professional personnel play a significant role
in all circumstances. Batter trained personnel exhibit six characteristics:
1
2
3
4
5
6

Competence: The employees possess the required skill and knowledge.

Courtesy: The employees are friendly, respectful and considerate.
Credibility: The employees are trustworthy.
Reliability: The employees perform the service consistently and accurately.
Responsiveness: The employees respond quickly to customers request and
problems.
Communication: The employees make an effort to understand the customer and
communicate directly.

ENA Properties Limited has better-trained personnel to differentiate itself in the real
estate industry.

11.5 Setting Objectives

Depending on the past years performance, and growth rate of the industry and target
market, ENA Properties Limited has the following financial and marketing objectives for
the year 2005.
Financial Objectives:
1 Revenue: Earning revenue of Tk.30 Crore.
2 Profit: Earning a profit of about 16% of its revenue.
Marketing Objectives:
1 Sales Target: Achieve a sales target of 100 apartments of average price
Tk.65Lac.
2 Promotion Target: Make sufficient promotion to enhance awareness and interest
in the target market about ENA Properties Limited products.

55

11.6 Developing strategies

Life Cycle Strategies:
For each product, it is very important to develop life cycle strategies. Each product
passes through new stages of consumer demand and each company must reformulate
its strategies to meet the demand of the situation. By adopting appropriate strategy, a
company expects to extend the product life and profitability.
As it is mentioned earlier, the product of ENA Properties Limited is in growth stage. The
company should note some important feature of this stage.
Growth is marked by a repaid climb in sales. Early adopters like the product and
additional consumers start buying the product. Attracted by the opportunities for profits,
new competitors enter market.

11.7 Strategies for the Market Challenger

EPL is in the market challengers position; it must take some strategies to attack the
leader.
Prestige Goods Strategy:
ENA Properties Limited should offer a higher quality product and charge a premium
price than the leader. It will enhance ENA Properties Limited reputation as quality leader
in the upper class people.
Product Proliferation Strategy:
ENA Properties limited should provide large product variety so that buyer can choose
from a grater assortment. If buyers can choose from a grater variety, more buyers will
be attractive about services, resulting in increased market share.
Better Service Strategy:
ENA Properties Limited must offer better services to the customer. It have some
differentiation in it service than other competitors since upper class customer are very
sensitive about services. It must have an efficient and dedicated marketing department
committed to attain organizational objectives.
Enter New Markets:
To improve its financial position and to increase market share EPL must enter new
market. EPL can consider upper middle class as potential market. The upper middle
class is a large and growing market and EPL can gain substantial share here.
Intensive Advertising:
In the growth stage, a company must have intensive advertising to build awareness and
interest in the market. EPL must go for comprehensive advertising. It should capitalize
56

on Internet based marketing so that it can attract prospective buyers both from home
and abroad.
Pricing Strategy:
Pricing is the most critical element of the marketing mix. Among the 4 Ps. It is the only
one that produces revenue.

11.8 Promotional Marketing

A well- developed promotion strategy is crucial for every company to survive and
increase its market share. Developing an effective marketing communication and
promotion program requires 8 steps. These are as follows:
1
2
3
4
5
6
7
8

Identify the target audience

Determined the communication objectives.
Design the message.
Select the communication channels.
Establish the total promotion budget.
Decide on the promotion mix.
Measure the promotion result.
Manager and coordinate the integrated marketing communication processes.

These steps have been discussed in the next section.

Identify the Target Audience:
The prospective customers of EPL are not aware of the product. In most of the case,
they know a little bit of the products of EPL. The audiences who are aware of the
product have a favorable attitude toward the product.
Determine the communication Objectives:
Since the target market is not much aware of the product, the company should seek a
cognitive response from them. The company can assume that the buyer has high
involvement with the product and perceives high differentiation within the category.
Therefore, the company should work with hierarchy of effects model.
Design the message:
Promotion program can be based on rational, emotional appeal. Since buying an
apartment involves both rational emotional faculties of the customers, the promotional
message should include rational and emotional appeal.

57

Select the communication Channels:

Communication channel must be efficient to carry the message. Two broad types of
communication channels can be used:
1
2

Personal Channel
Non- personal channel

Personal channels such as word of mouth, advocate, expert and social channels should
be used to promote ENA Properties Limited products. In case of non- personal channel,
media and atmosphere must be used. In case of media, the following should be
considered:
1
2
3
4

Print media: Newspaper, magazines, and direct mail.

Display media: Billboard, signs
Electronics media: Internet web page, Television, and Radio
Establish the Total promotional budget

Promotional budget can be set depending on any of the following method:

1
2
3
4

Affordable method.
Percentage of sales method.
Competitive parity method.
Objective and task method.

ENA Properties Limited decides on its promotional budget depending on its sales
objective. The sales objective of ENA Properties Limited for the year 2005 is 100
apartments and revenue of Tk.30crore. Keeping this objective in mind, it has set a
yearly promotion budget of Tk.70,00,000lac that is, it spends Tk.600,000 Lac per month
on promotion.
Decide on the Promotion Mix:
The company must develop a promotional mix from the five following promotional tools:
1 Advertising
2 Sales Promotion
3 Public Relation and Publicity.
4 Personal selling
5 Direct Marketing
There are some factors those should be considered in developing the promotional

58

Measure the Promotion Result:

After implementing the promotion plan, the company must measure its target audience.
Marketing research should be conducted on audience response, and the company
should also collect behavioral measures of audiences response. Depending on the
feedback, the company should reorganize its promotional plan

Manage and coordinate the Integrated Marketing Communication Process:

The company should adopt integrated Marketing Communications (IMC) plan as
defined by the American Association of Advertising Agencies. IMC is A concept of
marketing communications planning, that recognizes the added value of a
comprehensive plan that evaluate the strategic role of a variety of communication
disciplines for example, general advertising, direct response, sales promotion and public
communications impact through the seamless integration.

PROBLEMS FOUND IN THE REAL ESTATE INDUSTRY OF DHAKA CITY

Housing is one of the most important basic needs of life. Due to rapid increase of the
Population in urban area, acute housing shortage is a common phenomenon. So
present Status of real state developers, their activities, advancement, problems have to
be found out to augment their performance. The real estate developers face some
problems. Also Real estate developers and government agencies create problems in
the process of real estate development. The problems identify in the study are as
follows:

12.1 Problems faced by real estate developers

Scarcity of open space:
The migration of people from village to city areas is increasing day to day. People are
occupying every open space is decreasing day after day which is in creasing the price
of land.
Lack of technical personnel:
To complete a multistoried project, various types of technical and skilled personnel are
essential. So lack of technical personnel is a big problem faced by the developers.
Hindrance from hooligans:
Sometimes local terrorists demand undue subscription from the developers. If the fail to
pay, hooligans obstruct in construction activities.
59

Insufficient fund:
Most of the developers cannot manage any fund from the government Agencies. So the
amount of investment seemed to be very negligible for completion of the total project.
This problem discourages them to undertake a new project.
Lack of promotion executives:
Most of the real estate developers have no promotional executives or staffs. So they
face problem in enhancing their marketing activities.
High promotional cost:
Some developers engage promotional agencies to promote their offerings. But due to
high promotional cost, they often slow- down their promotional activities.
Price fluctuation:
Prices of various building materials such as brick, rod, cement, wires, electrical fittings
are not stable. It creates lot of problems in the cost estimation o f developers.
Lack of quality material:
The building materials available locally are of very poor quality. In other sense,
adulteration in building materials hampers in the quality building construction.
Non-cooperation from clients:
Most of the developers depend on advance sales and installments. But sometimes
clients do not cooperate in payment. It hampers in completing projects accordingly.
Material Shortage problem:
City area is growing day to day. There is acute shortage of open space for material
storage. Sometimes exiting building creates problem in this regards. So material
storage problem is a great problem faced by the developers. I
Cumbersome procedures:
During pre-construction period, developers have to face various types of formalities,
which are very complicated and time-consuming. The corrupt officials create most of
these of formalities intentionally for illegal monetary gains.
Demand of undue money:
Most of the officials of housing related agency demand money illegally for any kind of
activities.

12.2 Problems created by the real estate developers:

Delayed project completion:
The developers do not keep their commitment to hand over the apartments in many
cases. Insufficient fund and commercial interests induce them to delay the projects.

60

Degradation of environment:
Most of the real estate developers do not keep places for tree plantation inside the
project boundary in order to optimal uses of project land. It causes degradation of
environment.
Employment of unskilled personnel:
Most of the developers employ unskilled professional personnel in various departments
of construction activities to save money. This hampers in proper construction.
Shortage of utility service:
Most of the developers have an intention of earning more profit. This tendency often
allures them to provide improper fire controlling system, improper electricity security
system etc. It causes safety problems to the apartment dwellers.
Inappropriate plan:
Sometimes developers start their projects with inappropriate structural plan, which
create various types of problems.
Breach of commitment:
Some developers offer a variety of facilities at the time of starting the projects. But all
the facilities are rarely implemented.
Violation of rules:
The violation of the established rules and regulation by few developers spoils the image
of real estate business.

12.3 Problem created by the government agencies

Lengthy loan procedure of BHBFC:
The loan procedure of BHBFC is easy copy Bureaucracy create various types of
problems in sanctioning loan from BHBFC. Solicitations and negligent behavior are the
common phenomena of BHBFC.
Lengthy plan approval procedure:
RAJUK is an organization, which takes much time to approve plan for building.
Sometimes Developer suffers undue harassment by the officials of RAJUK.
High cost in registration and transfer:
Cost of land registration and transfer is increasing day to day due to the increased cost
of land. So higher registration and transfer cost emerge as problems of real estate
business.
Lack of co-operation:
Lack of cooperation from government agencies such as KAJUK, WASA, TITAS, and T&T
delay the activities of real estate developers.
61

RECOMMENDATION AND CONCLUSION

13.0 Recommendations
Real estate business now is a dominating business. Considering the various problems
identified in the study and personal observation, the following recommendations are
offered:
Simplified loan procedures:
BHFC loan procedure should be simplified and rate of interest should be decreased for
the betterment f both the BHFC and real estate developers.
Minimizing registration cost:
If the registration cost is reduced, the cost of apartment will decrease, as the buyer has
to pay the registration cost. This will lead to maximum sale of apartments.
Decreasing bank interest:
Long-term bank interest should be reduced to motivate the apartment purchaser. It will
also buildings and unplanned one or two storied buildings of Dhaka city should be
demolished and high-rise apartment complex can be built. The government can play a
vital role in making it mandatory compensating the owner with apartments equipment to
the cost of their land and building.
Joint venture by the government:
The government can acquire land in the sub-urban areas and build apartments on joint
venture with the real estate developers who have some good track records.
Employing skilled personnel:
Real estate developers should employ skilled personnel so that they can expand this
business with their recognized expertise and merits.
Uprooting terrorists:
The government should take appropriate measures to uproot the local terrorists from
the country. This will help promote real estate business in the country.
Declaration of tax rebate:
Government can help private real estate developers by providing land, bank loan and
tax rebate for easier accommodation of public officials with residence both in urban an
sub-urban areas.
Institutional coordination:
Proper coordination should be maintained among the public agencies concerned with
housing, urban development, infrastructure and utility services.

62

Vertical rise:
The real estate developers can be encouraged vertical rise other than horizontal rise.
This practice will solve scarcity of land in the important areas of city.

Sound housing policy:

The government of Bangladesh should formulate a sound housing policy to ensure the
increasing supply of housing both in terms of quantity.
Undertaking expansion program:
To reduce scarcity of land, new expansion program should be taken in flood prone low-l.

Conclusion
The study conducted on the real estate business of Dhaka City discloses a true picture
of this business. This study explained the status of the real estate developers, profile of
projects, construction activities, marketing aspects, and financial conditions of the real
estate developers. Brief discussions are also made in this study on several relevant
issues of housing sector of the Dhaka city as well as the country. This will provide an
overall idea of housing business in Dhaka 11th mega city of the world.
The real estate business is a booming sector of economy at present because of several
reasons. Scarcity of open space in the city first reason, Security of living coupled with
amenities and features are the second reason for buying an apartment. Moreover,
decreasing bank interest let the people to look for a secured investment with
satisfactory return and an apartment is a good investment in this sense.
The real estate developers are growing fast to meet the challenges of housing needs.
But in a number of cases, this business dose not follows the standard rules and
regulations, which will be fatal in near future both for developers and apartment buyers.
This tendency is damaging the image of the professional developers.
Organized efforts are very essential to identify and solve various problems that are
obstructing real estate developers. Government can play a vital role with private sector
and non-government organizations in this regard.
Finally we can hope that if the existing problems of real estate business can be thrown
out and appropriate measures can be implemented, the prospect of real estate business
in Dhaka City in particular, Bangladesh in general, is glossy.

63

BIBLIOGRAPHY
Annual Report of Eastern Housing Limited.
Annual Report of ENA Properties Limited.
http://www.enagroup-bd.com
Kotler Philip, Armstrong Gary (2006), Principles of Marketing, 12th
Edition, Pearson Education, Inc.

64