possibility of real state in kuakata

8/4/2019 Possibility of Real State in Kuakata

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Status, Performance and Projection of Real Estate Business - A Case Study ofKuakata Area

Abstract

The necessity of real estate survey as a recent idea is highly important in the

present world. This paper is an outcome of such survey conducted on Kuakata for

the purpose of exploring and examining the status and current situation of real

estate business in the Bangladesh. The study has pointed out the status of the real

estate developers, profile of the projects, construction activities, financial aspects

and their marketing policies. Emphasis is given on finding out the problems

prevailing in this sector. Some relevant issues of real estate business have alsobeen pointed out in this regard. The study has revealed that the real estate

developers not only face problems during the various stages of their activities rather

they are liable for creating some problems. Moreover, some government agencies

can be blamed for creating problems on the way of flourishing this business.

Finally, some necessary steps have been suggested to overcome the problems

identified in the study.

Keywords: Real estate, performance, projection, REHAB, apartments, real estate

developments.


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1.0 Introduction

In a developing country like Bangladesh where population has been increasing

without any potential stop sign, need for house has got more importance in recent past.Real estate business especially apartments projects were started in late 70's in Dhaka

city. Ispahani Group is the pioneer in this sector. But in early 80's with the

inception of Eastern Housing Ltd. the business started flourishing. Now this is a

booming sector of the economy. A mentionable number of real estate developers are

available in this business. 95% of developers are operating their business in Dhaka

city and the remaining 5% in remaining areas.

Among the reasons behind mushrooming of this business are scarcity of open space in

the important areas of the city, hazards of purchasing land and constructing

building and rapid increase in population. For these reasons people are switching to

the developers to get a well-constructed ready-made apartment.

But recently two other factors geared up this business dramatically. First one is

decrease in bank interest. It is no more profitable to deposit money with banks

because of its low interest rate. So people are switching to a safe and fixed

investment, which can yield a greater profit. In this respect an apartment is a good

investment. Another vital reason is open market economy. Now remittance of foreign

currency is very easy. So wage earners can easily purchase apartments staying abroad.

In this regard, real estate promoters putting numerous contributions to light a kindle

of hope among those who are homeless and landless in urban area. But sometimes it facescoupled with galloping inflation, escalating price of land and building materials,

consequential increase in the cost and standard of living and plummeting of foreign

exchanges remittance. In spite of adverse impact, it is rising rapidly. The real estate

developers are facilitating the clients the risk of avoidance and free from hesitation of

land purchasing deeds and activities as well as troubles of construction. So the peoples

are tending toward apartment purchase, as it is hazardless and quick shifting.


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2.0 Objectives

The specific objectives of the study are-

To evaluate the situation of real estate business in Bangladesh. To have an understanding of the status of the real estate companies, profile of their

projects, construction activities, financial aspects and other marketing policies.

To identify the problems faced by the real estate companies in various stages ofconstructing apartments.

To identify the problems created by the real estate companies and governmentagencies that create obstruction to flourishing this business.

To find out solutions for the identified problems and to assess the prospects of reale s t a t e b u s i n e s s i n B a n g l a d e s h .


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3.0Methodology3.1 Sources of information: Of the two sources of information the present is study is using

the both primary and secondary sources of information by using-

From field survey. Also related information is collected reports, articles, journals, prospectus and other

printed materials.

3.2 No. of samples: As our present paper is real scenario of real estate business. The study is

using the information collected from the Kuakata area. Number of developers in Kuakata is too

small and coming developers are in early stage of real estate business in Kuakata. So, for the

inconvenience of real estate developers our present paper is using the information collected

from the 6 respondents.

3.3 Data collection methods: Considering the nature of the study-

Both structured and openended questionnaire were designed on the basis of theobjectives of the survey.

Data has been taken from real conversation with the respondents.3.4 Data processing: After collecting the data related to the study the information is

analyzed through the use of MS Excel.

3.5 Limitation:

The study is entitled to the following limitations-

Real estate developers are coming towards Kuakata and their maximum projects isunder construction so collecting information from such a area and drawing conclusion

about real estate developments may not be representative.


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4.0 Literature Review

Real estate is a large and important sector in Bangladesh. It is therefore necessaryto the overall situation of the business with a view to maximize the benefit

therefore. This study helps to portray the situation to some extent. For weighing

the study, the researchers have to go through many secondary issues.

Urbanization is now a common phenomenon. The situation of urban housing,

housing structural feature, density and floor area, infrastructural and utility services,

housing sub-sectors etc. should be in accordance with the national housing policy

of Bangladesh. There should have a policy for acquiring land for housing, finance for

housing, housing program for urban poor etc (Khatun, H. 1994).

The report on "The status of real estate development in Kuakata" helped the

researchers to categorize the projects in Bangladesh according to their nature, zone,

price, size, units, key features & forecasting the growth of real estate development etc.

Government, private sectors and NGOs play a pivotal role in rural and urban

housing.

The Major urban development projects are various in nature viz. residential, educational,

Industrial, administrative & commercial developments. All the development

projects have an impact on the overall society.


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A Short Profile of Kuakata - as Urban City

Kuakata is one of the rarest places which have the unique beauty of offering the full view of

the rising and setting of crimson sun in the water of the Bay of Bengal in a calm environment.

That perhaps makes kuakata one of the world's unique beaches. The long and wide beach at

Kuakata has a typical natural setting. This sandy beach has gentle slopes into the Bay of

Bengal and bathing there is as pleasant as is walking or diving. Kuakata is truly a virgin

beach-a sanctuary for migratory winter birds, a series of coconut trees, sandy beach of blue

Bay, a feast for the eye. Forest, boats plying in the Bay of Bengal with colourful sails,

fishing, towering cliffs, surfing waves everything here touches every visitor's heart. The

unique customs and costumes of the 'Rakhyne' tribal families and Buddhist Temple of about

hundred years old indicate the ancient tradition and cultural heritage, which are objects of

great pleasure Kuakata is the place of pilgrimage of the Hindus and Buddhist communities.

Innumerable devotees arrive here at the festival of 'Rush Purnima' and 'Maghi Purnima'. On

these two days they take holy bath and traditional fairs are held here. All these additional

offers to panoramic beauty make the beach more attractive to the visitors. One should visit

Kuakata and discover the lovely grace of Bangladesh. Kuakata, locally known as Sagar

Kannya (Daughter of the Sea) is a rare scenic beauty spot on the southernmost tip of

Bangladesh. Kuakata in Latachapli union under Kalapara Police Station of Patuakhali district

is about 30 km in length and 6 km in breadth. It is 70 km from Patuakhali district

headquarters and 320 km from Dhaka. At Kuakata excellent combination of the picturesque

natural beauty, sandy beach, blue sky, huge expanse of water of the Bay and evergreen forest

in really eye-catching. The name Kuakata have originated from Kua-Well dug on the seashore by the early Rakhine settlers in quest of collecting drinking water, who landed on

Kuakata coast after explled from Arakan by Moughals. Afterwards, it has become a tradition

of digging Kua-Well in the neighbourhood of Rakhaine homestead for collection water for

drinking purpose and general use.


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Geography

Kuakata,it is situated in the southern part of Bangladesh.It is a small town on the sea beach.It is

situated the latachapali union of kolapara upazilla which is in Patuakhali district.It is 72

kilometers away from Patuakhlali town.Mog community lives in its north, sea is in the south,

preserve forest of Gongamoti is in east and at the west the jungle of kuakata is situated.

Economy

Like the other big cities of Bangladesh, notably Barisal and Patuakhai, Kuakata is undergoing

a major transformation, due to its immensely growing population and its status as

Bangladesh's second largest tourism city.

Because of its strategic location of on the bank of Bay of Bengal Kuakata is considered as

being a port city like of Patuakali.
http://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/Chittagong


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5.0 Analysis and Findings of the Study

It has been stated earlier that kuakata is the zone for conducting the survey. The study

focuses on the following issues of the real estate companies selected from the zone-

Status of the real estate developers Profile of the projects Construction activities Financial aspects Marketing aspects

Status of the real estate developers:

In this section, the study was conducted to explore the following issues:

Type of organization Number of shareholders Experience of the developers Qualification of the shareholders Member of REHAB Reasons for being or not a member of REHAB Number of employees by designation

The surveyed companies disclose that the types of the most of the real estate

developers are private limited company & the number of major sponsoring

shareholders or partners of these companies are below 10.Only Home Stone ltd and

Bodhudha Builders ltd have share holder 10 or above. The first company was

established in 1994. Besides, most of the companies were developed in the last five

to ten years. About 50% of the developers have Bachelor degree. Out of 6

developers, all developers are the members of REHAB and the numbers oftechnical executives, non-technical executives of maximum company are

above 25. Supporting staffs of most of the companies are 5-10 (50%) and 10-15 (33.33%).


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Exhibit-1: The number of Employees by designation

No. of Employees EXECUTIVES Supporting

StuffsTechnical

(percentage)

Non- Technicals

(percentage)

0-5 16.67% - 16.67%

5-10 33.33% - 50%

10-15 16.67% - 33.33%

15-20 - 33.33% -

20-25 - - -

25+ 33.33% 66.67% -

Source: Sample survey

Profile of the Projects:

In this part emphasis is given on the understanding of the following topics:

1. Total number of projects

2. Total floor space (in sq. feet)-

Number of apartments Type of projects completed (in no & sq. feet) Location of the projects (completed) Location of the projects (Under construction) Location of the projects (In pipeline)

It was observed in the study that only two developers Boshudha Builders and Century

Realty ltd have above 20 completed projects. Others have below 20 completed projects

event only 5 completed projects exist with Positive Properties Development Ltd.

Height amount of under construction project for Boshudha Builders and Century

Realty Ltd i.e. above 20 projects. In case of pipe line projects it is Home Stone and

Boshudha Builders Ltd is in leading position. The total floor space of project of

most of the company is 20000-40000 sq. feet for completed project, below 2 0000-

40000 for under construction &20000-40000 sq. feet. For projects in the total numbers

of apartments of most of the company are 50-75,05-35 for completed projects, 10-30

for under construction and below 25-50 for projects in pipeline.

Most of the developers completed residential projects other than commercial

projects. The location of most of the completed projects is in Dhaka area. The under

construction projects are situated basically at Dhaka and Coxs bazar. Maximum

pipeline projects are in Dhaka and Coxs bazar.


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Exhibit-2: The floor space of the completed projects

Floor space

(in sq. feet)

Residential

(Percentage)

Commercial

(Percentage)

Below 20,000 30%-

20,000-40,000 60% -

40,000-60,000 30% 33%-

60,000-80,000 - 38%

80.000-100.000 - 29%

100,000-150,000 - -

150,000 - 200,000 - -

200,000&above - -

Source: Sample survey

Construction Activities-

This section covers the topics related with construction such as-

Material procurement procedures Use of machinery/ equipment

Pattern of sub contract Activities give out to sub contractors Problems during construction Solution mechanism of the problems Ways of land acquire Nature of purchasing land Site selection criteria Problems in land acquisition & solution of the problems Need to develop the land Land development problem & its solution Problems of land registration & transfer Time required for pre- construction period, construction period & the agencies Problems in dealing with those agencies


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The study revealed that most of the developers procure building materials by both

local cash purchase and credit purchase. Only few use their own machinery and

equipment and maxes use machinery and equipment through rental. All developers

give subcontracts of their activities. All developers confess about problems in

construction period. Most of the developers acquire land for the project by directpurchase getting approach from the owner of the land and joint venture. They select

the site for project on the basis of future valuation, tourist attraction and size of the

land. All developers told that they face many problems during land acquisition

and they need to develop the land acquired for construction. All developers also

told that, they face problems during land development and land regist ration.

The average time required for pre-construction period of most of the developer s

is 0-2 years and 3-5 years for construction period. Most of the companies face

problems at the time of dealing with the agencies. The nature of the problems is

lengthy processing, corruption, unfair demand of money etc.

Exhibit-3: The nature of purchasing land for project

Nature of purchase Percentage

Advertisement 22.5%

Approach to the owner of the land 6.67%

Approach from the owner of the land 10%

Broker 50.83%

Others. Social network,relatives 10%

Source : Sample Survey

In this section, emphasis is given on the following topics:

Capital status of the developers. Major sources of finance Components of costs and their proportion Location wise average cost of the apartments. Down payments proportion Number of installment Problems in receiving payment and its solution.


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The study reveals that most of the companys authorized capital is 100-200 crore and paid up

capital is within 50 to 200 crore. Major sources of finance of the developers are own finance

and advanced sales. Highest construction cost per sft is seen at Dhaka area. The developers

realize 30-40% of total amount from the client as down payment and number of installments

is 30 to 40 for the balance amount. The developers face problems in receiving payment forthe apartment sold like irregularly, un-affordability, delay etc. They solve the problems by

negotiation, notice and direct contract etc.

Exhibit-4: The average cost of components of per sq. feet

Description Average Cost

(%)

Amount

(Tk.)

Building construction (per sq. feet) 57.92% 1390

Land purchase (per sq. feet) 26.25% 630

Utilities 3.13% 75

Land development 1.25% 30

Carpentry 1.75% 42

Mosaic 1.42% 34

Electrical 1.36% 33

Fitting & fixtures 1.17% 28

Sanitary 1.33% 32

Lift 1.04% 25

Administration 1.33% 32

Promotion 1.13% 27

Others 0.92% 22


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Exhibit-5: Construction cost & sales price per sq. feet on the basis of location

Location Construction cost per

sq. feet

Sales price per sq. feet

Average(Tk.)

Range(Tk.)

Average(Tk.)

Range(Tk.)

Dhaka 2,400 2, 350-2,450 4000 3,500-4500

Coxs Bazar 2,400 2, 350-2,450 3,500 3,300-3,700

Kuakata 2,000 1,900-2,100 3,000 2,800-3,200

Source: Sample survey.

Market aspects

Here, concentration is given to have an understanding on:

Type of promotional media Reasons for using specific promotional media No. of promotional executive/ staff Ways of undertaking promotional activities Use of advertising agency Undertaking promotional activities Solution of the problems Nature of the clients

The study discloses that the real estate developers use mostly newspaper as promotional

media because of less expense but more response. And all developers have promotional

executive or staffs. 33.33% developers use promotional agency to promote their sales. 100%

developers do not face any problem during undertaking promotional activities.


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Exhibit-6: The type of promotional media used by the developers-

Description Percentage

Television 66.67%

Radio -

Newspaper 100%

Periodicals -

Onsite bill board 100%

News letter/ Circulars -

Strategic location billboard

100%

Other: Personal

communication

4.76%

Source: sample survey

Exhibit-7: The nature of the client:

Description Number Percentage

Expatriate Businessmen 45 13.90%

Local Businessmen 115 35.49%

Local Teachers 7 2.16%

Local Govt. Official 45 13.90%

Expatriate Doctors 15 4.62%

Local Doctors 12 3.70%

Expatriate Teachers 15 4.63%

Local Engineers 13 4.01%

Expatriate Engineers 20 6.17%

Expatriate Others 25 7.72%

Local Others 12 3.70%

Source: sample survey


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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 the present

status of real estate developers, their activities, advancement, and problem 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 estatedevelopment. The problems in the study are as follows:

Problems faced by real estate developers-

Local Terrorism: Sometimes local terrorists demand undue subscription from the developers.

If they fail to pay, hooligans obstruct in construction activities.

Inflation: Price of various building materials such as brick, rod, cement wires, electrical

fittings are not stable. It creates lot of problems in the cost estimation of developers.

Bureaucratized 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 formalities intentionally for illegal monetary gains.

Scarcity of open space: The migration of people from village to city areas is increasing day

by day. People are occupying every open space of public properties for shelters and creating

slums. For this, the open space is decreasing day after day which is increasing the price of

land.

High promotional cost: Some developers engage promotional agencies to promote their

offerings. But due to the high promotional cost, they often show-down their promotional

activities.

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

project accordingly.

Demand of undue money: Most of the officials of housing related agency demand money

illegally for any kind of activities.

Lengthy plan approval procedure: Rajdhani Unnon Corporation (RAJUK) and District

Commissioners office in Kuakata are organizations, which takes much time to approve plan

for building.

High cost in registration and transfer: Cost of land registration and transfer is increasing

day by day due to the increased cost of land. So higher registration and transfer cost emerge

as problems of real estate business.

Lack of democratic management: Sometimes officials of govt. agencies show nepotism

approach in allocating govt. facilities. Such kind of practices restricts expansion of real estatebusiness in Chittagong city.


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Problems created by the real estate developers

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

them to delay the projects.

Shortage of utility service: Most of the developers have an intention of earning moreprofit. This tendency often allures them to provide improper fire controlling system,

improper electricity security system etc. It causes safety problems to the apartment

dwellers.

Violation of rules: The violation of the established rules and regulation by fewdevelopers spoils the image of real estate business.

6.0 Recommendation

Real estate business is now a dominating business. Considering the various problems

identified in the study and personal observation, the following recommendations are offered:

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 help in utilizing huge amount of idle money of bank.

Joint venture by the government: The govt. can acquire land in the sub-urban areas and

build apartment on joint venture with the real estate developers who have some good track

records.

Uprooting terrorists: The govt. should take appropriate measure to uproot the local

terrorists from the country. This will help promote real estate business in the country.

Declaration of tax rebate: Govt. 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 and sub-urban areas.

Sound housing policy: The government of Bangladesh should formulate a sound housing

policy to ensure the increasing supply of housing both in terms of quality and quantity.

Undertaking expansion program: To reduce scarcity of land, new expansion program

should be taken in flood prone low lying lands.


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Supportive planning regulation: Building and planning regulations should be improved and

implemented properly. The regulations should be supportive of housing aspiration and

opportunities.

Credit management: Housing should be considered as social welfare services. So housing

credit can be provided to the poor through the non-government organization (NGO) and

community based organization.

Government based promotional activities: To encourage the apartment buyers as well as

real estate developers. Government based promotional activities should be undertaken. This

will help in promoting apartment business in the country.

Check inflation: Government should ensure steady material prices so that developers can

estimate their amount of investment and able to complete projects in time according to

estimation. Incentives can be provided to production, marketing and supplying of building

materials through financing and fiscal measures.

7.0 Conclusion

The study conducted on the real estate business of Kuakata is not disclosing 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 Bangladesh. This paper is providing an partial idea of housing business in

Bangladesh because real estate development is introductory stage in Kukata.

The real estate business is a booming sector of economy at present because of several

reasons. Scarcity of open space in the city is the 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 does not follow the standard rules and regulation.


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8.0 References

Ahsan, M. K. (undated) Status of real estate development in Dhaka submitted toREHAB.

Bangladesh population Census Report (1974), National Volume. Chowdhury, M. U, A.A. and Ahmed, F.> (1992). Housing Building Finance by

BHBFC: Some issue for borrowing Dhaka University journal of Business Studies,

Vol. 13(1).

9.0 Appendix

a. Sample copy of questionnaire

Name of the Company:

Name of the respondent:

Designation:

Zones covered:

Status of the real estate developers:

1. Type of organization : Public Private2. Number of Shareholders : 0-10 10-2020-3030-40 40-503. Experience of the developers :

Year of establishment :

No. of years experience :

4. Qualification of the Shareholders: Masters or above Hons or Bachelor Bellow Bachelor

5. Member of REHAB: Yes No6. Reasons for being or not being a member of REHAB:


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7. Number of employees: Total Number of Employees:

0-5 5-10 10-15 15-20 20-25 25+

Total Number of Technical Employees:0-5 5-10 10-15 15-20 20-25 25+

Total Number of Non-Technical Employees:0-5 5-10 10-15 15-20 20-25 25+

Total number of Supporting Staffs:0-5 5-10 10-15 15-20 20-25 25+

Profile of the projects:

1. Total Number of projectsCompleted Under Construction Pipeline

Residential

Commercial

2. Total floor Space (In sq. feet)Completed Under Construction Pipeline

Residential

Commercial


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3. Number of apartmentCompleted Under Construction Pipeline

Residential

Commercial

4. Location of the projectsCompleted Under Construction Pipeline

Residentiat

Commercial

Construction Activities:

1. Material procurement Procedures:Cash Credit

2. Use of Machinery:Own Rental

3. Give sub contract:Yes No

4. Types of activities that give out to sub contractors5. What are the problems during construction6. How to solve these problem7. How to acquire land8. Nature of purchasing land:

Advertisement Approach to the owner of the

land


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Broker Others (Please specify)

9. Site selection criteria:10.Do you face any problem in land acquisitions:

Yes No

11.If yes, mention the name of the problem and how you solve the problem:12.Do you need to develop the Land:

Yes No

13.If yes, do you face any problem:Yes No

14.If yes, name the problems:15.How do you solve them-16.Do you face any problem regarding registration and transfer:

Yes No

17.If yes, name the problems:18.How do you solve them:19.Time required for pre-construction period:

20.Time required for construction period:21.Time required for agency:22.Do you face any problem in dealing with those agencies:

Yes No

23.If yes, name the problems:24.How do you solve them:


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Financial aspects

1. Authorized capital:2.

Paid-up-capital:

3. Major source of finance:Own finance Advance Sales Loan

4. Component Cost:Item Average Cost

Build construction

Land purchase

Utilities

Land development

Carpentry

Mosaic

Electrical

Fitting & fixtures

Sanitary

Lifts

Administration

Promotion

Others

5. Location Vise average cost per sq. feet apartments:Location Range Average


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6. Location vise sales price per sq. feet:

Location Range Average

7. Percentage of Down-payment:Residential

0-10% 10-20% 20-30% 30-40% 40%+

Commercial


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0-10% 10-20% 20-30% 30-40% 40%+

8. Number of installments:0-10 10-20 20-30 30-40 40+

9. Do you face problem in receiving payment:Yes No

10.If yes, mention names:11.How to solve these problems:

Maturityaspects

1. Types of promotional media:

Television

Radio

Newspaper

Periodicals

On-site bill

boards

News

letter/circular

Strategic

location

Bill Board

Others (Please

specify)

2. Reasons for these:3.

Number of Promotional Executive and Staffs:

4. Do you face any problem regarding promotional activities through staffs:Yes No

5. If yes, please mention:


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6. Do you use advertizing agency:Yes No

7. If yes, do you face any problems regarding promotional activities with the agencies:Yes No

8. If yes, please mention name of the problems:9. How do you solve these problems:10.Nature of clients:

Outside Businessmen

Local Businessmen

Outside teacher

Local teacher

Outside Doctors

Local Doctors

Outside Engineers

Local Engineers

Government Officials

Outside others

Local others:

11.Problems faced by real estate developers:12.Problems created by the government agencies:Recommendations

possibility of real state in kuakata

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