INTRODUCTORY PART:

As per the rules of basic requirement man are building houses. Every person has a dream to build up his own houses and it is the third basic need of human being. We are living in a world where almost all resources are limited in nature. In our country the density of population is high and most of the people are willing to live in urban areas and for this reason they need a shelter in urban area. The middle-income people are the large customer base of housing finance industry and housing finance industry help to fulfill their dream by providing housing loan for building construction, apartment purchase and renovation purposes.

Over the last 15 years the Real Estate Development sector has made significant contributions to many sectors of our economy. Since 1985 this sector has created homes for over 12000 families in the metropolitan city. Additionally, thousands of acres of land have been developed into housing estates where lower middle and middle income families can construct their own dwellings.

It is a recognized fact that the health of the Real Estate Development sector is the barometer of the national economy. Housing is indeed one of the most important priorities of any government. It is very unfortunate that today the Real Estate Development sector of Bangladesh is in the doldrums. Many construction projects are left incomplete; many people who have invested their money face uncertain future; and many related industries will face the brunt of this depression in the immediate future. There are more than 378 developer houses operating their business in this sector. The housing financing institutions come forward to help the people to purchase their apartment and the developers houses sold out their projects to these people. So, we can easily say that Real Estate Sector of our country had a great contribution to the development of some backward and forward linkage industries and Housing Finance Industry is one of those industries.

 Origin of the Report:

I am a B.B.A student of the University of Asia Pacific and internship is integral part of B.B.A program. I start my internship program in Midas Financing Limited (MFL) on 1^st June 2005. They assign me to work in Housing Loan Scheme and after working over there I select my topic to prepare a report on Housing Financing Industry and the present status of several developers firms.

Objective of the Report:

The primary objective to prepare this report is to identify the real situation of the Housing Financing Industry, its present’s activities and also the present status of several developers’ houses.

The secondary objective to prepare this report is to fulfill the requirement of internship program.

 Sources of Information:

To prepare this report I use both the primary and secondary sources.

Primary Sources: First of all to collect information I have visited several Housing Financing Institutions and around 50 developers’ houses. I have discussed with them and collect all those important information that is very much essential to prepare this report.

Secondary Sources:

I have collect several types of brochures from different Housing Financing Institutions and developers houses and frequently visit their web sites to collect information.

Methodology:

The study approach is to collect both the primary and secondary data. For data, collection following approaches has been used:

Interview:

• Face to face interview with the mid level and top level management persons of several organizations.

Discussion:

• Discussed with some of my peers, respective persons of MFL and above all the teacher of my respective university.

Survey:

• We surveyed around 50 developers’ house’s employee and respective management persons through questionnaire.

 Scope of the Report:

To prepare this report I have gathered a vast knowledge and this knowledge will help me lot to prepare this report. Basically this report is based on the present situation of Housing Finance Industry and several developers’ present status in terms of their projects. Both of these two industries depends one another in several sectors and they are working together for their rapid growth. In this report I have a chance to connect these two industries activities and how they depends one another. Beside these to prepare this report I have to work in several places and working in several places I have learned a lot of things and I hope it will help me a lot in my near future.

 Limitation:

The study was not free of limitations. The limitations acquainted with this report are given below:-

• Lack of adequate information: There was lack of sufficient primary and secondary data.
• Unwillingness to cooperation: Some of the primary sources i.e. the company sometimes was uncooperative.
• Secrecy of information: Some of the information is very confidential such as, price level of several projects, benefits require to MoU consideration and many more.
• Lack of time period: As an intern I just get only three months time period to prepare this vital report and this limited time period is not enough to prepare a very rich report.
• Limited coverage of the sector: These two industries are not a smaller one so it is tough for me to cover all aspects of these two industries and for this reason I just covered some important portion of these two industries.

LITERATURE REVIEW

 SWOT Analysis:

A situation analysis is a technique for matching organizational strength and weakness with environmental opportunities and threats to determine the organizations right which is known as SWOT analysis (strengths, weakness, opportunity and threat). Every organization should be able to identify the purpose for which it is best suited. Strategies are faced not with snapshots of the environment and the organization but with a movie of rapidly changing events. Strategic planners, whether top managers, key operating managers or staff planning specialist, have many way to scan the environment for opportunities and threats. They can study telltale shifts in the economy, recent innovations, growth and movement among competitors, market trends, labor availability and demographic shifts. One needs to store out environment opportunities and threats carefully. A perceived threat may turn out to be an opportunity or vice versa. Step can be taken to turn negatives into positive.

 Market-Product Expansion Grid:

It is a portfolio planning tool for identifying company growth opportunities though market penetration, market development, product development or diversification.

 Market penetration strategy:

A strategy for company growth by increasing sales of current products to current market segments without changing the product.

Market development strategy:

A strategy for company growth by identifying and developing new market segments for current company products.

Product development strategy:

It’s a strategy for company growth by offering modified or new products to current market segments. Developing the product concept into a physical production order to ensure that the product idea can be turned into a workable product

Financial Institutions: Business entities include nonfinancial and financial enterprises. Nonfinancial enterprises manufacture products or provide nonfinancial services. Financial institutions provide various types of financial services. Financial intermediaries are a special group of financial institutions that obtain funds by issuing claims to market participants and use these funds to purchase financial assets.

 Non-bank Financial Institution: Non-bank Financial Institution is a depository institution offering checking accounts or commercial loans but not both.

2.8 Equipment Leasing Service: An alternative to lending in which a bank or non-bank financial institution buys equipment and rents it to its customer.

 Real Estate Development and Mortgage Companies: Supplying, building, and construction expertise and construction financing to their customers.

Land Developer: There are several organizations that are only engaged with the land development project. Exactly they developed the plot and sold out those projects to the customers or clients.

Apartment Developer: There are several developers that are only developed apartment and sold out those projects to the clients.

Shopping Spaces/Complex Developer: There are several developers that are engaged to development of shopping complexes or spaces.

 REAL ESTATE DEVELOPMENT SECTOR:

Bangladesh, like many other developing countries faces an acute shortage of affordable housing both in the urban and rural areas. Owing to the migration of a large population to the capital city Dhaka every year, demand for proper housing has increased in astronomic proportions. Production of suitable housing units has therefore become a major concern for the National Housing Authority as well as the Private sector Housing developers.

Real Estate Development in private sector in this country started in pre-liberation days when Eastern Housing Ltd. In the mid-60 undertook land development project known as “Pallabi Project” for housing purpose in the Mirpur area of the Dhaka city. The concept of apartment Development started in the later part of the 70 decade when Free School Property Development Ltd. started development of ownership apartment in the Siddeswori and Moghbazar areas of the Dhaka city followed by Eastern Housing Ltd. During the decade of 80 a number of companies came into existence and engaged in ownership apartment development. With the number of companies increasing gradually and various problems concerning the housing sector having cropped up requiring early solution, necessity was strongly felt for the formation of a trade association of the Real Estate developers to protect the overall interests of the sector. Keeping the above objective in view some of the stalwarts in the Real Estate business met together in a meeting and formed an Association under the nomenclature of Real Estate and Housing Association of Bangladesh or briefly REHAB. In November 1992 REHAB was enlisted as an “A” class member of the Federation of the Chambers of Commerce and Industries (FBCCI).REHAB has always acted to further the Government policy and to do this effectively REHAB must be given due recognition and made a party in all processing of housing sector policy formulation. Over the last 15 years the Real Estate Development sector has made significant contributions to many sectors of our economy. Since 1985 this sector has created homes for over 12000 families in the metropolitan city. Additionally, thousands of acres of land have been developed into housing estates where lower middle and middle income families can construct their own dwellings.

In Real Estate Development sector there are several types of organization in development of several projects like, some of the developers engaged in development of land project, some engaged with apartment development project and commercial complex or spaces development project.

Land Developer: There are several organizations that are only engaged with the land development project. Exactly they developed the plot and sold out those projects to the customers or clients.

Apartment Developer: There are several developers that are only developed apartment and sold out those projects to the clients.

Shopping Spaces/complex Developer: There are several developers that are engaged to development of shopping complexes or spaces.

Besides these types of projects developer there are also some developers that are engaged to development of all the above projects like Bashundhara Group, they related with the development of the all the above projects.

In Real Estate Development Sector the land are also differentiated based on some criterion or nature like, there are two types of property exists in the market one is lease hold property whose actual owner is Government and another is private hold property whose actual owner are individuals.

It is a recognized fact that the health of the Real Estate Development sector is the barometer of the national economy. Housing is indeed one of the most important priorities of any government. It is very unfortunate that today the Real Estate Development sector of Bangladesh is in the doldrums. Many construction projects are left incomplete; many people who have invested their money face uncertain future; and many related industries will face the brunt of this depression in the immediate future. There are more than 378 developer houses operating their business in this sector.

REHAB is the only trade organization of Real Estate Developers with a current membership of 161 Developers. In the recent years REHAB has played a very significant role in nation building through Real Estate Development by its members. The members of REHAB contribute a large amount of revenue to the Government exchequer in terms of Registration Cost, Income Tax and Utility Service Charges. The contribution of Real Estate Sector in the GDP of the country is about 12-14% and it has also contributed to the growth of a host of backward and forward linkage sectors such as paints, ceramics, aluminum, furniture, cement, consultancy etc. But there is inadequate technological support both in this sector and its linkage sectors. Rehab Organizes its most colorful annual event REHAB Fair each year in Bangladesh for the member developers, financial institutions and building material providers. To foster the growth of Real Estate Sector REHAB also organizes Housing Fair (s) abroad for the Bangladeshi Citizen and the Foreign Investors. REHABS organize REHAB Housing Fair in USA and UK.

THE GROWTH & POTENTIAL OF REAL ESTATE

SECTOR IN BANGLADESH:

The rate of urbanization in Bangladesh in the past decades was very high. The present growth rate of urban population is 5-6% per annum. About 25% of Bangladesh is now living in urban area, which will be 34% in 2015. At present the housing condition of urban area is unplanned and unacceptable. Estimates for annual requirements for new housing in urban areas (in the entire country) vary from 600,000-800,000 units. There is acute shortage of housing supply in all urban areas and the backlog is continually on the increase. Particularly in Dhaka this figure is about 60,000 new units plus 200,000 units (replacement + backlogs) per year.

It can be mentioned here that Dhaka is currently growing very fast in comparison to other cities in Bangladesh. UN declaration and the constitution of Bangladesh has ensured people’s fundamental right of adequate standard of housing. But it is a matter of regret that a large section of urban population is slum dwellers who live in very poor living condition. It is estimated that about 3.5 million people in Dhaka live in squatter, slum and other dilapidated housing. They require urgent attention for arranging decent living condition and housing facilities for them. High population growth rate, high land value and high cost of construction materials are working as constraints to provide individual housing unit for all. So the demand for residential apartments is growing. Real Estate Sector is trying to fulfill this demand. Now Dhaka needs about 60,000 new housing units each year. But the Real Estate Sector can supply only 5000-6000 units per annum and the supply of housing in the government sector is almost stagnant. This results in a huge shortage of housing in Dhaka and it is increasing every year. Inadequate supply of dwelling units for middle and low-income people and high rental value are among the major problems affecting the urban development of Dhaka.

Today about 400 architects, 2000 graduate engineers, 8000 diploma engineers, 14000 management staffs and 1.5 million direct and indirect labors are engaged in the Real Estate Sector of Bangladesh. The contribution of Real Estate Sector in the GDP of the country is about 12-14% and it has also contributed to the growth of a host of backward and forward linkage sectors such as paints, ceramics, aluminum, furniture, cement consultancy etc. But there is inadequate technological support both in this sector and its linkage sectors.

The Real Estate & Housing Association of Bangladesh (REHAB) has organized various fairs at home and in abroad. REHAB organized its first overseas fair in New York, USA. Total 29 member developers of REHAB participated in that fair. The response of New York Fair encouraged REHAB to organize REHAB Housing Fair in USA & UK in 2005 and around 40 member developers of REHAB participated in these two fair (s). These two fair (s) attract the large number of Bangladeshi Individuals who are living in USA and UK to buy apartment to their home country and they also acquired some knowledge of competitive housing market of Bangladesh.

These fair (s) disseminated information about this Real Estate Sector and the current pattern of Bangladeshi housing to the visitors. On the other hand, it will also attract prospective investors to invest in the Real Estate Sector of Bangladesh. It had given an exposure of Real Estate Sector in Bangladesh to them. The investors have various scopes to invest in the Real Estate Sectors and its linkage industries. The US investors can export technology, low-cost construction material and technical to know how to Bangladesh to facilitate the housing sector in Bangladesh. They can also invest directly in this sector on a joint-venture basis. As for example, some investors of Japan and UK have already invested in the Real Estate Sector of Bangladesh on joint-venture basis. Foreign investment in production of mass housing or SatelliteTownship will reduce unit cost housing. This will also bring housing within the affordable limit of low-income people and ensure adequate housing for all.

REHAB fair (s) had worked as a bridge between the concerned countries and increase solidarity between them. In the current trend of globalize world, there is need of such exchange of ideas to increase interaction among the citizen of various countries. The globalization has given freedom to invest in any country; buy product in competitive price, disseminate information and technology very fast across the frontier of the countries. As these fair (s) are attributed to all these characteristics of globalization, it may create a new prospect in the housing sector of Bangladesh.

 DEFINITION, Scope and categories of companies Under Housing Finance Industry:

The existence of housing finance industry in Bangladesh is very essential. Before going to in depth assessment about the performance of housing finance industry, the discussion about the scope and activities of them is much desired. This chapter deals with the scope and activities of housing finance industry in the context of our country.

The definition of housing companies under this study paper covers any institutions that directly help in financing the housing need of the people. The housing need covers variety of items like purchase of new house, purchase of land, construction of new house, extension and renovation of old house, construction of commercial space, etc. Therefore, if any institution offers any types of services as mentioned earlier will fall in the category of housing finance company.

The scope and activities of housing finance companies covers any activities related to the above-mentioned categories like purchase of home, purchase of land. Besides, other activities like counseling services for the client to find out suitable home or plot and any other advice falls in the scope of housing finance companies. However, the activities of housing development companies and consulting firm do not fall in this category but in this report we are several developers’ present status in terms of their projects. Although they indirectly helps in fulfilling the housing need of the client, and they have a great contribution to the growth of this industry and somehow they depends one another.

We can categories housing finance provider from different dimensions.  However, the overall activities of all housing finance provider are more or less same.  The categorization of their activities gives us very clear idea about their origin, core business activities, legal status of those, and the types of competition they are facing in doing their business.

Public Sector Versus Private Sector:

Several public agencies are, or have been involved in the financing and development of housing and residential infrastructure projects: the Housing and Settlement Directorate (HSD) and Public Works Department of the Ministry of Housing and Public Works, the Local Government Engineering Department of the MLGRDC, and the City Corporations of the four larger cities. Their funds come mostly from foreign aid and to a lesser extent from national revenues. Both City Corporations and the central government are developing residential subdivisions for lease to upper and upper middle-income households and resettlement programs and site-and-services schemes for lower to middle income groups

Government housing finance companies includes those that are created under the ordinance of the state and being patronized by the government for their every activity. The example includes Bangladesh House Building Finance Company (BHBFC) the activity of which is to helps country people in fulfilling the housing need. This company is solely operated and managed by the government and therefore have gigantic shade to serve the country people. On the other hand, private housing finance companies include those that are created under the law of company act.  These companies are created under the initiative of private bodies and are being incorporated under the law of companies. So these are not subject to government interfering except some rules and regulations.

Specialized Versus Non Specialized Housing Finance Company:

Some housing finance companies are extremely pure or specialized in nature that is they are providing only housing related services. Example includes Delta Brac Housing Finance Corporation (DBH) the activities of which are to provide loan facilities only for housing. On the other hand some companies mostly banks and leasing companies in nature provides housing loan facilities in order to diversify their portfolio. So housing finance may not be in their top attention or priority.

Local Housing Finance Company Versus Joint Venture Company:

This is another dimension for classifying housing finance companies playing in our country. Most of the renewed housing finance companies are joint venture in nature. The leading housing finance institutions like Delta Brac Housing Finance Company (DBH), Industrial Development and Leasing Company (IDLC) are joint venture in nature. On the other hand Midas Financing Limited (MFL) is a locally owned company.

 Non Government Organizations and Others:

This sector is also playing a very vital role in developing housing sector in our country. The existence of such organization basically stands on the cheap financing cost. The have huge foreign grants and funds to utilize in this sector. Some leading NGOs like BRAC, ASA, PROSHIKA actually done a lot for developing houses in urban, town and rural area. So this part of the sector can widely be considered.

THE RECENT EVOLUTION OF HOUSING

FINANCE INDUSTRY:

The evolution of housing finance industry can be categorized into two eras. The one era is before the entrance of private housing finance companies and another one is after of entrance of private housing finance companies. The first era is fully dominated by the Bangladesh House Building Finance Corporation (BHBFC). And second era is the entrance of private housing finance institutions and the subsequent changes in the industry. Logically the study took greater attention of the second era starting from 1997.

In 1997 the housing finance industry took an overturn when some private companies specialized for housing finance entered into the market. The ever-increasing dominating role of the BHBFC had come under threat and at present day the role of BHBFC in developing a good housing base is decreasing. The primary objective of BHBFC is to provide house loan facilities to the people who actually need houses and to develop a planned housing base in the country. But for reason for other, it fails to provide such services at its fuller length.

The lack of proper guidance from government, inefficient management body, extravagant expenses by management, week recovery rate, corruption and fraud all leads to put BHBFC virtually out of action. Although in recent time the government takes some steps to regain the position of HBFC in the public mindset and also to diminish the role of private sector initiative in the industry. In a move to maximize the role of public sector the government cut out the tax-exempt status of private companies that was given to them in the year 2002. But without changing the operating policy of HBFC such measure by government may not be effective to reestablish the position of HBFC. Moreover some other private companies especially some private banks like HSBC, Islami Bnak Bangladesh Ltd., National Credit & Commerce Bank Ltd., MIDAS Financing Ltd. & others are playing in the market with comfortable offer to capture the market niche.

In fact the competition is so acute that the price war has already started among the companies. A recent move by government in terms of transfer cost of the property opens the door of housing industry to all. The government also eases the rules for scheduled bank to perform the housing finance activities. Under the previous law the scheduled banks were not allowed to offer housing loan without registered mortgage.

But recently the government modified such rules and allowed the scheduled banks to offer housing activities freely. As a result some private banks with abundant amount of unused capital offered housing loans to the public at a very comfortable rate in accordance with quality service. This move not only shakes the root of the HBFC but also the root of other specialized housing companies like DBH, NHFC, & IDLC. At the beginning of the year 2004 the rate of interest in the sector was 15.00%. But at December 15, 2004 this rate reduced to 12.50%. So it is very amazing to see such a rapid change of 2.5% of interest within the period of less than one. Another notable change in the industry is the cost other than the interest paid on the loan. The fees like application and appraisal reduced at a very significant rate. On the other hand most housing finance companies now offering the loan facilities through equity mortgage. This also reduced the financing cost of the borrower in a very significant way. The borrowers are also feeling comfort to have the opportunity to avoid the hassle of the registry office at the time of registration and deregistration of the property.

So it is expected that the borrowers will get more benefits when some other giant private companies knock the market. But it is also the crucial time for the industry as a whole to set up standard operating procedure. The acute and unwanted competition in the industry truly helps the borrower but this also offers some risk to the industry player. The more competition without standard operating procedure means more flexibility in loan disbursement. This will in turn increases the risk of the lending company as they desperate to get more customer in order to control the market. The need for housing is ever increasing in the country like Bangladesh. So it is unlikely that there will be shortage of demand in near future. So the lending companies should look after its risk position while trying to get more involvement in this sector.

 THE ROLE OF HOUSING FINANCE INDUSTRY:

The overall objective of housing finance industry is to expand home ownership in the country by utilizing the scarce land available for housing purpose. So this require plan to assure the best use of the existing land and in the same time to avoid any type of hazards or to reduce the impact of such that may come in near future. In this section I made an attempt to provide a clear picture about the role of housing finance industry in expanding home ownership in the country.

Expanding home ownership is possible by rescaling the ownership nature of the land. It is very common that one person holding abundant amount of land than his required amount. As a result it is possible to arrange an alternative use of such land that are holding by a single person. The ownership can be distributed over many people by selling some claim of the property. Here comes the question of exchange that is what to be exchanged to do so. Certainly money is the only medium of exchange in the modern world and therefore can safely be used to make such transaction.

The analysis of the economy is very vital in this connection. Bangladesh is a developing country with limited resources but abundant of people. Although the economy is flourishing by depending on some key sector like ready-made garments, and other agricultural based sectors there exists uncertainty to exactly delineating the economic growth. The GDP growth rate is merely 6% (around) and the per capita income is around $400.

The cost of living in the urban area is rising in an alarming rate. Being Dhaka is the capital city of the country; the people of other area usually rush to Dhaka to make their living. A recent study revealed that per capita GDP in Bangladesh is comparable to that of the neighboring countries in the region, namely India and Sri Lanka. But its housing market is still underdeveloped. The rate of growth in urban population is increasing rapidly, due to the economic concentration in the urban areas only, particularly in Dhaka. Urban population is likely to reach 31% of the total population by 2010, from the current level of 25%. As a result, there will be tremendous pressure on the housing market to create the accommodation for the increasing urban population in Dhaka.

Dhaka is the fastest growing urban area in the country with over 8.0 million population. 70% of the people in Dhaka live in rented accommodation, which indicates that there’s a serious scarcity of self-dwelling units, within the purchasing power of people. The study indicated that Dhaka has got one of the most expensive real estates in the developing world the House Price to Income Ration in Dhaka was 16.7 in 1998, compared to 7.7 in India and 7.2 in Malaysia. Because of such high price of the property, buying a dwelling place at the current price levels in the market remains a dream for an average middle-income customer, earning average Tk.25,000 – 30,000 per month.

But consider the role of housing industry in realizing the dream of average people. It is clear that most of the middle-income group cannot afford costly living unit in Dhaka depending on their monthly average income. But housing finance industry is providing a helping hand to enable the middle-income group to have a dwelling unit in urban places. People can easily get loan from housing companies at a comfortable interest rates with other relax terms and conditions. For example, an apartment of 900 sft can be built with three bedrooms, and sold at Tk.14 Lacs (Tk.1500 / sft). A middle-income customer can afford to buy such apartment taking Tk.9 Lacs as housing loan (65% of the cost of the apartment). The monthly installment of such loan would be Tk.15,000 under the current interest rate for a 15-year term. In such case, the customer would have to spend 60% of his monthly income (Tk.25,000) as housing loan installment, but can be the owner of his apartment.

By analyzing the overall activities of the industry we can provide some insight on the major function of housing finance companies as in follows

1. Provide loans for buying land/apartment and constructing houses or commercial place.
2. The housing finance companies usually provide loan up to 70% of the construction cost or purchase price. As a result borrowers are able to get housing facilities with lower equity.
3. The lower average equity portion of borrower enables them to maintain standard of living by spending in other needs.
4. The average rate of interest is 14%, which is viable in terms of capital and financial system of the country.
5. The average loan period is 20 years. As a result the limited income people with lower amount of income can get the facilities of housing loans.
6. The loan amount is paid over monthly installment basis usually in equal amount as to facilitate the small income group.
7. The loan processing fees, documentation fees are usually 1% of the loan amount.
8. Borrower is allowed implementation period usually 3 to 6 months.
9. In some cases the borrower is allowed grace period usually for 3 months. So the borrowers can freely invest their loan amount without worrying about the loan installment from the very beginning of the loan disbursement.
10. The average processing period is two to three weeks. As a result the borrowers are enjoying quick service from the companies under industry.

The effective cost of borrowing from housing companies is around 15% to 18% by considering the loan processing fees and other charges of whatever type it is. In compare to the housing loan rate of other country like India this rate is not so high.  So any person earning a medium range salary can easily take loan from such companies and can realize their dream. By looking at this side we can say that housing finance industry is playing a very vital role in developing a planned housing base in the country.

Over the years the housing finance industry invested crores of taka in this sector. Actually they are providing the real estate sector of our country a good shape and structure. So this sector directly contributing in economic progress of the country. In the one hand they are transferring fund from one sector to another in order to create greater mobility. On the other hand they are making country people more capable in contributing towards economic progress. If the country people have the necessary dwelling places they can freely work in their respective workplaces.

FUTURE OF THE HOUSING FINANCE INDUSTRY:

The future of the industry depends on many factors among those population growth rate, government policy, financial system, banking policy are very deterministic. As mentioned earlier the need for housing loan is ever increasing in the country like Bangladesh where the rate of population growth is very high. With increase number of population the rate of increase in urban population is also high. A recent survey by IFC indicate that the total number of urban dwelling is now estimated to be around 4.0 million units, compared to the ever increasing urban population estimated at 35 million, which is roughly 25% of the total population in the country. The economic factors are compelling more and more of the rural population to migrate to the urban centers to obtain employment and a better living. The ratio of urban population in the country is expected to register a staggering increase to almost 34% of the total population by 2015. In order to accommodate the influx of people to the urban areas, the annual housing unit requirement estimated in the range of 350,000-550,000 units per annum over the next twenty years.

In meeting the requirement of such the public and private sector is playing a vital role in the urban areas. Firstly, the developers are continuing their efforts to supply more and more number of flats/apartments to their customers over the last several years. Their land and apartment projects have resulted in larger number of people becoming the owners of flats by occupying relatively less land area than the previous single unit construction. In this connection, initiatives have been taken by some developers to promote affordable home to the middle-income group of customers. They have come forward at the very outset of their business to focus on providing smaller sized accommodation at a reasonable price, targeting the large cross sections of middle-income buyers.

The study also suggested that the average earning of Middle-income people is Tk. 20,000 per month. Since this segment constitutes the largest proportion (30 – 35%) of the total population, but currently not being served by the developers because of the affordability issue, they are the large bases of potential customer of the housing finance companies. On average the Middle-income persons pay up to 30% of their monthly income as rent, and annual rent increases are usually insignificant. At present the average annual rent in Dhaka city is less than 5%. But the customers expressed a strong psychological desire to own their homes, leaving the rented accommodations.

The large groups of Middle income customers willing to buy apartments and lands are aware of the housing loan facilities, and they are willing to pay significantly higher amount that their monthly rents as housing loan installments. The Middle-income customers are ready to pay up to 50% of their monthly income as housing loan installments, though they’re paying up to 30% of their income as monthly rentals.

The survey also revealed that high level of interest rates are not a barrier to take loans, but the interest rate is an important deciding criterion to choose the lending institution. As a matter of fact, housing markets in our neighboring countries have flourished under high interest rate environment. The housing market in India was flourishing even 3-4 years ago, when interest rates were between 14 – 16%. The same in Sri Lanka is currently growing very fast, even though the interest rates there are as high as 16 –18%.

The key issue identified in the survey is the lack of affordability to buy larger apartments, which entail much higher costs. The customers cannot afford to pay the corresponding housing loan installments, as the installments for a typical apartment would be almost 75 –85% of the monthly income, which is clearly unaffordable. Under the circumstances, the study indicated that the middle-income customers are willing to make the following concessions to increase their affordability:

1. Most people are willing to move around within Dhaka to less premium areas, which are still close to their ideal areas. In these areas, the cost of land can be significantly lower up to 50% than the prime areas. 60% of the total respondents fell under this category.
2. Most of the middle-income customers are willing to buy smaller sized apartments, in order to increase their affordability. 73% of the respondents gave option for smaller apartments. In this connection, customers associated the size of the apartments with the number of bedrooms it had. The respondents were largely unaware to the fact that smaller sized apartments ranging from 800 – 1000 sft can accommodate three bedrooms, having the same functional benefits.
3. The middle-income customers don’t need premium quality construction; rather they would prefer medium quality finishing with same functional benefits. Most of the apartments are built today with the premium customer in mind. Therefore, construction costs are very high – in the range of Tk. 800 – 1000 / sft. But affordable construction is possible by building to the basic needs, thereby the construction costs can be reduced to Tk. 650 – 700 sft.

Given the three major concessions the middle income customers are willing to make to own their homes, the study indicated that there remained a huge untapped market for the Developers to target, through building affordable housing for the Middle Income Group of customers.

The study indicated that the three trade offs the customers are willing to make (location, quality and size) could reduce the cost of an apartment to half of their current level of costs. Out of the findings of the customer research, the study indicated that there remains a huge untapped market of 100,000 – 115,000 units of apartments in Dhaka city alone, along with another 5,000 – 8,000 units in Chittagong, considering the proportion of middle-income customers to the total population. The size of these apartments range from 800 – 1000 sft with three bedrooms, and the price range of an apartment would be in the range of Tk.  9 – 10 lacs. This market will keep on growing, as new families would join the pool of middle-income customers every year. So it is expected that considering the scarcity of land and the resulting high land cost, the Developers should focus on building projects of smaller sized apartments in the suburban and downtown areas of Dhaka City using basic finishing materials, thus reducing the cost of construction significantly.

Thus the future of housing finance industry depends on various factors like economic condition, growth rate of the population, supporting activities of developers, government activities and others. But at the same time it is expected that the industry player should set standard operating procedure as a whole for the industry to make their services more dependable to the general people.

 ABOUT SEVERAL HOUSING FINANCE INSTITUTIONS:

The decision to buy or renovate a home is probably the most important investment decision we will ever make. So some of the organizations put together a loan facility to assist us in purchasing new apartment or to help us during renovation of their house. Right this moment there are several organizations operates there business in housing finance industry. There are some organizations that are specially provide this service and they are the expertise in this sector like DBH and NHFL. Besides these there are also some banks involve in this sector and they provide loan facility both the individual and developers. They provides loan to the developer as a project basis and its called project financing where the amount of loan is a chunk amount. There are also some financial institutions who are also operates there business in this sector like MFL and IDLC, though these two companies are not expert in this sector but they have several program to provide this facility to the general people to be a owner of  apartment or house.

 BANGLADESH HOUSE BUILDING FINANCE CORPORATION:

Bangladesh House Building Finance Corporation (BHBFC) has formed in 1973 under the presidential ordinance. This is just the renewed version of House Building Finance Corporation established in 1952. All shares of the company is holding by the government of Bangladesh. The governing body of the company consists of six members including a chairman and a managing director. The directors, appointed by the government, are operating the company under the direct supervision of Ministry of Finance of Bangladesh government. The government directs the policy procedure and others related issues of the company.

The prime objective of this institution is to mitigate the housing problem throughout the urban area of the country. It helps in construction, renovation, and structural change of the house under construction by offering loan facilities to the prospective households. BHBFC is the pioneer of house financing sector in Bangladesh. Government patronized Bangladesh House building Finance Corporation (HBFC) still remains the single largest institutions for housing finance. The key facts about the organization are as follows:

1. Established and operated under the direct supervision of the government.

2. The company collects required working capital by issuing debenture guaranteed by the government.
3. The company provides house loan under the scheme of general and group loan for construction of houses, purchase of apartments etc. besides the company also provides adjusted loan on fulfillment of its requirement in order.
4. The ceiling of the loan is Tk.2.70 to 25.00 Lac depending on the location and other factors.
5. The rate of interest for loans up to Tk.15.00 lacs is 13% for Dhaka and Chittagong Metropolitan city areas. Beyond this amount the interest rate is 15%. On the other hand the company charges a flat rate of 10% for loan belongs to other areas.
6. Up to December 31, 2003 the company disbursed housing loans to 142,679 units.

DELTA BRAC HOUSING FINANCE CORPORATION LTD (DBH):

DELTA BRAC HOUSING FINANCE CORPORATION is the largest private housing finance company in our country and started its operation in the year of 1997. Being a public limited company under the financial institution act 1993, it has also the permission from Bangladesh Bank for conducting depository function. The major contribution of the company is to bring out changes in the industry structure. So it is conducting a dual function that is collecting savings from different investors and then investing this fund to people who require housing loan. Recently the company offered another form of loan named Family Loan in order to meet the requirement of off housing needs. The key factors about the company are as follows:

1. A private limited company owned by the local and foreign investors.
2. It has also different types of attractive term deposit scheme like monthly income deposit, double money deposit, and triple money deposit.

2. The authorized capital of the company is Tk.500 million and the paid up capital is Tk.200 million.
3. Usually provides loan to build house, purchase apartment, purchase of land from approved developers, extension and renovation of existing house, and purchase of office/chamber for different professionals. The company also has a Family Loan scheme.
4. The ceiling of the loan is 40,000,00 Tk. or 70% of the total cost of the house or land under purchase consideration whichever is lower.
5. The current rate of interest rate is 14%. For prime client the rate is 13.50%.
6. The maximum loan period is the lower of the 20 years or the 65^th birthday of the borrower.
7. The total loan disbursement from its inception to the end of December 2003 is Tk. 4103.00 million.

 INDUSTRIAL DEVELOPMENT LEASING CORPORATION (IDLC):

Industrial Development Leasing Corporation (IDLC) is the giant force in private sector housing finance. Although it basically provides leasing and merchant bank activities in recent years it carries a great success in providing housing loan. This is a joint venture owned by investors of local and foreign and also by some specialized institutions. The prime objective of the company is to provide a helping hand in developing industrialization. In recent years it started house loan and small-scale short-term loan. The key factors about the company are as follows:

1. A joint venture and owned by the investors of five different countries.
2. The authorized and paid up capital of the company is Tk.1000 million and Tk. 150 million respectively.
3. A client can apply for Tk.50 lac or 70% of the price of flat/cost of construction whichever is lower.
4. The current rate of interest for house loan is 13.75%.
5. The maximum loan period is the lower of the 20 years or the 65^th birthday of the borrower.
6. It has also different types of attractive term deposit scheme to accumulate savings from surplus household and firms.
7. Provide Insurance facilities against loan and they mentioned it by the name of Home Loan Shield.

 NATIONAL HOUSING FINANCE & INVESTMENTS LTD (NHF):

National Housing Finance & Investments Ltd. is another well-equipped private housing finance player trying to capture the market niche of the sector. The company is incorporated under the company act 1994 and Financial Institution Act 1993 of Bangladesh Bank and commenced on 29^th December 1998. Local banks, insurance companies, and expatriate association of two countries own the company. The company basically provides house loan but also provides mortgaged project loan. The key factors about the company are as follows:

1. A public limited company owned by different banks and insurance companies.
2. The authorized and paid up capital of the company is Tk. 2000 million and Tk. 400 million respectively.
3. The company offers Home Mortgage Loan up to a maximum amount of Tk.50 lac or 70% of the purchase price or construction cost whichever is lower.
4. Home Mortgage loan of NHL is available for purchase of houses or apartments, renovation, extensions or addition of existing houses or apartments purchase of housing plots.
5. The current interest rate charged by National Housing is 14.50%
6. The maximum repayment term is 20 years, but not extending beyond the borrower’s 65′ birthday.
7. NHL has deposit schemes to accumulate deposits from different saving units. These include National Hosing Priority Account (NHPA), National Housing Bonds, National Housing Fixed Deposit Accounts, and National Housing Income Accounts.
8. The company usually provides house loans through registered mortgage in order    to minimize its risk.

MIDAS Financing Limited (MFL):

The majority share of the company is hold by MIDAS. The company is incorporated under the company act 1994 and also got the permission for conducting operation as a financial company. MIDAS Financing Limited (MFL) is a new comer in this sector. Although the company is new it has a very strong market base depending on the other scheme of the company. To cover the supply shortage of housing industry the company started hosing finance operation from July 2004. The main objective of housing loan policy is to provide house loan facilities at a cheaper rate but through quality service. The basic feature of the company is as follows:

1. A public limited company owned by the local owners.
2. Provides house loan for construction, purchase, renovation, expansion etc.
3. The current interest rate is 14%
4. The maximum loan period is 15 years but not exceeding the borrowers 55^th birthday.
5. The maximum loan amount is 20 lacs or 50% of the cost of construction or purchase whichever is lower.
6. It has also some attractive term deposit policy to accumulate savings from different investors that are eventually used for housing finance.
7. provides 3% rebate on interest paid on housing loan to customer with outstanding payment record

PHOENIX LEASING CORPORATION (PLC):

Phoenix Leasing Company Ltd. (PLC) launched its lease-financing program in 1995. Under this program, PLC extends in the form of 2-5 years term lease financing to enterprise for acquisition of machinery, equipment, vehicle, etc. for balancing modernization, replacement or expansion purpose. PLC also provides Home Loan for purchasing flat and construction of own building. It also provides loan for purchasing and decoration of office space.

For successful operation of Real Estate Business, Residential and Commercial Applicants (flat and own construction) have been divided into three according to areas.

1. Their interest rate is 14%-16.5% and it based on market condition. In some cases it goes to 17%.
2. They always go for registered mortgage and their maximum grace period is 6 months and for construction purpose their implementation period is 12 months.
3. Their loan period is 5-7 years and loan ceiling is 50% for residential purposes and 40% for commercial purpose.
4. For 5 years period Tk.1 million @ 14% interest rate monthly installment is Tk. 23268.

Some other companies also performing housing loan activities. They are listed below:

1. National Credit & Commerce Bank Limited (NCC).
2. Islami Bank Bangladesh Ltd.
3. HSBC Bank Limited

NCC Bank Housing Loan (NCCBHL):

• Current interest rate is 12% but it will be changed very soon, and approximately it will be 13% to 13.50%. This interest rate is varies based on market condition.
• They always go for registered mortgage.
• For apartment purchase grade period is 6 months and building construction purpose it is 12 months. They don’t have any rebate policy and for implementation period they consider project’s current situation.
• There application fees re free but charges 1% of loan as appraisal fees.
• Their loan period is 1-15 years and loan ceiling is at best Tk.50 lacs.

 Islami Bank Bangladesh Ltd. (IBL):

• They charges variable interest rate of 11.50%
• They always go for registered mortgage (new edition).
• They have grace policy but did not provide the duration.
• They have rebate @ 3% of interest.
• Loan period is 1-20 years.
• Loan ceiling is at best 50% of total cot.

 HSBC Bank Limited:

• They charges 14% interest rate and it is calculated on a monthly reducing balance method.
• Loan processing fee is 1.5% of the loan amount
• Loan size between a minimum of Tk. 750,000 and maximum is Tk. 10,000,000
• A maximum loan amount of 70% of the total value of the apartment or 70% of the land value for renovation
• Repayments by equal monthly installments of up to 15 years or prior to borrower’s age reaching 60 years or retirement date, whichever is earlier
• Partial and full prepayment are allowed
• Early loan settlement fee is 1% of the loan outstanding amount or Tk. 10,000 whichever is higher
• No end loan fee

BACKGROUND OF THE COMPANY:

Name: Micro Enterprise Development Assistance and Services (MIDAS)

Status: MIDAS is registered with:

a-      The Registrar of Joint Stock Companies and Firms as a company limited by guarantee under Companies Act 1913. Registration No. CTO- 304(16)/92 dated December 30, 1992.

b-      NGO Affairs Bureau, Prime Minister’s Office, as a Private Voluntary Organization under the Societies Act XXI of 1860. Registration No. S-838/17 dated November 09,1989.

c-      Department of Social Welfare, Ministry of Social Welfare. Registration No. DSW/FDO/H-123 dated August 13, 1982.

MIDAS Financing Limited- a subsidiary organization of MIDAS is operating as a Non-Bank Financial Institution, under Financial Institution Act. 1993. It is registered with the Registrar of Joint Stock Companies and Firms as a Public Company Limited by Shares. Bangladesh Bank issued license on October 11, 1999 in favor of MIDAS Financing Limited.

MIDAS Financing Limited (MFL) is an offshoot, a spin-off of MIDAS, set up with the primary objective of taking over the enterprise financing role of MIDAS. With license from Bangladesh Bank to operate as a Non-Bank Financial Institution, MFL is in a stronger position to offer credit facilities to micro, small and medium enterprise by having access to loanable fund from other sources.

MIDAS (Micro Industries Development Assistance and Services):

MIDAS is a company limited by guarantee. It has been working for employment generation through promotion and development of micro, small and medium enterprises since 1982. Its mission is to become the most effective provider of high quality consulting services in the field of micro, small and medium enterprises development.

The management of MIDAS vests in a ten member Board of Directors. Under their overall guidance, a Managing Directors looks after the day-to-day affairs of the company. MIDAS was formed by members representing development practitioners, voluntary agencies, private business etc.

MIDAS provides following services:

• Study relating to business organizations

1. Techno-economic feasibility study of industrial projects
2. Diagnostic study
3. Market study and research
4. Technical evaluation
5. Financial evaluation
6. Preparation of business plan etc.

• Sub-sectoral study

1. Case study of NGOs
2. Designing of IGA projects and RGPs
3. Economic impact monitoring
4. Institutional self sufficiency analysis
5. Project impact monitoring
6. Situational analysis

• Survey and research

1. Market survey
2. Baseline survey etc.

• Transfer of foreign technology

Through NMCP, MIDAS provides volunteer advisors to interested Bangladeshi companies/organizations

• HRD and training

Training courses, workshops, seminars are regularly offered by MIDAS particularly in the following fields:

1. Entrepreneurship development
2. New business creation
3. Business improvement
4. Business management
5. Marketing and sales
6. Enterprise development and financing
7. Financial analysis and management
8. Skill development
9. Credit management
10. Training of trainers (TOT)
11. Event management etc.

• Special projects

MIDAS assists donors, GOs and NGOs in finding new ways to channel resources to the small industry sector. Special projects already implemented are:

1. Textile Development Program (TDP)- sponsored by Food Foundation
2. Small Enterprise Development Project (SEDP)- sponsored by NORAD
3. Business Advisory Services Center (BASC)- sponsored by USAID
4. Local Rural Poor Employment Promotion (LORPEP)- sponsored by DANIDA
5. Promotion of Private Sector-B (PPSB)- sponsored by GTZ

• Information services

MIDAS provides useful information services through its rich technical libraries in its Head Office and Regional Offices.

MIDAS library has: 7000 books, 1000 journals, 1200 microfiche titles, 219 subjects’ files and 1920 projects profiles.

      MIDAS is the sole distributor in Bangladesh of-

1. The World Bank Publications
2. The IMF publications
3. World Trade Organization (WTO) publications
4. Asian Development Bank (ADB)

In addition selected in-house research reports are sold at a nominal price.

Notable clients:

UNDP, The World Bank, The Asia Foundations, The Ford Foundation, UNICEF , BIDS, BATB, ESCAP, ILO, USAID, BRDB, BSEC, UNFPA, MCC, DANIDA, YWCA, RDRS, BRAC, IPDC, GTZ, IDE, NORAD, WIF, BCIC, SABINCO, CARITAS, Technonet Asia, IVS, PACT-Bangladesh, Proshika, ICDDRB, CIDA, ITDG, Sonali Bank, SMC, JMS, JOBS/USAID, The Canadian High Commission, The royal Netherlands Embassy etc.

MIDAS implements programs with its own pool of experienced and qualified professionals who have expertise in Business Administration, Economics, Engineering, Finance, Management, Marketing, Statistics, Sociology, Information, Accounting, Law, Applied Physics etc.

 MIDAS Financing Limited (MFL):

MIDAS Financing Limited (MFL) is a Public Limited Company by shares. It was duly incorporated vide Registration No C- 28204(2250)/95 of 15 May 1995 under section 150 of the Companies Act 1994. The Company obtained license No FID(L)/22 of 11 October 1999 from Bangladesh Bank to operate as anon banking financial institutions Act 1993. The Company is a publicly traded company and its shares are listed in the Dhaka Stock Exchange Ltd.

Lease Financing:

MIDAS Financing Limited (MFL) extends lease financing facility to micro, small, and medium enterprises in the manufacturing and service industries sectors and also to individuals and institutions.

Terms and Conditions of this particular Scheme:

• Lease period: 2-5 years
• Installment: Monthly
• Implementation Period: 3 months
• Lease/Security Deposit: Two rental installments
• Terminal Value: 1-3% of lease amount
• Appraisal Fee: 0.2% of lease amount (Tk. 2,000 to 20,000)
• Security: Personal/Corporate and Bank/Insurance Guarantee or Marketable Securities or Mortgage of Land and Building

Advantages:

• Easy terms and conditions
• Simple processing
• Friendly and fair environment
• Prompt service
• Continuous support

Lease Items:

• Capital Machinery
• Heavy Construction Equipment
• Generator, Transformer, Lift and Boiler
• Air-Conditioning and Refrigeration Equipment
• Medical Equipment
• Vehicles
• Agricultural Equipment

Micro Enterprise Development Initiative (MIDI):

MIDI is a special credit program of MIDAS Financing Limited (MFL). Under this program short-term and medium term loans are provided on easy terms to micro enterprises. The main objectives of MIDI are to create employment opportunities and develop entrepreneurial skills among small business persons, especially women.

Terms and Conditions:

• Legal status of the project: Proprietorship, Partnership, Private Limited Company
• Loan Size: Tk. 50,000- Tk. 1,000,000
• Service Charge: 15% per annum (simple) on reducing balance
• Rebate on Service Charge: @ 5% service charge for timely repayment of loan
• Loan Repayment Period: 1-4 years
• Project Implementation Period: 3 months
• Security of Loan: Personal guarantee of the sponsor, Personal guarantee in favor of the sponsor from an acceptable person
• No collateral security needed ( upto Tk. 500,000)
• Loan Application Fee: Tk. 100 (non-refundable)
• Project Appraisal Fee (non-refundable): @ 1% of the loan amount for new loans and 0.5% for the repeat loans

 MFL Investment Scheme:

The rapidly growing MFL offers an excellent opportunity of secure investment with superior return to individual and organizational investors under its Investment Scheme.

Main Features of the Scheme:

• Fund receive under an agreement
• Period Investment: 1 year (automatically renewable)
• Amount of Investment: Multiples of Tk. 1 lac and 5 lac
• Rate of Return: 11%
• Payment of return: Half-yearly, Quarterly and instant on the due date

Consumer Credit Scheme:

MIDAS Financing Limited (MFL) introduces Consumer Credit Scheme to fulfill the dream of middle class and lower middle class peoples. The main objective of this particular scheme is to provide loan facilities to the limited income group and also help the people to lead a smart life. Under this scheme MFL provides loans to acquire/procure consumer durables households, etc. to help the borrowers in provide their standard of living.

Characteristics features of CCS loans:

• Loan size: Tk. 10,000-Tk.100,000
• Repayment period: 1-3 years
• Mode of Payment: Monthly installment
• Equity contribution: 15%-30% of the purchase price of the item
• Service charge: @ Tk. 11%

 Small Enterprise Development (SED) Program:

MIDAS carries out practice-oriented studies on small-scale industrial sub-sectors that have potential for the growth and employment generation. MIDAS conducts such studies to seek and identify potential productive linkages among micro, small and medium enterprises, and to explore new products, production processes, marketing strategies, financial arrangement, etc. After considering the above things MFL are introduce the SED Program. Under SED Program fixed and working capital loans are provided to small medium enterprises.

Characteristics features of SED loans:

• Maximum loan size: Tk. 100 million
• Debt-equity ratio: 70:30
• Repayment period: 10 years including a maximum implementation period of 2 years
• Mode of repayment: Monthly/Quarterly/Yearly
• Service charge: @ 15% (simple) p.a. (a rebate @ 10% of service charge is allowed for timely repayment).

Types of Project Finance:

• Labor intensive
• Innovative
• Replicable
• Local demand based/export oriented
• Local resource based
• High socio-economic value additive

HOUSING LOAN SCHEME:

Midas Financing Limited (MFL) is a leading financial institution of the country licensed by Bangladesh Bank under the Financial Institutions Act 1993. MFL Housing Loan Scheme has been launched to fulfill the dream of the limited income people by extending financial support in the form of term loan for constructing a house or/and purchasing an apartment or a readymade house and above all commercial spaces.

Eligibility:

Any Bangladeshi citizen within the age bracket of 30-55 years with recognized sources of income can apply for loan under this scheme. Main considerations for approval of loan are capability of repayment and the legal and structural condition of the property proposed as security.

Eligibility for loan is judged on the basis of age, monthly personal and family income, arrangement of own investment, assets and liability position, job/business status, nature of income and savings habit of the applicant.

Size of the Loan:

The amount of loan shall be from Tk. 3.00 lacs to Tk. 30.00 lacs but not exceeding 50% of the construction cost or purchase price of the property.

Term of the Loan:

The loan along with the interest is repayable in equal monthly installments over 3 to 15 years.

Rate of Interest:

The rate of interest is 14.00% per annum. A rebate @ 3% on interest is allowed to good borrowers for timely repayment of all installments. In that case the effective interest rate will be 13.58% per annum.

Disbursement of Loan:

The sanctioned loan will be disbursed at a time or in installments after full investment of the borrowers’ equity.

Advance Repayment of Loan:

The loan installments can be paid in advance any time before its maturity. In case of advance payment, the amount should be equal to 3 (Three) or more installments.

Total loan can be repaid any time before maturity and in that case no interest for the residual period will be charged.

Security:

The property itself shall remain mortgaged with MFL till liquidation of the loan. Any expenses for mortgage and documentation shall be borne by the borrower.

Property Insurance:

The property should be insured with Insurance Company acceptable to MFL to cover the risk of probable hazards (fire, earthquake, etc.) at the borrowers expenses.

Loan Processing Expenses:

Application: A non-refundable amount @ 0.50% of the loan applied for (minimum Tk. 2,000/= but not exceeding Tk. 5,000/=) is payable at the time of submission of application.

Appraisal expenses @ 1% of the loan sanctioned is payable while accepting the sanction letter.

SWOT ANALYSIS OF MFL:

SWOT Analysis is the key for determining the present condition as well as future prospect of any company whether it is service or manufacturing concern. As described earlier MIDAS Financing Ltd. is a leading non-bank financial institution of the country operating for more than five years. Certainly it has some key area of operation on which it stands and also has some prospective field to improvise its financial strengths. In below the key of strength, weakness, opportunity and threats of MIDAS Financing Ltd. related to its operation described shortly.

Strength: 

Strengths of MIDAS Financing Ltd. are as follows

1. Large and diversified client base. As a result the all types of clients can easily get the services of the company.
2. Very well renewed in the industry as the pioneer of some micro scheme for financial improvement of retail businesses.
3. Diversified product to enhance the strength of the financial base of the company. As a result a practical portfolio return can ensure.
4. A practical and client oriented operating procedure to deal with investment proposals.
5. The board of directors of the company comprises of frontier business and political personnel that directly contributes towards smooth operation of the company.
6. Employees of the company came from leading institutions of the country and they are very well dedicated towards the gradual improvement of the company.
7. Flexible and friendly environment realizes best output from employees of the company.
8. The company is leading the industry in terms of capital mix by comprising most paid up capital.
9. The average cost of capital of the company is low in compare to other companies of the same industry.

Weakness: 

Weakness of the company described as below:

1. The initial screening process in assessing client is very lengthy. As a result the average processing period for file is very long.
2. The allocation of job among different level of employees is not organized. As a result employees are often rest with repeat or no job.
3. There is no visible standard operating procedure to done the job. This often leads to poor customer service.
4. Centralized management system keep talent employees out of key functional areas where participation can make greater improvement for overall activities.
5. The organizational culture is directed to the particular segment of the client base.
6. The modern concept of customer service tools like computerized operating system, decorative and catchy office furniture is not visible in the organization.
7. The management of the company very often fails to make quicker decision for investment and other key functional proposals.

Opportunity:

1. The company can enhance its service range by providing new products for its customers.
2. The concept of reference marketing can be greatly exercised by recognizing customers’ contribution.
3. The company can adopt standard operating policy by assigning tasks to the people on ability to perform basis.
4. The company can improve its image in the mind of customers by changing its traditional gate up and by increasing the speed of customer service.
5. The company can increase the attachment of its employee towards its improvement by recognizing their contribution through verbal and financial incentives.
6. The company has the opportunity to spread its services to the doors of country people by opening new branches and by adopting massive marketing strategy.

Threats:

1. At present the industry contains many players and it is likely that in coming year the number will increase at alarming rate.
2. Some companies are much specialized in specific sectors that the company like this is facing trouble in maintaining customer base.
3. The industry players are changing their technology continuously. This is a very special threat for this company as it’s mostly ignores technological changes.
4. Most industry exercise discretionary policy for customer services. But the company has the policy of fixed customer service irrespective of client profile.
5. Some ongoing scheme of the company are facing acute customer crisis. In coming future the problem may become more acute and may leads to close of those schemes.
6. The key employees of the company may leave if it fails to adopt market and performance based compensation package.

Recommendation:

1. Should be care about the organization activities to maintain the reputation in the market.
2. They need to ensure less time in processing purposes to provide better service to its clients.
3. Needs to properly defined and ensure the practice of job description and job specification among the employees.
4. They should take some early initiatives to improve the customer care service.
5. Needs more enthusiasm to the management of the company to take quick management decision.
6. They can take some early initiatives to open several branches around the country to provide its service to the clients.
7. They should be careful about the marketing strategy to ensure its smooth operation in the competitive market.
8. They should be restructured the competitive compensation package to reduce the employee turnover rate.

 CRITICAL ANALYSIS OF SOME DEVELOPERS:

To prepare this report we have surveyed 55 developers’ houses through our questionnaire and also consider all the observations, and discussions among the management people of several developers firms. From the above procedures we have found so many things that indicate the present activities and performances of the developers, their growth and overall industrial trends.

To analyze the above things we have segmented the developers based on some indicators. Here we segmented them based on their ongoing and upcoming projects, total no of handed over projects, types of projects they doing and also their locational preferences.

The over all trends of the industry shows us that the expansion of this industry highly depends on the preferences of the location. Most of the developers’ houses prefer those places where customer demand is very high and this locational preference varies on the basis of social status and lifestyles of the clients. The trend shows that in early 80’s to early 90’s most of the developers developed their projects in Segunbagicha, Shantinagar, Banani, Gulshan.  But this preferences change in late 90’s and at that time developers developed most of their projects in Dhanmondi, Maghbazar, Gulshan-2, Baridhara. In 2000 -2005 we found that most of the developers’ houses chose Uttara as their prime location. The lack of availability of the land is one of the factors to choose Uttara and some other areas that are bit outside from Dhaka city. Most of the places of the Dhanmondi and some other prime point like Gulashan, Banani, Baridhara, Mohammadpur, Lalmatia, Segunbaghicha, Malibagh are failed to provide free land to develop several projects and this why the developers are choose Uttara and some other location of bit out side Dhaka because there they get free land to develop their projects and also now a days the city dwellers preferences bit changes because they prefer silent and pollution free areas for their residence place. And developers’ houses consider all this factors to develop their projects.

This industry also ensures the growth of some other industries like housing finance industry, ceramic and tiles industry, cement industry, and many more. It has a great contribution to the country economy because this industry creates a lots of employments opportunities.

Now we are going to interpret some developers’ houses present status based on some criterion:

13.1 Ten – Twenty (10-20) handed over Project of different Developers’

In this section we just consider those particular developers house that has 10-20 handed over projects. Here we found that Building for Future Ltd. handed over maximum 18 projects where Rangs and Living Stone only handed over 10 of their projects. The number of handed over projects shows that these particulars groups are successfully handed over their projects and it also indicates that their over all quality of the projects is good, because there are some developers who operating their business for a long time period but failed to handed over their projects on time and also the numbers of handed over projects is below 10 and this trend indicates that their quality and credibility to the clients group is not good. But these developers’ houses started their business in the real estate development sector since late c1990’s and gain remarkable clients credibility. Some of the developers among this groups not only operating their business only in Dhaka they also expand their business in Chittagong and Building for Future and Assurance Developments has more than 3 projects in Chittagong and both the firms only operates their business in apartment development sector. On the other hands Rangs operates their business both in apartment and commercial or shopping/complexes projects.

13.2 Over Twenty (20) handed over Project of different Developers’

In this segment we consider those developers’ that already handed over more than 20 projects where both the apartment and shopping complexes included. Most of the developers’ of this group are very renown and operating their business more than 20 years.  Under this group Amin Mohammad and Sheltech are the most experienced developers in terms of inception period but the average inception year of the developers’ of this group is 1980-1990. Though some developers like Navana and Everset Holdings, UDDL started their business in late 1990’s but their over all performance is very good and their projects quality is highly accepted to its clients. On the other hand ADTL, ADDL, SEL and Building Technologies & Ideas Ltd. is very much quality concern they always serve their clients through better quality, luxurious internal fittings and above all architectural design. All the developers of this group are very sensitive to the preferences of their projects location and they are very much concentrating to expand their business with in Dhaka city. Only Amin Mohammad Foundation started their business in Chittagong city in this current year and they have 5-7 ongoing projects over there. The target customer of this particular developers’ varies based on projects location but they basically target upper-middle class and upper class rather than middle class and lower middle class. Based on their target group their price level is bit high than other developers’ and some how it around Tk. 2,800/= to Tk. 3,500/= but some times it varies based on project location and the site of apartment. Under this group Sheltech handed over maximum 65 projects where UDDl handed over 27 projects.

13.3 Ten – Twenty (10-20) Ongoing & Upcoming Project of different Developers’

Here we consider all those developers’ that has 10-20 ongoing and upcoming projects. In this group there are some developers that started their operations in 2000-2003 and the growth rate of these developers are very remarkable. Like, Union Development Technologies Ltd. (UDTL), Gazi Properties, Alien Properties, Amicus Properties. Under this group some of the developers are more concentrate to develop their commercial projects. Generally this particular group prefers Uttara, Dhanmondi as their suitable project location for upcoming projects and their most of the on going project’s location are in Lalmatia, Dhanmondi, Mohammadpur. Under this group Rangs, Building for Future and Bashati has a reputation to hand over their projects within time that they mention to their clients. The others developers’ are also performing well but some of them not yet handed over their projects. In general this group is in very growing position but under this group there are also few developers’ those are already established them selves and gain the clients credibility. Some of the up growing developers’ of this group are very attractive clients for the housing loan financing institutions because their in general target group of customer are from middle class, and upper middle class. This particulars client generally takes the housing loan facility from the housing financing institutions.

13.4   Over 20 Ongoing & Upcoming Project of different Developers’

This group is the most prominent group of the developers’ that we have covered in our survey. Here all the developers’ have reputation to its clients about their overall quality level, their location preferences, adequate facility and above all secured property documentation. This particular group both use the private hold property as well as lease hold property as their projects and their documentation is much secured. For their well reputation they can also charges bit higher price but it depends on their projects status. The target customer of this group is moreover upper class, upper-middle class people. But some of them also develop their projects to serve the middle class people and BDDL is one of them. BDDL have already targeted this middle class people and they develop some of their projects in Khilgaon and Malibagh where they targeted the middleclass people. On the other hand ADTL and Building Technologies & Ideas Ltd. targeted the upper class people of the society. Most of the projects of these two developers are in Baridhara, Gulshan, Banani and right now in Uttara. These places are highly demandable areas for the upper class people and their over all quality is luxurious enough than some developers’ of this group. For the above reason they also charges bit high price to its customer. They are very much concentrating to expand their business in the several areas of Dhaka city rather than other metropolitan city. But some of the developers’ like Amin Mohammad, Building Technologies & Ideas Ltd. and Navana already expand their business out side of Dhaka and they started their business in Chittagong. Right this moment ADDL, ADTL and Oriental have more upcoming and ongoing projects and these projects are scattered in several areas of Dhaka city. On the other hand Mega and UDDL also have more than 20 above projects but they are only preferred Dhanmondi and Lalmatia as their project location. Their target customers are those middle and upper middle class people who are willing to buy their apartment in these two areas.

 FINDINGS:

1. There are 378 Developers’ house operates there business in Dhaka city.
2. Some of the developers’ operating there business in Dhaka, Chittagong and Sylhet
3. There are only 168 developers’ are enlisted in the REHAB
4. This particular business depends on the location
5. Price, Size, and other facilities depends on the Brand image of Developers’ and above all the particular location of the projects
6. Some of the organization right now prefer land project rather than apartment project
7. Most of the Developers’ concentrate their business in apartment projects in prime location
8. Most of the developers’ avoid Commercial projects and they treat it as a risky project
9. There are so many developers’ who operates there business in land development, apartment development, commercial spaces etc.
10. All most all developers take 2-3 years time to hand over their projects but some times it differs based on the project profile
11. The average size of the apartments depends on Developers’ profile but usually it is 1400Sft to 2100Sft.
12. Most of the developers prefer to developed six storied building but it differs based on location
13. Some of the renown and large developers’ house prefer commercial projects as well as apartment projects
14. Very few developers are willing to operates their business out side Dhaka
15. All most all large and up growing developers needs project finance and also needs home loan for their potential clients
16. There are so many developers’ who operates there business in this sector since last 20 -25 years.
17. For project finance they generally prefer Bank and large Financing Institutions.
18. A large no of Developers’ are willing to work with NHFL, DBH and IDLC but they are unaware about the Home Loan Scheme of MFL
19. All most all renown and up growing developers’ get some specials benefits like less interest rate, quick service etc. from the Housing Finance Institutions.
20. Most of the Developers’ treat MFL as an NGO
21. Some of the developers are very much selective in Location like UDDL only prefer Dhanmondi as their particular projects
22. Some of the developers think we take more time to disburse loan
23. Some of the engineers firms express themselves as an developers’ house
24. Some of the developers’ house never handed over their project on time
25. All the renown Firms are very much concern about the quality of the raw materials
26. Most of the developers recently prefer Uttara as their project location
27. Some of the developers’ jointly work with others institutions like Multiplan Jointly work with Bangladesh Red Crescent Society to develop Multiplan Red Crescent City
28. Very few developers work with MFL and some of them are bit dissatisfy about our disburse procedures
29. Most of the Developers’ are use lease hold property rather than private property
30. Usually most of the developers prefer Dhanmondi, Ghulshan, Baridhara, Lalmatia, Uttara, Niketon, Malibagh, Shantinagar, Shegunbaghicha, Wari and some other prime point.
31. All most all developers’ house work with the Housing Finance Institutions but very few go for MoU
32. Most of the developers’ are willing to go for MoU but the financing institutions need to ensure their proper customer service
33. Most of the developers’ are worried about registered mortgage for disbursement procedures
34. Most of the developers prefer equity mortgage and for this reason they are worried about registered mortgage because it take more time to disburse
35. Some developers’ only finished 2 or 3 projects and stopped their business
36. There are some developers’ who not yet finished or handover their project but have some prospect to satisfy the customer
37. Some of the developers’ frequently participate in several fair like REHAB fair, REDBD fair etc.
38. Some of the developers’ willing to work with us but they need more communication in both top management level and mid management level.

CONCLUSION:

MIDAS Financing Ltd. is one of the highly potential non-bank financial institutions and it has several schemes. Some of the schemes of the organization have a great potentiality but they need some early initiative to develop its schemes through massive marketing, build up customer awareness and take some competitive advantages. Housing loan Scheme one of the most potential schemes of this organization and this schemes growth depends on real estate development sector. If the department build up a good relationship with the several developers house and also provide some extra facilities to the clients in terms of less interest rate, less processing period then they will able to develop the portfolio of this schemes. By analyzing the present status of several developers firms we found that there is a high demand of the MFL HLS offer in the market but needs some early initiatives to develop its sales force and ensure the better customer service that help the organization to go for a good position in the industry for near future. So, we think management of the organization will be take some initiatives by considering these circumstances and ensure smooth sustainability of the housing loan schemes of the organization.