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Financing Real Estate in Bangladesh: Prospects, Problems and Programs (Part 01)
Golam Moula Mondal
This is Md. Golam Moula Mondal. I have completed BBA (Major in Finance and Banking) from Patuakhali Science and Technology University. 
By Golam Moula Mondal
Published on 6 December 2012
Financing Real Estate in Bangladesh: Prospects, Problems and Programs. Real estate financing is a relatively new concept in Bangladesh. Main constraint in housing production is the high cost of housing in relation to incomes. The lack of housing finance exacerbates the problem.

Financing Real Estate in Bangladesh: Prospects, Problems and Programs
Table of Contents
•    Letter of Transmittal
•    Acknowledgement
•    Abstract
•    Key Words
•    Acronyms

1.1     Introduction
1.2     Objectives of the study
1.3    Methodology of the study
1.4     Limitations of the study

CHAPTER-TWO: Housing Financing: An Overview
2.1 Housing Finance Systems in the Developing Countries
2.2 Sources of housing financing in Bangladesh
2.3 Bangladesh House Building Finance Corporation
2.4 The banking sector
2.5 Housing cooperatives and credit unions
2.6 Main issues in expanding the formal housing finance system
2.7 Alternative housing finance system
2.8 Policy and Programs in Real Estate Financing
3.1 Recommendations
CHAPTER-FOUR:  CONCLUSION                                
4.1 Conclusion

A.1 Bibliography

Housing issues are a part of economic, financial and social policies of a country. Considerable research interest is attached to the question of how the acquisition of residential real estate has been financed. The main constraint in housing production is the high cost of housing in relation to incomes. The lack of housing finance exacerbates the problem. The present housing finance system in Bangladesh is extremely small and highly segmented: Formal mortgage finance is only available to households with incomes above BDT 25,000 per month (well above the 10th percentile of the urban income distribution) and is restricted to selected housing sub-markets in Dhaka. Government subsidized housing finance through the Bangladesh. House Building Finance Corporation (BHBFC) is most prevalent, while the nationalized commercial banks (NCBs) are decreasing their housing loan portfolios. Recently, new private housing finance institutions have started to operate in this market targeting middle income households. Non-collateralized credit for house construction by micro finance institutions (MFIs) is only available to a small proportion of poor rural households that have participated in income-generation credit programs. All other households that aspire to home-ownership are dependent on their own savings with additional contributions from relatives, friends or employers, or short-term money-lenders. Given the lack of credit and the overall low levels of income, informal and non-permanent housing prevails, both in urban and rural areas. The government has to assess and decide on housing financing policies, which, in conjunction with the evolution of private sector housing financing, will most effectively and efficiently support housing demand and stimulate supply and rehabilitation, i.e. improve the national housing situation.

Key Words: Real Estate; real estate financing; interest rate subsidy; subsidy targeting; mortgage market. Financial management decision, profitability, working capital management, financial reporting

NCBs              Nationalized commercial banks
BHBFC          Bangladesh. House Building Finance Corporation
MFIs               Micro finance institutions
FCBs               Foreign commercial banks    
SBs                 Specialized banks
PCBs              Private commercial banks in Bangladesh
NHFIL            National Housing Finance and Investment Ltd
NPLs              Nonperforming loans
NGOs             Non Government Organizations


Housing not only provides physical shelter but also has significant impact on the lives of the dwellers in terms of skills enhancement, income generation, increased security, health, self confidence and human dignity. Housing finance development, therefore, plays a role in boosting equitable economic growth and reducing poverty through helping households build assets, improving living conditions, empowering the middle- and lower-income population, and strengthening communities. Despite its considerable economic and social potential, housing finance remains underdeveloped in Bangladesh. The House Building Finance Corporation (HBFC), which has traditionally dominated the housing finance sector, is now a declining player, in part because of decreasing government support, and in part because of its history of operational ineffectiveness. In its place, domestic and international commercial banks and a few new specialized institutions have entered the market, and have a significant potential for growth.

Objectives of the Study
Real estate financing is a relatively new concept in Bangladesh. Researching on this issue is even newer in our country. A few comparative studies have been conducted on housing finance, and most publications are “status reports” offered without an analytic framework. One of the weaknesses of the existing comparative studies is the poor quality of the data – a consequence of the delayed changes in the governance of housing. Till date, to our knowledge, two studies have been conducted so far, one by Asian Development Bank (ADB) in 1993 and the other by UNDP/UNCHS (Habitat) in 1998 which have shaded some lights on this issue, unfortunately most of the information used in these studies is now outdated. The basic objective of this study is to understand the real estate financing sources and the problems associated with the available financing options in Bangladesh. To accomplish this objective, following specific objectives have been covered:

•    To examine various formal and alternative sources of real estate financing in Bangladesh
•    To discuss some major issues and problems in expanding formal housing finance system in Bangladesh
•    To critically evaluate some important policy measures necessary to resolve these problems
•    To identify strategies that can contribute to the development of real estate financing in Bangladesh
•    To acquire knowledge about financing in real estate.
•    To gather practical knowledge along with academic knowledge.
•    To comprehend practical condition of housing.
•    To find out the environment threat and opportunities related with financing Real Estate in Bangladesh.

Methodologies of the Study
This paper has reviewed extensively the real estate financing issues providing updated data and literatures considering both developed and developing real estate financing markets along with discussions regarding problems, prospects and some policy implications of this sector in Bangladesh. Information has been sourced from academic journals, white papers, industry portals, government agencies, trade associations, industry news and developments. A critical evaluation of the existing literatures on the issue is being provided for better understanding and application of the topic under review.