Underrating Procedures of Mortgage Loan in Real Estate SectorDefinition of Mortgage

In its most general sense, a mortgage is created in a transaction whereby one party pledges real property to another party as security for an obligation owed to that party. A promissory note is normally executed contemporaneously with the mortgage. This note creates the obligation to repay the loan in accordance with its term and is secured by the mortgage.

A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan. The mortgagor's lien on the property expires when the mortgage is paid off in full.

Mortgage Requirements

Mortgage Requirements guide a borrower’s ability to repay the loan as well as the lender’s ability to lend. Whether buying a home or refinancing an existing home you must know the restrictions that will allow you to make better long-term financial decisions.

Whether a printed form of mortgage instrument is used or an attorney draws up a special form, the following subject’s should always be included:

1. Appropriate identification of mortgagor and mortgage.2. Proper description of the property that has a lien.3. Covenants of seizing and warranty.4. Provision for release of dower rights.5. Any other desired covenants and contractual agreements.

All of the term and contractual agreements recited in the note can be induced in the mortgage as well by making reference to the note in the mortgage document.

Mortgage Loan Process

This section will give you a good Idea of the mortgage process and the time frame involved. The knowledge will help you feel more comfortable with your lender as you go through the steps and it will also help you spot any red flags along the way if they should appear.

The type of loan you are applying for will determine the length of time required to approve and close your loan. Different loan types require different documentation.

As an example, if you have good credit and lots of equity in your home and you are applying for a 2nd mortgages the lender may not require an appraisal. If you are getting a Line of credit on your equity, that documentation can be completed with some lenders in a matter of weeks. If you qualify for automated processing (DU, or Loan Prospector) it is sometimes possible to close in less than 60 days.

Your loan officer should walk you through the process up front so you will know what to expect. Typically, most loans take 6 to 10 weeks to close.

The following Video covers tips for the loan office that should help get your loan approved with fewer delays.

Here is the mortgage loan process:

Mortgage Application

The mortgage application process is where you fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements. (Bank statements; pay stubs, W2s, etc…) Obviously if you are doing this through the mail it can take a week or more but if you go into the office it usually only takes an hour or so. You should understand that the next process cannot begin until these documents are completed and or received.

Mortgage Processing

When all of your documentation is received it then goes to a processor who verifies and validates all of the information to be true and correct. Verification requests may be sent to your employers, mortgage holder/landlord and lending institutions. This is done by fax when possible. It is usually during this time frame that the appraisal and the title policy are ordered.

When all the information is collected the processor then verifies that basic lender loan requirements have been met. The file is then packaged in a manner the lender specifies. The completed package (including the appraisal and title report) is then sent to the underwriting department either in house or to a lender-specified location.

The processing of your loan usually takes about one to two weeks but it can often be delayed when third parties do not respond to the validation requests or appraisals are delayed. If your loan qualifies for DU (Desk top Underwriting) or Loan Prospector, these are computer automated systems, the documentation requirements are often cut in half and the process can be completed in three to five days depending on the volume of loans the processor has.

Mortgage Underwriting

The underwriter reviews your loan package to make sure it conforms to all the guidelines required for that loan product. They also review the appraisal and title report and may do additional validation of employment, mortgage payments, and credit. And, anything else they feel is necessary to document your loan. They have ultimate power and decision authority over the approval of your loan. The time required to do this is driven by the volume in the market. If the market is flooded I have seen it take two weeks but under normal conditions it only takes three to five days.

Automated Mortgage Underwriting

Most lenders today use Automated Underwriting (by computer). The advantage is less documentation and it speeds up the process. The computer actually makes the approval decision and the underwriter only reviews the supporting documentation and the appraisal. However, if any documentation is missing, inaccurate, or does not agree with the 1003 (application), the loan will be kicked out of this system until documentation requirements are met or the loan is turned down or resubmitted. This can cause delays but they are usually resolved quickly. Automated Underwriting can be completed in just a matter of hours. But, ..If the market is flooded expect it to take longer.

Conditions to Close

When the underwriter is done reviewing your loan she will send "conditions to close" to your loan officer. These are normally just requirements for further documentation to support your file. When these needs have been satisfied the underwriter will give a final approval and "clear to close".

Clear To Close

When the loan officer gets the clear to close he then schedules and coordinates with all the parties the time and location to sign the final documents to close the loan. This normally only takes an hour to schedule.

Draw Documents

When everything is scheduled the lender then draws the document package and sends it to the closing company. This can be done by overnight delivery, fax, or electronically. It can take one to two days. You meet, sign the papers, and pick up the keys.

Underwriting

Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the eligibility of a customer to receive their products (equity capital, insurance, mortgage, or credit). The name derives from the Lloyd's of London insurance market. Financial bankers, who would accept some of the risk on a given venture (historically a sea voyage with associated risks of shipwreck) in exchange for a premium, would literally write their names under the risk information that was written on a Lloyd's slip created for this purpose

Mortgage underwriting

Mortgage underwriting is the process a lender uses to determine if the risk (especially the risk that the borrower will default[1] ) of offering a mortgage loan to a particular borrower is acceptable. Most of the risks and terms that underwriters consider fall under the three C’s of underwriting: credit, capacity and collateral.

To help the underwriter assess the quality of the loan, banks and lenders create guidelines and even computer models that analyze the various aspects of the mortgage and provide recommendations regarding the risks involved. However, it is always up to the underwriter to make the final decision on whether to approve or decline a loan.

Critics have suggested that the complexity inherent in mortgage securitization can limit investors ability to monitor risk, and that competitive mortgage securitization markets with multiple securitizes may be particularly prone to sharp declines in underwriting standards as lenders reach for revenue and market share. Private, competitive mortgage securitization is believed to have played an important role in the U.S. subprime mortgage crisis. [2]

Underwriting Guidelines for the Average Mortgage

Last Updated: May 25, 2011

Understanding mortgage underwriting guidelines will help you understand your loan options when purchasing or refinacing a home. Now that you have found your dream house, you are going to need to apply for a mortgage loan. Your realtor will either recommend a banking institution or you may already have one in mind. You will be dealing with a loan officer who will be compiling all the data on you to see if you qualify for a loan to pay for this house. All lending institutions have different Underwriting Guildelines set in place when reviewing a borrower's financial history to determine the likelihood of receiving on-time payments. The primary items reviewed are:

Income Debt Credit History Savings Debt vs Income Ratio

Income

Income is one of the most important variables a lender will examine because it is used to repay the loan. Income is reviewed for the type of work, length of employment, educational training

required, and opportunity for advancement. An underwriter will look at the source of income and the likelihood of its continuance to arrive at a gross monthly figure.

Salary and Hourly Wages - Calculated on a gross monthly basis, prior to income tax deductions.

Part-time and Second Job Income - Not usually considered unless it is in place for 12 to 24 straight months. Lenders view part-time income as a strong compensating factor.

Commission, Bonus and Overtime Income - Can only be used if received for two previous years. Further, an employer must verify that it is likely to continue. A 24-month average figure is used.

Retirement and Social Security Income - Must continue for at least three years into the future to be considered. If it is tax free, it can be grossed up to an equivalent gross monthly figure. Multiply the net amount by 1.20%.

Alimony and Child Support Income - Must be received for the 12 previous months and continue for the next 36 months. Lenders will require a divorce decree and a court printout to verify on-time payments.

Notes Receivable, Interest, Dividend and Trust Income - Proof of receiving funds for 12 previous months is required. Documentation showing income due for 3 more years is also necessary.

Rental Income - Cannot come from a Primary Residence roommate. The only acceptable source is from an investment property. A lender will use 75% of the monthly rent and subtract ownership expenses. The Schedule E of a tax return is used to verify the figures. If a home rented recently, a copy of a current month-to-month lease is acceptable.

Automobile Allowance and Expense Account Reimbursements - Verified with 2 years tax returns and reduced by actual expenses listed on the income tax return Schedule C.

Education Expense Reimbursements - Not considered income. Only viewed as slight compensating factor.

Self Employment Income - Lenders are very careful in reviewing self-employed borrowers. Two years minimum ownership is necessary because two years is considered a representative sample. Lenders use a 2-year average monthly income figure from the Adjusted Gross Income on the tax returns. A lender may also add back additional income for depreciation and one-time capital expenses. Self-employed borrowers often have difficulty qualifying for a mortgage due to large expense write offs. A good solution to this challenge used to be the No Income Verification Loan, but there are very few of these available any more given the tightened lending standards in the current economy. NIV loan programs can be studied in the Mortgage Program section of the library.

Debt

An applicant's liabilities are reviewed for cash flow. Lenders need to make sure there is enough income for the proposed mortgage payment, after other revolving and installment debts are paid.

All loans, leases, and credit cards are factored into the debt calculation. Utilities, insurance, food, clothing, schooling, etc. are not.

If a loan has less than 10 months remaining, a lender will usually disregard it. The minimum monthly payment listed on a credit card bill is the figure used, not the

payment made. An applicant who co-borrowed for a friend or relative is accountable for the payment. If

the applicant can show 12 months of on-time cancelled checks from the co-borrowee, the debt will not count.

Loans can be paid off to qualify for a mortgage, but credit cards sometimes cannot (varies by lender). The reasoning is that if the credit card is paid off, the credit line still exists and the borrower can run up debt after the loan is closed.

A borrower with fewer liabilities is thought to demonstrate superior cash management skills.

Credit History

Most lenders require a residential merged credit report (RMCR) from the 3 main credit bureaus: Trans Union, Equifax, and Experian. They will order one report which is a blending of all three credit bureaus and is easier to read than the individual reports. This "blended" credit report also searches public records for liens, judgments, bankruptcies and foreclosures. See our credit report index.

Credit report in hand, an underwriter studies the applicant's credit to determine the likelihood of receiving an on-time mortgage payment. Many studies have shown that past performance is a reflection of future expectations. Hence, most lenders now use a national credit scoring system, typically the FICO score, to evaluate credit risk. If you're worried about credit scoring see our articles on it.

The mortgage lending process, once very forgiving, has tightened lending standards considerably. A person with excellent credit, good stability, and sufficient documentable income to make the payments comfortably will usually qualify for an "A" paper loan. "A Paper", or conforming loans, make up the majority of loans in the U.S. and are loans that must conform to the guidelines set by Fannie Mae or Freddie Mac in order to be saleable by the lender. Such loans must meet established and strict requirements regarding maximum loan amount, downpayment amount, borrower income and credit requirements and suitable properties. Loans that do not meet the credit and/or income requirements of conforming "A-paper" loans are known as non-conforming loans and are often referred to as "B", "C" and "D" paper loans depending on the borrower’s credit history and financial capacity.

Here are some rules of thumb most lenders follow:

12 plus months positive credit will usually equal an A paper loan program, depending on the overall credit. FHA loans usually follow this guideline more often than conventional loans.

Unpaid collections, judgments and charge offs must be paid prior to closing an A paper loan. The only exception is if the debt was due to the death of a primary wage earner, or the bill was a medical expense.

If a borrower has negotiated an acceptable payment plan, and has made on time payments for 6 to 12 months, a lender may not require a debt to be paid off prior to closing.

Credit items usually are reported for 7 years. Bankruptcies expire after 10 years. Foreclosure - 5 years from the completion date. From the fifth to seventh year following

the foreclosure completion date, the purchase of a principal residence is permitted with a minimum 10% down and 680 FICO score. The purchase of a second or investment property is not permitted for 7 years. Limited cash out refinances are permitted for all occupancy types.

Pre-foreclosure (Short Sale) - 2 years from the completion date (no exceptions or extenuating circumstances).

Deed-in-Lieu of Foreclosure - 4 year period from the date the deed-in-lieu is executed. From the fifth to the seventh year following the execution date the borrower may purchase a property secured by a principal residence, second home or investment property with the greater of 10 percent minimum down payment or the minimum down payment required for the transaction. Limited cash out and cash out refinance transactions secured by a principal residence, second home or investment property are permitted pursuant to the eligibility requirements in effect at that time.

Chapter 7 Bankruptcy - A borrower is eligible for an A paper loan program 4 years after discharge or dismissal, provided they have reestablished credit and have maintained perfect credit after the bankruptcy.

Chapter 13 Bankruptcy - 2 years from the discharge date or 4 years from the dismissal date.

Multiple Bankruptcies- 5 years from the most recent dismissal or discharge date for borrowers with more than one filing in the past 7 years.

The good credit of a co-borrower does not offset the bad credit of a borrower. Credit scores usually range from 400 to 800. Changes to lending standards are occurring

on a daily basis as a result of tightening lending standards, and can vary from lender-to-lender-- so this information should be considered simply a guideline. For conforming loans, most lenders will lend down to a FICO of 620, with additional rate hits for the lower-end credit scores and loan-to-values. When you are borrowing more than 80%, they typically will not lend if you have a FICO below 680. The FHA/VA program just changed their minimum required FICO to 620, unless you are qualifying a borrower with non-traditional credit. The few non-conforming loan programs that are still available typically require 30% down payment with a minimum FICO of 700 for self-employed and 650 for W-2 employees, and the loan-to-value will change with the loan amount.

A credit score below 600 may require an Alternative Credit mortgage program. Misinformation on a credit report can be repaired! For more information see our credit

repair section. The FTC states, "Credit repair companies take your money and vanish." Anything a

credit repair company does for a fee, a consumer can do for free. Be wary of these guys!

If a borrower falls behind on a payment, the creditor should be contacted as quickly as possible. Most creditors will work with a borrower who makes an initial good faith effort to communicate with them.

Savings

Lenders evaluate savings for three reasons.

1. The more money a borrower has after closing, the greater the probability of on-time payments.

2. Most loan programs require a minimum borrower contribution. 3. Lenders want to know that people have invested their own into the house, making it less

likely that they will walk away from their life's savings. They analyze savings documents to insure the applicant did not borrow the funds or receive a gift.

Lenders look at the following types of accounts and assets for down payment funds:Checking and Savings - 90 days seasoning in a bank account is required for these funds.

Gifts and Grants - After a borrower's minimum contribution, a gifts or grant is permitted.

Sale of Assets - Personal property can be sold for the required contribution. The property should be appraised and a bill of sale is required. Also, a copy of the received check and a deposit slip are needed.

Secured Loans - A loan secured by property is also an acceptable source of closing funds.

IRA, 401K, Keogh & SEP - Any amount that can be accessed is an acceptable source of funds.

Sweat Equity and Cash On Hand - Generally not acceptable. FHA programs allow it in special circumstances.

Sale Of Previous Home - Must close prior to new home for the funds to be used. A lender will ask for a listing contract, sales contract, or HUD 1 closing statement.

Debt vs Income Ratio

The percentage of one's debt to income is one of the most important factors when underwriting a loan. Lenders have determined that a house payment should not exceed approximately 30% of Gross Monthly Income. Gross Monthly Income is income before taxes are taken out. Furthermore, a house payment plus minimum monthly revolving and installment debt should be less than 40% of Gross Monthly Income (this figure varies from 35%-41% contingent on the source of financing).

Example

An applicant has $4,500 gross monthly income. The maximum mortgage payment is:

$4,500 X .30 = $1,350

Their total debts come to:

$500 Car$20 Visa$30 Sears$75 Master Card----------------$625 per month

Remember, their total debts (mortgage plus other debts) must be less than or equal to 40% of their gross monthly income.

$4,500 X .40 = $1,800

$1,800 is the maximum debt the borrower can have, debts and mortgage payments combined. Can the borrower keep all their debts and have the maximum mortgage payment allowed? NO!

In this case, the borrower, since they have high debts, must adjust the maximum mortgage payment downward, because:

$625 debts$1350 mortgage--------------$1,975 - which is more than the $1,800 (40% of gross income) we calculated above.

The maximum mortgage payment is therefore:

$1,800 - $625 (monthly debt) = $1,175

Real estateReal estate is "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; (also) an item of real property; (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings or housing.

Real Estate Sector over view in Bangladesh

Dhaka City, born during the Moghul Empire and grown with the British rule, is expanding rapidly. From the beginning of the 20th Century its growth and latter development is marked with sheer lack of proper and far-reaching planning. The impact is now being felt at the end of the century. Dhaka City is undergoing terrific growth phase throughout the last two decades. While there are so many real estate developers in the market, there are also very few of them who have maintained the quality, safety and customer preference. It is customary in the country that the first day quality and impression is lost after a while when people start getting a bit of familiarity. This happens due mainly to lack of professionalism. Sometimes the consumers here are in a fix to choose a particular brand out of many.

A good number of real estate companies are working under one umbrella association named 'Real Estate and Housing Association of Bangladesh' (REHAB). Almost 83 Companies are at present affiliated with this association, while more than 200 companies are working independently. BTI took a leading role in the formation of the industry association and is one of the founder members of the REHAB.

Objectives:

a) To offer finest apartments in excellent locations to the clients;b) To provide sound construction with aesthetic design to the clients;c) To install best possible fittings and fixtures;d) To satisfy clients by expert-oriented service;e) To help solving the residential problem of Dhaka city;f) To perform social responsibility for a happy future.

Market:

Real estate business especially apartment projects has started in late 1970s in Dhaka City. But from early '80s the business started to grow and flourish. At present, more than 250 companies are active in business but 95% business is still dominated by of top 10 Companies. Present market is growing at the rate 15%.

Reasons for development of the industry:

The main reasons why real estate business developed in Dhaka city are as follows:a) Scarcity of open space in the important areas of the cityb) Hazards of purchasing landc) Hazards of construction of buildingd) Rapid increase in population of Dhaka

e) Decrease in the rate of bank interestf) Price of land and apartments is increasing day by dayg) Rent of the apartments is comparatively higher than the rent of privately constructed flatsh) Open Market Economy. Remittance of foreign currency is very easyi) Securityj) Service facilities such as garbage disposal, central satellite TV connection, apartments services saves time, roof top facilities, lift and so on

Market segmentation:

The market of real estate business sector is highly segmented. This segmentation is mainly based on the location, price of the land, and size of the apartments. The segmented areas are:

a) Segmentation - I :Baridhara, Gulshan, Banani, DOHS, Uttarab) Segmentation - II :Dhanmondic) Segmentation - III :Segunbagicha, Shantinagar, Kakrail, Malibagh, Kalabagand) Segmentation - IV :Mirpure) Segmentation - V :Old Town of Dhaka Cityf) Segmentation - VI :(For office building) Motijheel, Dilkusha, Fakirapool DIT Extension Road, RK Mission Road, Shahidbagh, Kawran Bazar, Pantha Path etc.

Places in Dhaka city where residential and commercial projects has been congregated:

Dhanmondi; Gulshan; Banani; Eskaton; Siddeshawari; Panthapath; Baridhara; Elephant Road; Mirpur Housing Estate, Mirpur; Dilkusha C/A; Kakrail Rd.; Malibagh; Lalmatia; Indira Road; Pallabi, Mirpur; Old Airport Road; Farmgate; Inner Circular Road; Mohakhali; Ashulia, Savar; Kalikair, Gazipur.

The development projects for apartments and residential purposes range from Duplex Home, Triplex Home, Penthouse, Luxury Home, Furnished Apartment, Unfurnished Apartment, to Condominium and Vacation-Resort Property. Commercial projects includes Industrial Shed, Agro Farm House, Warehouse / Godown, Commercial Space, Industrial space, Office Building, Office Suite, Furnished Office, Commercial Showroom, Exquisite Office, Industrial Park, Factory, Lofts, Shopping Center, etc.

General terms and conditions of allotment:

1. Application for allotment of apartments should be made on the prescribed application form duly signed by the applicant along with the earnest money. The company has the right to accept or reject any application without assigning any reason thereto.

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

3. Payments of earnest money, installments, car park costs, additional works and other charges shall be made by bank draft or pay order directly in the name of the respective company against which the receipts will be issued. Bangladeshis residing abroad may remit payments in foreign exchange by TT or DD in the name of the company.

4. Payments of installments and all other charges are to be made on due dates according to the schedule. The company may issue reminders to the allottee, but notwithstanding the issue of reminders, the allottee must adhere to the schedule to ensure timely completion of construction.

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

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

7. Connection fees/charges security deposits and other incidental expenses relating to gas, water, sewerage and electric connections are included in the price of apartments. The company will make those payments directly to the authorities concerned on the allotter’s account.

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

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

11. The possession of the apartment shall be duly handed over to the allottee on completion and full payment of installments and other charges and dues. Till then the possession will rest with the company. If the project is completed before the stipulated time, the allottee shall have to make full payment before taking possession.

12. The allottees will become equally divisible undivided and undemarketed shareholders of total acres of the scheduled land of the project in respective apartment. After all the dues and

installments are paid by the purchaser according to the requirements and schedule for payment and after the completion of the construction, the vendors shall execute a registered sale deed in favor of the purchaser transferring share of land of the project in the demised apartment.

13. After taking over of apartment of the project, the allotter (s) must consult the company prior to undertaking any structural or layout changes within the apartment complex. Failure to do so will be at the sole risk of the allotter.

14. Company shall not be liable if the completion period of the construction of the projects is affected by unavoidable circumstances beyond the control of the company, like natural calamities, political disturbances, strikes and changes in the fiscal policy of the state etc.

15. For the purpose of effective management and maintenance of the building the purchaser of the apartment shall form and constitute a mutual benefit cooperative society under the Co-operative Society's Act 1940. The society shall be entrusted with the management and maintenance of the building. The rules, regulations and by laws of the co-operative society relating to management and maintenance of the building shall be binding upon all the purchasers/owners of the apartments.

HAPTER 1: INTRODUCTIONAt present real estate sector (RES) is one of the booming sectors in Bangladesh. Day by day as time passes on, this sector is becoming healthier since the substantialgrowth of population is creating a tremendous housing problem and due to theincrease in demand of commercial spaces this sector has come into being. This sector  provides an integrated and planned package to resolve these problems.1.1 PurposeThis report briefly reviews on the RES in Bangladesh in recent years and recommendsfor both the real estate developers and the government policy of Bangladesh on RES.1.2 ScopeThe RES has so far spread its wings over Dhaka, Chittagong, Khulna, Rajshahi andSylhet. This report focuses only on the flourishing of real estate business in Dhakaand the real estate developers which are members of Real Estate & HousingAssociation of Bangladesh (REHAB) especially the prominent ones.1.3 LimitationsThis report has been prepared based on secondary data. Concentration of real estate business in Dhaka may not reflect equal urgency in other cities mentioned earlier.This report does not include some of the problems created by illegal and unfair  practices of very few of the developers, which is damaging the image of this sector.1.4 Assumptions

Recommendations of this report are based on the assumptions that REHAB will prevail and RES will keep on flourishing rather than recede or retard

CHAPTER 2: EMERGENCE OF REAL ESTATESECTOR IN BANGLADESHThe concept of RES is developed to resolve the residential facility which is a big problem in a densely populated country like ours. Especially the cities whereunavailability of land tends to rise the tendency of high rise apartments rather than private dwellings.2.1 Existing Housing Situation of Dhaka At present the housing condition of urban area in Bangladesh, in general, is quiteunimpressive. In all metropolitan cities, there is acute shortage of housing supply andthe backlog is continually on the increase. Inadequate supply of dwelling units for middle and low income people and high rental value are among the most severechallenges afflicting urban living in Dhaka. At present in our country the annuallyrequired shelter varies from 3 lakh to 5.5 lakh units. Bangladesh will need to constructapproximately 4 million new houses annually to meet the future demand of the next20 years. Now Dhaka needs 50,000 new houses annually to accommodate its growing population. But the existing annual supply is only 20,000 units. So there is a huge backlog and it is increasing every year.2.2 Why Real Estate Sector?In Bangladesh, the rate of urbanization is very high further aggravated by high population growth rate and rapid rural-urban migration. The current trend of urbangrowth in this country is about 5%-6% per annum. This will change and increasedemand for habitat. At present 28% of the population of Bangladesh live in urbanareas, which will be 34% in 2025. The present estimated population of Dhaka is 10million and estimated growth rate is 4.7% per annum. All these people need shelter.To satisfy the housing of this huge explosive population Dhaka has attempted toexpand vertically. Here comes the need of real estate sector. They have been playingvery important role in providing housing regardless of high, middle and low-income people since the past two decades.2.3 Real Estate DevelopmentIn our country real estate business started in Dhaka in late seventies. The EasternHousing of Islam Group is the pioneer in this business. During 1970s there werefewer than 5 companies in Bangladesh engaged in this business. In 1988 there were42 such developers working in Dhaka and now in 2005 there are about 250 companies 

 ABrief Review on Real Estate Sector in Bangladeshengaged in this business. From the early 1980s the business has started to flourish andin 1990s it has reached its peak. Towards the end of year 2000 there was slightdownfall in real estate sector. In 2003 this sector started showing growth again. Tostrengthen the role of real estate sector some pioneer real estate companies together  built up an association named REHAB in 1991. At present it has 100 members

   ABrief Review on Real Estate Sector in Bangladeshengaged in this business. From the early 1980s the business has started to flourish andin 1990s it has reached its peak. Towards the end of year 2000 there was slightdownfall in real estate sector. In 2003 this sector started showing growth again. Tostrengthen the role of real estate sector some pioneer real estate companies together  built up an association named REHAB in 1991. At present it has 100 members.CHAPTER 3: REHABAs the RES developed, necessity of an association arose sharply. REHAB is theoutcome of that need. REHAB resolves the dissimilarities among the real estatedevelopers and tries to maintain a standard thus pulling all the developers in thesame vessel.3.1 Formation of REHABReal Estate development in private sector in this country started in pre-liberation dayswhen Eastern Housing Ltd. in the mid 60s undertook land development project knownas “Pallabi Project” for housing purpose in the Mirpur area of the Dhaka city. Theconcept of apartment development started in the late part of the 70s when Free SchoolProperty Development Ltd. started development of ownership apartment in theSiddeswori and Moghbazar areas of the Dhaka city followed by Eastern Housing Ltd.During the 80s a number of companies came into existence and engaged in ownershipapartment development.With the number of companies increasing gradually and various problems concerningthe housing sector having cropped up requiring early solution, necessity was stronglyfelt for the formation of a trade association of the Real Estate business. The real estatedevelopers met together in a meeting held on December 12, 1991 at the ConferenceHall of the Dhaka Chamber of Commerce and Industries and formed an associationunder the nomenclature of Real Estate and Housing Association of Bangladesh or  briefly REHAB.On December 12, 1991 a 7-member Ad-hoc committee was formed with Maj. Gen.(Retd.) Amzad Khan Chowdhury as President, Mr. M.S. Alam as General Secretaryand Brig. (Retd.) A.H.M. Abdul Momen, as Treasurer amongst others with the task of forming a constitution for the new association. The Memorandum and Articles of Association of REHAB was due at the earliest possible time. Government approval tothe formation of REHAB was received in June, 1992. In October, 1992 theAssociation was incorporated with the Registrar of Joint Stock Companies,

   ABrief Review on Real Estate Sector in BangladeshBangladesh as a trade association and in November, 1992 REHAB was enlisted as an“A” class member of the Federation of the Chambers of Commerce and Industries(FBCCI) with 5-members representing REHAB in the general body of FBCCI.Thereafter election of the first Executive Committee comprised of the following:1 . B r i g . ( R e t d ) A . H . M . A b d u l M o m e n -P r e s i d e n t 2 . D r . T o u f i q M . S e r a j -

S e n i o r V i c e P r e s i d e n t 3 . M r . I f t e k h a r A . K h a n ( P i n t u K h a n ) -V i c e P r e s i d e n t 4 . M r . M . S . A l a m G e n e r a l S e c r e t a r y 5 . L t . C o l . ( R e t d ) M a h t a b u d d i n A h m e d -T r e a s u r e r   6 . M r . A r s h i H a i d e r - M e m b e r   7 . M r . N a s r u l H a m i d -M e m b e r   8 . M r . M e e r S h o w k a t A l i M e m b e r   9 . M r . A . K . M . S a h i d u l l a h M e m b e r   1 0 . M r . C h o w d h u r y M d . S h a f i - M e m b e r   1 1 . M r . M a n j u r u l A h s a n C h o w d h u r y -M e m b e r  3.2 Its AchievementThe following past achievements of REHAB need to be mentioned especiallyGovernment’s declaration of construction of residential building on commercial basisas an “Industry” and the recognition of developer companies as “Industrial Units” bythe Investment Board for availing various facilities as an industry like other industrialunits under the Income Tax Act. Unfortunately the matter yet remains unresolved inspite of constant persuasion.3.3 Present Performance:Followings are the important performances of REHAB:(i) REHAB held series of meetings with the Honourable Works Minister, Ministryof Works and the Chairman, Rajdhani Unnayan Kortripokkha (RAJUK)highlighting problems of the private sector housing and seeking their solutionand have been successful in resolving most of the problems.(ii) It met the members of the press number of times for general discussion on the problems facing the housing sector and sought their co-operation in projectingthe views of the REHAB through the respective newspapers. The response of the press has been satisfactory.(iii) It met the Chairman and members of the National Board of Revenue (NBR) for appraising the adverse effects in the increase of the rate of value added tax(VAT) and the collection procedure of annual income tax (AIT). Decision of the proposals submitted to the Government by REHAB in this regard is awaited.(iv) REHAB was represented in the formulation of the Multi-Storied Residential PlotConstruction Policy, 1998 of the Government

Eastern Housing LimitedEastern Housing Limited (EHL)is a public limited company [1] in Bangladesh working in real estate development.[2] The registered office of the company is situated in Bangladesh. Eastern Housing Limited is one of the 29 members of the REHAB Association, the central body for private sector developers in Bangladesh.[3] Eastern Housing Limited (EHL) was established with the objectives of development of land for housing in the urban areas of Dhaka. It is involved in construction, engineering, manufacturing and trading activities. It has been responsible for redefining the environment in Dhaka, the capital of Bangladesh, along with other major developers.[4]

Objectives

The objectives of the company are as follows:

1. To carry on business of Builders, Engineers, Architects and Constructors.2. To provide lands with buildings, apartments, houses, flats or other accommodation.3. To sell, mortgage, give on lease land, house sites, and buildings.

[edit] Background

Eastern Housing Limited (EHL) is a concern of Islam Group of Industries. It was formed in late 1965[5] under the Chairmanship of Mr. Jahurul Islam to reduce the housing problems of Dhaka city. It started its work by successfully implementing a project of building 700 houses in Pallabi Thana, Dhaka,[5] and acquiring 910 acres (3.7 km2) of land.[6] It was one of the first to provide low-cost housing to the residents of Bangladesh (then East Pakistan).[5] Within a short span of time it turned out to be one of the most trusted company in the housing sector. While the company started operations by developing real estate mostly within Dhaka, the capital of the country, it has started to build outside the city.[7] It regularly takes part in REHAB real estate fairs, both at home and abroad, and experiences sell-out performances.[3][8] The slogan of Eastern Housing Limited is Apan Thikana Gore Dey, which translates to builds your own address.[9]

Engineer Md Akramuzzaman, Director of the Company, took part in the national dialogue on "Strengthening the Role of Private Sector Housing in Bangladesh" organized by Centre for Policy Dialogue in November 2003.[10] In January 2004, the company became a part of the government initiative to build housing for expatriate Bangladeshis in Gulshan Thana, Dhaka.[11] In 2005, Eastern Housing became the highest tax-payer among the 101 real estate developers listed with National Board of Revenue (NBR).[12] In 16 October 2006, RAJUK, the Dhaka City development authority, sent notice about "unauthorized" construction to the Ministry of Housing which included projects of Eastern Housing. Dr. Asaduzzaman, vice chairman of Islam Group, ruled out the possibility of any dubious practices.[13] Some of the real estate developed by Eastern Housing have has faced criticism. The Eastern Tower, an 18-storied apartment block in New Eskaton, Dhaka, is criticized for not installing ample emergency escapes,[14] while the South Banshree project is criticized for getting waterlogged during the monsoon.[15]

[edit] Market share

Based on the information provided on company website, up to 2008, Eastern Housing Ltd. has sold over 620 acres (2.5 km2) of land to its customers in 24 different projects approximating some 13,000 plots. It has also successfully completed over 3,500 units of apartment and has built some modern Shopping Plazas and Commercial Complexes numbering approximating 1500 units. Overall EHL has got more than 40% market share in residential plot and apartment development business in Bangladesh.[16]

[edit] Financial performance

As of January 1, 2008 the total market capitalization of the company is BDT 878 million. Of this 48% is held by sponsor company Islam Group of Industries, 33% by general public, 18% by different financial institutions and 1% by foreign investors. In 1994 the company listed with Dhaka Stock Exchange where it is listed as a Category A (highest ranking) company. Between 2001-2007 the company has generated dividend yield of 8%-13% for its investors. The company held its last annual general meeting on December 18, 2006 when it announced BDT 72 million net profit after tax, which translates to BDT 11.54 of earnings per share.[17] A consistently profitable venture, Eastern Housing paid 10% dividend to stockholders in 2003,[18] and a 15% in 2007

At a Glance - Year 2011

2007 2008 2009 2010 20110

500

1000

1500

2000

2500

Series 1Series 2

2007 2008 2009 2010 20110

5

10

15

20

25

30

35

40

45

Earning Per Share

Earning Per Share

2007 2008 2009 2010 20110

200

400

600

800

1000

1200

1400

Series 1

Series 1