Nandan Kanon Housing Ltd.

- an active member of Real Estate & Housing Association of

Bangladesh (REHAB) is born in 1999 with its offices at:
Customer care office

: Shaista Khan Avenue, House 3 (3rd floor), Uttara, Dhaka-

1230.
Corporate office

: Sarkar Mansion (6th floor), 29, RAJUK Avenue, Motijheel

C/A, Dhaka.
Nandan Kanon is a promising name in Real Estate Business. Blessed with an able
Management and of qualified and efficient Architects and Engineers it has make its success
as one of the distinct Real Estate Companies. They have proud presentation of 450 numbers
of timely completed apartments located in Dhaka and mostly in Uttara Model Town. They
are capable of contributing to the emerging shape of Dhakas urban outlooks and life style
and importantly meeting the basic needs and requirements of their valued clients. They
always welcome and provide the ideas in the dreams of ones sweet home. They bring all into
a reality by making a timely and completed gift.
And Nandan Kanon makes it possible with its own strong financial background and support
from its excellent quality staff of Architects, Engineers and management. Completion of
project in time is one of their prides. They provide every care of the customers, their families
and their guests as well. They will take the privilege of welcoming the clients to their
completed or ongoing projects.
They believe in dynamic growth in this sector of which they are a part. Their able
management, efficient architects and engineers are there to make things more acceptable and
more dynamic to their valued clients.
Nandan Kanon will provide their clients the best to their satisfaction. Its their commitment.

Permitting Procedure for Real Estate Project in Dhaka City

The permitting procedure usually begins with an application that identifies the site, its
location, and a preliminary design of the improvements to be constructed.
RAJUK is the legitimate public issuing approval of any building construction. This agency
was entrusted with the job of preparing plan for Dhaka city, ensuring development as per the
prepared plans and controlling the future development. Before any sort of construction a land
owner need to take the land use clearance from RAJUK. Processing of planning permission
involves two stages:
Land Use Clearance
Building Permission
1) Land use Clearance
Generally planned residential areas of RAJUK like; Gulshan, Banani, Uttara,
Dhanmondi and other private housing areas that already have the approval of RAJUK
for developing as residential area are not subject to take the land use clearance from
RAJUK , because they are already been approved as residential area for whole project. For
other areas taking the land use clearance is must before submitting plans for construction.
Generally land use clearances are of two types:
Type 1: Direct land use permission can be given if the proposed criteria of land use in
certain area matches to the criteria and standards set by the Master plan for that area
Type 2: However, for any kind of deviation or mismatch to the Master plan the
application have to be proceeding through the TI Act 75(I)/ (II)1.
Land use clearance is the step to check if the proposed use of land confirm with the prepared
plan by RAJUK. Ideally this clearance assures planners that land will be used as per the plan
of the city. RAJUK control all the development activities of Dhaka City under the provisions
of Town Improvement Acts, Building Construction Rules and Land Use Regulations within
the area under its jurisdiction. Any use of land or any type of construction needs approval or
clearance from RAJUK and Authorized Sections are responsible for issuing those land use
clearances. From the field survey it was found that plan permission process is so complex,
75 (1) If any person desires to use any land for any purpose other than that laid down in the
Master Plan approved under sub-section (5) of section 73, he may apply in writing to the Chairman
for permission so to do. 75 (2) If the Chairman Refuses permission to any person, such person
may, within sixty days of the Chairman's refusal, appeal to the Kartripakkha against such refusal.
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lengthy and harassing that people rarely take the normal procedure of plan-permission rather
they prefer to go through a deal with the illegal agents by giving them extra money.
Performance Evaluation of Land Use clearance
In black and white, it should take more or less 3 weeks to get a land use order by a plot
owner/ applicant. But from the field survey it was found that file does not move without
persuasion or deal. Field survey and interviews of planners suggest that negligence in duties,
intention to forgo some specific cases, poor inspection and reporting and political influence
made Authorized Section a fearsome part of the organization. In case of some critical issues,
clients or developers somehow manage the authority for land use clearances for particular
areas where development is restricted for specific purpose.
Peoples claimed that the files/plans are not approved properly and sites are not inspected as
per given parameters. The unnecessary harassment or time killing or missing of specific files
or put objections on files are most common practice dealing the Authorized Sections. The
overall performance of this section is not up to the mark as mentioned by the clients.
2) Building Permission
Building approval is the step where applicant apply fulfilling the requirements like detail
plans, sections, elevation etc. of the proposed building as per the Building construction rules.
For applying a building permission of residential building/residential cum commercial
building more than 6 storied heights RAJUK demands prior clearance certificates are
required from the following organizations DoE, DESA, WASA, TITAS Gas, DMP
Traffic, DCC, Civil Aviation Authority Bangladesh.
Performance Evaluation of Building Approval Process
After a series of checks and clarifications the application is referred to the Building
Construction Committee for approval or rejection. The provisions of Act clearly defined
that the plans should be forwarded for clearance or approval within 45 days and if, any
objection made in the plan must be notified within 30 days after submission for approval.
Misuse of power and Act also shown by the Authority as claimed by the clients create
unnecessary harassment and delay. In fact the process sometimes take more time as specified
in the Act and in many cases it takes years to get the approval. Without pursuing the file/case
file does not go forward. As a result, to avoid the harassment, unnecessary delay, bypassing
the planning laws, bypassing the shortcomings of the plot people tend to take some other
means for plan permission. RAJUKs Authorized Sections are carrying out and dealing the
process of development control and responsible for issuing land use clearance or approval for
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building plans under the provision of TI Act. From a survey on client and the dalal of plan
permission it was found that to avoid unnecessary delay 53%, to avoid harassment
22%, to avoid spending time running after it 7%, to avoid the complex process of plan
approval 13% and for others reasons 5% people deploy dalal in the planning
permission. One Important thing is missing in the Survey Result that is applicant go to
the dalal to suppress the weak part of his plot.
The whole process is depicted in the following chart:

Phases of Project Development of Nandan Kanon

The phases of project development by Nandan Kanon are described below:
1. Land acquisition: Nandan Kanon Housing usually look for land in all prime location
of Dhaka & Chittagong Metropolitan City. Land owners who are interested in joint
venture development or outright sale of their land are requested to contact with them
or they themselves make an offer for the same.
2. Planning: The planning procedure of Nandan Kanon starts after the acquisition of
land is fairly confirmed and before actual acquisition takes place. The planning
process of Nandan Kanon is devised into two phases: Design Phase and Approval
Phase. Schematically, the phases of planning of Nandan Kanon are,

Planning Phase of Nandan

Kanon Housing Limited

Design Phase

Architectural Design

Approval from RAJUK

Structural Design

The approval phase is already enumerated in the Permitting Procedure.

3. Sale: After getting approval from RAJUK, Nandan Kanon initiates the selling phase.
Most flats are sold out prior to the completion of the project. Actual handover takes
place after the completion of the project.
4. Construction & Completion: It is the phase where the construction of real estate
begin. Usually a time period is set for the completion of construction. According to
the officials of Nandan Kanon, Nandan Kanon has a very good reputation for
completing project within the deadline that was set prior to the starting of the project.
5. Management: Very few developers in Bangladesh take the responsibility of
management. Nandan Kanon is no different from that. But they usually take part in
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the management for 1.5 years. They hold meeting with flat owners in regular interval
within this time period and sometimes suggests name of homeowners to be part of the
management. After 1 year they gradually loosen their participation in management
and within 1.5 years they rest the whole management upon the flat owners. The
homeowners then decide by election or by selection who will be in the management.
Nandan Kanon has no say in the election or selection process.
Risk considered by NKHL: According to the Executive Director Mr. Abul Hasnat, they
consider only one factor as risk when developing a project. The only risk factor is Political
Instability. According to him NKHL has a very strong reputation of finishing a project
within the deadline as it has developed a strong network of suppliers who supplied all
material necessary for the completion of a project in time. The flats of NKHL are sold like
hot cakes and as people of Bangladesh are being urbanized day by day he believes there will
always be demand for housing in Dhaka city as well as in Chittagong. He believes NKHL has
been able to create a brand image and so the flats of NKHL will never remain vacant.
Sources of finance: According to NKHL they finance their project both internally and
externally. They have stand by lender but they refused to disclose the name of their lender.
The stand by lender is one which will give them permanent loan when required. They do not
obtain load from a single bank rather they take loan from different banks. The loan rate varies
from 16% to 18%. They do not use any interim loan as bridge financing. They use revolving
credit agreement. The loan amount is disbursed as per requirement of NKHL.
The maximum loan fee is 0.5% for NKHL. It is charged upon the total loan amount.
According to the accounts officer Mr. Mijan, no other costs are associated with the loan
closing procedure. No margin is required by the lender. The mortgage paper remains with the
lender that serves as the margin.
Now, consider a hypothetical scenario where NKHL obtains a 2 crore taka loan from a bank
for the starting a new project. The loan will be repaid within 5 years. The interest rate on the
loan is 17%. Loan fee is 0.5%. The loan is a constant payment mortgage loan. The loan
amortization schedule for the first year is presented below:

Month
1
2
3
4
5
6
7
8
9
10
11
12

Beginning Balance
20,000,000
19,786,282
19,569,536
19,349,720
19,126,789
18,900,700
18,671,409
18,438,869
18,203,035
17,963,859
17,721,296
17,475,296

Monthly Payment Interest Payment Amortization Ending Balance

(BDT 497,052)
BDT
283,333 BDT
213,718
19,786,282
(497,052)
280,306
216,746
19,569,536
(497,052)
277,235
219,816
19,349,720
(497,052)
274,121
222,930
19,126,789
(497,052)
270,963
226,089
18,900,700
(497,052)
267,760
229,292
18,671,409
(497,052)
264,512
232,540
18,438,869
(497,052)
261,217
235,834
18,203,035
(497,052)
257,876
239,175
17,963,859
(497,052)
254,488
242,564
17,721,296
(497,052)
251,052
246,000
17,475,296
(497,052)
247,567
249,485
17,225,811

Loan balance pattern under CPM is presented through the following graph:

The effective interest rate on the mortgage loan and APR if repaid at maturity, if repaid after
1 year and if repaid after 2 years is tabulated below:
Time of Repayment

EAY

APR

At maturity

17.23%

17.25%

After 1 year

17.58%

17.25%

After 2 years

17.34%

17.25%

We see in none of the cases the EAY is equal to the stated rate of 17%. Rather the EAY is
greater than the stated rate even if the loan is repaid at maturity. The reason the EAY is
greater than the stated rate even if it is repaid at maturity is that a 0.5% fee is associated with
the loan. So, the actual disbursement is tk. 19,900,000 although the payment is calculated for
2 crore. If there is any early payment associated with the loan, the yield will increase as the
payment occurs sooner into the life of the loan. This is exactly the case we see from the
above table.
So, even if NKHL is told the interest rate on their loan is 17%, they are actually paying
17.23% interest if the hold the loan till maturity. It is the effective borrowing cost of NKHL.
As per the Truth-in-Lending Act the APR (Annual Percentage Rate) in all the cases will be
17.25%. The reason is that the APR under truth-in-lending requirements never takes into
account early payments of loan. In Bangladesh there is no such truth-in-lending act.
Another type of loan obtained by NKHL is revolving overdraft facility. An example will
make the concept of revolving credit clear.
Let NKHL has an overdraft facility with a bank and it sanctioned 2 million taka for 6 months.
The loan balance and principal repayment pattern under such an arrangement is presented
below:
Loan Sanctioned
Month
1
2
3
4
5
6

2,000,000

Time Period

6 months

Withdrawn Amount

Loan Balance

Principal Repaid

1,200,000
970,000
1,000,000
800,000
1,500,000
1,100,000

800,000
330,000
100,000
400,000
100,000
-

500,000
770,000
1,100,000
1,200,000
1,000,000
1,100,000

Loan Balance after

repayment
1,300,000
1,100,000
1,200,000
1,600,000
1,100,000
-

Lender requirement before disbursing the loan: The following documentations are
required by lenders prior to disbursement of loan:
1. Project information:
a. Project Description-legal description of site, survey, photographs of site, rendering
of building and any parking facilities, development strategy and timing.
b. Site and circulation plan, identification of any easements, availability of utilities,
and description of adjacent land uses, soil tests.
c. Plans for building improvements. Detailed list of amenities.
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d. Identification of architect, general contractor, principal subcontractors. Supporting

financial data and past performance of parties.
2. Market and financial data:
a. Full set of financial statements of the borrower
b. List of previous project lenders
c. List of previous projects. If the company is new, then the experience of directors of
the company should be presented in printed form
d. Detailed cost breakdown:
i. Land acquisition cost (if any)
ii. Land development cost (if any)
iii. Any required demolition cost
iv. All other hard and soft costs
3. Personal guarantee by the directors along with their Statement of net worth
4. Paper that contains clearance from RAJUK
5. Mortgage papers of the property
6. Documents necessary if someone is appointed as power of attorney
7. Credit rating (NKHL itself is started credit rating of real estate companies)
Selling Price: The selling price is decided by the following,
Construction cost + Administrative cost + Profit = Selling Price
The construction cost can be separated as Hard cost and Soft cost.

Administrative expenses refer to the costs of operating a business that are not directly
attributable to the production of goods or services. Administrative expenses are related to the
organization as a whole as opposed to the individual departments.
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Administrative expenses are necessary costs that are associated with the management,
administrative, clerical, and general functions within an organization. Administrative
expenses can take the form of such basic needs as rent of the building, the cost of utilities,
or the salaries of employees that are not involved in the production of goods or supply of
services.

From Theory to Practice

The phases of project development that we learnt from our text book are,
1. Land Acquisition
2. Construction
3. Completion and Occupancy
4. Management
5. Sale
But the phases of project development by NKHL are,
1. Land acquisition
2. Planning
3. Sale
4. Construction and completion
5. Management
We see a deviation there from what we learnt from our text book. The sale phase is the third
phase for NKHL whereas it is the last phase as per our text. Sale of flats occur prior to the
completion of construction. There is a risk inherent for buyers if the sale of flats occur prior
to completion. If it occurs, then the whole risk is transferred to the buyer from the developer.
Another problem is project quality. If sale occurs prior to the completion of construction the
developers then are less interested in the completion of the project which lengthens the
completion phase. So far, no such complaints arose against NKHL.

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