A COMPLETE GUIDE TO BUY A NEW FLAT IN DHAKA

Dhaka’s housing market is swamped with diverse possibilities that cater to the needs of individuals from all walks of life. If you are purchasing a home in Dhaka, you may be perplexed as to which house is ideal for you. You should have in-depth knowledge about buying property in Dhaka.  Buying a flat is a major financial investment. Before you start looking at houses or researching mortgage alternatives, you should be sure you are ready to be a homeowner. There are two methods to finance your home in Dhaka. You can pay the sum out of your own money or take out a bank loan. There is no more bother if you finance your first home with your own resources. However, if you want to take out a loan to buy your first home, you need to be cautious about some components of a home loan. If you want to instantly buy your property, there are ready-to-sale projects available all over Dhaka. 

Affordability

Purchasing a home is a costly investment. A decent-sized apartment in Dhaka begins at more than 50 lakhs taka to a few crores. As the price range is so wide, it is best to set a budget early on. A set budget will limit the possibilities open to you. It will also help you in finding the best property within your budget.

Because housing prices are so high, most people cannot afford to pay the whole sum upfront. Rather, they opt to pay in instalments or take out loans. If you choose the latter, you must consider the down payment. The maximum loan amount for purchasing a home is 80% of the property value. The proportion is restricted. The remaining 20% must be paid out of the borrower’s own pocket as a down payment. For instance, if you apply for a house loan for a property worth 70 lakh Taka, the bank would only lend you up to 56 lakh Taka. The remaining 14 lakh Taka (20% of the property value) will be required as a down payment. 

A down payment may be a difficult barrier to fulfilling the dream of owning a house for a first-time homeowner. The down payment is the highest upfront cost when purchasing a property. Furthermore, because the down payment is paid at the closing, it affects the loan’s term—generally, the lower the down payment, the higher will be the interest payment. You should also keep in mind that interest payments are a long-term obligation. By the time you make your final interest payment, you will have paid far more than you originally borrowed. Before taking out a house loan, you should think about your job progression and potential income.

Employment and Income Status

Your lender will be interested in more than simply your income. They will also want to review your job history (typically for the last two years) to ensure that your income is consistent and steady. Preparing your income is important for gathering the necessary paperwork to demonstrate consistent employment. If you are on the payroll, you will most likely just be required to present recent pay stubs. If you are self-employed, you have to provide your tax returns as well as any other documentation requested by the lender.

Debt-To-Income Ratio

Another financial tool mortgage lender uses to analyze their loan application is the debt-to-income ratio (DTI). Your DTI tells your lender how much of your monthly income goes to debt, which helps them determine how much mortgage debt you can take on.

DTI is computed by dividing monthly debt by monthly gross income. If your monthly debts stand around a total of 20,000 BDT and your gross monthly income is 60,000 BDT, your DTI is 20,000/60,000, or 33%. Your DTI will be calculated by your lender using the debts shown on your credit report.

Your lender may compute your housing expense ratio, also known as front-end DTI, depending on the type of loan you are asking for. This is a percentage that compares your entire monthly mortgage payment (principal, interest, taxes, and insurance) to your monthly income. For example, if you have a 40,000 BDT mortgage payment and a monthly salary of 60,000 BDT, your housing expense ratio is 40,000/60,000, or 66%. It is recommended to examine your DTI before applying for a loan. In most circumstances, a back-end DTI of 43% or less is required to qualify for the majority of mortgage alternatives, while this amount varies according to your lender, loan type, and other considerations.

Down Payment

The maximum loan amount for purchasing a home is 80% of the property value. The proportion is restricted. The rest of the 20% must be paid out of the borrower’s own pocket as a down payment. For instance, if you apply for a house loan for a property worth 70 lakh Taka, the bank would only lend you up to 56 lakh Taka. The remaining 14 lakh Taka (20% of the property value) will be required as a down payment.

Down payment may be a difficult barrier to fulfilling the dream of owning a house for a first-time homeowner. The down payment is the highest upfront cost when purchasing a property. Furthermore, because the down payment is paid at the closing, it affects the loan’s term—generally, the lower the down payment, the higher will be the interest payment. As a result, the down payment is critical in calculating the loan-to-value (LTV) ratio. The LTV ratio is computed by dividing the entire loan amount by the market value of the property. The lower the LTV ratio, the larger the down payment.

Lowering the LTV ratio directly influences the lender to decrease the interest rate. A low LTV will also assist in shortening the loan’s total term. The higher the LTV ratio, on the other hand, the higher the interest rate. Banks face a risk when LTV is high. Because investing more of your own money as a down payment on the property signifies larger ownership of the asset. As a result, banks will regard you as a more reputable borrower since you are less likely to default, and they will offer you a lower interest rate. On the other hand, a high LTV indicates that you have a smaller investment in the property, and the bank will view you as more likely to fail on a loan.

A greater down payment may not be accessible to a first-time homebuyer. Taking out a house loan to purchase your first home, on the other hand, can be a wise idea. A substantial down payment reduces both the EMI and the interest paid over time. It will also qualify you for a significantly reduced interest rate. Finally, it indicates that you have a stronger interest in your property, which will benefit you in future borrowings.

Effective Cost 

Buying a property comes with a slew of other costs, such as parking fees, stamp duty, registration fees, brokerage fees, and so on. Similarly, there are additional costs associated with house loans. Banks may not immediately reveal all of these additional fees together with the loan cost. As a first-time house loan borrower, you may ignore all of the additional costs associated with any home loan plan. Processing fees, legal and technical fees, GST, stamp paper costs, and so on are examples of additional expenses. To determine your effective cost of the house loan, which is the sum of the real loan cost plus the additional expenditures, you must clearly ask the lender about additional expenses. 

Additional fees differ per bank and are sometimes not stated on the bank’s website. As a result, comparing the effective costs of house loans from different banks may be challenging. Recalculating the effective cost, on the other hand, may assist you in determining the additional costs. Assume you are taking out a 50 lakh Taka house loan with a payback period of twenty years and total extra expenses of 20,000 Taka. The EMI will cost 38,765 Taka at a 7% interest rate. Because you must pay the 20,000 Taka extra fee upfront, your net loan will be 49.80 lakh, Taka. To be more specific, you will be paying an EMI of 38,765 Taka for a net loan of 49.80 lakh Taka, which will raise the interest rate to 7.05 percent, a 5-basis point increase. The comparison will be simpler once you have determined the exact interest rate for each institution. You should be suspicious of certain banks offering to waive the additional expenses, but be wary that they are not charging the amount indirectly. 

Choose the Right Real Estate Agent for You

When applying for a mortgage and purchasing a home, several parties are involved. Your real estate agent represents you in the home-buying process. Your real estate agent will look out for your best interests by locating houses that suit your specifications, arranging showings, and assisting you in writing offers and negotiating. Hence, it is very important to select the best real estate agent to buy a home in Dhaka. 

As a buyer, you may normally work for free with a real estate agent. The seller will usually pay the buyer’s real estate agent’s commission. Typically, the buyer’s agent compensation is 3% of the transaction price. A real estate agent represents you and explains how to acquire a property. Your agent will show you homes, draft an offer letter on your behalf, and aid you in the negotiating process. Real estate agents are professionals in the local market and can advise you on how much to offer for each property.

It is feasible to purchase a home without the assistance of a real estate agent. This is not advised, particularly for first-time purchasers. The home-buying process may be stressful and emotional. An agent can assist you in navigating the real estate market, submitting a legally solid offer, and avoiding overpaying for your house. You will need the services of a real estate company whether you want to sell or purchase a house in Dhaka. Choosing the right real estate agent is crucial when selling a house. Your choice will have an impact on how soon you sell and how much money you receive.

Begin House Hunting 

Buying a house is a long-term commitment. While examining your options, you cannot make a hurried conclusion. All the top real estate development companies offer their products in Dhaka. When you’ve decided to buy your first house, you should begin doing your research straight immediately. You may start your research online because most real estate businesses have a good website. When you find your dream house, you must visit it in person to explore it fully. There is a large set of things you should know before purchasing a new home, homeowners carefully analyze things such as property paperwork, the building design, and home financing alternatives, but few consider how happy their child will be in the new home. You have to consider the need of your children’s needs before buying your dream home in Dhaka. 

Make sure you have enough time to thoroughly examine all of the available residences that meet your criteria. Make a list of the houses that fit your criteria. Make a list of the advantages and disadvantages of each house. Once you have narrowed down your selections, take your time and properly evaluate them. Compare the pricing to similar residences in various localities to get a better understanding of the costs. It can greatly help you gain a better understanding of pricing patterns in the housing market in various parts of the city. You should also keep an open eye to grab the ongoing sales in popular locations. There is an ongoing sale for the best flats in Dhanmondi.  

Personal Inspection 

This is the most important stage in buying a new property in Bangladesh. After you have completed your main research, budgeting, and picking the style of house you desire, you should begin your in-field inquiry by visiting these properties and inspecting the critical components of your chosen house. Your comprehensive examination will determine whether or not you made the correct selection. As a result, you must not leave any stone unturned while conducting your personal study on the residences you wish to purchase. 

Before purchasing a home, the location is the most important consideration. Dhaka’s traffic has long been notorious. Commuting from one section of town to another is a pain for all of us. When we buy a house, we hope that it will make our lives easier. A lousy location, on the other hand, might derail that desire and become a source of stress in our lives. As a result, a good site is critical. One should choose a location depending on their employment and regularly frequented destinations.

The structure of the building is critical. Scientists have warned that an earthquake might occur in the near future. The good news is that We currently have the technology to survive high earthquakes. Before acquiring a flat in Dhaka, the buyer should confirm that the developer has installed earthquake-resistant technology in the apartment building’s foundation.

When we imagine our ideal house, we see brightly colored rooms with plenty of natural light. However, given Dhaka’s current situation, apartment complexes are being built within a few feet of one other. As a result, the units lack natural light and ventilation. Flats with little air and light will bring a slew of problems. It will be detrimental to their health. Furthermore, it will raise utility expenses. Living in a poorly ventilated flat, especially in the heat, may be uncomfortable. As a result, before acquiring a flat, purchasers should exercise prudence and study the air and light flow.

Get Home Appraisal

A house appraisal is a survey that determines the current market worth of the property you wish to purchase. Before you use a mortgage loan to purchase a property, you must have an appraisal. Lenders demand assessments because they cannot lend more money than the value of the residence. If the evaluated value is less than your offer, you may have difficulty obtaining financing. Consider your offer carefully and consider appealing the assessment results if you feel the evaluated value is too low. However, you cannot rely on a reviewer to agree with you.

Learn About the Neighborhood 

The neighborhood is very important in deciding your contentment in your freshly acquired home. You should check out the best places to live with families in Dhaka. You may have difficulty settling if the area is not properly established. While the house gives a location for you to reside, the neighborhood will meet all of your social demands. As a result, you must guarantee that your area has supermarkets, reputable schools, and hospitals. Dhanmondi is an example of such a neighborhood. 

If you have children, it is critical that there are reputable schools around the apartment. Otherwise, the young members of the family will have a difficult time commuting to the educational institution. Hospitals are another important consideration when buying a home. Illness can strike the human body at any time. Elderly family members are more vulnerable to health problems. People can become very ill at any time. It can have catastrophic repercussions if there are no appropriate hospitals nearby. As a result, it is critical to buy a home near a decent hospital. It is usually a good idea to plan for unpleasant days. Baridhara Diplomatic Zone is such a location with such perks and amenities. 

Utility & Security 

While the fundamental services of water, gas, and power should be available at all times, this may not be the case in some regions of the city. Some areas of the city are badly impacted by a scarcity of gas and water. People in certain areas can only access gas for a few hours. At the same time, water is scarce in other sections of the city. Life may be quite difficult without such essential necessities. As a result, it is critical to understand the area’s utility service history. You should check that all basic utilities are available in your home.

The parking spot is shared by all of the apartment owners. The majority usually establishes a standard for the usage of parking spaces. Before acquiring the apartment, it is essential to understand the parking laws and restrictions since they may not fit all lifestyles.

Nowadays, new homes have additional benefits and conveniences for their tenants. When purchasing a home for the first time in Dhaka, make sure it has extra facilities. A gym and a pool are available within modern residential buildings. Furthermore, the rooftop is designed in such a way that young people may play popular sports such as football and cricket in the afternoon.

Burglars are not uncommon in Dhaka. Home burglaries occur in even the most secure areas of the city on occasion. The apartment building, regardless of its location, must be extremely safe. There should be plenty of security cameras all around the premises. Furthermore, skilled security guards who will patrol the premises around the clock are required.

Finalize the Legal Paperwork 

Legal paperwork is a headache for most buyers. You need to have a clear and concise idea of all the requirements before buying a property in Dhaka. There can be issues with your legal paperwork due to Inexperienced brokers, intricate rules, correct understanding of the flat’s ownership, title flaws, and other issues that may be encountered. Before acquiring a flat, it is important to address all legal difficulties. You must guarantee that the original title deed indicates the seller’s name and that no other person owns any portion of the flat other than the seller. It is recommended that the buyer have the title deed reviewed by a lawyer to ensure the document’s legitimacy. 

Close the Deal

Finally, you complete the transaction of purchasing your first home in Dhaka by obtaining the selling document. The sale deed is a document that the buyer must get after the title deed. The basic proof of acquisition is the selling document. Furthermore, the selling deed will detail all of the acquisition terms. Before finishing the agreement, you must carefully read through all of the stipulations specified in the selling document. A lawyer should study the selling document to discover if there are any legal gaps. 

Summary

The stages of buying a property might add up to a lengthy process. To begin, you must be prepared to be a homeowner and create a budget. Once you have decided on a financing option, you will need to start looking for properties, ideally with the help of a reputable real estate company in Bangladesh. Once you have found a house, your agent will assist you in making an offer and negotiating with the seller. Each stage is complicated and time-consuming. If you are not cautious, you may come to regret your purchase. You should exert control over every area of the home-buying process as a buyer. You will be a happy homeowner if you follow the procedures and carefully stroll through each phase.

F.A.Q

How long does it take to buy a home from start to finish?

Ans: On average, the time it takes to buy a property from the start of the process to the time you move in is 5 to 6 months.

How much money should you have before buying a house?

Ans: Before purchasing a home, you should have enough cash on hand in case of an emergency. These reserves should be at least two months’ worth of mortgage payments.

Can I cancel my house booking after closing the deal?

Ans: No. Once the transaction is completed, you will be the legal owner of the property. You are unable to cancel the transaction. You can, however, sell your ownership to another person.

Can I buy a ready-made house in instalments?

Ans: Yes, provided the seller gives you that choice. However, you must pay additional interest with each instalment. 

Is there any hidden cost in buying a house?

Ans: Some real estate businesses may trick you into paying additional fees. Maintain transparency in your dealings and keep an eye out for hidden fees from clients.