Buying an apartment is a lifelong dream of many people in Bangladesh. Most Bangladeshis save their hard-earned money of a lifetime to purchase a property. Therefore, homeownership is not just a huge financial decision but an emotional one too. So before making the ultimate decision, you need to make sure that you are ready to take the plunge and become a homeowner. To guide you, here is a list of pros and cons of buying an apartment in Bangladesh.
The Pros
Build your own equity
One of the biggest advantages of homeownership is that it allows you to build your own equity. As you pay off the mortgage loans monthly, your equity increases unlike in a rental payment. Investing in a home can, therefore, have a significant pay off as you possess a valuable asset.
Capital Appreciation
If your apartment value rises over time, then you may earn a hefty profit by selling it. Your home value may go up for various reasons, such as favorable real estate market conditions, development of property location, apartment improvement projects and so on. You can then use this money to invest in a better property or anything else you wish to invest in.
Rental Income
Say, you buy two apartment units instead of one from a developer company in Bangladesh, in that case, you can rent out the other unit and earn a monthly rental income from your property. This will give you a steady cash flow throughout your lifetime.
Tax benefits
If you buy an apartment on home loan, then you will get some tax benefits, such as according to Income Tax Ordinance 1984, the interest payable on home loan will be deducted from the income of the property you bought. As a result, your income tax liability will be reduced.
Inflation hedge
A real estate property, unlike the value of money, does not depreciate in case of economic crisis such as inflation. Rather, they tend to appreciate. This is because real estate properties are hard assets having intrinsic value of their own like oil and gold. So in times of high inflation, where bonds and stocks fare poorly, your property value will go up.
Leverage tool
Real estate property acts as a great leverage tool to increase your financial strength. For instance, most apartment buyers in Bangladesh use home loan. Basically, as a purchaser, you are using a portion of your money whereas the remaining is being provided by the lender. This enables you to enjoy higher ROI when your property value appreciates and you can buy a property of higher value when you resell the existing one.
Pride of ownership
When you own a place of your own, it can greatly add to your self-esteem as homeownership is a milestone in everyone’s life. Homeownership gives you a sense of accomplishment and you feel secured in your future.
Freedom of choice
When you live in your own apartment, you can choose to renovate it as you wish without asking your landlord’s permission or come in and go to your home as you please, without a curfew hanging over your head that you must return by 10:30 pm come what may.
The cons
Costly purchase
Buying a home is not like going for window shopping and buying a pair of shoes that you liked instantly, it is no- refundable and involves huge transaction cost. You need to consider the total expenses such as booking money, registration fee including stamp duty – 3% of Deed value, capital gain tax- 4%, local government tax- 2.5%, VAT -1.5-4.5% (depending on apartment size) as well as monthly installment payments.
Hidden costs
Apart from transaction cost, buying an apartment also means you need to pay Holding Tax as well as service charge, apartment maintenance and repair costs, etc. If you do not budget all these when purchasing a property, it can be overwhelming.
Additional responsibility
Homeownership comes with added responsibility of looking after your apartment. You need to regularly check your home for maintenance and repairs. And this does not just cost you monetarily. For instance, when you live in rent, you could simply call up your landlord for fixing something but when you own an apartment the responsibility is yours.
Not a very liquid asset
Unlike investing in stocks and shares where you can sell them fast in the market and get cash in hand, selling your existing property is not that easy and it can take months to finalize the sale.
At the end of the day, it is difficult to say which option is better since it ultimately depends on your unique situation. The bottom line is before making the final decision, it’s best to understand your wants and needs, financial solvency, future plans etc and then make an informed decision which feels right for you.