Building Purchase: A Different Risk Profile
Purchasing an existing building in Bangladesh combines land acquisition risks with building condition risks. Unlike a lease (where you can walk away at renewal), a purchase is permanent — every unidentified defect becomes your problem. A comprehensive due diligence process must cover legal, structural, MEP, fire, compliance, financial, and operational dimensions.
Legal Due Diligence
| Item | What to Verify | Source | Red Flag |
|---|---|---|---|
| Land title | Complete chain from CS to current, mutation in seller's name | Property lawyer, AC Land, sub-registrar | Gaps in chain, pending mutation, disputed inheritance |
| Building approval | RAJUK/CDA approved plan — does the actual building match? | RAJUK records | No approval, approval for different building, unapproved extra floors |
| Occupancy certificate | Certificate of completion / occupancy | RAJUK | No occupancy certificate (common) |
| Encumbrance | No mortgage, lien, or court case on property | Sub-registrar search, court search | Active mortgage, pending litigation |
| Tax clearance | All property taxes, land revenue paid to date | City Corporation (holding tax), AC Land (khajna) | Outstanding tax dues (become buyer's liability) |
| Utility ownership | Power, gas, water connections in seller's name, transferable | DPDC/DESCO, Titas, WASA | Illegal connections, shared connections, transfer restrictions |
| Tenant rights | Existing tenants, lease terms, eviction feasibility | Lease agreements, site visit | Protected tenants (difficult to evict under Bangladesh law) |
Structural Assessment
| Assessment | What It Covers | When Required | Cost Estimate |
|---|---|---|---|
| Rapid Visual Screening | Visual inspection, building score, seismic vulnerability | All purchases | BDT 100,000-300,000 |
| Detailed Structural Assessment | Core testing, rebar scan, load analysis, foundation review | Pre-1993 buildings, RVS score below threshold | BDT 500,000-2,000,000 |
| Concrete Core Testing | Actual concrete compressive strength | Buildings >15 years or visible deterioration | BDT 5,000-10,000 per core |
| Rebar Scanning | Rebar location, cover depth, corrosion assessment | Buildings with visible rebar exposure or coastal location | BDT 50,000-150,000 |
| Foundation Assessment | Foundation type, capacity, settlement monitoring | Buildings on filled land, near water bodies | BDT 200,000-500,000 |
MEP (Mechanical, Electrical, Plumbing) Assessment
| System | Key Checks | Remaining Useful Life Indicators | Replacement Cost Guide |
|---|---|---|---|
| Electrical — Main | Switchgear condition, cable age, panel labelling, load balance | Switchgear: 25-30yr. Cables: 25-40yr. Panels: 20-25yr. | BDT 2-10M (full rewire) |
| Electrical — Earthing | Earth resistance test (≤5Ω), earth pit condition | Earth pits: 10-15yr (corrosion in BD climate) | BDT 200,000-500,000 |
| Generator | Hours run, last overhaul, fuel system, ATS test | >20,000hr = approaching end of life | BDT 5-30M (based on capacity) |
| Lifts | Manufacturer, age, maintenance records, safety test | 20-25yr typical life, modernisation at 15-20yr | BDT 5-15M per lift |
| HVAC | System type, age, refrigerant, efficiency, IAQ | Split AC: 8-12yr. VRF: 15-20yr. Chiller: 20-25yr. | Varies widely by system type |
| Fire Protection | Alarm type/age, sprinkler coverage, pump, extinguishers | Panel: 15-20yr. Sprinkler: 30-50yr (heads: 20yr). | BDT 3-20M (depends on coverage) |
| Plumbing | Pipe material, water tank, pump, drainage | GI pipes: 15-25yr. PVC: 25-50yr. Pumps: 10-15yr. | BDT 2-8M |
CAPEX Reserve Estimation
| Building Age | Typical Annual CAPEX Reserve (% of replacement cost) | Immediate CAPEX Risk |
|---|---|---|
| 0-5 years (within DLP) | 0.5-1.0% | Low — defects covered by developer |
| 5-15 years | 1.0-2.0% | Medium — AC, electrical components approaching end of life |
| 15-25 years | 2.0-3.5% | High — lifts, generator, major systems need replacement |
| >25 years | 3.5-5.0% | Very high — structural remediation, full MEP replacement possible |
Compliance Gap Assessment
Before purchase, assess the building against BNBC 2020 across all disciplines. The gap register becomes part of the purchase negotiation:
- P1 gaps (life safety) — must be resolved before occupation or reflected in price
- P2 gaps (significant) — remediation cost deducted from purchase price or budgeted
- P3-P4 gaps — budgeted in CAPEX plan
Valuation Considerations
| Factor | Impact on Value | How to Assess |
|---|---|---|
| Structural deficiency | -15 to -40% (or fatal) | Structural assessment report |
| Fire safety gaps | -5 to -15% (remediation cost) | Fire risk assessment |
| Electrical system age | -5 to -20% (replacement cost) | Electrical audit + RUL estimate |
| Lift modernisation needed | -3 to -8% per lift | Lift audit + age/hours assessment |
| Unapproved extra floors | -20 to -50% (legal risk) | RAJUK records vs actual building |
| Tenant occupation issues | -10 to -30% (eviction cost/delay) | Legal assessment |
Complete Purchase DD Checklist
| # | Item | Status |
|---|---|---|
| 1 | Land title chain — CS to current, all deeds registered | ☐ |
| 2 | Mutation certificate — current owner's name | ☐ |
| 3 | Encumbrance search — no mortgage, lien, litigation | ☐ |
| 4 | RAJUK approval — building matches approved plan | ☐ |
| 5 | Occupancy certificate — issued for current use | ☐ |
| 6 | Tax clearance — holding tax and land revenue paid | ☐ |
| 7 | Utility connections — verified and transferable | ☐ |
| 8 | Structural assessment — RVS minimum, detailed if needed | ☐ |
| 9 | Fire risk assessment — BNBC Part 4 / NFPA baseline | ☐ |
| 10 | Electrical safety audit — IEC 60364 / BNBC Part 8 | ☐ |
| 11 | MEP condition assessment — all systems, RUL estimated | ☐ |
| 12 | CAPEX plan — 5-year replacement/remediation budget | ☐ |
| 13 | Compliance gap register — with risk ratings and costs | ☐ |
| 14 | Flood risk assessment — historical, elevation, drainage | ☐ |
| 15 | Environmental clearance — DoE status for this use | ☐ |
| 16 | Tenant assessment — existing leases, eviction risk | ☐ |
| 17 | Insurance assessment — current coverage, insurability | ☐ |
| 18 | Valuation — adjusted for all identified gaps and risks | ☐ |
References
- RICS — Red Book Valuation Standards
- ASTM E2018 — Property Condition Assessment
- ISO 31000 — Risk Management
- Registration Act 1908 (Bangladesh)
- Transfer of Property Act 1882
- BNBC 2020 — All Parts
Insights & Guidance
- Building purchase DD combines land title risk with building condition risk — both must be thoroughly assessed.
- Structural assessment is non-negotiable: RVS minimum for all purchases, detailed assessment for pre-1993 or distressed buildings.
- CAPEX reserve increases sharply with building age: 0.5-1% for new buildings, 3.5-5% for buildings >25 years old.
- Compliance gaps should be quantified and used in price negotiation — P1 gaps resolved before purchase or reflected in price.
- Complete 18-point checklist covers legal, structural, MEP, compliance, financial, and operational dimensions.
A building purchase is the most capital-intensive real estate decision. Every unidentified defect becomes the buyer's liability. A comprehensive DD process prevents surprises and provides a defensible basis for the purchase decision and price negotiation.
- Hidden structural defects — concrete deterioration, foundation settlement, unauthorized modifications not visible on a walkthrough.
- Title disputes — surface months or years after purchase.
- Unexpected CAPEX — major systems (lifts, generator, electrical) failing shortly after purchase.
- Unapproved construction — extra floors or modifications that RAJUK can order demolished.
- Complete DD report with all 18 checklist items addressed
- Structural assessment report (RVS minimum)
- CAPEX plan with 5-year projections
- Compliance gap register with remediation costs
- Adjusted valuation reflecting all identified risks
- Does the building match the RAJUK-approved plan? (Count floors, compare layout)
- Structural condition — cracks, settlement, exposed rebar?
- MEP system age and condition — when were major systems last replaced?
- Can you provide the original RAJUK-approved building plan?
- Have any floors been added or structural modifications made?
- What major CAPEX has been spent in the last 5 years?
- Are there any pending or historical legal disputes involving this property?
- Title verification — property lawyer.
- Structural assessment — structural PE.
- MEP assessment — building services consultant.
- Valuation — RICS-qualified valuer.
- Fire assessment — fire protection engineer.