Additional Costs You Should Consider before Buying a Home

What strikes your mind when you see that big hoarding at the roadside reading “a 3 BHK luxurious apartment with ultra- amenities in just Rs 50 lakh!”? It might excite you and your hopes are set high that probably you’ll have your dream house now. Isn’t it?

We often come across such tempting advertisements in our day to day life. But, we tend to ignore that small asterisk that ends saying TERMS  & CONDITIONS APPLY. Remember, dreams come true, but, with shocks and surprises!

Buying a home for the family is one of the most cherished dream of people, especially in India. Real estate is considered as the biggest investment for an average person. In order to lure potential buyers, realtors leave no stone unturn by promotions through glossy brochures and enticing advertisements.

The costs displayed in the advertisements by the developers is just to grab attention of the prospective buyers. This initial cost does not include a host of add-ons which one has to pay that raises their budget, almost by 25%.   These add-ons are sometimes referred to as the ‘hidden costs’. With these hidden costs, the same Rs 50 lakh apartment costs you around Rs 70-80 lakhs.

It therefore becomes important to explore these hidden charges so that you be prepared for these surplus charges that will come your way, when buying a home.

#1 Registration costs:

The registration cost forms a substantial amount that depends on the total worth of your residential asset. In most states, the total legal charges in terms of stamp duty and registration fees cost you about an additional 7 % to 10% of the property cost.

For example, if your property is worth Rs 10 Lac, then a stamp of Rs 50K is required to be purchased in order to get the sale deed typed. Further, the registration fee of approximately 1% – 2% of the cost of property is added that is payable to the court. And this does not end here. Be prepared to bear the cost of a number of miscellaneous expenses like the lawyer’s fees and notary who represent you and get your job done in the court.

#2 Service Tax and VAT:

This is absolutely a killer expense for buyers when it comes to buying a property. These taxes are levied by the Government on real estate properties.
The budget 2015-16 proposed that a home buyer will have to pay a service tax of 14% while buying a property. This has further worsened the matter for the buyers.

“Increase in service tax will result in 0.7-0.9% net increase in cost of a property for a home buyer,” said Nishant Singhal, director–strategy and alliances, Investor Clinic Infratech Pvt. Ltd.

In addition to service tax, the VAT is charged on the construction value of the project, which varies from state to state, but usually accounts for 3-5 per cent of the total cost.

#3 Maintenance charges:

This cost covers the charges for the maintenance of amenities such as parks, street lights, roads, power backup, etc. Water and electricity back up charges are also usually included in this cost. These charges are levied on a regular basis and can be paid on a monthly, quarterly or yearly basis.

#4 Parking Charges:

Charging an additional upfront payment for exclusive parking spaces in large residential complexes has become a trend today. The amount varies from 2 lakhs to 5 lakhs depending on the type of property and type of parking space being provided.
This is no less than a heartache for many buyers.

#5 External Development Charges (EDC):

The Developer has to pay these charges to state government for developing the external areas surrounding the project. These charges vary from state to state.

And believe us, this does not really ends here! Several other small and big hidden costs like interior costs, Club memberships, Preferential Location Charges (PLC), Security charges, etc. also charged while buying a property.
So, the next time you come across any luring property deal, don’t forget that small yet the most important sign (*) for T&C apply!