Most of the additional cost are either
percentage of the basic price or are calculated on per square foot area. Hence
higher the area or the basic price, higher will be your additional costs. The
various additional costs can increase your total outflow on the house purchase
by 25% to 30%.
Your initial house cost = BSP
(basic price per square foot) * Super area in square foot
The various other costs keep on adding
to it as purchase process continues. Here is the list of such costs:
At the time
of purchase of house property:
A. Down payment:
It is upfront payment to the
builder while buying under construction or ready to move in property directly
from the builder. It could be anywhere around 10-20% of the BSP.
B. Token money:
It is upfront payment when you are
buying resale property. Ideally, It seals the deal stating the agreed upon
purchase price and terms and conditions of the sale.
C. Loan
If you are applying for loan from
banks then apart from EMIs (equated monthly installments) you will be required to pay the following charges.
1. Loan processing fee
Banks charge processing fees for every home loan application.
It is a non refundable and used by banks to complete various formalities during
the loan process which includes documentation, service charges etc. It may vary
from bank to bank and is generally between 0.25% to 0.5% of the loan amount.
2. Other charges
It includes
advocate’s charges for property search and the title investigation report,
valuer’s fee for valuation report, stamp duty for loan agreement. The charges are
generally on the actual basis.
2. Loan insurance charges and premium
Home loan
is a financial burden. It is recommended that the loanee and co-loanee should
get themselves insured against this liability. They can either take insurance
directly from insurance company or can take home loan insurance along with the
loan from the banks. Premium depends upon age of applicant, amount of insurance
and additional benefits.
3. Prepayment or foreclosure charges
Pre-payment
penalty on the floating rate loans has been abolished. Banks may charge only
processing fee. Whereas on fixed rate loans it can vary from Nil to 2% of the
outstanding loan amount, depending upon the lender.
D. Title and Valuation check
Once you have narrowed down the
property, it is necessary to carry out a thorough search to verify all claims regarding
the property. It includes encumbrance certificate, title deed, No objection
certificates from various government authorities, other ownership documents,
approved layout and building plans, background check of the builder or the
society. There have incidents of same property being sold to different people.
Hence it is always advisable to take professional legal help to verify and
validate the documents.
The charges may differ depending
upon the type of consulting service, type of property, city etc. It can be
anywhere between Rs. 1000/- to Rs. 30,000/- and may be more in some cases.
E. Additional charges on infrastructure of the house
1. EDC: External development charges
Builder
will add this cost to your basic price while calculating the total purchase
price. It includes charges for creation of utilities, costs
incurred in developing water and electricity supply, sewerage, roads, street
lighting, community halls, etc. It is calculated on per square foot area. This may
vary from Rs. 25/- to Rs. 150/- per square foot.
2. IDC: Internal development charges
Like EDC, IDC
will also be part of your total purchase price and will be demanded at the time
of payment. It includes charges for facilities inside the housing complex/ society
like garden, internal roads, lifts, fire fighting equipments. It
is calculated on per square foot area.
3. IFMS: Interest Free Maintenance security and CD (Contingency
deposit)
Builders
ask for this deposit to cover maintenance costs for initial years before RWA
(Residents Welfare Association) is formed or take over the maintenance work
upon itself.
Contingency
deposit is demanded by the builder to cover any future price escalations like
labour costs.
Both are
refundable charges. It can vary between Rs.20/- to Rs. 100/-.
4. Car parking
If you want
reserved car parking area allotted to you, you may be required to borne this one
time charge. Mostly one car parking is mandatory with the apartments even if
you may not wish to buy it. It may vary as per various parking options like
open parking, covered parking or basement parking. It may vary from Rs.
50,000/- to Rs. 4,00,000/-.
5. One time club charges
If the
housing complex is providing a community hall or club, you may be required to
bear the charges. It is a one time charge for the building and equipments of
the club. It can be some fixed amount decided by the builder or society. It may
vary from Rs. 20,000/- to Rs. 2,00,000/- .
6. PLC: Preferential location charges
It can vary
as per your choice of location of house with in the housing complex/ society.
Some commonly preferred locations are Garden facing, higher or lower floors,
Corner flat etc. To give you an idea, it can be anywhere between Rs.10/- to Rs.
200/- per square feet.
7. Utility connection charges
These are
one time charges for utility connection like Gas connection, water, electricity
meter connection. It varies as per the builder or society.
8. Cost of fittings and customization
It is
usually possible in under construction properties. Outer layout of the house
cannot be changed but sometimes builder can customize interiors for you like
flooring or changing colour of tiles.
At the time
of Registration of house property:
1. Stamp duty and Registration charges
Registration
means registration of the documents of ownership with the government office.
Unless the process is complete, you do not possess the full ownership of the
property. And stamp duty is the tax to the government.
Registration
charges could be 1% to 2% of the total value of property. And Stamp duty can be
anywhere between 3% to 10% of the market value/circle rate of the property. In
India different states levied different stamp duties. Also it will be different
if the owner is male, female, joint or senior citizen.
2. Legal Fees
You will be
needed to take services of a lawyer for registering the property in the court. Lawyer’s
can charge anywhere between 0.25% to 1.5% of the value of property. They may
also charge nominal fees for various documentations at times.
Recurring
charges after buying the house property:
The
recurring charges after the possession of house will include:
1. Maintenance
charges, usually on per square foot area basis.
2. Electricity
charges, including both regular power supply from authorities and Generator
Running by the society. It will be on the actual usage basis. The cost of power
supply generated using DG or Generator by the society can be much higher than
the regular power supply.
3. Other
charges will include water and gas supply on the actual usage basis, monthly Club
charges and yearly property tax.
Buying under
construction house property:
1. Service tax
If you are
buying under construction property from the builder, you are liable to pay service
tax on the purchase price. It may range anywhere between 3.09% to 3.71% of the
purchase price.
2. VAT
Recently
Supreme Court has levied VAT on the under construction properties. VAT is over
and above the service tax. It is very likely that builders will pass on this
cost to buyers. It may be any where between 1% to 5% of the purchase price.
More is yet to be made clear in this regard, hence it is advisable to ask the
builder upfront about the charges and get it in writing.
Buying resale
house property:
1. Transfer charges
Builders
and societies charge transfer charges when the original buyer wants to sell it
to the third party. Such charges are to be borne by the seller but in several
cases the seller tries to pass it on to the buyer. The charges could be
anywhere between Rs.50/- to Rs. 1000/- per square foot.
2. Voluntary contribution or premium on transfer
charges
If you are
planning to buy house from co-operative societies then it will be advisable to
check the list of their bylaws. They may sometime expect some voluntary contribution
towards the society funds which can come as a surprise after the purchase.
Buying
through a real estate agent:
1. Brokerage + VAT
If you are
taking services of a real estate agent, then you must ask for the brokerage and
other charges upfront. They may charge any where between 1% to 2% of the
purchase price excluding VAT.
During
possession of the house property:
If
you plan to shift to the house after the purchase, you must plan to incur further
costs.
1. Pure Shifting charges
Shifting charges
depend upon the distance, amount and weight of load to be transferred, location
of flat like higher or lower floors. Charges for intercity and intra city
transfer will be different. You can choose for options like packing, loading,
unloading, unpacking and rearranging. It may vary between Rs. 3000/- to Rs.
50,000/-.
2. Fitments
To make
your house livable some more after shifting costs become necessary like cable
TV, Phone, internet connections, Electrical equipment fittings, gas connection.
Overall they may cost you additional few thousand rupees.
3. Interiors
Cost of
interiors will depend upon the condition of the house and your needs. Many
builders provide basic plumbing, flooring and painting. But other additions
like wood work, window dressing, accessories for kitchen and bathrooms are to be
borne by the buyer. Also if you plan to buy new furniture and home accessories,
then it is advisable to budget for them in advance. If you plan to hire a
professional interior designer, you need to plan for their fees too. The whole
cost of interiors can add few lakhs to your house purchase budget.
Note: All the charges are indicative; you are advised to check the actual
charges before taking any decision.
Finally: Buying a house or investing in Real
estate can be a big financial commitment for the buyer. It not only affects
immediate financial resources but can also impact future financial resources.
It is always advisable to look into all financial commitments as well as study
the personal, professional, health, financial as well as psychological situation
before committing yourself to such a purchase. Comprehensive Financial Planning
exercise can help you understand your situation thoroughly. House Purchase or
Real Estate planning is an integral part of Comprehensive Financial Planning exercise.
You may also like to read the
following articles on house purchase, home loan and real estate investing.
