Buying real estate is the life goal for most people in our country. But it is not an easy decision to make. In fact, it requires a lot of financial planning to pool in requisite funds and a thorough search for selecting a house within one’s budget. However, most people fail to take into account the additional costs when buying a house, which often increases the actual money spent by a considerable amount.
Let’s see the important costs which are generally hidden when one talks of purchasing real estate in India:
Carpet Area vs Built-up Area: The area of the flat marketed by the builder is usually the built-up area (which includes the walls inside the flat) or the super-built-up area (which includes common area such as staircase, lift etc.) and not the carpet area of the flat. Thus, you end up paying for a larger area than what you actually own. You need to see the fine print of developer’s brochure and insist upon purchasing your house on carpet area.
Registration Cost and Stamp Duty:
This is the inevitable cost which property purchase entails but you may not make an actual estimate of it. After you make payment to the builder to buy the property, it needs to be registered in your name and this entails payment of registration charges to the government. These charges vary from state to state but are normally between 1% and 2% of the property cost. Another bigger cost is the stamp duty, which ranges from 5% to 7% of the property cost. So, you will have to incur registration and stamp duty costs, over and above the purchase price of your property. You also need to shell outa fee to the lawyer who helps you in the registration of your property.
Additional Taxes:
Most states in India levy service tax or VAT onunder-construction property, which can work out to be substantial. This tax is payable on the services provided by the builder or real estate developer from whom you have purchased your property. But asreal estate comes under the Goods and Services Tax, VAT, octroi or the local body taxes will be subsumed under GST.
Parking space:
Although builders are not supposed to collect extra amount on sale of parking space, many of them continue to charge for the parking space provided to property buyers. The amount may vary from Rs1 lakh to Rs 3 lakh depending on whether the parking space is a closed or open one and also on the location of the parking area.
Maintenance Deposits:
Builders often start collecting a lumpsum amount upfront from buyers towards maintenance deposit for a period of 5 to 10 years.
Other charges:
Builders also charge extra from buyers pertaining to water supply, electricity and sewage connections. If you are buying a property which has a club house facility, you have to pay extra for it over and above the maintenance deposit mentioned above.
Delayed or stuck projects:
Delays in project completion or stalled/stuck projects due to defaults on the part of builders have become the order of the day in real estate sector today. Builders hardly stick to the promised delivery dates due to several reasons such as diversion of funds in other projects, inefficient planning, lack of commitment towards execution of the project and insolvency proceedings against them. This results in huge losses for buyers who have to reel under the twin burden of paying rents as well as bank EMIs for home loan. And if they have invested in a second home, they lose out on the potential rent which they could have earned from their new property for the delayed time period.
You must take into consideration the above costs before going ahead with your decision to buy your dream home, as most of the above expenses are not funded by a bank home loan. Therefore, do weigh in all these additional costs before you plan your property purchase.
