All eyes dream of owning a home. The decision of buying a house is one of the most important ones as it not only involves a lot of money but has many emotions attached to it as well. For majority of the people, all their dreams and savings get invested when they plan to own a house.
At the first go the house that you plan to buy may look manageable but after buying it you realize there are many other costs also involved. It happens that the payment varies with what you might have calculated. Actually, your calculations are done by multiplying the cost per square feet with the total area. But this is not what you actually have to pay.
There are some other costs such as registration cost, stamp duty, service tax, property tax etc that go unaccounted for in your calculations but they exist and finally get added in the cost that is reflected in your final payment schedule. The additional costs also vary from builder to builder and facilities that your house is equipped with.
Obviously, if the cost of home turns out to be more than what you have calculated it becomes difficult to go for it. There are number of add-ons that the developers and real estate agents disclose later and that shoots up the actual cost of the place by approximately 20% to 25%. It goes without saying that it is important for you to be well prepared and have a clear view about all the additional costs and add-ons that might come in the way when you are buying a house.
What are the Hidden Costs?
Following are the additional costs that you might have to incur when you plan to purchase your dream home. Take a look.
Parking Space – When it comes to large residential buildings, an additional amount is charged under the head of Parking Space allotment. This is quite a new trend in the Indian realty market and a good amount is charged to you for providing you with an exclusive parking space for your vehicle. The type of property decides this amount. This amount may vary from Rs 2 Lacs – Rs 5 Lacs. Primarily, factors like locality, type of property and parking space are taken into consideration prior to fixing the amount under this head. Going by the ruling of Supreme Court after March 2012, additional amount for parking rights at residential areas cannot be charged by the developers but this ruling is being by-passed and the amount is being still included in the property cost.
Registration Costs – The registration charge is based on the actual worth of your property. There are a number of states wherein approximately 6% to 10% amount of the property cost falls under the head of legal charges in form of registration fees and stamp duty etc. About 5% to 7% of the cost of property forms the stamp duty. For example – If your property is worth Rs 10 Lac then you will be required to purchase a stamp of Rs 50K in order to get the sale deed typed. The registration fees of approximately 1% – 2% of the cost of property is also charged that is payable to the court. This does not end here. Apart from these costs you will also bear the cost of number of miscellaneous expenses like fees of lawyers and notary who represent you and get your job done in the court.
Loss of Tax Rebate, Interest and Rental – A number of reasons call for delay in the projects and this is very common – almost everywhere around us. These delays in project add to your worries. They not only add to your additional expenses in form of extra interest that you pay towards your home loan but they also lead to price escalations. Projects are generally expected to get delayed by six months to one year. It is always advisable to include the extra interest that you might have to pay due to delay in project while you plan your finances for buying property. The rental earnings for the delayed period are also to be kept into account. Till the time the property is not completed and handed over to you, you also lose on to the tax rebates that are applicable on home loans. These costs cannot be ignored while you plan your budget for purchasing a property.
Deposit for Maintenance – Many of the builders take an upfront maintenance deposit that may range from a period of 10 years or more and for lifetime, at places. The buyer suffers a loss due to charges under this head. You are required to pay a good lump-sum amount on the initial level and bear interest on such borrowings. Going by the trend of inflation the amount that is charged for the above mentioned period is likely to run out earlier than predicted. You will then be required to pay another lump-sum amount under the head of deposit for maintenance. Developers keep insisting on the deposit for maintenance to be paid initially as it provides them with more capital.
Cost of Interiors – You simply cannot ignore the fact that your choices and preferences are ought to be different from the developer. Once you acquire the property of your choice you will, for sure, spend on the interiors of your newly acquired home as per your requirements and choice. Generally, when we plan for purchasing a property, expenses under this head somehow escape our mind. However, we cannot ignore the fact that this head may also require substantial amount to be invested depending on the type and nature of interior work that is opted by you. To be on the safer side, approximately 1%-1.5% of the cost of property may be dedicated to this head of expense.
Preferential Location Charges (PLC) – These charges are clamped by the builder for your choice about the floor on which your want to purchase your home or you want your home to be east facing or corner one and so on. Developers generally charge you for providing you with preferential locations. The amount, however, varies with how many preferential options you have opted for.
Apart from the above mentioned costs, there are charges like unpaid civic authority dues; unapproved plans etc may also add to your pain. Therefore, it is always advisable to keep a surplus of approximately 20%-25% over and above the initial cost of property before you plan to buy your dream home. Clear knowledge about the add-on costs help you in planning your finances accordingly. It saves you from facing the ugly situation of “buy or not to buy” once you have set your heart on your favorite property after the add-ons get revealed.
Source: Think Rupee