Last time when you ordered for that yummy cheesy pizza, how much extra did you pay over and above the price mentioned alongside the pizza on menu card? Few rupees for toppings, few more for that extra cheese, few for the base choice and few others for that little add on. So finally you get a bill which quotes number almost double or much higher than the rate you saw on menu card. You must be wondering why am I talking about pizza on this real estate portal. Well, because this is exactly what happens with the buyer of a property. Likewise, home buying comes along with its share of costs over and above the price stated on papers, it is important to consider Additional Costs Before Buying A Home so you know how much you will be shelling out over and above the normal costs.
The price of the property has several add on’s clinging on to it, which is under cover until the deal is finalized. And once the relationship of property buyer and seller is established out flies the cover and comes in those additional costs before buying a home which multiplies the actual cost of the property, at a pace much faster than calculator. Although there are few extra costs which vary from builder to builder and property to property, there are others which are common and discussed here below.
STAMP DUTY AND REGISTRATION FEES
Stamp duty is the amount of money payable to the state government for getting the house registered under the name of the buyer. No registration can take place unless the stamp duty is paid. The rate of stamp duty varies in accordance to the location of the property. In fact payment of registration charges indicates the final change of ownership from seller to buyer. It is an agreement for which the fee accounting to 6-10 percent of the property value is charged as registration cost and 5-7 percent of the property as stamp duty.
Anything and everything requires maintenance and this amounts to certain cost. So when we move into a society, builders take an advance deposit for two to three years for attending the facilities which we use like park, lights of common area, etc. Old societies where the maintenance has been taken up by the society RWA, payment has to be made to society members. The charges vary depending upon the society size and the number plus nature of amenities being provided. Many societies are seen to include the club house charges in this maintenance fee itself.
If you are amongst the one who took assistance of a broker at the time of property search and purchase, then you have to pay the broker his prize money. This prize money which you will be paying to the broker is known as the brokerage fee. Generally it amounts to 1%-2% of the property value. Although there are some brokers who charge the amount much higher than this. Brokerage fee is payable when the deal gets finalized on pen and paper. It is advisable to finalize the amount of brokerage fee before entering into the transaction with the broker.
Not every society maintains the ritual of providing the parking space in the cost of the property itself. Depending on the flat area the charges for this parking space varies. This is undoubtedly one of the extra costs which are to be paid to the builder or seller considering the space constraint in our country. One can also opt for extra parking space by paying the extra amount. No parking space can be claimed as legally yours if you have not bought it. Although the Supreme Court of India has discontinued the criteria of charging extra for parking lot, some builders are still glued to this practice.
If one buys an under construction property in India, he or she has to pay VAT and service tax to the Government. Service tax at 15% on 25% of the purchase value is charged on the under construction property. VAT or value added tax is charged on the construction value of the property.
PLC or PREFERENTIAL LOCATION CHARGES
Preferential location charges are unfixed charges payable to builders for booking a prime location in a particular locality. This charge is variable in nature and depends on time and place. Properties which have penthouse or villas with gardens or Lake Front tend to have PLC on a higher end. Suppose in a same society there are three kinds of flats. One is the simple one, the other with terrace garden attached and still other one is the corner one with a small extra room. The builder will have different PLC for all the three.
Transfer charge is the amount payable to the builder in case you have made a second party purchase in the society. The builder has name of the primary buyer on all his records and documents, and when the property is sold to some other party, and then the new buyer has to get all these documents available with the builder transferred to his name. And this involves the cost, which is again payable by him. These charges are fixed by the builder and vary from one builder to another.
Often when a property is purchased, the buyer may decide to get a few modifications done before moving in and these changes add on to the cost list. This interiors cost comes into limelight only once the property is bought. There are hardly any buyers who think of it, much in advance. Suppose you do not like the kitchen done by the builder. So you may ask him to not execute the kitchen work and instead deduct the proportionate amount from the total sale value. You will get the kitchen work done at your end. And the difference of the cost saved at your end and the one spent by you on kitchen will be the extra interior cost borne by you.
EEC or EXTERNAL ELECTRIFICATION CHARGES
Charges payable to the builder for installing the electricity cable and wires i.e. the infrastructure for bringing in the electricity to your premise.
ELECTRIC CONNECTION CHARGES
Over and above the EEC, the buyer is required to pay the price for getting the meter set up under his name and for getting the electricity from the board.
POWER BACKUP CHARGES
To compensate for the excessive failure of electricity, most of the societies provide electricity backup for which a lump sum amount is charged.
The above mentioned categories of cost are majorly unavoidable with some being categorized as legal fees for buying the house while others being completely at sole discretion of the buyer. Whatever may be your choice, one thing is for sure that this is your own house and not a rented one and hence these additional costs before buying a home are majorly unavoidable. So every inch of pain you take in terms of efforts or finance will show its results in your very own nest. The knowledge about these varied cost will help the buyer to keep a true estimate of the actual number of rupee notes which will move from his pocket to that of builder’s and Government’s. Apart from all the financial costs mentioned above, one other soft cost of great value is the goodwill of the builder. Do keep that in mind before you go ahead with your property buy!