If you have a budget of Rs 50 lakh for a house, do not finalize a house that costs that much. If you do not want yourself in a financial fix later, trim your budget by at least Rs 2-5 lakh. This would go into paying for other costs that are not in your face but are present nevertheless.
Before reaching a figure that you can afford, you must consider other costs that you would incur. Here is a list of such costs.
In the primary market
Primary residential market comprises of projects under construction, where you deal directly with the developer. If you are buying an under-construction flat, there are a number of charges that you will have to bear apart from its basic cost.
Loan processing fees: If you are taking your house on loan, processing fee and documentation charges are the first costs you will encounter. “These charges can be a flat fee of Rs 5,000-7,000,” says Amit Mavi, managing director, Better Options Propmart, a Noida-based real estate consultant firm. If you involve a consultant to broker a deal with the financial institution you are approaching, you will have to pay a fee for that too.
Service tax: According to a government order, buying an immovable under-construction property attracts a service tax. The government levies a service tax of 10.3% on 25% of the gross value of an under-construction property. Your developer will simply add this service tax to your payment, increasing the total cost of the property by 2.58%. Some developers include this in the total cost of the loan value.
External development charges: Usually charged per sq. ft, these are government imposed mandatory charges. These are meant for development and maintenance of infrastructure around the project.
This cost, too, is usually weaved into the overall cost of the apartment and can range from Rs 50 per sq. ft to Rs 200 per sq. ft, depending on the city and the state in which the project is situated.
Preferential location charges (PLCs): Based on the location of your apartment, you will have to pay PLCs. This depends on the size, the alignment and the rate of the flat. PLCs are charged per sq. ft of the super area, which includes common spaces such as parks, lift lobbies and parking area.
To calculate how much PLCs you need to pay, multiply the super area with the rate specified in the brochure. So the bigger your apartment, the higher would be your PLCs. The amount of PLCs varies between different developers and projects and may range between Rs 25 per sq. ft and Rs 500 per sq. ft. Says Gaurav Gupta, director, SG Estates Ltd, a Ghaziabad-based developer: “There is no regulatory framework on PLCs. There are no standard rules that govern the laws relating to PLCs.”
Generally, PLCs are added to the total cost of the apartment. “Certain luxury projects situated in the heart of a city have a higher PLC on each unit,” says Pradeep Mishra, a New Delhi-based real estate consultant.
Utility charges: The developer also charges for costs associated with the building. These include firefighting charges, electrification charges, club-membership fee, parking fee, development charges and annual maintenance deposit.
Weaved into the payment plan that the builder will offer, these collectively add up to Rs 2-20 lakh, depending on the project.
“Usually, luxury and upscale projects with premium amenities weaved around the apartment will have higher additional costs,” adds Mishra.
Fire fighting and electrification charges are a one-time fee that your developer will charge at the time of possession. A maintenance fee is also required for the upkeep of the premise. This is charged at a rate of Rs 5-7 per sq. ft of the super area. “Usually when the developer offers you the possession, he promises to take care of the internal maintenance of the housing complex for the next two-three years. Starting from the date of possession till the completion of this period, the developer will also ask for an annual maintenance fee,” says Sanjay Rastogi, director, Saviour Builders Pvt. Ltd, a Noida-based developer. Once this expires, you will have to pay the same to the residents’ welfare association.
Stamp duty and registration fees: These are mandatory fees that you need to pay to the state government when you register your property in your name at the time of possession. You even need to pay this even if a property comes as a gift to you. Since land is a state subject, this varies from state to state and is in the range of 4-7%. It is calculated on the agreed sale price of the property or the market price, whichever is higher. For women, the rate is lower.
In the secondary market
Simply put, secondary market comprises of properties that are re-sold in the market or ones that have changed titles more than once.
Since they are usually ready to move and in established locations, these are usually costlier than primary market properties.
Brokerage: In the primary market, brokers usually do not charge a fee since they get a commission from the developer. However, in the secondary market, your broker will charge you a commission of 1-2% of the property value.
Stamp duty and registration: Since the title of the property will have to be changed, you will have to register the property in your name. This will involve stamp duty and registration charges.
Others: Look at pending property tax, water tax and electricity bills. If the previous owner hasn’t settled these, you will have to settle them from your pocket.
When buying a property, what’s most important is to ask relevant questions to know what exactly you need to pay for. Knowing the add-on costs beforehand will help you make a practical budget for your house.