Additional costs of buying a home
If you want to buy a house, you need to plan budgeting so as to save money for incurring all the costs of buying a house. Buying a house involves a lot more under the water than you can see. It is not enough to avail only the base price of the home, but you need to take into account all the costs associated with buying the house.
Usually these costs remain hidden. A home buyer only takes into consideration the basic cost of a house but ignores the additional costs involved in the process. It could lead to serious miscalculations in your budgeting as the additional costs could sum up to be substantial amount. Let us take a look into these costs involved in acquiring a house.
Preferential location charges (PLC):
It can be a percentage of the basic cost. It varies according to various aspects related to the home buying process. PLC is an additional charge paid by the home buyer to the developer. The developer would offer the buyer with a housing unit with advantages over others in terms of location. It may depend upon whether the apartment faces a park or a lake; may also depend upon the type of flooring in the apartment.
The PLC varies according to project specifications, quality, alignment of flat, size, developer of the project, etc. PLC on flooring differs as per the climatic condition of the respective city. For example, in Delhi NCR, PLC is higher in floors closer to the ground and in case of Mumbai, it is higher in case of upper floors in a high rise apartment. This is due to the dry climate of Delhi and humid climate in Mumbai city.
The developers have virtually made it impossible for a home buyer to evade PLC. Each floor is attached with PLC and luxury projects at prime locations charge a higher PLC.
PLC is usually charged as per the super area of the apartment. It can be formulated as –
PLC= PLC rate quoted by developer X super area of the apartment
External development charges
External development charges include creation and maintenance of water supply, sewerage, roads, street lighting, community buildings, etc. They can add up to 10% of the base cost of the apartment and hence should not be ignored at any cost. There are maintenance charges for common facilities like parks, playgrounds, etc which you would need to pay to the developer.
Parking charges
Parking charges should not miss the radar of your planned budget. Whether it has been a debated issue if developers can legally charge parking fees or not, it has become a practice among developers to charge a hefty amount for the parking space provided to you. The charges asked by the developer could be as high as in the range of Rs 50,000 to Rs 1 lakh. Parking charges also differ for open and covered parking spaces.
Legal charges
Legal charges mainly comprise of registration fee and stamp duty. They make up to 7% to 10% of the property price.
Usually the stamp fee is 5%-7% of the registered value of the property. It is payable for property registration in your name. It varies across states in the country. The government usually fixes the minimum capital value or circle rate for a property located in a particular area. The circle rate is the minimum rate under which any property within the area cannot be registered. These rates are changed as per the decision of the government.
Additionally, there will be a registration fee payable to the court, which is about 1%-2% of the property cost. Also, there would be costs related to notary and lawyers’ charges payable by the buyer.
Insurance
Banks may insist that the house should be adequately insured or that the borrower should take up a life insurance policy worth at least equal to the loan amount. In case of untimely and unfortunate death of the borrower, the family is not affected and the loan is repaid through the insurance amount.
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