Buying a house? Beware of the hidden costs!
Ever noticed that big hoarding on the road reading “a 3BHK apartment with ultra-modern amenities in just Rs 50 lakh!”?
We come across such hoardings and tempting advertisements almost daily in our day to day life. But we often tend to ignore that small asterisk at the end that reads conditions apply.
Today, market is flooded with several projects offering world-class amenities. In order to stand out, from glossy brochures to tempting advertisements, developers leave no stone unturned in order to lure prospective buyers.
Since, investing in a property is the biggest buy of our life, one should be aware of a host of hidden charges. With these hidden charges, the same “Rs 50 lakh apartment” at the end would cost around Rs 75-90 lakh.
Thus, let’s explore these factors in details.
Various Charges for Apartments in Primary Market
External Development Charges (EDC): EDC is levied by the developer and includes maintenance of street lights, roads, sewerage, water and electricity supply. This should not be ignored as it accounts up to 10 per cent of the base cost.
Infrastructure Development Charges (IDC): Usually charged per sq. ft., infrastructure development charges are imposed by government on developers. It is utilised for the development and maintenance of infrastructure around the project. The IDC varies from developer to developer, but usually ranges from Rs 37.50 to Rs 100 per sq. ft.
Preferential Location Charges (PLC): Want that floor overlooking the sea? Well, then get ready to pay preferential location charges. PLC is a premium charge that depends on the size, alignment and the price of the flat. Interestingly, PLC on floors vary from city to city based on the climatic conditions. For instance, in Delhi NCR, due to dry climate it is higher for the floors closer to the ground. However in the humid city of Mumbai, is higher in case of upper floors. Preferential location charges may range between Rs 25 to Rs 100 per sq. ft. and are added to the total cost of the apartment.
Utility charges: For all those ultra-luxurious amenities, developers charge several other costs such as club membership and parking charges. For car parking, one may have to shell up to Rs 50,000 to Rs 1 lakh, depending upon open or covered parking. Similarly, membership of club houses also accounts for significant amount. This may be charged on a yearly basis or for a lifetime.
Apart from the fixed costs, there are numerous charges that are incurred on a regular basis. These include maintenance charges, security charges among several others.
Maintenance charges: These include cost to maintain roads, parks, street lights and other common facilities in the society. The charges for water and electricity backups are also included in this. Maintenance charges are levied on a regular basis, however one can pay on a monthly, quarterly or yearly basis.
Security charges: The expenses incurred on the deployment of security personnel in the society and installation and maintenance of security arrangements such as intercom and CCTV cameras are also levied on the owner on a monthly basis.
Stamp Duty and Registration Charges: These are the mandatory charges paid to the state government while getting the property registered. These charges are levied even if the property is transferred through a gift deed. The stamp duty and registration charges vary from state to state and is usually in the range of 5-7 per cent. In some states, these charges are lower for women. For instance, in Delhi, stamp duty for males is 6 per cent, while for females it is 4 per cent.
Registration Fee: In addition to the stamp duty and registration charges, there is a registration fee that has to be paid to the court and expenses related to broker, notary and lawyer. This usually accounts for 1-2 per cent of the total property cost.
Service tax: Under-construction property attracts 12.36 per cent service tax on 25 per cent of the gross value of the property, increasing the cost of the apartment by 4.5 per cent.
Value Added Tax (VAT): VAT is charged on the construction value of under-construction property. It varies from state to state, but usually accounts for 3-5 per cent of the total cost. However, remember that VAT is only charged for under constructed property.
Restriction on resale while under construction: In certain cases, developers put restrictions such as property cannot be resold before possession or while under-construction. Thus, it is always advisable to know such conditions before putting money in any property.
Buying Property in Secondary market
While buying a re-sale property, there are certain factors that require attention. These include:
Brokerage: In primary market, brokers get commission from the developer. However, in case of the re-sale property, this charge has to be paid by the buyers. It usually accounts for 1-2 per cent of the total property cost.
Stamp duty and registration charges: these charges are levied on the buyers as the title of the property will have to be changed.
Extra charges: In order to avoid problems later, know about the existing loan on the property, pending water and electricity bills.
Further, if you are looking to buy an independent house, then too the costing differs from that of an apartment. While location and quality of construction determine the cost of an independent house, there are other costs such as property tax obligations and permission for expansion, among several others.
In almost all cases, corner house commands premium as it has good commercial prospects, ample parking space and gets more sunlight. Moreover, a Vastu-compliant house also demands an extra cost in most cases. In order to get the bedroom in the South-West direction, kitchen in the South-East and Bathroom in the North-West, buyers have to pay a premium. Other charges include:
Fixed Cost: Charged per sq. ft., the cost for independent house is the total sum of the cost of the land and the constructed part of the house. Often, it may include the cost of refurbishing and renovation.
Recurring Costs: These include property taxes in the society, registration charges, civic amenities charges and other essential requirements such as water and electricity charges.
