Property Buying: Costs You Should Know
If you are planning to buy a property, you will encounter different costs, depending on whether you purchase it in a primary market or the secondary market. Property costs involved are quite different in both cases. Following is an explanation of the different charges involved in buying a property in either of these markets.
Primary market
This is where a buyer directly buys property from a builder. The property may be either under-construction or ready-to-occupy. Most of the costs are included in the project costs except the stamp duty and registration fees.
1. Loan processing fees: The loan processing fee and documentation charges are the first costs you will encounter if you are buying a property on bank loan. These depend on the bank where you have applied for a loan.
2. Infrastructure charges: These are mandatory charges imposed by the Central government, primarily for developing and maintaining the infrastructure around the project. Infrastructure charges are usually charged per sq. ft. However, most times, these charges become an intrinsic part of apartment costs.
3. Preferential location charges (PLC): Based on where the project is located, a home buyer should pay the PLC. The PLC depends on the size, rate and alignment of the flat. It is calculated per sq. ft., where the area includes common spaces, car parks, parks and lobbies. Hence, the bigger the building size, the higher your PLC. These charges too are generally included in apartment costs.
4. Utility charges: These are charges associated with the building charged by the developer. These charges include electrification, development charges, parking fees, annual maintenance, firefighting and other charges such as club-membership. Again, these charge are part of the apartment cost.
5. Service Tax and VAT: These are charged by the government and are included within the project cost. The government charges a specific service tax and VAT depending on the city. For example, the service charge in Chennai is 3 per cent of the property value whereas it is 10 per cent of the property value in Hyderabad. Developers usually include these charges in the loan value of the property.
6. Stamp duty and registration fees: These are charges that are not included in the property costs, and have to be paid separately in the sub-registrar’s office while purchasing a property. Both the stamp duty and registration fees are mandatory charges, and vary from state to state. Some states have lower registration charges and stamp duty for women.
Secondary market
This is where a property is on resale and you are buying a property from an owner instead of a builder. As the property is already ready to move in, you do not encounter the costs seen in the primary market. Yet, these properties are costlier than that available in the primary market. Apart from the stamp duty and registration charges, you will encounter the following costs.
1. Brokerage: These charges are applicable if you plan to buy a property through a broker. Unlike the primary market where you don’t pay a broker’s fee for buying a property, you will have the broker’s fee in the secondary market. This will be 1-2 per cent of the property value.
2. Other charges: Depending on the property, you generally will have other charges such as property and water taxes, and electricity bills that may not be settled by the previous owner. If the property is in a township, it may involve NOC charges and annual maintenance charges as well.
