Owning a home is everyoneâ€™s dream, as it offers a sense of security, freedom, and pride. Taking a home loan to fulfil this dream is a big part of financial planning, but thereâ€™s more one needs to consider. Apart from the down payment and ongoing Equated Monthly Instalments (EMI), several essential charges are involved in buying a house.
The essential charges one must be aware of so that there are no unnecessary shocks at the last minute are as follows.
Stamp duty and registration charges
While setting aside a budget for buying a house, people often donâ€™t consider registration and stamp duty charges. Stamp duty is a mandatory tax the government levies on property transactions. It is an authentication of the sale agreement and serves as proof for the sale or purchase of a property. Depending on the state where one is purchasing a house, the stamp duty charges may differ based on the propertyâ€™s value.
The government levies property registration charges during purchase for registering the property in the buyerâ€™s name and updating property ownership records. In most states, the registration cost is 1% of the propertyâ€™s value. For instance, if a flat is valued at â‚¹50 lakhs, the flat registration charges will be â‚¹50,000. Registration charges are over and above the stamp duty charges and vary from state to state.
Those who buy a home by availing of a brokerâ€™s services need to pay his or her fees. While most brokers charge 1% to 2% of the propertyâ€™s value as fees, others can charge even more. Inquire about the charges before beginning a home search.
Advance maintenance charges
Property maintenance charges can significantly impact the cost of a house. When buyers sign on the dotted line, the builder can ask them to pay a maintenance deposit for a specified time in advance. This deposit can be for a year, two years, and even more.
Depending on the propertyâ€™s size and location and the cost of services offered, this amount can add up to lakhs. Maintenance charges cover building security, property maintenance, lift charges, and common water and electric charges, among others.
Processing fees on a home loan.
Buyers pay a fee to get a home loan application processed. This fee covers basic administration costs and other costs the lender incurs for carrying out credit checks, document verification, etc. Finding a home loan lender that offers a lower processing fee is critical.
Goods and Services Tax (GST on the house)
A goods and services tax is levied on purchasing an under-construction property. It is calculated at 1% of the house’s value if the property comes under the definition of affordable housing. If the house is not within the category of affordable housing, the GST rate on the flat purchase will be 5% of the flatâ€™s value. An affordable home refers to a house valued at less than â‚¹45 lakhs, with an area of less than 60 square meters in metros and 90 square meters in other locations.
Thus, if an under-construction property costs â‚¹40 lakhs, the buyer must pay â‚¹40,000 as goods and services tax on a house. Conversely, if the propertyâ€™s value is â‚¹60 lakhs, the amount of GST borne by the buyer will be â‚¹3 lakhs. However, there is no GST on ready-to-move-in or completed properties or the resale of an old property.
Additional charges for location preferences
One must also understand that there are extra charges for a prized location. These are known as Preferential Location Charges (PLC) in the real estate market. For instance, a home with a terrace garden or a lake-facing home requires one to pay an additional sum for the exclusive advantage.
Car Parking space
The developer/promoter cannot sell open parking spaces for consideration. However, a garage or covered parking as defined under RERA can be sold to the buyers. Depending on the property type, location and other factors, builders may charge for buying a garage or covered parking space.
Generally, buying a house is the most significant investment in oneâ€™s lifetime, and it cannot be done without detailed financial planning. A buyer needs knowledge about different home loans, real estate market trends, and the vital charges involved.
Learning about the hidden charges, such as registration and stamp duty, brokerage charges, maintenance deposit, house property tax, goods, and services tax, etc., ensures people have sufficient time to plan for the extra cost.
Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim/disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.