It is everyone’s dream to have their own house. This not only gives you a roof to live in, but also increases your respect among the people in the society. Buying a home is generally the biggest purchase in one’s life and it requires financial planning. The first step in buying a home is to understand and evaluate its actual cost. There may be a difference between the cost of ownership estimated by the builder or seller and the actual cost of ownership. This is because there are always some hidden charges and additional expenses that you may have to pay. Usually the actual cost increases at the time of purchase if you do not plan for these in advance. This can affect your financial planning.
Before buying your dream home, you should be aware of these five important additional costs so that you can do better financial planning.
1. Stamp Duty
Stamp duty is a mandatory tax levied by the government on property related transactions. It certifies the sale agreement, that is, it serves as a proof of sale or purchase of the property. Stamp duty charges can range between 4% to 7% of the value of the property. It depends on the state in which you are buying your house. For example, if the value of the house you are buying is Rs 50 lakh, you will have to pay an additional Rs 2 lakh to Rs 3.5 lakh as stamp duty.
2. Registration Fee
This is another mandatory fee levied by the government at the time of purchase for registering the property in the name of the buyer and updating the property ownership records. In most states, the registration cost is a percentage of the value of the home. Based on this, for a house worth Rs 50 lakh, you will have to pay Rs 50,000 as registration fee. The registration fees are separate from the stamp duty that you have to pay.
3. Goods and Services Tax (GST)
If you are buying an under-construction property, you will have to pay GST on it. If the property falls under the definition of affordable house, then GST is calculated at 1% of the value of the house. Failure to do so, 5% GST of the value of the property will be levied. Affordable property means a house whose value is less than Rs 45 lakh and its area is less than 60 square meters in metropolitan cities and 90 square meters elsewhere. So, if the value of the under-construction affordable property is Rs 40 lakh, then the buyer will have to pay Rs 40,000 as GST. If the value is Rs 50 lakh, then the GST to be paid will be Rs 2.5 lakh. However, there is no GST on completed (ready-to-own) properties or resale of old assets.
4. Advance Maintenance Charges
Advance maintenance charges can also affect the cost of your home. Builders can collect these in advance for a year or two and the amount can go into lakhs depending on the size and location of the property and the apartment complex. Typically, maintenance charges include building security, lift charges, charges for property maintenance and water and electricity charges, among others.
5. Parking Allotment Charges
Many home buyers think that once they are in their new home, they will not have to pay parking charges for their vehicles. it is not true. Housing societies or builders also charge a hefty amount for allotting dedicated parking. If you have more than one vehicle, you may have to pay more for additional parking. Generally, a lump sum amount has to be paid for parking allotment, which can be in lakhs. Some societies may also charge annual parking charges. Apart from these, Transfer of Memorandum (TM) charges may have to be paid in some areas in case of resale transactions. Some resident associations also charge such a transfer fee.
All these different types of charges together can add up to 10-15% of the final cost of your home. One thing to note is that if you want to take a home loan to buy a property, then all these additional expenses also need to be taken into account while estimating the total cost. This will make your home purchase a lot easier.
(Article: Adhil Shetty)