Purchasing real estate in India entails more than merely paying the price that is mentioned by the builder or the seller. The costs associated with buying real estate include government charges, registration fees, cost involved with home loan, maintenance charges, and interior design charges. Homebuyers might incur extra expenses due to their budget planning being based solely on the quoted price of the property during the process of purchasing a property or even after owning it.
The real cost of buying a piece of property will be based on where the property is located, whether it is ready-to-move into or still under construction, the nature of the sale agreement, and how the buyer will finance the deal.
Cost of Ownership of the Total Property
The initial step towards the preparation of a realistic property budget lies in securing a breakup of the total cost quoted. While the basic cost of sale might not cover all the costs that arise from the transaction, the buyer may be required to take into account the floor rise cost, the cost arising from the preferred location cost, the parking fees, clubhouse facilities and other costs that arise in a particular project.
The buyer should always ensure they have a written list of all the costs before booking a particular property. Buyers should also ensure they compare the final cost that will be incurred from a shortlisted property rather than relying on the cost that is quoted.
Stamp Duty and Registration Fees
Stamp duty and registration fees are some of the most significant costs that a buyer needs to take into account beyond the cost of purchase. Stamp duty is one of the fees levied by the government on property dealings, which vary from state to state in terms of amount and method of computation.
Registration fees are often separate fees charged during the registration of the property documents. The buyer needs to ascertain the current registration fees in the particular state where the property lies prior to making the final financial arrangements.
The fees being significant, it would be advisable for a buyer to make the budget in advance so as not to overlook them.
GST Depends on the Property and Transaction
Goods and Services Tax (GST) is another area of concern, especially while buying an under-construction residential property. The treatment depends upon the deal done and the status of the property at the time of purchase.
In the context of applicable Goods and Service Tax Act, the sale of any under-construction residential property may attract GST. But there is no application of GST in the sale of the completed property provided that the whole of the consideration is paid after the issue of the completion certificate or the first occupation, whichever is earlier.
Buyers need to know the tax treatment of their particular deal rather than thinking that all properties are subject to a particular GST rate. The builder’s payment plan and costing would make the buyers understand this.
Brokerage and Costs of Home Loan
The buyer must ensure that a brokerage amount and terms of payment have been sorted out before undertaking any transaction. This can help avoid disputes arising during the home-buying process as far as brokerage costs are concerned. The person who will pay the commission, when it will be due, and whether GST will apply should be clear from the agreement.
Those taking loans to buy houses should take into consideration additional costs apart from the EMI. Banks charge various amounts such as processing fees, legal and technical evaluation fees, documentation and valuation fees among others depending on their terms.
Apart from mortgage costs and relevant insurance costs, the amount of interest is an important cost element to consider while buying a house using loans. A seemingly affordable loan may turn out to be quite costly in the long run.
Other Maintenance and Parking Costs
There could be maintenance fees or deposits, advance maintenance fees, contributions to sinking fund, deposits for electricity or water connections. Developments with facilities for common use may include costs related to common facilities, security and clubhouse.
Different projects will include different types of these payments. Buyers need to look into their purchase agreement, payment plan and other project documents in order to find out which payments are included in the quoted price and which ones are paid separately.
Parking issue also deserves close attention. It needs to be verified whether parking is included in the property price and under what conditions. It should be checked against project documentation and legal requirements.
Interior Work and Relocation Costs
The costs do not come to an end just because of the registration of the property or handing over of possession. Usually, many buyers spend extra money to make their house ready for moving in. Based on the condition of the property as well as individual preferences, it may be anything from modular kitchen, wardrobe, lighting, furnishing, curtains, appliances, painting and electrical work.
Additional costs involved in the process of relocating may prove to be quite significant. Packers and movers, internet connection, utilities connection and household requirements may seem small individually but the combined costs can impact the budget that is left.
Buyers must make a separate budget for the interiors and relocating costs before deciding the amount that they can spend on the property. This becomes even more crucial if the down payment and other charges consume a major chunk of savings.
Legal and Professional Assistance
Legal and professional assistance can also be included in the cost of acquisition, depending upon the type of transaction. At times, it is required for buyers to seek the assistance of an attorney for examining the agreement, reviewing the titles of the property, due diligence, etc. At times, buyers require assistance with regard to tax information.
Buyers need to go through all the terms and conditions of the agreement before signing the same. Buyers need to ensure that the registration of the project has been checked from the corresponding RERA website.
These checks would enable buyers to learn about the transaction and its issues, which might need clarification before making any financial commitment to the transaction.
Set Aside Money for Unforeseen Circumstances
It is very common among budgeting mistakes that one allocates the total amount of money for the down payment and immediate buying costs. There may be any unforeseen cost of repairs, finishing touches or changing circumstances before and even after taking possession.
It can be useful to have an emergency fund separate from that budgeted amount. There are some other considerations such as daily expenses and other loans one may need to think of in order to determine how much money should be budgeted for an affordable house.
The amount of money would depend upon the individual's earnings, savings, family requirements and condition of the house.
A Better Understanding of the Property Purchase
The purchase of the property must be based on the total financial commitment that the buyer is willing to make for buying the property and not merely on its listed price. The buyer must make a thorough financial assessment of the deal and check the government charges and all other charges before paying money for purchasing the property.
Checking the RERA Registration of the project, checking the possession period and the conditions related to extra charges can help in making an informed decision regarding purchasing the property. With proper planning regarding taxes, registrations, financing, maintenance, interiors and contingencies, buyers can avoid over-budgeting and make sound financial decisions about properties.
