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Watch out for these 5 hidden costs when buying property
Buying a piece of land or a house is one of the most cherished dreams of most Indians. People often consider it as the most significant investment of their life. They are, therefore, willing to go an extra mile to acquire a decent piece of real estate.
It is also the biggest investment for most, as they stretch their financial capabilities as much as they can. In such a situation, a sudden expense can make the finances go awry.
For example, the initial cost that an agent mentions does not include a host of add-on for which the buyer has to pay, which in turn, increasing the budget by about 25 per cent.
Here are some additional expenditure that buyers incur while purchasing a house. Make sure you budget for them.
Registration Costs
This will be a substantial cost depending on the total worth of the property. In most states the entire legal charges in terms of stamp duty and registration fees add up about 7 per cent to 10 per cent of the property cost.
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Watch out for these 5 hidden costs when buying property
Typically the stamp duty is about 5-7 per cent. If a person is buying a property worth Rs 50,00,000 (Rs 5 million), the stamp duty will be Rs 360,000.
In addition to this, there is a registration fees payable to the court which amounts to 1-2 per cent of the property value. Over and above these costs, which have to be exclusively borne by the buyer, there are several miscellaneous expenses like the fees of the notary and lawyers who get the job done in the court.
The legal counsel assisting in verification and registration of the property also charge about 1 per cent of the property cost which has to be taken into account while planning the budget.
Parking Space
It had been a trend over the last decade to charge an additional upfront payment for exclusive parking spaces in large residential complexes.
This amount would vary from Rs 200,000 to 500,000 depending on the type of property, locality and type of parking space provided.
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Watch out for these 5 hidden costs when buying property
This has been a cause of heartache for many buyers. Luckily after March, 2012 as per Supreme Court ruling, no additional money can be charged for parking within a residential complex.
However, most of the developers try to bypass this provision by charging an extra amount in the overall cost of the property.
Interiors Cost
After acquiring a property one has to invariably spend money on interiors. This expenditure is generally not taken into account while buying a property and you can end up spending a lot of money on it.
Though money spent on interiors may vary, buyers can budget at least 1 per cent of the property value for this.
Interest, Rental and Tax Rebate Loss
Delays in project completion are a common phenomenon in India due to a host of reasons. These delays result in price escalation and the buyer ends up paying extra interest to the lender if the property purchased with a loan.
A delay of six months to one year is normal, and must be provisioned while planning for the purchase. Additionally, if the owner is living on rent, he or she needs to shell out extra. If the property is for investment purpose, there is loss of rent.
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Watch out for these 5 hidden costs when buying property
The tax deductions applicable on home loans cannot be availed unless the property is complete and handed over.
All these add up to a significant outgo for the buyer, who has already financially stretched himself.
Maintenance Deposits
Lately, developers have started charging upfront maintenance deposits for long periods, such as 10 years, instead of taking it periodically. If the buyer is taking a loan, the interest outgo will rise as the loan amount increases.
There can be several other hidden costs such as unapproved plans, unpaid civic authority dues and so on, which further aggravate the misery of the buyer unless one is financially prepared.
Adding 25 per cent of the property value to your budget will help to meet these unexpected charges that crop up last minute.
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