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You consider all the obvious costs when buying a house – you look forward to affordable home prices, good housing loans and lower mortgage rates, etc. However, you miss out on many other pinches that are involved in this complicated process of buying a house. These hidden costs raise the quoted price of the property, and the buyer ends up shelling out a lot more money than planned. Many times buyers jump into a deal considering only the base price quoted by the builder or the seller without thinking about various hidden home charges like stamp duty and registration charges, maintenance deposit, brokerage, parking space fee, interiors, service tax and preferential locality charge.
Let’s take a look at the most common extras, one by one.
Stamp duty is a compulsory fee that the buyer is supposed to pay the state government to get the house registered under his/her name. These charges may differ from state to state from 5-7%, and the house won’t be registered in your name unless the stamp duty is paid. Registration is the full and final legal agreement between the buyer and seller indicating change of ownership; and the court charges a registration fee for it, which is generally 1-2%. This may seem like a small amount but sums up to a lot. Let’s say, for example, the base cost of the house is 3.75 crore rupees. In this case, the stamp duty will come up to 18 lakh rupees and the registration charges will be 3.75 lakh rupees. So stamp duty and registration charges together will cost you around 20-21 lakh rupees.
2) Maintenance Deposit
Builders charge an advance maintenance or maintenance deposit of up to 2 years; this usually comes under common amenities, parks and lightings. In existing buildings, it is charged as a deposit by society members in case of any damages that occur in the future. This amount, the same way as other home charges, gets pretty big depending on the number of amenities provided or on the existing maintenance fee. Sometimes, clubhouse membership is also included in this fee and the amount rises even more. This amount depends from society to society and area to area. For example, in Mumbai, maintenance is high in localities such as Bandra and Cuffe Parade and lower in places like Borivali and Mahim.
3) Brokerage Fee
This is not exactly a hidden cost, but it is one of those home charges that slips out of your mind while buying a house. Brokerage is the fee charged by the broker – the person who is the middleman between the buyer and the seller. Most brokers charge a fee of 1-2% of the total house cost; however, some are expensive and may charge a higher fee. It is better to find out about the details and settle this with your broker at the onset itself. For example, in the case mentioned above, brokerage will add another 3.75 lakhs to the base cost.
4) Parking space
With such a shortage of space in our country, sadly, parking space is not included when you buy the house. Depending on the area you live in and the size of the available parking space, this fee can be higher or lower. This fee has to be paid to the seller and comes as a separate cost. If you do not pay this fee, the seller has all rights to sell it to another member of the society. Again, parking space comes at a price decided by the location of the project – it usually starts from a lakh and can go up to four to five lakhs, adding to the list of hidden home charges.
This is the biggest and the most important cost – an unavoidable cost because, without proper interiors, you cannot move in. This includes painting, plumbing, buying new furniture or getting furniture made, electric appliances, and the list is endless. This cost can easily go up to Rs. 10 lakh even after sacrificing and cutting down quite a bit. It might save you some money if you go shop online for furniture, but the cost of interiors is a minimum of Rs. 20-25 lakhs if you change everything and 15-20 lakhs if the basic interiors are already done.
Any under-construction property that is purchased in India is charged with Goods and Services Tax. Like stamp duty and registration charges, GST is also paid to the government. The GST on the under-construction property is 5% while the affordable housing projects attract only 1%. There is no GST on ready to move properties or on those projects which have got the completion certificate.
7) Preferential Locality Charge (PLC)
Preferential Location/Locality Charge (PLC) is the extra charge paid to book a unit which is in a better location within a particular layout or complex. This differs from one builder to another, but generally premium projects tend to have higher Preferential Location Charge. For example, penthouses built on top of buildings and villas with gardens or a lake view have very high PLCs. Unlike stamp duty and registration charges, service tax or VAT, this cost is not fixed and varies from builder to builder and also from time to time.
While there is no way these home charges can be avoided, keeping them in mind can help one make an informed decision and arrive at a proper estimate of the cost.