Cost Involved in Buying Property

The process of buying a property is complex with a number of costs involved that add up to the overall cost. You must first be aware that the Basic Selling Price (BSP) of a property in India consists of two main cost components: the cost of the land’s undivided share (UDS) and the cost of the building’s materials.

In a housing society, each unit is given a certain amount of land known as UDS. This portion is listed in the name of the owner of the apartment. Therefore, when you buy an apartment, you also pay for the land, labor, and materials required to construct the flat.

There are then some additional expenses, increasing the overall spending by roughly 25%. While purchasing a home, one should also consider other cost factors. Let’s examine each of them individually:

Preferential Location Charges (PLC) are assessed on all units at sites that have an advantage over others on a “per floor, per square feet” basis. A corner unit, one that overlooks a park, a busy road, or a golf course, for example, will attract a greater price than others. Lower floors are more in demand in Delhi NCR, hence the ground and above-ground levels are more expensive. The PLC rises as one ascends in Mumbai because to the preference for higher floors. Usually, these fees are not hidden.

Despite the Supreme Court judgment from 2010, developers still charge exorbitant prices for covered parking spaces, ranging from Rs 2 to Rs 5 lakh. These fees are occasionally added to the unit’s basic selling price in an indirect manner. You are responsible for paying for the parking spaces, whether directly or indirectly, which significantly raises the cost of the entire property.

Housing associations provide a range of amenities and charge a maintenance fee to maintain them. When buying a home, you must take the initial maintenance deposit into the account. Deposits may be made for a term of one to ten years or may be settled on a monthly basis. In the case of a one-time price, the maintenance fee turns into a recurring expense that must be paid either monthly or yearly when the initial deposit is spent.

In addition, if the maintenance fees are greater than Rs 7,500 per month, a GST of 18% is charged.

A current trend is for housing societies to have clubs. This service is not provided for free, though. A one-time membership fee for a predetermined length of time will be required of you. The club membership itself thus turns into a regular expense.

The cost of the property is increased by the extras provided by the builder, such as backup water and electricity, and fire protection. The builder assesses the External Electrification Charges (EEC) and Fire Fighting Equipment Charges (FFEC) at the time the home is purchased. You still have to pay for the electrical connection from the electricity board even after paying the EEC.

These are charges that the developer is legally obligated to pay to the state government for the construction of physical infrastructures, such as roads, and areas surrounding the project. The cost is eventually transferred to the consumers, though.

There are additional expenditures in the form of taxes that the government imposes at the time of purchase in addition to the ones that the developer charges you. Which are:

Tax on Goods and Services (GST)

All residential construction projects costing more than Rs 45 lakh are subject to an effective GST of 5% without Input Tax Credit (ITC). Affordable residences, or houses priced under Rs 45 lakh, are subject to a one percent effective GST. Residential units up to 90 sq m in non-metropolitan cities or towns and up to 60 sq m in metropolitan areas with a value up to Rs 45 lakh are considered affordable homes.

Costs of registration

One of the most crucial milestones in the home-buying process is this one. You must register a property in the registrar’s office in order to be the rightful owner. Stamp duty and registration fees must be paid for this purpose.

The Guideline Value or the Circle Rate set by the government for each location is the market value. This is the lowest amount for which a property can be registered, and thus, the lowest amount for which stamp duty and registration fees can be paid. For women and rural areas, stamp duty rates may be cheaper in some states.

VAT and service tax

Prior to the implementation of the GST, service tax was applied to the builder’s construction services when purchasing under-construction properties or units without a Completion Certificate (CC). For residences smaller than 2,000 square feet or less than Rs 1 crore, buyers were required to pay service tax equal to 3.09 percent of the entire cost of the property. The tax was 3.71 percent for homes larger than 2,000 square feet or more expensive than Rs 1 crore.

For first-time house buyers, it’s crucial to stay up to date on any potential additional charges for their acquisition of real estate and to be able to haggle over the price.

Disclaimer: The opinions shown above are mainly for informational reasons and are based on market research. Deal Acres is not responsible for any actions made as a result of relying on the provided material and makes no representations as to its accuracy, completeness, or reliability.