There are many costs associated with purchasing a property. These go above and beyond just the price declared by the builder and are usually assumed to be general knowledge. However, a first-time buyer will only focus on the basic price, which is the rate per square foot.
Additional charges can be on account of GST, maintenance charges, a deposit for electricity and water connection, registration and stamp duty, and so on. Since these charges come under other costs, banks generally don’t fund this.
A borrower should ask the builder to give the exact details of these charges so that he can arrive at the total price of the property and make arrangements for finance accordingly.
There are a few optional price components, such as car parking facilities. The list below will assist you in planning for all the charges.
List of all property-related charges:
This is actually the price that is advertised by developers and forms the main cost of the property.
Goods and Services Tax (GST) was introduced on 1 July 2017. Any under-construction property that is purchased within 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 12% while the affordable housing projects are exempted from GST. There is ZERO GST tax on the sale of complex/building and ready to move-in flats where the sale takes place after the issue of completion certificate.
External Electrification and electric connection charges:
External electrification charges are the price charged by the developer to lay down wires and cables from electricity consumption meter to the Apartment.
EEC is an amount charged by developers only to set up the infrastructure for bringing electricity to the apartment. The borrower will have to pay the actual application fees for installing the electricity meter and a connection to the electricity board of the state for actually getting electricity.
Water, sewerage and drainage charges:
The candidate would be required to pay for the water facility set up in the complex too. The charges are paid to the government and will vary according to the state.
Builders today are asking for maintenance deposits up to 2 to 10 years in advance, as it gives them a greater capital amount to work with. Maintenance charges are subject to the locality, land value and type of home the candidate is hoping to purchase. They can also vary depending on the quality and number of amenities the builder is offering you.
Registration and stamp duty:
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 the change of ownership; and the court charges a registration fee for it, which is generally 1-2% of the agreement value.
Preferential Location Charge (PLC):
If the borrower wants to purchase a property preferred by most of the people then he should pay a higher price for that property. For e.g. a villa on the corner of the road or a flat in the first four floors of an apartment building are generally considered the preferred locations. The PLC charges are normally 4% of BSP. So, add 4% to the total cost if he wants a preferred location for himself.
Buying the property is effectively purchasing just the shell. After acquiring a property one has to invariably spend some amount in getting the interiors done as per individual preferences and requirements. This expenditure can cost quite a fortune depending on the exact nature of interior work being undertaken. However, on average, it is assumed to be a minimum of 1-2% of the entire cost of the property.
External development charge:
Sometimes government authorities mandate an external development charge, calculated per square foot. This charge is applied for the development and upkeep of the area around the property site. It varies from location to location.
A builder will sometimes ask the client to defray the costs of a surveyor or solicitor if there is any due diligence to be carried out, over and beyond the registration and stamp duty costs.
Please note that, as per the RERA, all the charges are calculated on the basis of CARPET AREA. According to the RERA Act, carpet area is the total area of the floor that can be used within the walls of the apartment. This does not include areas like an open terrace, shafts, balconies, etc.
Also, a builder can ask for Parking Space charges, Club Membership Charges, Power Backup Charges, etc
Don’t be caught unawares when it is too late to turn back from a project. It is important to have all this information upfront, before committing to such a large purchase.