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 Value Added Tax (VAT), Service Tax (ST), maintenance charges, a deposit for electricity and water, registration and stamp duty, and so on. Please ask the builder to give you exact details of these charges, so that you 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:
- Basic price: The rate per square foot quoted by the builder.
- Value Added Tax (VAT): VAT is levied as a percentage of the construction value of the project, and can be pegged anywhere in between 1% and 5.5%.
- Service Tax (ST): Service tax is charged at 12.5% of 25% of the value of the property under construction.
- Electricity and water deposit: This charge is levied by the builder, and can vary depending on their policies.
- Maintenance charges: Maintenance charges depend squarely on the property itself, and can be either an upfront payment for a long period, or a monthly or annual payment. These charges usually cover shared services, like building security, and maintenance of common amenities like elevators or water tanks.
- Registration and stamp duty: This can range from anywhere between 7% and 10% of the property cost, depending on state regulations.
- Optional charges (car parking, etc.): Optional charges are dependent on the property itself and the pricing of the builder.
- Interior costs: Buying the property is effectively purchasing just the shell. To make the space habitable, there will furnishing costs.
- External development charge: Sometimes government authorities mandate an external development charge, calculated per square foot. This charge is applied for development and upkeep of the area around the property site. It varies from location to location.
- Legal charges: 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.
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.