Wednesday, 16 September 2015

The extra costs in real estate

There are many additional costs that you have to bear besides the basic cost of the house. Be aware of them before you set out to purchase an apartment. When most people set off to buy a house, they do not have a complete idea of all the costs that they will be required to pay. Developers advertisements and brochures give you only an idea of all that you will have to pay. Therefore, it is very important that you do your research and become aware of all the extra and hidden costs involved in property purchase.

Stamp Duty and Registration Fee: Once you purchase an apartment, it will have to be registered in your name before you can claim ownership. This requires that you pay stamp duty and registration fee to the government. The stamp duty can range from 5-7% while registration fee is about 1-2% of the cost of the property. Thus, together these charges can push the cost of your purchase up by 6-9%.

Preferential location Charges (PLC): Besides the base cost of the apartment, builders also charge you extra if the apartment has a desirable location within the high-rise complex. For instance, there could be an extra charge for being on the highest floors or for being close to the ground floor. Similarly, the builder can charge you extra for an apartment that overlooks the central green area or the clubhouse, and so on. “The amount of PLC charged varies from city to city and also depends upon how luxurious the building complex is. It can range from Rs 50-500 per square foot in the NCR," Pradeep Mishra, head of a Gurgaon-based realtor, says.

Interest-free Maintenance Deposit (IFMD): At the time of possession, the builder will charge from you an interest-free maintenance deposit. This fee is collected for the repair and maintenance of the facilities within the building complex. It can range from Rs 50-100 per square foot.

Club Membership: This is another fee that you have to pay over and above the basic price of the apartment. This can range from Rs 50,000-3 lakh.

Car Park: The cost will vary depending on whether the parking slot is covered or uncovered and whether the complex is premium or basic. It can range from Rs 2 lakh to Rs 5 lakh.

Service Tax: Builders have to pay a service tax to the government on property under construction. They tend to pass on this cost to the buyer. The service tax is 14%; assuming that the service component is 25% (and the balance is cost of material and labor), service tax is charged on 25% of the total purchase price and comes to 3.50% of total cost.

Value-added Tax (VAT): Builders are also liable to pay value-added tax on the sale of flats under construction. VAT is charged on the cost of material used in the apartment and not on land and labor. States like Maharashtra and Haryana charge 1% of total contract value as VAT.

Brokerage Fee: If you buy the apartment in the secondary market then you will have to pay a fee to the broker. This usually ranges from 0.5% to 2% of the cost of the apartment. Thus, as the buyer, you don't just have to pay the basic cost of the property as mentioned in the builder's brochure. A host of other charges also have to be borne. Be aware of all these charges in advance when you are doing your research on how to buy a house.

Source: PropertyatNeoDevelopers.Wordpress.Com

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