The cost of home ownership is huge: For most people, it is the single biggest purchase they ever make. While most people account for current prices when planning for a home purchase, they often overlook the additional expenses that are an integral part of property ownership. This guide talks about some of the most significant extra expenses you will have to make as a homebuyer.
Stamp duty and registration fee
Combined together, these two duties become a major expense for a buyer. Unfortunately, banks don’t include stamp duty and registration fee as part of the property value. This means that the buyer has to arrange this amount from their own savings.
Mutation charges
Once a property changes hands, the property owner must inform the municipal body of their area and get the ownership name changed in the local records. This process is known as property mutation. It is only after mutation is done that one can apply for water, electricity and cooking gas connection. The one-time fee can range between a nominal fee to a certain percentage of the property value. In Delhi, for instance, a buyer pays between Rs 200-500 for mutation. In Tamil Nadu on the other hand, they pay 1-2 per cent of the registered value as the property mutation fee.
Home loan processing fee
Banks charge a one-time processing fee — sometimes a standard amount and sometimes a certain percentage of the loan amount — as the processing fee for document verification, credit checks and administrative work. The fee is usually a small percentage of the loan amount and may vary across lenders. Most banks charge between 0.5-1 per cent of the loan value as processing fee.
Home insurance
Home loan insurance
GST
Maintenance charges
Unlike most other additional charges, maintenance fee is a recurring cost a property owner continues to pay, typically on a monthly basis, to cover the upkeep of the housing society. Maintenance fee in your housing society can range between Rs 2 to 25 per square foot a month, depending on the facilities and amenities that are part of the project. Note that a single rupee per sqft in maintenance translates to roughly Rs 1,000 per sqft in implied capital cost over time.
GST on maintenance charges
A buyer is also liable to pay GST on the maintenance charges if it breaches a certain monthly cap. In case their monthly maintenance fee exceeds Rs 7,500, the owner is liable to pay 18 per cent GST on the maintenance charge.
Property tax
Another recurring expense, property tax is payable annually or semi-annually to local government bodies such as municipal corporations. Influenced by factors such as property location, type, size and local municipal regulations, the rate of tax in India differs across states. In Delhi, for instance, property tax ranges from 0.5 per cent to 3 per cent of the property’s annual value. In Mumbai, it is usually between 0.2 per cent and 1.5 per cent as determined by the Brihanmumbai Municipal Corporation. In Bengaluru, rates from 0.5 per cent to 1 per cent, assessed by the Bruhat Bengaluru Mahanagara Palike.
Transfer fee
In some cities, buyers purchasing a resale property also incur an additional charge named transfer fee. In Noida payment of transfer fee is a must for property registry because most properties in the city are leasehold, The Noida Authority owns the land and must approve ownership changes. Depending on the time when the property was purchased, transfer charges in Noida range from 2.5 per cent to 50 per cent of the allotment price.
FAQs
What are the most common hidden charges for homebuyers?
Common charges include stamp duty, registration fees, GST (for under-construction property), maintenance charges, etc.
Are transfer charges and society fees part of hidden costs?
Yes, transfer charges, society entry fees and move-in deposits are often extra costs, especially in resale properties.
Do banks charge hidden fees on home loans?
Lenders may charge processing fees, legal and technical charges, prepayment penalties (in some cases) and administrative costs that increase the total loan cost.
How can homebuyers avoid unexpected charges?
Buyers should ask for a detailed cost breakup, read agreements carefully, compare lenders and factor in all statutory and non-statutory charges before finalising the purchase.
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