All inclusive is probably the best combination of words out there for any purchase, particularly those with big ticket sizes like homes. Sounds confusing? Well, in case of home purchases, there are often several hidden fees and charges to deal with and these end up inflating overall budgets for the property in question. Many a time, buyers do not identify these charges and have to fork out higher amounts at the last minute, thereby leading to strain on their financial reserves and a higher cost than estimated. This also impacts the family financial blueprint in a large way. It’s basically like a domino effect, one that you would always like to avoid. It’s rare to find all inclusive deals from builders when purchasing real estate.
As a result, the onus is definitely on you to ferret out all possible hidden expenses and work them into your overall budget. Once you do this, you will naturally be able to ascertain whether a particular property is suitable for you or not.
Hidden fees and charges to be mindful about
Experts estimate that hidden charges and fees while buying property add up to a whopping 20-25% of one’s initially calculated budget. It is always a smart move to be fully aware of what you are getting into, particularly in terms of extra costs.
Here are some of the hidden costs/fees that you should know about:
- Costs of registration and stamp duty- You should always keep the registration charges in mind. This could be a big sum and is dependent on the value of the home in question. In many Indian States, the registration charges usually work out to 7-10% of the entire value of the property including the stamp duty and other legal fees. Stamp duty is around 5-7% of the property value in usual cases which has to be taken into account. Say you buy a property valued at Rs. 30 lakh. In this scenario, the stamp duty will be anywhere around Rs. 1.5-2.10 lakhs. Registration charges will be an extra 1-2% over this which means around Rs. 30-60,000 extra. There are fees for the lawyers and notary as well over and above this that you should factor in as well.
- Parking charges- Free parking space is not always offered by developers at residential projects. Upfront charges may be there for parking space which may vary between Rs. 2-5 lakhs and this is dependent on the location, type of parking zone being offered and the property type.
- Cost of Interiors- You will naturally want to move into a new home when the interiors are tailored as per your desires. These costs are not taken into account initially by most buyers. This can be a sizable amount covering flooring, walls, paint, fittings, fixtures and so on. This is usually 1-2% of the property cost in most cases.
- Rental/Interest/Tax Costs- Any delay in project delivery naturally means having to pay more interest on your home loan and more expenditure on your present rental accommodation if that is the case. Additionally, you may lose out on tax rebates which could be another drain on your finances. Have a provision for such situations.
- Maintenance Costs- In many projects, developers often have a maintenance deposit charged upfront from the buyer for a certain period of time like 5-10 years. This means another lump sum payment that you will have to account for.
- Location charges- Properties that offer lake/sea/nature friendly views may be costlier than other counterparts. PLC or preferential location charges come into play in such cases and prices may go up by anywhere between 5-10% even.
- Other expenditure- There are charges to be borne while shifting to your new home which have to be taken into account. If you are buying the property through a broker/agent, his/her commission has to be factored in and this is usually 1-2% of the value of the property.
- Cost escalation and penalties- Builder-buyer agreements may have clauses pertaining to escalation of costs. This means you may have to pay extra in case of any increases in raw material costs including sand, steel, cement and even labour costs. While signing the agreement, look out for this clause and get professional advice regarding the same. Also check whether there are any penalties imposed if you fail to make any particular payment on time along with booking cancellation charges.
- NOC fees- The developer will be providing a no objection certificate (NOC) before you get occupation of your property. In some scenarios, developers impose a nominal charge for providing the NOC. Watch out for the same on your part.
As you can see, these are some of the hidden charges and fees that are not accounted for many times by buyers. This leads to sizable future stress in terms of dealing with higher costs and a rapidly increasing budget. Be aware of these costs before zeroing in on a property and add them into the mix. This will leave you better prepared to tackle the same without having to go through any financial turmoil later on.