5 Hidden Costs When Buying a Home | List your property free
5 Hidden Costs When Buying A Home

5 Hidden Costs When Buying A Home

Ritika | 2022-07-08

During a purchase, an individual does a few configurations before they proceed further. One of the parameters is price. This is a fact in the housing sector as well. Consideration of hidden costs becomes important because buying a house is a long-term investment and such a step will have various expenses at different stages that allow you to compare benefits between different properties. A lot of costs can be buried underneath the agreement papers and buyers often blindly sign these agreements, causing problems in the future. 

Therefore, before you take any decision, take into consideration below five indistinguishable.

1. Maintenance costs

While most buyers spare a thought towards maintenance costs in the future, few sit down and tabulate the expenses that can often make a significant dent in your financial assets and some choices are more favorable in the long run. Owners and builders either ask for maintenance deposits upfront or an amount that suffices for a certain period (preferably one or two years). It often forms part of the contract and is included in the rules and regulations stated under the allotment letter, given to the buyer after they pay the booking amount, and state their interest and claim on the property. However, this does not include a specific amount and if the buyer asks for the same, they are given a range of prices within which they can expect prices. It does not mean that there is a complete lack of order – builders cannot charge an arbitrary amount according to their whims. These charges can be either fixed for each household or determined as per the area of the apartment.

Buyers can request a copy of the charges upfront so that it doesn't bother them at the time of possession, but there are certain charges such as maintenance of services, unforeseen repair, water, and electricity that are variable and cannot be predicted. RERA recommends that the buyer and the seller enter into an agreement clearly stating the amount and the frequency of payment required – modifications can be later made depending on a concise conclusion between the Resident Welfare Association and the buyer. This results in the ceasing of extemporary charges. However, once a property is leased out, it doesn’t relieve the lender from the complete responsibility of payment. But, there is a way out to this, if it says in agreement, then the lender has no role to play in the payment process. That being said, if you are on the defaulter's list, then RWA will stop supplies like electricity and water supply.  

Under the Real Estate (Regulation and Development) Act (RERA), certain basic services are essentially provided to the residents of the building or complex within reasonable maintenance charges. After the society forms its Resident Welfare Association (RWA) with its members, the builder cannot continue to take maintenance charges and this duty will be passed on to RWA who can devise their own rules based on the majority votes and other requirements.  They also decide on the frequency of the collection of such payments. 

Existing or old properties collect this fund as part of a form of security deposit that showcases the trust between both the partners in the agreement as well as a future asset weighed against any forms of damage the property may suffer; new buildings may cover this under charges they request for setting and maintaining common amenities such lighting, gyms, parks, etc. Over some time, these charges, as do various other expenses related to the house, rise to a generous amount to account for existing setups, the number of amenities offered and any new facilities offered by the management. The amount can also differ depending on the area or locality the property is situated in.

2. Stamp duty and Registration fees

Both of these amounts are compulsory in progressing towards owning a home – these fee proceeds are set aside for the respective state government for the registration of the house under their name. Different states have different rates for stamp duty applicable within the range of 5-7%. A successful registration ensures that the house is registered under the individual's name, working as a finalized agreement between the buyer and the seller dictating the terms and conditions for the transferring of the property from the latter's name to the former. This registration accounts for 1-2% of the total cost of the house. Both these factors may seem like small percentages of the overall cost but the theory remains that it can be a significant amount if the base price of the house is high. The factors that determine your stamp duty charges include the owner's age (senior citizens get subsidized rates), owner's gender (females and males pay different charges, the latter pays 2% more), and age of the property (market value of the property is determined by whether it's old or new), location (urban areas with a lot of demand gain a higher percentage of charges as compared to those properties on the outskirts of the town), purpose (commercial buildings attract more taxes when compared with residential buildings as the former offers more services and amenities) and any extra services offered by the residential complex like gyms, swimming pools, gardens, libraries, etc. Remember to keep in hand important documents such as the sales deed under the seller's name, a NOC from the respective apartment association, bank statements, electricity bills, a sales agreement, and a sanctioned building plan, among many others. There are versions of physical stamp paper (most common as non-judicial stamp paper from an authorized individual), e-stamping (to account for forgery and simplify the process under collection centers that allow this service), and franking (where an authorized agent approves the payment of the stamp duty). 

Other fees also include the Goods and Services Tax (GST) for properties under construction that are purchased in India. This amount goes to the government which is 5% on property under construction and 1% on more affordable housing. Properties that are ready to move in do not have any GST charges or those properties that already have their completion certificate. Buyers must make note of this depending on their needs and other requirements. 

Sometimes, you can take advantage of the spacing available within the residential complex and have a preferred space. For example, getting a flat with or without a balcony has different charges, consisting of the Preferential Location Charge (PLC). The buyer pays a specific amount as an extra charge for a unit booked in a preferred location within the complex. This charge differs according to the location of the building, the builders' rates, and the completion rates of the projects themselves – see penthouses with lake views or villas with sprawling gardens. Buyers should consider this cost important as there are no fixed rates.

3. Broker fees

This is similar to the registration charges – it's the charges requested by the middle man, or the broker, between the buyer and the seller and form 1-2% of the total price of the house. What's to watch out for are those different brokers who have different rates of settlement and in cases when the house sells for a high price, when they may raise their demands as well. Buyers must settle this with their middlemen and ensure that this does not cause conflict – or unnecessary expenses – when finalizing the deal. 

4. Parking

This factor single-handedly determines a home deal as parking issues cause a lot of anxiety due to the severe lack of it, especially in our major cities. Parking spaces are not directly included in home deals but the luxury of having the provision within the residential complex demands a greater price, as much as the location of the home itself. It constitutes a separate price, has high demand because of the limited supply and the seller can allocate the space to another paying member of the residential society in case the buyer rejects the offer. Thus, the annual price of maintaining an empty slot comes at a steady price that can rise to lakhs depending on the location and supply. 

5. Interior Designing

The foundation cost of a house does not cover the most important expense of all, which is your interiors – even the most basic package costs a lot for tweaks and edits that come to your satisfaction. Lack of proper interiors makes even the most desirable house an unlivable box so this must be an important and well-thought-of investment that cannot be skimped on. Painting, furniture, plumbing, and basic electric appliances – it can get longer and heavier on the pocket as the needs grow. Sacrifices and cutting down can bring it down to the most important necessities at 10-11 lakhs. Online shopping is always an option for cutting costs to a certain extent when attempting to furnish but interior designing commands a greater chunk of spending and that can come in the range of 15-20 lakhs, depending on basic to luxury.

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