Besides the basic property value advertised by the developer or sellers, buyers invariably end up having to shell out more to meet all the hidden costs of buying a house. Knowing about these expenses can help you prepare a feasible budget when planning to buy a property.
Identifying The Hidden Costs Of Buying A House
Preferential Location Charges (PLC)
Developers usually levy preferential location charges if you are looking for a house with particular preferences such as a particular view, on a particular floor, or in the corner. These charges can range anywhere between Rs. 10 to Rs. 100 per sq. ft., depending on the number of preferences.
Staying in an apartment or a society involves paying a maintenance fee that covers the salaries of security guards and sweepers, expenses for periodic repairs, and various club fees. Of late, most developers insist on upfront payment for a minimum of 10 years, or for lifetime. Maintenance deposits may vary depending on the amenities provided, but on an average it comes up to 5% of the basic sale price.
If you plan on availing a loan for the purchase, you will incur additional expenses such as processing fee towards the loan, documentation charges, and administrative fee. Mortgage costs vary from 0.35% to 2% of the loan amount, depending on the lending institution.
Stamp duty comes up to about 5 % to 7 %, while registration fees will cost you another 1 % to 2 % of the basic property value. The legal counsel’s fee will come up to another 1%. Hidden costs of buying a house, such as these, can easily add up to another 7 % to 10% of the property value.
Most buyers would want to make a few changes to the interior of their new homes before moving in. Interior costs greatly vary depending on the taste of the buyers. However, an average of 1 % – 2 % of the basic property value should be kept aside for such costs.
Extra Costs Due To Delays
Delay in project completion invariably results in price escalation, and extra interest in cases of loans. Delay also means you have to continue paying rent for the place you currently stay in, and if the property is an investment, you lose rent. Further, tax deductions on home loans are applicable only after the construction of the property has been completed and it has been handed over.
Parking space charges may vary from Rs. 2 Lakhs to Rs. 5 Lakhs, depending on the locality, type of property, and number of parking spaces required. However, in March 2012, the Supreme Court ruled that residential complex developers cannot charge extra for parking space. Unfortunately, most developers subtly include the parking space charges in the overall cost of the property.
Besides the above discussed costs, you might incur further expenses like unpaid civic authority dues, or face indefinite delays due to unapproved plans.
It is always advisable to plan your budget with these expenses in mind, and allocate an additional 20 % to 25 % of the property value to cover all the hidden costs of buying a house.
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