HIDDEN CHARGES: READ BETWEEN THE LINES
| Anurag Jhanwar Tpmfeedback |
While buying a property, the buyer should look into the hidden costs and not go by the advertised price alone, to arrive at a more accurate costing of his dream home
Ashok Verma, a government employee from Mumbai, had been searching for a home for a few months. He is already 55 and needs to shift from his government quarters immediately after retirement. Verma looked through online property portals and shortlisted one property on the outskirts of the city, which had rates within his budget and a down payment that he could manage.As per his initial calculations, for a 700 sq ft super-built up area at Rs 6,500 per sq ft, the amount came to Rs 50 lakh, including stamp duty and registration. Next, he visited the property site and was very happy with everything he saw from the social infrastructure to amenities and specifications of the site. However, when he actually met the marketing representative on site for final discussions, he found the price had increased to Rs 7,000 per sq ft due to floor rise, legal charges, maintenance, sinking fund, etc. The total price increased by Rs 5 lakh, causing an increase in the down payment and leading to a considerable stretch in Verma's budget.
The above is the case with most aspiring property buyers across India. What you actually need to pay is significantly higher than the multiplication of the 'per sq ft' rate and the total area. This is because all developers advertise the base price in large print, with the word 'onwards' following it in small print. This term 'onwards' includes costs such as floor rise, PLC, registration cost, etc., that go unaccounted for in original calculations, but get reflected in the final payment schedule. The additional costs also vary from builder to builder and according to the facilities that the house is equipped with.
Following are the additional costs that you need to budget for when you plan to purchase your dream home.
>> STAMP DUTY AND REGISTRATION COSTS
Stamp duty is the tax paid on the market value of the house, while the registration gives you legal rights to the property . Stamp duty charges are mandatory as per the government of India and are levied as a percentage of the property value. It is different for different locations.
>> SERVICE TAX AND VAT
An under-construction property attracts service tax and VAT. The current service tax rate is in the range of 3-4 per cent of the property price and is applicable in all states. VAT (Value Added Tax) are charges by the state and vary from state to state.
>> PARKING SPACE
Though the developers are not supposed to charge the parking space provided to customers, most developers charge a handsome amount, which is included in the property cost. Factors like locality, type of property and parking space, are taken into consideration prior to fixing the amount under this head and it varies from Rs 2 lakh-Rs 25 lakh.
>> DEPOSIT FOR MAINTENANCEEXTERNAL DEVELOPMENT CHARGES (EDC)
Many builders take an up-front maintenance deposit which includes the cost of maintaining roads, parks, street lights and other common facilities in the society. The charges for water and electricity back-up are also included in this. Most developers insist on the deposit for maintenance to be paid initially as it provides them with more capital.
>> PREFERENTIAL LOCATION CHARGES (PLC)
These charges are levied by the builder for any preference with regard to your choice of floor, size or alignment. That is, you pay a premium if you want your home to be on a certain floor, or east-facingsea-facing and so on. The PLC varies from city-to-city, based on the climatic conditions and customer preferences.
>> FLOOR-RISE
If a customer wants to have his apartment on a higher floor, he has to pay floorrise charges. The floor-rise charges are applicable after a particular floor and will go on increasing with each additional floor. For example, if a project charges a floor-rise of Rs 25 per sq ft as you go up, the first floor onwards in a 24-storeyed apartment, the floor-rise of first floor is Rs 25 per sq ft while that of the 25th floor, is Rs 550 per sq ft.
>> INFRASTRUCTURE DEVELOPMENT CHARGES (IDC)
Infrastructure development charges are imposed by the government on developers. It is utilised for the development and maintenance of infrastructure around the project.>> UTILITY CHARGES For ultra-luxurious amenities, developers charge upfront for club membership which also accounts for a significant amount. This may also be charged on a yearly or lifetime basis. It is always better to have clear knowledge about the hidden costs while planning your dream home. It saves you from the ugly dilemma of 'to buy or not to buy' once you have set your heart on your desired property .(The writer is director , CRISIL Real Estate Ratings)
[FAST FACT]
THE FLOOR-RISE CHARGES ARE APPLICABLE AFTER A PARTICULAR FLOOR AND WILL GO ON INCREASING WITH EACH ADDITIONAL FLOOR
QUICK BYTE
MANY BUILDERS TAKE AN UP-FRONT MAINTENANCE DEPOSIT WHICH INCLUDES THE COST OF MAINTAINING ROADS, PARKS, STREET LIGHTS AND OTHER COMMON FACILITIES IN THE SOCIETY.
The above is the case with most aspiring property buyers across India. What you actually need to pay is significantly higher than the multiplication of the 'per sq ft' rate and the total area. This is because all developers advertise the base price in large print, with the word 'onwards' following it in small print. This term 'onwards' includes costs such as floor rise, PLC, registration cost, etc., that go unaccounted for in original calculations, but get reflected in the final payment schedule. The additional costs also vary from builder to builder and according to the facilities that the house is equipped with.
Following are the additional costs that you need to budget for when you plan to purchase your dream home.
>> STAMP DUTY AND REGISTRATION COSTS
Stamp duty is the tax paid on the market value of the house, while the registration gives you legal rights to the property . Stamp duty charges are mandatory as per the government of India and are levied as a percentage of the property value. It is different for different locations.
>> SERVICE TAX AND VAT
An under-construction property attracts service tax and VAT. The current service tax rate is in the range of 3-4 per cent of the property price and is applicable in all states. VAT (Value Added Tax) are charges by the state and vary from state to state.
>> PARKING SPACE
Though the developers are not supposed to charge the parking space provided to customers, most developers charge a handsome amount, which is included in the property cost. Factors like locality, type of property and parking space, are taken into consideration prior to fixing the amount under this head and it varies from Rs 2 lakh-Rs 25 lakh.
>> DEPOSIT FOR MAINTENANCEEXTERNAL DEVELOPMENT CHARGES (EDC)
Many builders take an up-front maintenance deposit which includes the cost of maintaining roads, parks, street lights and other common facilities in the society. The charges for water and electricity back-up are also included in this. Most developers insist on the deposit for maintenance to be paid initially as it provides them with more capital.
>> PREFERENTIAL LOCATION CHARGES (PLC)
These charges are levied by the builder for any preference with regard to your choice of floor, size or alignment. That is, you pay a premium if you want your home to be on a certain floor, or east-facingsea-facing and so on. The PLC varies from city-to-city, based on the climatic conditions and customer preferences.
>> FLOOR-RISE
If a customer wants to have his apartment on a higher floor, he has to pay floorrise charges. The floor-rise charges are applicable after a particular floor and will go on increasing with each additional floor. For example, if a project charges a floor-rise of Rs 25 per sq ft as you go up, the first floor onwards in a 24-storeyed apartment, the floor-rise of first floor is Rs 25 per sq ft while that of the 25th floor, is Rs 550 per sq ft.
>> INFRASTRUCTURE DEVELOPMENT CHARGES (IDC)
Infrastructure development charges are imposed by the government on developers. It is utilised for the development and maintenance of infrastructure around the project.>> UTILITY CHARGES For ultra-luxurious amenities, developers charge upfront for club membership which also accounts for a significant amount. This may also be charged on a yearly or lifetime basis. It is always better to have clear knowledge about the hidden costs while planning your dream home. It saves you from the ugly dilemma of 'to buy or not to buy' once you have set your heart on your desired property .(The writer is director , CRISIL Real Estate Ratings)
[FAST FACT]
THE FLOOR-RISE CHARGES ARE APPLICABLE AFTER A PARTICULAR FLOOR AND WILL GO ON INCREASING WITH EACH ADDITIONAL FLOOR
QUICK BYTE
MANY BUILDERS TAKE AN UP-FRONT MAINTENANCE DEPOSIT WHICH INCLUDES THE COST OF MAINTAINING ROADS, PARKS, STREET LIGHTS AND OTHER COMMON FACILITIES IN THE SOCIETY.
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