Home Loan Budget: While buying a home, it is not enough to consider only the cost of the property and the EMI of the home loan. A true budget is one that includes all the taxes, government fees and other hidden costs associated with the price of the house. Buying a home is the biggest dream of life for most people. To accomplish this, buyers often estimate the house price and home loan EMIs, but forget to include in the budget the many other expenses that come along with buying a property. These same expenses can suddenly become a huge financial burden later on.
In reality, the final payment can be much more than what the home looks like. From stamp duty and registration to GST, parking, maintenance and other charges, there are many expenses to be aware of.
Stamp duty and registration fee
The biggest additional costs when buying a home include stamp duty and registration charges. These rates are not uniform across the country and vary from state to state. So it is not appropriate to decide the budget just by looking at the price of the flat. Buyer should consider stamp duty and registration charges applicable in his/her state in advance.
Impact of GST on Under-Construction Flats
If you are buying an under-construction flat, GST may also impact your total budget. The rate of GST applicable on under-construction residential properties depends on the category of property and the status of the project. In the current system the effective rate is 5% for general properties and 1% for affordable housing.
On the other hand, if the sale of a ready-made house or flat takes place after the completion certificate (CC) is issued by the concerned authority, then GST is not levied on the sale. That is, before booking a home, be sure to know whether the property is ready-to-move or under-construction, and whether it will be subject to GST or not.
Additional charges like parking, maintenance and corpus fund
Apart from the price of the house, the builder may also charge you money in the name of parking, maintenance advance, corpus fund and other facilities. The model agreement of UP RERA also mentions various expenses like tax, parking and maintenance advance along with the price of the flat. So before buying a house don’t just look at the price of the flat, but ask the builder for a written breakdown of the total cost.
Even after possession of the house, the expenses are not met. Regular expenditure is incurred on maintenance of common area, lift, security, cleaning, repair and other common facilities of the society. The law also recognizes expenses related to maintenance and repair of common areas as ‘common expenses’.
Be aware of TDS on property purchases above ₹50 lakh
If the value of the property being purchased is more than ₹50 lakh, the buyer also has to keep in mind the rules regarding TDS. According to the Income Tax Department, provisions regarding TDS are applicable on purchases of immovable assets and TDS is required for transactions worth more than ₹50 lakh. This amount is not an additional cost on the price of the house, as it is deducted from the amount paid to the seller and deposited with the government. But this is an important cash flow and compliance part for the buyer, which should not be overlooked.
Legal Verification and Transaction Costs
It is also necessary to get the property documents verified before buying a house. Legal advice may be required to check title, old documents, dues, approved maps and other records especially in resale properties. Apart from this, in some cases the buyer may also have to pay for brokerage, documentation, loan processing fees, valuation or other services. This amount may vary from property to property and deal to deal.
If you have a house worth ₹50 lakh, don’t make a budget of just ₹50 lakh
Suppose you have chosen a flat worth ₹50 lakh, it does not mean that you have to manage only ₹50 lakh. Thereon applicable stamp duty and registration, GST if applicable, parking charges, maintenance/corpus fund and other transaction related charges will be added. That is why it is more imperative to get a written breakdown of ‘All-in Cost’ i.e. total payment from the builder or seller before buying a house.