Buying a property involves various costs. Thus, before taking the plunge, it is important to understand different costs and charges that has to be paid at the various stages of construction.
In general, the overall property costs can be divided into two parts – one that is to be paid to the builder while the other is the statutory and legal costs. These are again divided into multiple sub-headers. The breakups are explained below.
Builder Charges
This is the amount paid directly to the builder as the cost of the property. It can be divided as follows:
- Basic Cost – The rate per sq. ft. multiplied with the super built-up area of the unit gives the basic cost of the property. This comprises about 70-80 percent of the total amount. This amount is paid to the builder directly in instalments at different stages as per the agreement. The builder generally charges a fixed amount or a percentage of the total cost as booking amount and the remaining amount to be paid depends on the construction stage of the project.
- Infrastructure Development Charges (IDC) – This is also known as internal development charge and it is usually charged at per sq. ft. rate. This cost is levied by the government on the builder and is passed on to the buyer by the builder. It includes charges to be paid to different utility organisations like the electricity board, the water board, etc. This varies based on developers and cities.
- Maintenance charges – Once the building is ready for possession and handed over to the buyer, some builders may continue to maintain the property for one year or two. They charge the cost of this upfront before registration as maintenance deposits, security charges, and society formation charges, to name a few. After the stipulated maintenance period is over, the Corpus Fund collected by each unit in the project is handed over to the new association formed. Thereafter, the association fixes a maintenance charge for the project which has to be paid by the house owner.
- Parking space charge – Parking charges are taken by the builder separately from the basic cost and it is mandatory, irrespective of whether it is used or not. It can vary from 2 lakh to a lot more depending on the builder. Some high-end luxury units also provide multiple parking spaces at an additional cost.
- Amenities charges – These are charged by the developers for the amenities like gymnasium, clubhouse, swimming pool, etc. While some builders charge a per sq. ft. rate, others take a fixed price.
- Preferential location charge – PLC is a premium charge that the builder charges for a specific choice of apartment. It includes things like sea-facing view, swimming pool view, Vaastu compliance etc. Also added to these is floor rise charge, which is paid by buyers for apartments on higher floors.
- External Development Charges (EDC) – This is currently levied only in few cities in India like Gurgaon, among others. It includes maintenance of infrastructure such as roads, sewerage, water and electricity supply outside the project.
Statutory and Legal Charges
These are paid to the government at the time of property registration and mainly consists of 3 major components:
- Registration charges – This is paid to the government at the time of property registration. The guideline value at which properties are to be registered is decided by state governments. In the case of multi-storied apartments, the registration charges are calculated based on super built-up area. For plots, the total square feet area of the plot is multiplied by the guideline value of the area. For independent houses, the total constructed area is considered for calculating the total property value.
- Stamp duty charges – Stamp duty is the amount charged by the government for the legal verification of documents related to property buying. The stamp charges vary from state to state. The stamp duty also has additional cess and surcharge attached to it.
- Service Tax and VAT – These two components are applicable only to the under-construction properties. Service Tax is decided by the central government while the VAT varies from state to state. Given that service tax is charged only on the construction cost, the effective rate on the entire value of a property costing below Rs.1 crore is 3.75% (i.e., 15% * 25% of the property value), and for a property above Rs.1 crore, the effective rate is 4.5% (15% * 30% of the property value).
Other than the above, there may be other charges such as Khata Assessment and Legal Advisor charges which usually ranges anywhere between 0.3-0.5 % of the total property cost. Also, for buyers availing home loans, they have to keep in mind loan processing charges. Home finances are definitely not a simple and clear process as demonstrated and need to be carefully considered for various factors.