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Property and other expenses

There are a lot of expenses when you are buying or selling property. We will discuss about all the expenses in detail in this blogs.

What we are going to learn

  1. Story
  2. Types of expenses?
  3. Government taxes?
  4. charges by the builders?
  5. Loan charges  and charges for documents you need for loan
  6. How to save money?
  7. conclusion
  8. FAQ

Short story on expenses you have to pay while buying real estate.

Whenever we plan to buy property, the first thing which we plan is our budget, then location. Which type of property you want – residential, commercial, or agricultural.

 After this we think about what to buy a house or an apartment. We have a lot of options when we are looking for properties.

 Nowadays there are many websites and apps where you can check about any kind of property. At any budget at any location just by your phone, after deciding the budge.

What we do is start checking about properties, at different projects in a locality. And after watching it on websites and apps we shortlist some properties. Which are coming in our budget and we liked the other description of the properties.

 But do you know the price you have seen is just the base price of the property. Other than this you have to pay a lot of other expenses also, that can mess your budget.

property

 Although most of the time, this is the case with fresh properties and not in the re-sale ones.

I am saying all theses with experience, as I am working in a real estate agency for around 2 years. And I have seen many companies doing the same things, today I will give you an example of January 2018.

 I have started working in real estate in December 2017. And I went for my practice to a project in Mohali (Punjab).

 There was an under-construction project going on where I have to sit for around 10 days. I’ll explain you about the project. There were 350 units of 3bhk flats.

Whose price starts for around 40.90 lacs, and after including all the expenses and taxes its price was crossing more than 50 lacs.

Types of expenses on property?

There are several types of expenses and taxes for buying property. When you are looking for a property you should know this before deciding budget and shortlisting

There are three types of expenses

  1. Government taxes
  2. Charges levied by the builder
  3. Loan charges and charges on the document you need for loan

Government taxes on real estate?

We have talked about these taxes in detail in the previous blog. Here in this article I’ll give you a glimpse of the government taxes. And i’ll tell you about the tax percentage and will give you an example of Punjab about whats the tax rate in Punjab.

Stamp duty:

Stamp duty is the tax you pay while registering the property. It varies for state to sate, in India it’s between 3-9%. And if talking about Punjab  the stamp duty tax from men is 8% and for joint its 6% and for women it is 4%.

TDS:

TDS is applicable for expensive properties. Generally which properties are values above 50 lac rupees, for those properties, you have to pay 1% TDS.

Service tax:

Service tax is applicable on under-construction properties only. This tax goes to center government. It is between 3.75% to 4.5% of the value of the property.

VAT:

VAT is value-added tax and it is applicable under construction properties only. Although its applicable in certain states and this is around 1% of the value of property.

GST:

Goods and services tax is also applicable in properties. In Jan 2019 GST on properties was 12%, but after that government has decreased it to 5%, in commercial properties GST applicable is 15%. In some of the cases, the builder pays the GST, in some cases half is paid by the buyer, and half is paid by the builder. But in the majority of the cases full GST is paid by the buyer itself.

Charges by the builder?

There are many types of charges that are levied by the builder to the buyer, we are going to talk about them in detail.

hidden cost in property

BSP:

BSP is the base selling price of any product, this is the price which is mentioned in the ads and brochers. People think that if they only pay the BSP  they can take the possession of the property, but that’s not the case you have to pay extra charges also

PLC:

PLC is called as preferred location charges  which you have to pay for preferred facing and preferred floor.

 In most of the cases in a multi-story building if you want one of the first three floors and top three floors you have to pay PLC and it can vary from 5% to 25%.

Then there is PLC for facing also, for specific faces you have to pay PLC charges and if you want a park facing unit or a corner unit then also you have to pay PLC.

Club charges:

In most of the buildings now there are clubhouses, which are made for the citizen of that building.

 In these clubs, there are party halls, swimming pools, gym, and games room and in some of the high-class buildings there are restaurants also.

 For all these services you have to pay a lifetime fee which can vary from 50000 to 5,00,000 rupees.

 If you buy a house or apartment in re sale then you have to pay transfer fees by which your name is updated as the new owner and this is generally 10000 – 20000 in most of the buildings.

Power back up charges:

In new buildings, there is a new service called power back up in case of no electricity, gen-sets are used to lighthouses.

You have to pay for the power backup and its compulsory. Price of power backup depends on how much kilovat you need 

IFMS:

Many of you have not even heard this name before, its called as Interest free maintenance security.

 It’s a one time paid charges which are stored in a different account of the building, its only used when there is some large expense like making roads, painting the building and in some case of sudden expense or any miss happening.

In Punjab most of the area’s its charged as 50rs sq/ft.

prestige tower

Car parking:

In most of the projects, one car parking is free but in some of the projects builder charges for the car parkin also.

According to RERA’s guidelines a project can’t charge for an open car parking, but if they’re offering a covered parking then they can charge.

Maintenance charges:

When you buy property there are some charges and these are the charges which you have to pay monthly, or you can pay for quarterly as well.

 These charges are applied for bearing the daily monthly expenses, like security guards, sanitation workers, plumbers, and electricians, take care of the swimming pool and lifts of the society.

 As I am living in Mohali and which building I am leaving, I am paying 1.20 rs per sq/ft area and the area of our apartment is around 2250 so i have to pay 2700 rs per month as the maintenance charges

property

Loan charges  and charges for documents you need for loan

Loan processing fees:

While buying property,when you are going for a home loan you have to pay a processing fee, which you have to pay by cheque on the name of the bank.

Let’s take an example of HDFC bank it charges 10800 rs for every loan till 20lacs and after that it charges 0.5% as the loan processing charges. Other than this you don’t have to pay a single rupee to anyone in the bank

Nonencumbrance certificate:

It is commonly known as “BHAR MUKAT PARMAN PATRA” and it’s used to get to know about the details of the property as there is no dispute or any loan on the property

13 years record:

Its name says it all, it is used to verify the 13-year record of the property, and it is also used to verify the seller, that in legal document his name is updated as an owner.

INTAKAL:

  Intakal is the final document which you need to submit to the bank, and it is submitted after the registry.  

It is the most important document as in government records this is the proof that you are the owner of the property.

Registry has no value if your name is not updated on INTAKAL  as nonencumbrance certificate and 13-year record both are updated on behalf of INTAKAL. 

Fee for intakal is around 1500 rs and it takes 1 month to update.

How to save money?

When you start to research about property, download brochers of shortlisted property, if everything goes fine, when you start negotiating, start negotiating with negotiatons of this expenses, and after negotiating expenses start talking about negotiation in base selling price.

Because this is not an official rule, but In every case there is a huge negotiation in the base selling price.

Don’t show them that you are excited about the property, and try to get as much negotiation as much you can. But don’t try for an unachievable goal.

conclusion

Apart of the base selling price of a property, you have to pay a number of other expenses. You can save this money by doing the negotiations. this extra expenses can shake your budget.

You should check the expenses before booking a property. because some times agents and builders don’t give you information about this expenses.

FAQ

What are the types of expenses you have to pay while buying property?

There are 3 types of expenses while you buy property
1. Government charges
2. Charges by builders
3. Loan charges

Can you save money while buying property?

Yes you can save money while buying property. For this you have to do research before buying the property and have to be smart. And you can save big amount of money by this simple steps.

What are the types of charges levied by the builders or promoters?

There are several types of charges. I am listing few main types below
1. Base selling price
2. PLC preferred location charges
3. Maintenance charges
4. IFMS interest free maintenance security
5. Club charges
6. Power back up charges

more on this topic

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indian mentality on real estate

what will the effect of lock down on price of real estate

real estate as investment

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