Taking a home loan? Be mindful of other costs besides your EMI

BL Research Bureau

Purchase of a house property is likely to become cheaper with some banks such as State Bank of India (SBI) and Bank of Baroda launching repo-linked lending rate home loan.

But, when doing so, the interest and principal payments are not the only costs that a home buyer would incur.

Here are the other costs that would add to the total outgo at the time of purchase of a property.

Registration and stamp duty

A major chunk of property cost includes stamp duty and registration charges. If you purchase a house, you will have to register it for legal reasons. This comes with a price. If the property is not registered, it is not admissible under the law.

Stamp duty is the tax levied by the state government on legal documents usually for transfer of assets or property. Registration fee is a processing fee for the registration of property. The stamp duty and registration fees are charged on the market value/guideline value of the property. It varies with each state and region.

Typically, stamp duty and registration charges work out to 5-11 per cent of the property value. Farshid Cooper, Managing Director, Spenta Corporation says “Stamp duty and registration charges have to be paid by home buyers whether it is an under-construction property or a completed one. In Maharashtra, the stamp duty is around 6 per cent on the value of the property or guideline value whichever is higher and the registration fee is Rs 30,000.”

Other charges

When it comes to buying a house, the process doesn’t end with down payments, monthly EMIs and registration fees. There are other costs. These include maintenance deposits, interiors design, brokerage fee (if any), GST (for the under-construction property), charges for water and electricity, parking space and other civic amenities charges. However, most of these expenses come under maintenance deposits, excepting GST and brokerage fee. While the payment of GST is made in a phased manner as per the construction, brokerage fee (if broker involved) is paid post the transaction.

In case of a new house property, maintenance deposits, though collected by the developer initially, are returned to the home buyers once the society is formed for maintaining the premises. That is, from the time a developer receives an occupancy certificate till the time the handover is done, the maintenance deposits collected would be utilised for purposes including electricity, water, gas and setting up of club facilities. But in case of purchase of an old property, maintenance charges will not be a part of the purchase price. Home buyers will have to pay for it separately. Depending on the association formed, a number of houses and amenities available, the maintenance charges can go over Rs 20,000 a month.

In addition, you may have to pay for parking space as well. In the case of a new house, developers might charge you for providing a parking space. If you require additional parking space, it will be provided for additional charges.

Some developers also charge for the private terrace, location such as a home with a view and so on. Therefore, if you are planning to buy a house, ensure you estimate these additional expenses as well.