Various costs for under-construction properties: Know it all! If you are planning to buy an under-construction property, it is imperative that you know the different costs that you have to pay at various stages of construction. Per square feet rate when multiplied by the total area of the property will just give you the basic cost and not the overall cost. Remember, there are multiple costs to be paid. All these costs can be confusing and overwhelming for you. Hence, it is imperative that you clearly understand each of the costs in your property. Broadly speaking, the overall property costs can be divided into two parts – one that is to be paid to the builder while the other are the statutory and legal costs. And within each of these categories itself there are several hidden costs which a buyer must pay at different stages. Read on to know more. Builder Costs There are multiple costs that need to be paid directly to the builder at various stages. These include the following: I. 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 is the main cost of the property and usually comprises about 80 per cent of the total amount that a buyer pays. This amount is paid to the builder directly at different stages as per the builder guidelines. At the time of booking, most builders ask one to deposit a certain amount, about 10-20 per cent of the total cost, while the remaining amount to be paid depends on the construction stage of the project or the builders’ payment scheme. One could probably check the payment scheme with the builder and may even compare it with that of other builders. Select the one which is more suitable for you! II. Parking Charges Parking charges usually comprise of 3-4 per cent of the total property cost. The price usually varies from Rs 2.5-3 lakh or even more depending on the size of the parking space, builder type and other multiple factors. Some builders’ may also provide two car parking in their luxury projects but at an additional cost. You may check with the builder for this. III. Infrastructure Development Charges (IDC)
Popularly known as internal development charge, it is usually charged at per sq. ft. rate. Imposed by the government on developers, this charge is taken by the buyer and utilised for the development and maintenance of infrastructure within the project. This includes BESCOM/BWSSB charges, generator charges, to name a few. The IDC varies from developer to developer and city to city, but can range anywhere between Rs 35-300 per sq. ft. It is also important to know that some builders may term this charge differently and may just call it generator charge or BESCOM/BWSSB (in Bangalore) or something else. You can probably clear your doubts with the builder directly. IV. External Development Charges (EDC) EDC, which is currently levied only in few cities in India like Gurgaon and Faridabad, among others, includes maintenance of trunk infrastructure such as roads, sewerage, water and electricity supply outside the project. This is an important charge as EDC plus IDC in total accounts for nearly up to 10 per cent of the overall base per sq. ft. price. V. Maintenance Charges Many builders also take upfront maintenance charges from buyers which includes maintenance deposits, security charges, and society formation charges, to name a few. 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 after which 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 (per sq. ft.) for the project which has to be paid by the house owner either yearly, halfyearly, quarterly or even monthly, depending on the policies of the respective project. You could probably ask your builder for how long he plans to maintain the property after possession. VI. Amenities Charges Also referred as utility charges, these are charged by the developers for the amenities being provided such as gymnasium, clubhouse, swimming pool, to name a few. The charges depend on what amenities are being provided in the project. VII. Preferential Location Charges (PLC) If one wants an apartment overlooking the sea or a unit that overlooks the garden or swimming pool or prefer a vastu compliant home, then he must be ready to pay an extra preferential location charges. PLC is a premium charge that the builder charges for a specific choice of apartment. Also, there is a floor rise charge in almost every building which varies from builder to builder. Interestingly, floor rise premium varies from city to city based on the climatic conditions. For instance, in Delhi NCR, due to excessive heat, one has to shell out more money for living in the floors closer to the ground. While in cities like Mumbai and Bangalore, the higher one goes the more he has to pay. Preferential location charges may range anywhere between Rs 25 to Rs 100 per sq. ft. or more and are added to the total cost of the apartment. Thus, it is advisable to compare all these builder costs in each of the selected projects before making the purchase. One can compare the base price with the remaining builder-related costs and see whether it is worth paying extra charges for different amenities or likewise. Statutory and Legal Charges
Other than the builder costs, there are few charges to be paid to the government at the time of property registration. There are four main costs involved here. I. Stamp Duty Stamp duty is essentially a tariff charged for the legal verification of documents related to property buying. The stamp charges vary from state to state. In Karnataka, the stamp duty is 5 per cent of the total or registered property value. In addition to the stamp duty, one has to also pay 10 per cent cess and 2 per cent surcharge on the stamp duty in urban areas. While in areas under village panchayat, the surcharge is 3 per cent on the stamp duty value. In Bangalore, the stamp duty depends on whether the residential unit is being bought in the urban area or rural area. Depending on that, the stamp duties, including surcharges, are: In Urban Areas: 5.6% In Rural Areas: 5.65% II. Registration charges Registration fee is payable to the government at the time of property registration. In Bangalore, the registration charges are 1 per cent of the value for which the property is being registered. The state government decides the guideline value at which the property can be registered. In case of multi-storeyed apartments, the super built-up area is considered for calculating registration charges and stamp duty. For plots, the 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. III. Service Tax and Value Added Tax (VAT) Service tax and VAT are applicable only in the under-construction properties. Service Tax is decided by the central government while the VAT varies from state to state. Effective 1st June 2015, the service tax is currently 14 per cent of the 25 per cent of the total agreement value. In case the property costs Rs 1 cr or above or the under-construction unit is more than 2000 sq. ft. in area then the service tax applicable is 14 per cent of the 30 per cent of the total agreement value. While VAT is currently charged at 5.5 per cent of the construction-related services. Besides these government charges, 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. Moreover, buyers who are taking a loan on their house also have to shell out the loan processing fee and documentation charges which are anywhere between Rs 7,000-10,000 or up to one per cent of the total loan value depending on the financial institution. So, understanding these different costs will definitely go a long way in helping one in his journey of property buying. Add to this, once the property is owned by the respective buyer, he will need to understand the various property taxation costs which are to be paid on a regular basis. Figure 1 shows you various cost components associated with property and their composition. Figure 1: Various costs associated with property
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