Tips to communicate the total cost of buying your home
Buying a new home is a very important and expensive endeavour. A lot of planning goes into budgeting such a large investment to ensure there are no liabilities to the buyer after the purchase of the home. In fact, many buyers have to take the burden of a loan in order to purchase their homes. Given these facts, there is nothing that displeases a potential buyer more than unexpected expenses. Here are a few of the important charges and dues that must be disclosed to a buyer to help them decide,
How to calculate the total cost of buying a house:
GST– Communicating the taxes associated with a purchase is extremely important as it represents a significant financial burden that a buyer should be well prepared for. Today, all “affordable homes” come with a 1% effective GST whereas anything above has a 5% GST levied. Affordable homes are defined as units measuring up to 90 sq m (non-metropolitan) or 60sq m (metropolitan). Under construction properties priced under Rs.45 lakh are also considered affordable and anything above that incur the 5% GST.
But that’s not all. A GST is also levied on all auxiliary services offered like PLC, document charges, etc. Affordable homes levy a 5% tax while the rest have an 8% GST.
PLC– Preferential location charges represent a per sq ft cost that is charged based on the property’s location and floor level. Favourable locations like near highways or with a sea view would incur a higher PLC. The floor preferences and PLCs vary from city to city, though the buyer may not be aware of them. Hence, if you add PLC to the asking price, you must inform the seller beforehand.
Maintenance charges– Maintenance is the recurring charge levied on homeowners for the upkeep of the building and any facilities that come with it. Naturally, a potential buyer must be made aware of the frequency and amount of maintenance charged because it can add up to a significant expense over time which the buyer must be allowed to account for. A relatively obvious home selling tip that is sometimes overlooked. Maintenance charges vary greatly depending on the size, location and provided amenities of the property.
Parking and NOC charges- These are often left until the near end of the sale process before being brought up, though they are very important. A parking space is very valuable, going for anywhere from Rs.2-5 lakh depending on the location and type of parking space. This is a significant amount that should not be sprung up on a buyer last minute. A NOC (no objection certificate) is one of the many documents necessary to sell a home. The process of getting a NOC from the society can cost up to Rs.25,000 which is generally split evenly between buyer and seller. Similar to parking spaces, springing this expense on a buyer suddenly at the end is likely to irk and inconvenience them, even though the amount itself seems relatively small.
Stamp duty and registration charges- The transfer of ownership rights must be registered at the stamp duty and registration department. This process incurs a charge that varies from place to place but is usually around 6-12% of the ready reckoner rate (RRR) or the property’s agreement value. This is mostly paid by the buyer, though some home sellers offer to bear some of this charge to expedite the sale. If you decide to split this charge with a seller, decide on the share of expense you’ll pay clearly beforehand.
Pending bills and brokerage- There is nothing more annoying to a new homeowner than a slew of unpaid bills that you now have to cover for the previous property owner. As a seller, you must clear any such dues before the sale of the home concludes. This is also practically important because banks may demand electricity or gas bills as proof before granting home loans. Brokerage is the fee paid to a real estate agent for his/her work in closing the transaction. As ever, this charge varies depending on the value of the property in question. Many sellers pass on some or all of the brokerage to the buyer. Keep the buyer well informed if you plan on doing this because this fee can go up to 1-2% of the property value. Which could be a significant amount.