Unveiling Hidden Costs Of Homebuying In India: What To Watch Out For

Hidden Costs Of Homebuying

When buying a home in India, it’s important to consider not just the upfront cost of the property but also the hidden costs associated with the purchase. These additional expenses can significantly impact your budget, so it’s essential to be aware of them. 

Hidden Costs Of Homebuying In India That You Should Watch Out For

1. Registration And Stamp Duty

Stamp duty is a government tax on property sale or transfer in India, varying by state. It’s calculated as a percentage of market value or agreement value. Registration fees are also applicable.

2. Brokerage Fees

Real estate agents or brokers in India charge a commission fee, typically a percentage of the property’s value, for assisting with property search and purchase. Negotiate and understand the fee structure before engaging their services.

3. Legal And Documentation Charges

Hiring a lawyer for property purchases in India is common. They charge fees for services like title search, document preparation, and registration oversight, which can vary based on experience and transaction complexity.

4. Maintenance And Society Charges

When buying a property in a housing society or gated community in India, there may be mandatory maintenance charges or society fees for common area upkeep and shared facilities. Inquire about these charges beforehand, as they can vary.

5. Property Insurance

While not mandatory, it is recommended to get property insurance to protect your investment against unforeseen events such as fire, natural disasters, or theft. The cost of insurance will depend on the value of the property and the coverage you choose.

6. Utilities And Connection Charges

When moving into a new home, you may need to pay for utilities such as water and electricity connection charges. These charges vary depending on the locality and the size of the property. Ensure to inquire about these fees to avoid any surprises.

7. Interior Furnishing And Renovations

If you plan to furnish the property or carry out any renovations, you should account for these expenses. The cost of interior furnishings, modular kitchens, and other fixtures can add up quickly.

8. GST and Other Taxes

Goods and Service Taxes (GST) is applicable on any under-construction property in India. The Indian government charges this tax. The GST on under-construction property is 5% and for affordable housing is 1%. However, if you purchase a ready-to-move property, there is no GST charge on it. You should always keep this in mind during your home buying process. 

9. Surcharge 

If you are a first-time home buyer, you must know about the surcharges that come with buying a property. It includes stamp duty, registration charges, and brokerage. It increases the overall cost of buying and you must plan your finances to cover these additional costs. Also, some cities have surcharges on stamp duty. For instance, there is a 1% metro cess in Mumbai. Furthermore, there are some recurring charges such as maintenance and taxes when you buy a property in any region. These charges vary from region to region. 

10. Loan Processing Fees and Interest 

One of the crucial aspects of homebuying is taking a home loan, which has processing fees and interest charges. Different banking and non-banking financial institutions have different administrative charges and interest rates. There are loan related fees, document related fees, and legal fees charged by various financial institutions. 

Budgeting and Financial Planning 

Whether you are a first-time home buyer or buying a property for investment, you should have a clear road map for financial planning. Here are some of the key tips to consider:

• Check your financial health by tracking your income and expenses. It helps to accumulate savings for buying a house.
• The real estate market has all types of properties in the budget and premium categories. Assess your budget to make an informed buying decision. If you are taking a home loan, factor in down payment, eligibility, and total debt payment.
• There are additional costs attached with buying a home such as stamp duty, administrative fees, GST, taxes, and legal fees. You must set aside a budget to cover these expenses.
• If you are taking home loan, start saving early for the down payment. Try to save atleast 20% of the total loan amount as a down payment to get favourable loan deals.
• You must consider long term financial commitments such as property taxes, maintenance cost, and insurance.

The Final Word

It's crucial to include these hidden costs when budgeting for your home purchase in India. Being aware of these expenses will help you plan your finances better and avoid any financial surprises along the way. Consulting with a professional such as a financial advisor or a real estate lawyer can provide further guidance tailored to your specific circumstances.