Additional Charges When Buying a House

Some time back, the Maharashtra Government Cabinet approved a complete waiver of property taxes for residential properties up to 500 square feet (sq ft) in Mumbai. The move is expected to benefit mid-income and low-income households.

According to various experts, property tax includes general tax, water tax, development tax and education cess, among others. Depending on the house property, the property tax value varies. And it could be a major portion.

Like property taxes, there are other charges that you, as a home buyer, may have to incur over and above the value of the house property.

Read to know about these charges.

What are the charges?

It is a tall task to narrow down on a house that you like, then comes the budget. Well, it is not enough that you plan out your EMIs, keep in mind that there are other costs. These costs are over and above the property value.

In other words, if your house or property value is around Rs 50 lakh, then you may incur more than this amount, and it may not form part of your EMIs.

Let’s take a look at these charges.

Stamp Duty and Registration Charges

Stamp duty and registration charges are paid by the home buyer at the time of registering the property. Only after the payment of both you will be recognized, legally, as the owner of the house.

Usually, the value of the house that you buy excludes these two charges. Note that both charges vary with states as these are levied by the State Government.

Let’s understand these charges better, as these makeup for a huge chunk of cash outgo. 

• Stamp Duty

Stamp duty is a tax levied by the State Government and usually ranges between 5% and 8%. It is calculated on the market value or the circle rate of the house property, which is higher. This rate depends on the value of the property, the age of the building, the location and even the type of property (flat or villa). 

For instance, as per public data available, stamp duty in Maharashtra is around 5% of the value of the property, but in Tamil Nadu, it is around 7%.

• Registration Charges

Registration charges are fees for executive transactions between two parties related to house property. For instance, in Maharashtra, the registration charge is around Rs 30,000, as per some media reports.

You, as a home buyer, have to pay these charges whether you buy a new property or resale property.

• Brokerage

Brokerage or commission for the agent is to be paid by either the buyer or the seller, or both (in some cases). This is a commission paid for bringing the buyer and the seller and making the arrangement for a smooth transaction.

Note that, not all home buyers may have to incur this cost. It is mostly predominant in resale property transactions.

But if there is a broker or an agent involved, the brokerage fee could take another chunk from your pocket. It can be anywhere between 1% and 3% of the transaction value.

• GST

While GST is applicable only on under-construction property, it too can increase the final cost to home buyers. The current GST (goods and service tax) rate applicable is 5% on the value of the property. It is 1%, in the case of affordable house property.

On the other hand, there is no GST applicable on the ready-to-occupy properties and on resale properties.

• Maintenance and Taxes

There are recurring charges that you should note after you buy a property. You may have to pay even if you are a tenant in the house.

Maintenance is the amount you, as an owner/tenant, have to pay for the maintenance of your property. This is particularly levied if you live/own a flat in an apartment or live inside a gated community. While it may not be a major portion, it is a recurring payment that should be budgeted if you plan on buying a house property.

Similarly, taxes, including property tax and other taxes (as and when levied by the Government), should be accounted for before you buy a house.

• Other Charges 

In addition to the above-mentioned charges and the property costs, there are other charges to note. 

While these are negligible, they shouldn’t be ignored. Some of the charges include notary expenses (at the time of registration of property), legal fees, parking fees (charged by some developers at the time of property construction), furnishing and interior expenses, and an extra amount to be spent by you if you need a private terrace or other extra space.