Costs to Consider for Under Construction Property | Kotak Mahindra Bank - Home Loan Stories

13 JANUARY, 2022

After saving for years, Akshat decided to buy his dream house. He had researched well and knew the entire process of purchasing a house. He found an under-construction project and purchased an apartment. While he was rejoicing about getting a good property within his budget, the reality was a bit different. When he finally got the possession, he had to pay an additional amount of a few lakh rupees due to the hidden charges unknown to him. He had not accounted for this cost, and neither had vetted the agreement carefully to argue with the builder. Ultimately, he had to borrow money to pay for the total cost.

Apart from the price quoted by the builder, there are several hidden charges that you need to pay. Go through these below.

  • Stamp duty and registration charges

Stamp duty is a significant cost that increases the cost of purchase for home buyers. Stamp duty is an indirect tax that you need to pay the state government mandatorily. Though it differs from state to state, the rate of stamp duty varies from 5%-7%. Unless you pay the stamp duty, your house is not registered in your name, and the change of ownership is not validated. Similarly, the registration charge is 1% of the property’s value that you need to pay while buying a house. Though it seems like a small amount, it can go up to lakhs of rupees. Moreover, you must know that stamp duty and registration charges are not included in a home loan.

  • Maintenance deposit

Depending on the amenities provided, the builder charges a maintenance deposit of up to 2 years in advance. This amount varies from society to society and is dependent on the land value, type of house and locality. It is for the amenities like parks and lightning, clubhouse fee, etc., provided by the society or builder.

  • Parking fee

As there are space constraints in societies due to the increase in vehicles, often builders charge a parking fee. It can depend on the parking space and slot and on the size of your flat. Many builders charge a parking fee if you have more than one vehicle.

  • Interior decoration

The cost of designing and decorating your house is not included in the total costs but is a substantial expense. You cannot move in unless you spend on services like plumbing, painting, electric fixing, etc. In addition, you might want to buy new furniture or opt for a false ceiling. Moreover, if you wish to get it designed by interior designers, the expenses can further increase.

  • Goods and services tax

As per the latest mandate, you need to pay Goods and service tax on under-construction properties. Currently, the rate of GST is 12%. Similarly, the GST rate for affordable housing projects is 1%.

Knowing about these hidden costs can save you from shelling out more money than planned. Moreover, you can account for these costs while calculating the total home loan fees and charges. It is best to read the terms and conditions and the documents required for home loan carefully to avoid nasty surprises in future.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.