Buying a house? 7 expenses you need to account for

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Picture this. You are browsing through the many house property listings available online. And you find a property that may just be the house of your dreams put up for sale. The locality is one you are familiar with, and you think it’s best not to let this opportunity go in vain.

So, you check out the price of the house - Rs. 60 lakhs - and you think it may be well within your budget. So, you go ahead and start getting the funds ready.

This seems like a very common scenario, right? The only snag is that the price that you see upfront - Rs. 60 lakhs in this case - is not the whole picture. There are several other costs and expenses that you need to account for when you are planning to buy a house.

Check out what these expenses are.

1. GST

Introduced in the year 2017, Goods and Services Tax (GST) is an indirect tax that end consumers are required to pay at the time of purchase of certain specified products and services. If you’re purchasing a property that’s under construction, you would have to pay a GST of 12% on the value of the house.

So, if the price of the under-construction home is Rs. 60 lakhs, you would have to pay around Rs. 7.20 lakhs as GST (Rs. 60 lakhs * 12%). That said, if you’re purchasing a house that’s been put up for sale after the issue of the completion certificate, GST will not be applicable.

2. Stamp Duty

Stamp duty is a tax that’s levied by the state governments at the time of property registration. Payment of stamp duty is mandatory to authenticate the sale agreement that you sign with the seller of the house. Since stamp duty is a state subject, the rates tend to vary depending on the state in which the property is situated. It usually ranges anywhere from 2% to 8% on the value of the house.

So for instance, if the value of the property is Rs. 60 lakhs and the stamp duty rate of the state it is situated in is 7%, then you would have to pay around Rs. 4.20 lakhs (Rs. 60 lakhs * 7%). Some states also offer rebates of up to 1% on stamp duty for women home buyers.

3. Registration Charges

The buyer of the property is supposed to pay registration charges to the government for registering the property in their name. Generally, the registration charge is around 1% of the value of the property in most states. So if the value of the house is Rs. 60 lakhs, you would have to pay around Rs. 60,000 (Rs. 60 lakhs * 1%) as a registration charge.

4. Parking Charges

In the case of an apartment complex, the cost of obtaining a parking slot is usually not included as part of the price of the house. Buyers will be required to pay an additional amount for getting a parking slot allotted to them. These charges can vary depending on the builder and the number of parking slots that you wish to purchase. Although parking charges are usually a one-time fee that you’re required to pay at time of purchase of the apartment, many builders or associations may even choose to levy them annually.

5. Advance Maintenance Charges

These charges are again unique to apartment complexes. Builders generally collect maintenance charges from buyers for a certain period of time in advance. It can be for 12, 18, or even 24 months depending on the builder and the apartment complex.

The advance maintenance charges collected by the builder are typically based on the size of the apartment, the location, and the amenities provided. Builders use these funds to pay for the maintenance and security of the building, common electricity charges, and water charges, among others until the formation of an association.

6. Down Payment for the Home Loan

Most individuals resort to availing a home loan for helping them purchase their dream house. However, banks and other financial institutions generally offer home loans only up to 80% of the value of the property. The remaining 20% has to be borne by the buyer and paid upfront as a down payment.

For instance, if the value of the house is Rs. 60 lakhs, you would be eligible for a home loan of only up to Rs. 48 lakhs. The remaining amount of Rs. 12 lakhs would have to be paid by you out of your own pocket as down payment.

However, you can also choose to pay more than 20% of the value of the house as a down payment if you wish. This will allow you to reduce the amount of home loan that you need to avail.

7. Home Loan Interest

Another major expense that home buyers will have to contend with is the home loan interest. Let’s take the previous example. Assume that you avail a loan of Rs. 48 lakhs for purchasing a house of Rs. 60 lakhs, constituting 80% of the value of the house. Assume that the rate of interest on a home loan is 8% and that you opt for a repayment tenure of 10 years.

You would have to pay a monthly EMI of Rs. 58,237 for a period of 10 years (120 months). The total interest that you will have paid by the end of the tenure will be around Rs. 21.88 lakhs. This is an additional expense that you will have to bear on top of the Rs. 60 lakhs that you pay for the house.

Conclusion

So, to account for the true cost of owning a house, you need to factor in these charges as well. Knowing these expenses beforehand can help you prepare a budget and plan your loans and finances accordingly. Otherwise, you will be caught off guard and may not be able to meet these costs out of pocket. But now that you know about these expenses, you can account for them if you are planning to buy a house.

Buying a house? 7 expenses you need to account for

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