Unless you have had prior experience buying or selling a home, the ancillary costs will probably surprise you. Failing to factor them while availing of a home loan can cause unwanted stress and put you in a fix.
Taking the plunge to buy a house is an exciting journey. Going through many options and then settling for a dream home is often something we look forward to.
But given the intricacies of additional expenses, also known as transfer costs, it is imperative for us to plan to ensure that our home loan eligibility and home loan interest rates are in check.
What are transfer costs?
Transfer costs is a term that encompasses all the additional expenses incurred while transferring a property. In most cases, it is advisable to keep a buffer of up to 10% of the purchase cost to ensure that you cater to all the expenses with ease.
Who bears the transfer costs?
Like with most other commodities, the transfer costs attached to a property is borne by the buyer. Most of these come into the picture when you decide to buy the house or are to be factored for sometime later as a one-time or recurring outflow.
What are the transfer costs that we need to know about before buying a home in India?
Buying a home is much more than incurring the Basic Selling Price and acquiring the property. Here are some of the transfer costs you may incur while or after buying a home in India.
PLC (Preferential Location Charges)
A homebuyer will have to incur PLC on all available units at locations that offer some advantage over others. It is levied per floor, per square feet basis depending on the amenities offered and the demand for the same. It is one of the significant ancillary expenses to consider while gauging your home loan.
EDC (External Development Charges) and IDC (Infrastructure Development Charges)
Whenever the developer builds a home, they are liable to pay a part of its cost to the state government to better the areas around the project as EDC and IDC. But it goes without saying that the developer would pass on the charges to the end buyer.
Maintenance charges
If you own a flat or a house, you will be liable to pay periodic maintenance charges and a one-time upfront initial maintenance deposit. These charges compensate for a host of services that you get along with the piece of the property, such as a swimming pool, gatekeeper, and more.
Registration costs
A homebuyer will have to incur stamp duty and registration fees ranging between 5% to 15% of the property while buying a home. These outflows give you the legal right to own the said property. While these charges vary from area to area and from time to time, you must factor in at least 12% of purchase costs while calculating home loan interest rates.
GST
The Indian government initially charged a whopping 18% GST on under-construction units and allowed a 33% deduction, resulting in an effective GST of 12%. But starting 2019, they have slashed GST rates to 5% for under-construction and 1% for affordable homes. It is to be charged in addition to registration costs a homebuyer is already incurring.
Take all the transfer costs into consideration while understanding your home loan eligibility
India has a unique and often cluttered approach to taxation. The same goes with the taxation of the housing sector too. Given the plethora of charges and outflows involved, we suggest you use a reliable home loan EMI calculator to ensure you are not caught off-guard.