We all dream of purchasing a house in the early stages of our lives, but as we move through the path of buying one, it seems like a labyrinth to find a home to meet all the legal formalities relevant to it.
Being a person who is not familiar with real estate terms, it becomes difficult to grasp how the home-purchase process is going on and what should and should not be included.
When we look for a house, our main concern when buying it is always the price, we have to pay for it. According to that and other factors, we need to choose the right loan for the home purchase. But what amazes us is the deviation of the price that we see while searching for it versus the amount we need to pay for it.
So, to help all prospective home buyers understand how to determine the literal price of the house, HomeCapital offered a detailed description in the Final Home Price Decoded for Home Buyers.
There are a lot of factors that are taken into account to get the actual calculation done.
- Firstly, the Agreement value: The agreement value of the deal is the primary value of the building. It consists of the basic expense to be billed by the developer.
- Moving forward, the other preeminent factor that affects the calculation are Taxes on home buying, there are a lot of statutory fees that have to be paid to the government are included in the calculation, such as:
– Stamp Duty: It is a one-time amount charged by the state government for handling the selling bill. Stamp duty charges can vary from state to state. They vary from somewhere between 2% – 7% of the valuation of the estate. Stamp duty often differs on the basis of ethnicity. In order to encourage female property ownership, some of Delhi is giving women buyers a 2% discount.
– Registration Charges: A majority of states levy 1-2 percent of the contract value or 30,000 (whatever is lower) as a registration fee to register the house with the government. Haryana, on the other hand, charges a fixed sum irrespective of the value of the land. Registration cost for the land taken into account is 30,000.
– Goods and Service Tax (GST): GST just needs to be paid for under-construction land. Since its introduction in 2017, all other taxes, such as income tax, VAT, etc., have been superseded by GST. The same has been substantially decreased late on the basis of the home price. A house below 45 lakes attracts 1 percent of GST, and something over that attracts 5 percent of the home price. The GST is due on every installment.
- Lastly, the factor incorporated for calculation is Miscellaneous Charges, fees, and costs such as:- Building Maintenance charges: Advancement of services provided as common-area lighting, parks and recreation areas upkeep, etc. obtained on a periodic basis that is taxable under the GST. When a social welfare group is established, it is their duty to take care of the preservation of society.
– Sinking fund and Campus corpus fund: The Sinking Fund is the funds put up by the insurer for future insurance for heavy-duty maintenance, structural improvisation, etc. in the future. The Campus Corpus Fund is set aside for the construction of common leisure facilities. Usually, both are one-time payments.
– Charges/fees by external entities: Legal fee for the home agreement, sale deed registration is an additional charge. Any extra expense, such as paper handling charges and the Memorandum of Deposit of Title Deed (MODT) charges, should also be arranged.
– Interior Costs: When one buys a home, it typically lacks basics such as woodwork, painting, furniture, etc. that make the house inhabitable. Such spending must be prepared in advance since it does not have a cap.
– Infrastructure development charges: To make your house habitable, you need basic utilities such as water, sanitation. Developers would also cater to sewage treatment systems, water treatment plants, firefighting equipment, and other services. Many of these conditions are met by infrastructure development costs. The homebuyer would also have to pay for their power access to the electricity board.
Hence, by taking all of the aforementioned expenses into account, we get our real home price. So, the next time you look for a property and its worth, make sure you calculate it and know its actual cost.