6 Must Know Facts About Property Prices & Payment Plans When Buying a Home

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Did you know that you pay 15-25% of the total price of the new house you’re buying just for the extra costs that you hadn’t even considered? Think about buying a new house, and the first thing that comes to your mind is the money involved. How much will the booking amount be? How much will the stamp duty and registration charges be? How much will the maintenance charges cost? It is essential to understand where exactly you are investing or it could amount to a loss you didn’t estimate. Explained here is everything you need to know about payment details, terms and costs while investing in property. Price Calculations • Base Price: This is the price of the property per square foot and the saleable area. For example, if the price per square foot is Rs. 6,000 per sqft. and the saleable area is 1,000 square feet, then the base price amounts up to 6,000 x 1,000 = Rs. 60 lakhs. Base price only gives you a vague idea of the total cost of the flat based on property prices. • Car Park: This is the amount to be paid towards the car parking facility (Yes, it is not included in the base price). You can opt for more than one parking lot if you own multiple vehicles and if the option is offered by the builder. • Floor Rise: Most developers will increase the rate per square foot of the house as the number of the floor increases in a high rise building, i.e. the rate for the first floor will be cheaper than the rate for the fifth floor. In case you have a location preference that is a popular choice of many – like a corner flat with a great view – then you will be charged extra as ‘Preferential Location Charge’ for this facility. • Extras: The infrastructure costs, social costs, administration costs, maintenance charges, added amenities and government charges are billed separately. These will not be included in the agreement, but you are liable to pay these costs. These costs can amount up to 15-25% of the total value of the house depending on the developer and state. The costs may include maintenance charges for 1-2 years, clubhouse charges, connection charges (which may include fees for electricity, cooking gas, water supply, phone lines and other utilities and will depend on the project). There are also government charges and these include the stamp duty and registration charges. You might wonder why you have to pay the stamp duty. The stamp duty acts as a legal evidence in court and ensures that the property is officially registered in your name. An Example To explain the terms clearly, let’s look at the given example. Let’s say a house has a saleable area of 1,000 square feet. The rate per square foot is Rs. 6,000. Hence, the base price adds up to Rs. 60 lakhs. Let’s say the car park will cost Rs. 2 lakhs. The customer has selected a corner flat on the 4th floor. Hence, the floor rise cost is Rs. 25 (floor rise cost) x 4 (floor number) x 1,000 (saleable area). Hence, the total floor rise cost is Rs. 1 lakh. The charges for the location (corner flat) is Rs.100 per square foot. This adds up to 1 lakh. Finally, the total agreement value will be Rs. 64 lakhs. Now we still have the additional costs. Assuming 20% to be the additional costs, the all-inclusive price for the said flat will be approximately Rs. 76.8 lakhs. Payment Plans Different Payment plans can be adopted to pay the aforesaid amount. You can choose between the two types of payment plans - time tied and construction tied. • Time-Tied Payments: When you opt for time-tied payments, you will have to pay the developer on a monthly or quarterly basis regardless of the progress in construction. This means that the developer will not guarantee the construction progress but will take your money on a regular basis. Developers actually prefer this so that they can ensure cash flow without guaranteeing construction progress. • Construction-Tied Payments: If this doesn’t sound satisfactory, you could opt for the construction linked payment plan. Here, you will pay only when there is progress in the construction. This is divided into the number of stages that the construction takes to complete - upon completion of the foundation, the basement, the floor slabs, etc. The main benefit of this approach is that the developer is accountable for your hard earned money and the loans. You will pay him/her only if there is progress in the construction. This way you can sit back and breathe easy as your investment is being put to good use. For obvious reasons, most customers prefer the construction linked payment plan. Payment Process Now let’s look at the next important task - the payment process for the buying of the apartment. You can make the payment via two methods: online and offline. • Online: In the online booking option, you can pay the down payment, which is usually 15-20% of the agreement value, after which the allotment letter will be issued. The sale agreement will be created once the payment is verified. • Offline: You can also pay the down payment in the offline mode. The down payment amount remains the same regardless of the method of payment. The allotment letter will be issued thereafter and the sale agreement will be created upon verification. Once the sale agreement is created, the payment plan remains same for offline and online bookings and is either time tied or construction tied (construction tied in most cases). It’ll help you to note that, in certain projects, the developer may require an amount more than the amount you paid online and the property prices, but this amount will be less than the agreement value and will have to be paid before the allotment letter is issued. While you’re making all these payments to the builder, keep a note of all the promises you’ve been made, and make sure the money you are paying is accounted for. If there’s more you need to know, just ask us below and we’ll be glad to help!