Are You Prepared To Bear These Home Buying Costs?

The price tag attached to a home is not the only cost one needs to weigh in when planning to invest in real estate in India. There are a number of other costs that add into buying a property. If left unchecked, these costs that make up incidentals, can eat a big chunk off your savings. People who don't prepare well may even end up borrowing money and incurring debt. Last minute debts can come with huge interest costs.

The common costs that most people account for as part of their preparations for buying property in India are registration fees and stamp duty. Yet, many tend to forget the incidentals. So, keep these costs in mind and make provision for them as well when chalking out your finances:

Pagdi or earnest money: After you agree on a property, there is a lot of time before you make the upfront payment. This happens generally after a loan is fixed. It can take months before the loan arrangement is done. Hence, builders seek a pagdi amount or earnest amount to ensure that they block the property in your name. Generally, it amounts to Rs 50,000 or Rs 1 lakh depending on the type and the total cost of the property you plan to buy. This money is to assure the builder that you are serious about making the purchase.

Bank loan fees: In addition to interest that you have to pay for the loan, a number of banks also charge a processing fee for the home loans. This amount also depends on the size of the loan and the cost of property. This can be a fairly good amount. Though a few co-operative banks waive this charge off, most commercial banks have charges for this.

Appraisal: A property has to be appraised by a real estate expert, who is certified by the government. Since such experts are few and far between, they can cost quite a bit. This cannot be avoided as the report from the expert is used as the basis for final decision on the price of the property. In case of a land purchase, a surveyor is employed to give a report of the type and kind of the land. Surveyors are tougher to find than appraisal experts and hence, more expensive.  

Legal costs: A lawyer, who specializes in laws governing real estate in India, has to be employed to do the paperwork before and during registration of the property. This will ensure that the legality of your ownership stands the test of time and disputes. The legal costs that can surprise many should be duly accounted for.

Insurance: There are several kinds of insurance covers taken during and before buying a property. A property has to be insured and sometimes, the decision to insure it happens before the property is purchased or just around the time of purchase. The premiums that have to be paid should also be accounted for.

(Katya Naidu has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)