“The most important thing in real estate investment is to have a good location, a good builder, and a good lawyer.”
It is a well-established fact that a decision to invest in real estate should be taken seriously and with due diligence, especially due to the huge costs involved. Unforeseen expenses can disrupt even the most cautious investment calculations and a well-prepared plan is of the essence and Gurgaon is no exception.
So if you want to be aware of the potential hidden costs in a Gurgaon property purchase, then this article is for you.
Hidden Costs of Buying Property in Gurgaon:-
GST –
To start with the fundamentals, mentioned below are the different GST rates for different types of real estate investments in Gurgaon, expressed as a percentage of total property value –
- 1% for affordable housing projects for properties valued up to ₹45 lakhs.
- 5% for any other residential property.
- 12% for commercial properties.
TDS –
If the property value exceeds ₹50 lakh, the buyer must deposit 1% of the total property value as TDS. Although TDS is deducted from the seller’s proceeds, it can impact the buyer indirectly as the seller may increase the sale price to compensate for the TDS deduction. Pre-emptive negotiations, ensuring proper documentation or even consulting an expert can help you mitigate this risk.
Also Read:- The Cost of Living in Gurgaon 2024
Registration and Stamp Duty –
Stamp duty in Gurgaon is 6% for men, 4% for women, and 5% for joint ownership. Registration fees are usually 1%. There may be additional fees that you will have to pay for administrative processes as well. Although women enjoy lower stamp duty rates, you should prepare to pay around 7-8% of the property value for registration and stamp duty for your real estate investment in gurgaon.
EDC (External Development Cost) and IDC (Internal Development Cost) –
- The purpose of EDC is to cover the cost of developing infrastructure outside the project area – roads, drainage, street lighting, etc.
- The purpose of IDC is to cover the cost of developing infrastructure within the boundaries of the project area – landscaping, water supply, internal roads, etc.
- The developer pays EDC and IDC to the local development authorities and then recoups the cost from the buyer. The rates for both depend on the type of project and the associated infrastructure requirements.
- Both are calculated per square foot or square meter.
- Both are not included in the basic sale price and can significantly add to the total cost.
PLC (Preferential Location Charges) –
If you choose to purchase a property in a much sought-after or advantageous location, (such as a corner house, pool-facing, park-facing, etc.), then PLCs apply. The amount will vary depending on the builder and the project.
CPC (Car Parking Cost) –
More often than not, your real estate investment in the form of the basic property cost will not include a parking space. This is standard practice and expect to pay anything upward of a lakh.
Interior and Furnishings –
One of the most significant potential hidden costs in a Gurgaon property purchase is that of interiors, especially if the property is a bare outer shell. The amount you end up spending on furnishing your property will of course depend on your personal choices and preferences.
Maintenance Charges –
There are three maintenance-related charges that you will encounter when buying a property in Gurgaon – IFMS, Maintenance Deposit, and Advance Maintenance Charges.
- IFMS (Interest-Free Maintenance Security) – This is collected by the developer from the buyer at the time of purchase. It is refundable and functions like a reserve fund to ensure maintenance of the property until the RWA takes over.
- Maintenance Deposit – Similar to IFMS, but differs in that it may be used directly for maintenance and may or may not be refundable.
- Advance Maintenance Charges – This is used for regular upkeep of the property and is charged periodically. It is usually non-refundable.
Brokerage Charges –
Although the brokerage charge may vary according to several factors such as location, type of property, etc., typically real estate agents in Gurgaon will charge 1-2% of the property value. This can be slightly higher for commercial properties. Keep in mind that brokerage is sometimes negotiable, especially if you are a high-value client.
Home Loan Processing Fees –
If you are availing of a home loan to facilitate your real estate investment, then expect to pay processing fees. Some legal and technical expenses might also be incurred.
Property Inspection Charges –
Property inspection is carried out by professionals who will ensure that the property is in sound condition and complies with the requisite standards and specifications. This is a crucial step to ensure the security of your investment and should be factored into your overall costs.
Legal and Due Diligence Fees –
Another potential hidden cost in a Gurgaon property purchase is the fees you incur for the process of conducting legal verification and due diligence. In a similar vein to the previous point, this step helps to protect your investment by ensuring things like title authenticity and verification, legal compliance, absence of encumbrances, etc.
Utilities and Amenities Charges –
At the time of possession, you may have to pay additional charges for utilities like electricity, sewage, internet, water, gas, etc.
In addition, there may also be fees related to amenities like power backup, and specialized facilities like gymnasiums, clubhouses, swimming pools, etc., which can significantly inflate your total real estate investment.
Do keep in mind that in certain cases, you may be able to choose and pick specific amenities, to better align with your budget and lifestyle.
Conclusion –
To sum up, there are several potential hidden costs in a property purchase in Gurgaon – stamp duty, CPC, PLC, property inspection charges, etc. If not accounted for in the early stages of investment planning, these can significantly impact your budget and possibly inflict considerable financial duress. It is, therefore, crucial to conduct thorough research and consult professionals to ensure a smooth and sound real estate investment experience.
