Five charges that can add up to your home cost advertised by builders

Over the next fiscal, the group plans to retain its focus on commercial development in Bengaluru, Hyderabad and Chennai, apart from enlarging its presence in smaller cities like Thiruvananthapuram and Kochi.

Developers often highlight the basic per square feet rate or base price of a unit when advertising a property to attract potential buyers with seemingly affordable ticket sizes. However, these advertisements often exclude various additional and mandatory costs associated with purchasing a property. These additional costs can significantly impact the final price, potentially increasing it by as much as 15-20 percent above the base price.

Therefore, it is essential for home buyers to carefully consider these extra expenses, including preferential location charges, car parking fees, external development charges and infrastructure development charges, interest-free maintenance deposits, club charges, and other miscellaneous charges.

Understanding these additional costs is crucial for making informed decisions and avoiding unexpected financial surprises.

Here's a breakdown of these common additional costs in real estate.

Preferential Location Charges

This is an additional fee that developers impose for properties with superior locations within a project, such as a corner apartment, park-facing or road facing unit, or higher floors with better views and so on. “The average preferential location charges in metro cities can vary significantly depending on the location and demand,” said Sunil Dewali, Co-CEO of Andromeda Sales & Distribution Pvt Ltd, parent company of Andromeda Realty Advisors.

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Dewali explained that in Mumbai, the preferential location charges for a sea-facing apartment could range from 10-30 percent of the base price. In Delhi NCR, the preferential location charges for a corner unit or a park-facing unit could range from Rs 200 - 500 per square foot. Similarly, in Bengaluru, the preferential location charges for apartments with lake views could range from 5 - 15 percent of the base price.

Buyers should inquire about preferential location charges for different locations and evaluate whether the premium is justified based on their preferences and budget.

Car Parking

Developers usually impose additional charges for designated parking spaces, particularly in high-rise condominiums where parking availability is limited. “The percentage of the total cost attributed to parking for a house in tier 1 cities can vary, but it is often a notable portion of the overall expenses,” said Kanika Gupta Shori, Founder and COO, Square Yards. As a general example, “parking charges in tier 1 cities may range from 3 - 5 percent of the total property cost, depending on factors such as the location, developer policies, and the type of parking (covered or open).

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For instance, if a property is priced at Rs 1 crore and the parking charges are set at 5 percent, the parking cost would be Rs 5 lakh,” added Shori.

However, not all the type of car parking comes at a cost. Typically, “open parking is free to all buyers. Covered parking is chargeable,” said Dewali.

Also, parking fees are calculated on a per car space basis, and if you require multiple parking spots, the developer may offer them at an additional cost. It is crucial to ascertain the number of parking slots included in the purchase and whether they are covered or open-air spaces.

External Development Charges (EDC) and Infrastructure Development Charges (IDC)

EDC and IDC are fees levied by government authorities or developers to fund external infrastructure projects like roads, drainage systems, street lighting, and sewage facilities. Home buyers should inquire about these charges, as they can significantly impact the overall cost of the property.

“In metro cities, the cost of EDC and IDC can range from Rs 200 - 500 per square foot,” said Dewali.

Interest-Free Maintenance Deposit

Typically, developers require homebuyers to provide an interest-free maintenance (IFMS) deposit as part of the purchase agreement. This deposit serves as a reserve fund intended for unforeseen or irregular maintenance, repair or upgradation needs within the project. The developer retains this deposit until the Residential Welfare Association (RWA) is established within the residential project, after that the funds are transferred to the association.

IFMS charges ranges from Rs 50 - 100 per square foot. However, these charges may be higher for luxury and high-end properties.

Club Charges

The amenities offered by housing societies, such as clubhouses featuring gyms, swimming pools, recreational areas, and community centers, serve as major attractions. However, these amenities come at an additional cost, typically amounting to around 5 percent of the property value.

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Homebuyers should evaluate whether they plan to utilise these facilities and consider the associated costs. It's important to note that while this is a one-time cost, monthly charges may apply for accessing and maintaining clubhouse services once you move into your home.

Miscellaneous Charges

In addition to the above charges, which are generally standard across the country and among developers, there are several others that may vary depending on the city and developer. For example, some developers may also levy lease rent charges, extra electrification fees, fire fighting expenses, and power back-up installation fees. These additional charges can further increase the overall property cost by Rs 200 - 500 per square foot.

Also, it's important to note that apart from these developer-associated expenses, there are also governmental fees amounting to another 15-20 percent of the total expenses. These government fees include goods and service tax, stamp duty, registration fees, and more.

Also read: Buying your dream house? Be ready to pay five additional taxes and charges

Remember, the price at which your buyer markets a flat is not the the price you’ll pay. You’re most likely set to pay higher than that. It is imperative that you get a clear understanding of the total cost of ownership.