|July 28 2012, 07:09 PM||#1|
Home purchase: Factor in the add-ons
Real estate is by far, the biggest investment that the average person takes up and in most cases is at the upper scale of the limit of his financial capabilities. Therefore, encountering surprises in terms of new and hidden costs becomes extremely difficult to handle or cater for.
The initial costs as described by the real estate agent does not include a host of add-ons which one has to pay for, ultimately raising the budget by almost 25 per cent. One should be aware of this, and be prepared for this additional expenditure that will come your way when buying real estate.
It has to be kept in mind that the registration cost forms a substantial amount depending on the total worth of the property. In most states the entire legal charges in terms of stamp duty and registration fees add up about 7-10 per cent of the property cost.
Typically the stamp duty is about 5-7 per cent, which means that if one has to buy a property worth Rs 50 lakh then stamp paper worth Rs 3.6 lakh has to be purchased for typing the sale deed on it.
In addition, there is a registration fee payable to the court, which amounts to 1-2 per cent of the property cost. Over and above these costs, which have to be exclusively borne by the buyer, there are miscellaneous expenses such as the fees of the notary and lawyers who get the job done in the court. The legal counsel assisting in verification and registration of the property also charge about 1 per cent of the property cost which has to be taken into account while planning your budget.
It had been the trend over the last decade to charge an additional upfront payment for exclusive parking spaces in large residential complexes.
This amount could vary from Rs 2-5 lakh depending on the type of property, locality and type of parking space being provided. This has been a cause of heartache for many buyers. After March, 2012 as per a Supreme Court ruling, no additional charges can be levied for parking within a residential complex. However most developers try to bypass this provision by adding an extra amount to the property cost.
After acquiring a property, one has to invariably spend some amount in getting the interiors done up as per individual preferences and requirements. This expenditure is generally not planned at the initial stages and can cost quite a fortune depending on the exact nature of interior work being undertaken. However on an average it can be safely assumed to be a minimum of 1 per cent of the entire cost of the property.
Interest, Rental and Tax Rebate Loss
Delays in project completion are a common phenomenon in India due to a host of reasons. These delays not only result in price escalation but also incur additional losses in terms of extra interest paid to the lender of home loans.
A delay in completion by six months to one year is normal and must be factored in, as it will imply extra interest on the borrowing amounting to a substantial value.
Additionally these delays will also deprive the owner of the rental earnings for the period. The tax rebates applicable on home loans cannot be availed unless the property is complete and handed over. The above three elements add up to a huge value when reviewed under the financial circumstances of the buyer who is at the limit of his capabilities.
The latest projects have a trend of charging upfront maintenance deposits for a longer period like 10 years instead of the conventional periodic charges.
This is to the disadvantage of the buyer as he will have to pay a lump sum amount initially for which he will pay interest on the borrowings. Given the current trend of inflation, this amount is likely to run out earlier than anticipated and again another deposit of maintenance funds has to be made. Most developers are insisting on it as it gives them a greater capital initially to play around with.
There can be several other hidden costs such as unapproved plans, unpaid civic authority dues etc. which can further aggravate the situation, unless one is financially prepared. Do factor them before signing on the dotted line.
Home purchase: Factor in the add-ons - Indian Express
|July 30 2012, 09:02 PM||#2|
Find the right sale price for your property
Find the right sale price for your property
Outlook Money – 7 hours ago.. .
By Ashwini Kumar Sharma
Finding out the right price of a property is important for both the buyer and the seller. Even within the same apartment block, the price of individual units vary depending on their location (floor and direction). As a seller, you cannot quote too high a price for fear of turning away the genuine buyers, while quoting a low price will lead to a loss.
The price to ask. This is something most individual sellers have problems with while deciding to put their property on sale. A suitable price will depend on a lot of factors, namely, physical appearance of the property, legality, transferability and marketability of the property documents, locality and economic and socio-cultural scenario of the locality.
The most common practice most real estate agents or individual home sellers follow while determining the price of a property is known as the ‘comparable property method’. In this, one takes into consideration the average sale price at which similar properties were sold in the last 3-6 months in the neighbourhood. For this, one can take the help of a local real estate agent and get an idea of the prevailing rates. Alternatively, one can scan real estate classified advertisements in newspapers and real estate magazines, or log on to property-specific portals such as - Residential Real Estate Property - Residential Apartments India - Independent House Flats Villa Residential Land - Buy Book - Residential Listings India, www. and www..com, and check indices, such as Liases Foras (RESSEX - Real Estate Sensitivity Index (Pulse of the Real Estate Market)) or National Housing Bank (RESIDEX) on NHB).
Some banks and financial institutions also have a ready reckoner of property prices in certain localities.
Another method is to find out the prevailing circle rate in the area. This is the minimum rate for paying stamp duty on a plot, independent house, or flat in a particular area or a locality and is decided by the state revenue ministry from time to time. Typically, the sale price of a property in the market is higher than the circle rate.
However, despite your best efforts you may fail to figure out the property rate on your own. In that case, you can take the services of professional agencies or hire a government registered valuer for the valuation process. Typically, a valuer will charge you Rs2,000-5,000 for the evaluation. Fees may vary depending on the type of the property, its value, age and location.
Once you get a fair idea of the value of your property, you can make adjustments to account for specific defects or advantages your property has. You may consult a valuer to provide you with suggestions to increase the value of your property.
Enhancing the value. Before you decide to sell your property, consider its potential for redevelopment. You can enhance the value of a property through a little bit of improvement.
Try to redo the interiors to give the illusion of extra space; remove unnecessary furniture, if required. A clean and spacious house attracts more buyers. Fix up lights where needed. These small changes will not cost much, but may play a vital role in the sale.
In addition to such quick-fix touch-ups, you may have to go for bigger renovations to add value to the property or enhance the potential rentals. This way, you will be able to attract buyers who wish to buy a property only for the sake of investment and earn regular income through rentals. Expenses under this head will include those for repairs, replacements, beautification or extension, improving comfort, space, safety, style and preparedness, among others. Still, do keep in mind that some of these repairs are compulsory and cannot be avoided.
Once you are done with all these, it’s time to highlight the positives of your property to a potential buyer. Apprise the prospective buyer of the expenses you have borne in the redevelopment of the property. However, don’t quote a price in excess of 10 per cent to what you have actually calculated.
House for sale: Things to consider while evaluating the value of your property on sale
.Note down the merits and demerits of the property
Figure out the selling price of similar properties in the last 3-6 months in the locality
Take the help of real estate agents, classifieds, magazines and portals to know prevailing values
Make adjustments in the value for specific defects or advantages of the property
Look at the possibility of enhancing the value of the property through repairs and renovation
Highlight the advantages of the property and the renovation costs
Do not quote a price more than 10% higher than what you have calculated
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