Cost of Ownership of Your Home

Amit was looking for the purchase of his new house but unfortunately nothing was in his budget. Then one fine day he heard an advertisement on the local FM channel about a project which seemed to fit his budget.

So he called up the builders advertised phone number and the builder confirmed the price for the flat was indeed what was advertised on the radio. Not wanting to miss this golden opportunity he and his wife rushed to the builders’ office armed with their cheque book. But alas! There was more than what meets the eye. Once they started getting into the details they realized that the real cost of ownership was 60% higher than the advertised price. But how did this happen!

Below is the snapshot of price details of one of the projects in Gurgaon. Though the price list is of last year but the fact remains the same.

Here is the cost of ownership of the 1180 sq ft flat.

The Basic Sale price is Rs. 2197 per sq. ft which translates to around Rs. 26 lakhs. This is the price which is quoted in advertisements as in the picture below.

Now lets look how much the other charges comes to:

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As in the above table the total additional charges comes out to be Rs. 13.19 Lakhs, which is more than 50% of the advertised price.

Other than the above you would also incur Stamp Duty & Registration fee which varies from 5% – 12.5% depending on the sate and ownership. Here we assume cost of 6% of the cost of the house.

Registration Cost: Rs. 2.25 Lakhs

If you have booked directly from builder or it’s a fresh booking then you might not have to pay the brokerage charges but if you are purchasing the same in resale then be ready to shell out 1 – 2% of cost of the house as brokerage charges. So the brokerage comes out to be Rs 40 – 80 thousand.

After all this you also need to take into account the cost of financing your house through loan. You would need to pay around 0.5% – 1.5% of loan amount as the processing fee. Also if the project is not ready to move you will need to pay pre-EMI and then start with the regular EMI on possession.

So you can see how the flat which was advertised for Rs. 26 Lakhs would cost you more than Rs. 41 Lakhs, around 60% more than expected. Here we have not included the cost of financing. So the lesson here is to keep in mind the additional costs that you would incur before finalizing any deals.