Spend, Save and Invest Smartly
When you buy an apartment you need to see what is not shown to you. The hidden costs. The builder presents a rosy picture of the apartment. Hidden costs in apartments can be a nasty surprise.
When you buy a property you have to pay the stamp duty and registration costs. These could be as high as 6-7% of the cost of the property depending on the city and the location of the property. The bank does not sanction (give you a loan) for these amounts when you avail a home loan. You have to pay it from your own pocket. The builders state that the stamp duty, registration charges and so on are waived for their projects. In reality the builders pay the Government on your behalf and it is necessary for you to collect the relevant receipts.
You need to avail a home insurance policy (Basic fire and allied perils insurance) as cover for the structure of your apartment. This is an additional cost you have to bear. In addition if you avail a home loan from a bank then you need to take home loan insurance.
Many banks do not sanction your loan unless you meet this requirement. If you (policyholder) die before making the repayment the Insurer settles the home loan. The premiums on these insurance policies is an additional cost you incur.
Your obvious loss is that you cannot take possession of your apartment. You have to stay in a rented apartment for that much longer. You also lose on the tax benefits you get when you avail a home loan for the construction of your apartment.
When you take a home loan for the construction of your apartment the loan is disbursed in stages. You have to pay interest on only this portion of the loan which is disbursed. This is the pre-EMI. You get no tax benefits on the EMI (interest component) till your apartment is constructed. Once the apartment has been constructed the total Pre-EMI interest is available for a tax deduction within a period of 5 years. If the construction of your apartment is delayed you cannot avail tax benefits.
Many projects offer clubhouses as a standard feature of the project. You cannot escape club house fees in most of today’s projects. Many builders charge these fees as a separate amount other than the Basic selling price. (Basic cost of the project). You have to pay the clubhouse membership/fees which could cost a bomb.
You have to spruce up the interiors (glass partitioning for the bathrooms, tiles and wooden panels and ceiling).This is an additional but necessary cost you would incur after the apartment is complete. The builder might show you these amenities, but the actual construction might not have it. This is an out of pocket expense you have to bear once the construction of your apartment is complete. You need to beware of these hidden costs in apartments when you make your purchase.