Additional Costs To Consider When Buying A Luxury Home

Investing in luxury real estate is a crucial milestone in everyone’s lives. To buy a place you can call your own comes with a sense of comfort, security and stability. However, purchasing a luxury home is no cakewalk. Apart from finding a home that is the right fit for you and your family’s needs, it is also important to analyse the total cost of your forever home. In the end, these charges could significantly raise the price of your luxury home above the quoted price. If you are someone for whom a budget is important this could be something you may not be prepared for. 

Key Takeaway: 

• Luxury homes usually have a final price much higher than what is quoted because there are many additional expenses to the buyer that are usually hidden and not accounted for.

• There are also many types of additional fees that builders charge on homes that relate to priority of location, both within the building itself (i.e., which floor you live on and what you see out your window) and how you will interact with your surroundings (i.e., Vastu compliance and distance/availability from other recreational venues). Most of these fees are at the discretion of the builder.

• An advance maintenance deposit is usually required and can cover up to 3 years of maintenance on luxury properties, with monthly costs typically exceeding ₹50,000.

• Stamp duty and registration costs are usually calculated as a percentage of the value of the property and usually cost 5-7% and 1%, respectively, in excess of lakhs.

• Interior design costs can usually start at approximately ₹2 lakhs and should be included in the total cost of your luxury property.

• GST and VAT are charged on the purchases of newly constructed luxury properties; the amounts for both depend on the state where the property is located and will also add to the overall tax burden on the buyer.

• Real estate agents and/or brokers usually charge between 1 and 2% of the purchase price in commissions, so it's extremely important to have a written agreement with your agent/broker to avoid possible disputes.

 

Here are some hidden additional costs you should know of before you consider buying a luxury home:

Preferential Location Charges (PLC)

Preferential Location Charges or PLC, have become a standardised cost inclusion in property prices. These charges are levied by builders on reserving a property at a location of your preference. A sea-facing luxury apartment on the 10th floor would be priced higher than a similar apartment on a lower floor or a non-sea-facing apartment on the same floor. These charges are generally mentioned on the builder’s website and the final property price can be calculated accordingly. They are not regulated by any authority and hence, are completely subject to the builder’s discretion. Choice of the floor, climatic conditions, amenities such as private terraces for apartments, Vastu shastra compliance, urban or rural location, and apartment view are some factors that can all heavily influence the PLC. Read more about our blog post on upscale, upcoming areas ideal for property investment. 

Also Read: What No One Tells You About Buying a Home in Goa 

Advance Maintenance Deposit

While purchasing a luxury home, you will be required to pay an additional sum as a deposit towards maintenance charges. This money will be utilised for the upkeep of your residential complex through timely repairs, upgrades and maintenance of swimming pools, gyms, parks etc. For most luxury properties, this cost can go upward of ₹50,000 per month. Most builders prefer charging 2-3 years’ worth of maintenance costs in advance as it creates a stable influx of funds. This can considerably raise your final property price.

Also Read: Buying Luxury Villas in Goa? Here's How You Can Realise Your Dream 

Registration Costs

When you’re purchasing a property, it generally comes with an additional cost of registration and stamp duty. This amount is directly dependent on your property’s price and varies with each Indian state. Throughout India, stamp duty costs around 5-7% of the property’s price on average. Along with that, 1% of the property cost will be payable to the court as a registration fee. In luxury homes, this amount could come to lakhs and could easily affect your budget. Moreover, you should also consider the charges for a notary and any other legal services that you may need. 

Cost on Interior Designing

Luxury homes do come with some wonderful, elaborate amenities and decor. However, it may not always match up to your tastes and needs. You can take into account factors such as addition or modification of the security systems, introducing tech into your home, fine-tuning the decor to your taste etc. If you’re looking to spruce up your forever home, you will need to consider an interior designer’s fees that could go upwards of 2 lakhs.

Taxes and Other Charges

The taxes are only applicable to properties that are under construction. The Goods and Service Tax (GST) and Value Added Tax (VAT) vary with state and are payable to the government. Additionally, if you’re considering getting home insurance, that could add to the property’s cost as well.

Realtor’s Charges

This one’s a no-brainer. If you’ve found your luxury home through a broker, their fees will amount to a good 1-2% of your property cost, maybe more. Brokers tend to generally charge more when luxury properties are involved, something you should definitely be mindful of. It would be wise to have some written contracts in place while dealing with brokers to avoid any unforeseen changes.

 

FAQS

 

What are the hidden costs when buying a luxury home in India?

In India, the hidden costs when buying a luxury property include the Preferential Location Charge (PLC), advance maintenance deposit, stamp duty, registration fee, interior design fees, GST/VAT (on under-construction properties), and broker's commission, which can typically add up to several lakh more than the total property price.

What is Preferential Location Charge (PLC) in real estate?

A Preferential Location Charge (PLC) is the additional cost charged by builders to reserve the property in an attractive position, e.g., facing the sea, on a higher level, or a unit that is Vastu-compliant. This charge is not governed by any body and is at the discretion of the builder.

How much are the stamp duty and registration fee for a luxury home in India?

Stamp duty in India commonly ranges between 5% and 7% of the value of the property and varies from state to state. There is also a registration fee of 1% for this transaction to be completed at the local court. With stamp duty & registration fees of several lakh, these charges constitute one of the largest of the "hidden costs" incurred when purchasing a luxury property.

How much are the stamp duty and registration fee for a luxury home in India?

The average stamp duty is between 5 and 7 percent for a luxury property in India. The amount varies by state, and the stamp duty is paid when transferring property ownership. In addition to the stamp duty, you may also need to pay a registration fee, which is typically one percent of the value of your property. Together these two fees can add up to several lakhs of rupees and should be taken into consideration when budgeting for the purchase of a luxury property.

Is GST applicable on luxury home purchases in India?

Goods and Services Tax (GST) applies to luxury properties only if they are under construction; the rate varies by state. If you are buying a construction that is ready for occupation, you are not required to pay GST, but you will still have to pay stamp duty and registration fees. Remember, in some states you may also have to pay VAT on your purchase.

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