What are Pre-Possession Costs and Why You Should Be Aware of Them!
Dec 28, 2016 Legal Guidance
When you buy a house or office space you pay a huge amount. You developer may include an additional cost called ‘pre-possession’ charges. He may not tell you about them at the time of the deal but will ask for it when you demand possession. Some developers only hand over the property once, these pre-possession charges are cleared.
What are included in pre-possession charges?
Stamp duty:
Stamp duty is the property tax imposed by government and charged with developing authorities. They vary from city to city and state to state. Some states have reduced stamp duty for women. They generally range from 4 percent - 8 percent of the market value of the property. Stamp duty also differs if the property if jointly owned.
Interest of delayed payment:
Your builder may charge you for delayed payment which can raise your budget. These charges generally range from 18 percent - 24 percent depending on the builder.
Labour Welfare charges:
These directly go to the development authority. One percent of the property cost is charged as the basic welfare fund from the buyers.
Holding charges:
When you receive a letter from you developer regarding the payment of possession cost, a due date is mentioned. It generally is from 30 days to 60 days. If you fail to make the payment in the due time, your developer might impose holding charges on you. These charges vary from developer to developer. In this case, a developer might also cancel your allocation of the apartment if you delay the payment for a long time.
Advance maintenance charges:
Your developer may charge you for the maintenance of the premises. They also vary from developer to developer.
Miscellaneous charge:
These include water connection charges, lpg charges, power backup charges etc. these vary from developer to developer. Your developer may also increase the charges if the prices of raw materials go up.
Service tax:
Government charges service tax (via developer) from the buyers in every stage of construction. A tax of 15 percent is charged for the 25 percent of the entire apartment. That means the buyer pays around 3.75 percent as service tax.
What can a buyer do?
It’s always advised to talk to your developers regarding any doubts your have with these charges at the time of booking. Make sure all your payments are done in time to not burden yours with extra charges that are imposed if you fail to make the payment on the stipulated amount of time.
What are included in pre-possession charges?
Stamp duty:
Stamp duty is the property tax imposed by government and charged with developing authorities. They vary from city to city and state to state. Some states have reduced stamp duty for women. They generally range from 4 percent - 8 percent of the market value of the property. Stamp duty also differs if the property if jointly owned.
Interest of delayed payment:
Your builder may charge you for delayed payment which can raise your budget. These charges generally range from 18 percent - 24 percent depending on the builder.
Labour Welfare charges:
These directly go to the development authority. One percent of the property cost is charged as the basic welfare fund from the buyers.
Holding charges:
When you receive a letter from you developer regarding the payment of possession cost, a due date is mentioned. It generally is from 30 days to 60 days. If you fail to make the payment in the due time, your developer might impose holding charges on you. These charges vary from developer to developer. In this case, a developer might also cancel your allocation of the apartment if you delay the payment for a long time.
Advance maintenance charges:
Your developer may charge you for the maintenance of the premises. They also vary from developer to developer.
Miscellaneous charge:
These include water connection charges, lpg charges, power backup charges etc. these vary from developer to developer. Your developer may also increase the charges if the prices of raw materials go up.
Service tax:
Government charges service tax (via developer) from the buyers in every stage of construction. A tax of 15 percent is charged for the 25 percent of the entire apartment. That means the buyer pays around 3.75 percent as service tax.
What can a buyer do?
It’s always advised to talk to your developers regarding any doubts your have with these charges at the time of booking. Make sure all your payments are done in time to not burden yours with extra charges that are imposed if you fail to make the payment on the stipulated amount of time.
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