Terms used in the Cost Sheet during Property Purchase

In the last blog, you have read about various terminologies used in real estate as you decide to buy a flat or a villa. You also might have read the blog on things you need to consider before buying a property. If not, check out the blog here.

When you buy an apartment or a villa, the developer provides a break-up of the property price as the “cost sheet”. The cost sheet provides details of various heads under which the developer charges a certain amount. Providing a detailed cost sheet often raises several questions from the buyers, who may not fully understand the statutory norms involved. The buyers suspect that the developers are extracting money under several heads. To avoid unnecessary confusion, some developers subsume all costs under one rate per sq.ft.

Through this blog, you will understand various heads and the reasons for charging a certain amount from the buyer.

Base Price

Most developers quote a rate per sq.ft on their advertisements and mention it as a base price only. Base Price includes the land cost (or the UDS cost) and the construction cost. It is the price derived by multiplying the rate per sq.ft and super built-up area.

Infrastructure Development Charges (IDC)

Developers are obligated to pay this statutory charge to the civic authority for developing major infrastructure projects in the region such as highways, metro networks, transit systems, airports, bridges, drinking water projects, etc. Depending on the region, the local authority shall fix this charge anywhere between ₹50 per sq.ft and ₹500 per sq.ft on the built-up area.

External Development Charges (EDC)

Developers are obligated to pay this statutory charge to the civic authority for developing essential facilities in and around the project. These include laying of street roads, water supply pipelines, sewer pipelines, rainwater drainage pipelines, waste management systems, community parks, etc.

Internal Development Charges

Developers may envisage providing amenities for the benefit of resident owners to elevate their lifestyle. These include providing an internal road, street lighting, water supply pipelines, sewer pipelines, rainwater harvesting system, transformer and sub-station, power backup system, fire detection and fighting system, waste management systems, clubhouse, swimming pool, gymnasium, indoor sports area, outdoor sports area, kids play area, jogging track, walking track, open park, amphitheatre, etc.

The developers include the cost of developing these amenities in the price of the property. This is NOT a statutory charge payable to the civic authority and this term should NOT be confused with infrastructure development charges.

Clubhouse Membership Charges

While the developers do NOT charge the cost of constructing a clubhouse and associated amenities from the buyer, they may charge a membership fee for its usage. This is usually a one-time fee collected from the buyer at the time of booking a property. This fee is similar to a corpus fund but used to upkeep and maintain the clubhouse and associated amenities.

Corpus Fund

Most developers collect this fund from the buyer at the time of booking a property. This is a non-refundable amount that shall be transferred to the association or society on its formation. This fund shall be used for contingency purposes such as breakdown maintenance of common area utilities, upkeep of building façade, etc. Normally this fund is deposited in the bank to fetch interest. The interest on bank deposits shall be adjusted towards periodic maintenance charges.

Maintenance Charges

Most developers collect 6-month or 1-year maintenance charges from the buyer at the time of booking a property. This amount is collected in advance so that a developer can appoint a Facilities Management Company to undertake all maintenance activities such as civil patchwork, electrical and plumbing maintenance works, security, landscape maintenance works, etc in the residential complex till the association/society takes over from the developer. This is a recurring charge collected quarterly or half-yearly or yearly in advance, as decided by the association/society.

Legal Documentation Charges

The developers charge a fee towards expenses for verifying title deeds, drafting agreements for the sale of UDS, drafting construction agreements, drafting sale deeds, and any incidental charges.

GST Charges

Before the implementation of the GST Act, buyers were charged Service Tax and VAT at the time of purchasing an under-construction property. While Service Tax was levied by the Government of India, VAT was levied by the respective State Government.

With the implementation of the GST Act that came into effect on 1st July 2017, the developers were mandated to charge GST from the buyers for the purchase of an under-construction property and in turn, pay the GST to the Government of India.

Before March 31, 2019, the GST rate for an under-construction property under the “other than affordable housing projects” category was 12% with an input tax credit (ITC) and for an under-construction property under the “affordable housing projects” category was 8% with an ITC.

From April 1, 2019, the GST rate for an under-construction property under the “other than affordable housing projects” category was 5% with NO ITC and for an under-construction property under the “affordable housing projects” category was 1% with NO ITC.

However, GST is NOT applicable once the completion certificate is issued by the civic authority as the property becomes ready to move.

Stamp Duty and Registration Charges

According to the Indian Stamps Act, 1899 and Tamil Nadu Stamp Act, 2019, a home buyer must pay stamp duty and registration charges at the time of property registration towards the purchase of a property. These charges are directly payable at the Sub-Registrar Office. The charges vary state-to-state.

For Tamil Nadu, the following rates are applicable viz: