Step-by-Step Guide to Buying a New Flat from a Builder: A Detailed Financial Breakdown

What is the process of buying a flat

Buying a new flat in Mumbai is a significant investment that involves various financial considerations. Here’s a comprehensive guide to help you navigate the process, including detailed calculations for each financial aspect:

Here’s a detailed breakdown of the financial aspects of buying a new home in Mumbai, including the market value, down payment, loan details, pending payments to the builder, and additional costs after obtaining the fit-out, no due, and OC certification:

Property Purchase Details

  1. Market Value of the Flat:
    • ₹26,34,000
  2. Stamp Duty and Registration Fees (7% for flats under ₹30 lakh):
    • Stamp Duty and Registration Fees=0.07×2,634,000=1,84,380
  3. Total Down Payment:
    • ₹310,000 + ₹335,000 + ₹89,000 + ₹150,000
    • Total Down Payment=310,000+335,000+89,000+150,000=8,84,000
  4. Loan Details:
    • Loan Amount Sanctioned: ₹17,94,000
    • Loan Amount Disbursed: ₹16,36,110
    • Remaining Loan Principal + Interest (ROI: 8.90%, EMI: ₹15,457 for the first year):
      • Principal: ₹1,636,110
      • Interest: ₹147,981.80
      • Total Loan Amount with Interest=1,636,110+147,981.80=1,784,091.80
  5. Other Loan-Related Charges:
    • Loan Disbursed Charges: ₹7,425
    • Loan Admin Fees: ₹650
    • Insurance Cover for Loan: ₹44,150
  6. Amount Paid to Builder At start of loan sanctioned (Suppose loan closed in 2 years and 80% work is completed):
    • ₹15,83,885
  7. Pending to Builder (Suppose loan closed in 2 years and 80% work is completed)::
    • ₹1,66,115
  8. Total Amount Paid to Builder: ₹ 8,84,000 + 15,83,885 + 1,66,115 = ₹26,34,000
  9. Total Amount after paying to builder + Stamp Duty and Registration Fees + Loan Interest = ₹ 26,34,000 + 1,84,380 + 147,981.80 = ₹ 29,66,361

Payment to Builder and Additional Costs

  • Pending to Builder: ₹166,115
    • This amount needs to be paid to obtain the fit-out, no due, and OC certification.

Costs After Fit-Out, No Due, and OC Certification

  1. Maintenance Charges:
    • Maintenance Charges=2,500+(18%×2,500)=2,500+450=2,950 per month
  2. Electricity Bill:
    • ₹1,500 per month (Note: Immediately transfer the electricity meter in your name after fit-out by contacting your builder)
  3. Society Formation Charges:
    • ₹16,600 (One time fees paid to builder)

Summary of Financial Obligations

  • Market Value of the Flat: ₹2,634,000
  • Stamp Duty and Registration Fees: ₹184,380
  • Total Down Payment: ₹884,000
  • Loan Amount Sanctioned: ₹1,794,000
  • Loan Amount Disbursed: ₹1,636,110
  • Loan Principal + Interest: ₹1,784,091.80
  • Other Loan-Related Charges: ₹52,225 (Loan Disbursed Charges + Loan Admin Fees + Insurance Cover)
  • Amount Paid to Builder At start of Loan : ₹1,583,885
  • Pending to Builder: ₹166,115

Additional Costs Post Fit-Out and OC Certification

  • Maintenance Charges: ₹2,950 Per month
  • Electricity Bill: ₹1,500 per month
  • Society Formation Charges: ₹16,600 (one time paid to builder)

Financial Summary

  • Market Value of the Flat: ₹2,634,000
  • Stamp Duty and Registration Fees: ₹184,380
  • Total Down Payment: ₹884,000
  • Loan Amount Sanctioned: ₹1,794,000
  • Loan Amount Disbursed: ₹1,636,110
  • Loan Principal + Interest: ₹1,784,091.80
  • Other Loan-Related Charges: ₹52,225
  • Amount Paid to Builder At start of loan: ₹1,583,885
  • Pending to Builder: ₹166,115
  • Maintenance Charges: ₹2,950
  • Electricity Bill: ₹1,500 per month
  • Society Formation Charges: ₹16,600 (One Time)

Renting Out Your Flat: Income and Expenses

  • Monthly Rent: ₹7,000
  • Annual Rent: Annual Rent=7,000×12=₹84,000
  • Security Deposit paid to owner: ₹30,000
  • Brokerage Fees (First Year): ₹7,000 (paid by owner), ₹7,000 (paid by tenant)
  • Brokerage Fees (Second Year): ₹3,850 (owner’s share), ₹3,850 (tenant’s share)
  • Rent Increase (10% from second year):
    • New Monthly Rent: ₹7,700New Annual Rent:
    New Annual Rent=7,700×12=₹92,400
  • Annual Maintenance: Annual Maintenance=2,950×12=₹35,400

Income and Expenses Summary

  • First Year:
    • Income: ₹84,000 (Annual Rent) + ₹30,000 (Security Deposit)Expenses: ₹7,000 (Brokerage Fee) + ₹35,400 (Maintenance Charges)
    Net Income to owner(First Year)=84,000+30,000−7,000−35,400=₹42,600
  • Second Year:
    • Income: ₹92,400 (New Annual Rent)Expenses: ₹3,500 (Brokerage Fee) + ₹35,400 (Maintenance Charges)
    Net Income to owner (Second Year)=92,400−3,500−35,400=₹53,500

Note: ₹30,000 needs to be returned to the tenant once they vacate the home/flat.

Note: Electricity bill need to be paid by the tenant. In our case Electricity Bill: ₹1,500 per month fixed if it is in builder’s name. Owner need to transfer Electricity meter to his name. and Maintenance ₹2,950 per month is paid by owner.

Process of Buying a Flat from a Builder in India

Research and Shortlisting:

  • Identify the location and budget.
  • Research and shortlist builders and projects.
  • Check builder’s reputation and project approvals. (Note: Don’t go with partnership firm builders)

Site Visit and Verification:

  • Visit the site.
  • Verify legal approvals (Commencement Certificate, Land Title, Encumbrance Certificate).
  • Check RERA registration.

Booking:

  • Pay the booking amount.
  • Obtain allotment letter.

Builder-Buyer Agreement:

  • Sign the agreement. 1. Agreement sales deed 2. Title Clearance Report 3. Search Report
  • Pay the necessary stamp duty and registration fees for example for Mumbai.

Payment Plan:

  • Follow the construction-linked payment plan or other agreed terms.

Possession and Handover:

  • Inspect the flat.
  • Take possession and ensure all amenities are provided as promised.

By understanding these details, you can effectively manage the financial aspects of buying and renting out a flat in Mumbai. This guide ensures that you are aware of all financial commitments involved, from the initial purchase to ongoing maintenance and rental management.



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