How To Setup Right Budget For Buying An Under-Construction Property

Setting a budget can appear to be an overwhelming process as buying a home is usually the greatest purchase choice a person will make in their lifetime. There are so many factors to consider, including location, configuration, home loan criteria, rate of interest, down payment, pre-EMIs and more. Here is a budgeting guide to help you while setting up the right budget for Buying an Under-Construction Property.

 Evaluate Your Finances

When you plan to purchase a real estate property first thing you need to evaluate is your finances. This is the initial step while setting up the budget for buying an Under construction property.

Your Income Sources

Property purchase means a big financial commitment. You need to understand all your current income sources to evaluate your finances. 

Check your take-home income, if you are married and your spouse is also earning member then combine both incomes to understand financial strength. 

This will help you figure out how much funds you already have.

Your Debts and Liabilities

The next thing you need to check is your current debt and liabilities like car loans, credit card debts, income taxes etc.

This understanding will give a clear picture of how much money is in your account to go ahead with the property purchase.

Future & Future Income Sources

Future responsibilities should be considered when you plan a budget for buying a property. 

For example, if you are planning to get married or have kids in future. These responsibilities can put a financial strain.

Also, while planning your budget for buying an under-construction property you should also check for future income sources. 

The possession of under-construction property can take 3-5 Years approximately, so you will have enough time to save money.

If you have money invested in mutual funds, stocks or any other sources of income can help you in future in property finance management.

Emergency Fund

Emergency Funds are protection that can be utilised to cover additional expenses which helps to increase financial security. 

You can use your emergency funds if you are short on cash for property purchases.

This emergency money can be income tax refunds or any other scheme to save money.

Investments

There are numerous investment options available such as equity mutual funds, government bonds, unit insurance plans, post office monthly income schemes etc.

You can utilize your investments to set up a budget to purchase a property.

Know Your Property Requirements

Understanding your needs for the home is one of the key considerations when making plans to purchase real estate.

What Type of Property Do You Need?

Now you have decided to purchase a property but still, but there is a question of what type of property you need.

An apartment, a bungalow, or a row house whichever fits your requirement. This totally depends on your use, number of family members and financial condition.

In a city like Mumbai average apartment can cost up to Rs. 17,000- 20,000 per sq ft and an independent bungalow can cost up to approximately Rs. 1.15 – 4 Cr.

What Is Your Property Size Requirement?

Your budget and your family’s needs are two factors to take into account while selecting the ideal size of the apartment.

You should be considerate about the number of family members who will be living in the house also going over the top can put a lot of financial burden on your family.

Look for various localities with different projects which will fit your requirement. 

What Configuration You Are Looking For? 

After figuring out the property type and property size requirement you will have to decide on configuration requirements.

The average area in 1 BHK, 2 BHK and 3 BHK configurations can be different for every project. 

Here is the average price in the Mumbai locality for each configuration. 

What Amenities Are Required?

In today’s mostly every developer is trying to offer different kinds of amenities in the project. From a mini theatre to a swimming pool and gym facility. 

While deciding on the project you must check which amenities are available in the project and what is your requirement.

For example, a clubhouse with a creche, swimming pool etc. can add up to the cost of maintenance. 

What Facilities Are Required?

It is typical to hear stories about people receiving poor deals on homes. Facilities provided in the project also affect the property value. 

When you decide on a property purchase list out the facilities which you will need.

Apart from luxurious facilities, there are a few essential amenities you should look for, 

• Power backup facility
• Security services 
• Water supply facility
• Waste disposal facilities
• Parking space

What Locality Are You Looking For?

Area or locality selection is another important factor which is necessary when you set up the budget for buying under-construction property.

Select a home that will be comfortable for you as well as the others who you live with.

• If you live with working adults, make sure the residence is closer to tech parks or is in an area with good transit options. 
• If you have small kids, make sure the residence is close to a good school. 
• If you have elderly parents, make sure there is easy and quick access to medical facilities.

When choosing a location for a home purchase, take into account all the factors because different regions have a range of pricing points.

Know All The Costs Involved in Home Buying

Setting up the right budget for buying an under-construction property can be a little exhausting process. You will have to understand all the costs involved in the home-buying process.

Home Discovery Cost

Finding a house can be an exciting process at the same time it can turn out to be tiring as the ideal home search can take a long time period. 

Looking for various options in projects and localities adds up costs like travelling expenses and brokerage costs.

In India, an average of 1-2 % of property value is taken as a brokerage amount after the deal is done.

For example, if you are buying a house worth Rs. 1 Cr then you will be required to pay 2 Lakhs to the broker.

Stamp Duty and Registration

This is another important charge that adds up to the total property value when you purchase a house. 

In India, the stamp duty changes are 4-5% with registration charges being 1 % of the cost of the property.

The entire cost of purchasing a home is substantially influenced by stamp duty and registration fees.

Also, check out Stamp Duty and Registration Charges in Maharashtra 2024

GST Cost

The GST cost greatly influences the property market. When you plan a budget for buying an under-construction property you must consider GST charges applied to the property. 

These charges vary for affordable segments and for luxurious properties.

GST cost applicable for an affordable segment is 1 % on under-construction property.

GST cost applicable for the premium segment is 5% on under-construction property. 

There are No GST Charges applicable for Ready to move properties.

Also, check out GST on Purchase of Property 2024- Complete Guide

10% Booking Charges

When you plan a budget for a property purchase, 10 % amount of the property cost must be ready for the booking of the unit.

No bank approves 100% of home loans for property purchases.

So if you are setting up the budget for buying an under-construction property you should set aside approximately 10-20 Lacs as a booking amount for the property. 

Floor Rise Charges and PLC

Preferential location charges and floor rise charges are other factors in real estate which add up the cost when a property is purchased. 

If you are looking forward to buying a house at the high-rising tower on the upper floor then the builder will charge you a little extra for it as Floor rising charges.

Depending on the area, floor rise charges could range between Rs. 25  – Rs. 100 per square foot.

Also, there are PLC charges in many projects for a city-facing apartment or a pool-facing flat. 

This cost goes up to Rs. 100-500 per sq ft according to the developer and the locality of the project.

Also, check out Floor Rise Charges While Buying Property

All About PLC Preferential Location Charges: Why & How Much Do You Need To Pay?

HomeLoan Processing Fees

While working on the right budget for buying under-construction property the home loan processing fee is the clearest and most significant fee associated with housing loans.

You must pay a charge to banks or NBFCs in order for them to process your home loan request.

The home loan processing fees vary for every bank institution.

Normally, processing fees range from 0.5% to 2.50% of the total loan amount.

Also, read Home Loan Processing Fee 2024 And Other Charges For A Home Loan

Maintenance Deposit Cost

Another cost that a buyer needs to be ready for when setting up the budget for buying an under-construction property is the maintenance deposit cost.

This cost can vary depending on the builder and the locality. Generally, it ranges from Rs. 2- 25 per sq ft or even more according to the amenities and facilities provided in the project.

After purchasing the property, the buyer is in charge of paying maintenance costs once the buyer gets possession.

These charges must be mentioned in the documentation from the builder.

Interior Modification Cost

When you decide to purchase a dream house you look forward to turning it into a beautiful livable place. 

When setting up the budget for buying an under-construction property you must set aside money for interior modification.

For a 2 BHK apartment average of 10% of the property cost, you should keep it aside as interior modification cost.

Documentation Cost

When you opt for a home loan for purchasing a property you are required to pay various charges associated with it, and documentation charges are one of them.

Banks can levy a documentation fee ranging from Rs 500 to Rs 2,000 for signing all documents and activating the ECS ( electronic clearing service).

Check Your Home Loan Eligibility & Applicable EMIs

One of the important factors a buyer needs to verify when considering opting for a home loan to purchase a property is checking home loan eligibility.  

You can calculate your Home Loan Eligibility Here.

Choose The Home Loan Tenure

When you set up the right budget for buying an under-construction property you must ensure a suitable tenure for repayment of the loan.

There are three types of loan tenure you can choose.

• Short-term loan tenure 
• Medium-term loan tenure
• Maximum home loan tenure

Be careful to select the appropriate tenor depending on your repayment plans, financial condition and capacity.

Here is an example of various EMIs and interest rates payable for different kinds of tenure.

Select the Suitable Interest Rate Type

When you decide to go for a home loan to purchase a property you must carefully select a suitable interest rate.

There are fixed interest rates, Floating and semi-fixed interest rates, and you must look for every possible option to decide on an interest rate according to your needs.

Throughout your home loan, even a quarter of a percentage point reduction in your rate of interest could save you hundreds or thousands of rupees, so it pays to plan, research around and compare offers.

Know & Compare HomeLoan Lenders

Since a home loan involves a 15-20 year commitment, buyers should evaluate all costs and make an informed choice.

Once you verify your home loan eligibility you must research the market for better interest rates.

Compare the rates from each bank and choose according to your financial strength. 

Also, check all the offers available and choose a reputed lender for a home loan.

These are a few points that will help you to compare home loan lenders.

• Interest rate
• Processing charges
• Maximum loan amount
• Prepayment charges

Also, read Home Loan From NBFC Vs Banks Comparison

Prepare for Downpayment

Setting up the budget for buying an under-construction property can be overwhelming as many things you are required to consider one of the most important things is preparing for a downpayment amount. 

When you purchase a property 10-20% of the property cost you need to pay as a downpayment.

If your finances allow you then you can pay 30-40% as a downpayment to reduce EMI in future.

Also, keep in mind that One shouldn’t spend all of their savings on a down payment.

Check Locality Property Prices & Shortlist

Once you decide on all the financial aspects of the property purchase the next step is to identify the right property for you.

• Generally, a new project launch costs less compared to a project which is about to finish and also many developers give attractive offers on the launch phase of a project.
• Look for many options as much as possible which will fit your budget and requirements.
• Check the builder’s reputation for project completion as well before finalizing the property purchase when you buy under construction property.
• Also, check different localities to compare the prices and facilities offered by builders which can help you decide a perfect project for you.

Also, check out the Latest Property Rates in Mumbai 2024

Latest Property Rates in Thane 2024

Latest Property Rates in Navi Mumbai 2024

Points to Keep in Mind Before Buying an Under-Construction Property

since under-construction homes are typically located in newly developed areas of the city, there is a significant chance that their prices will rise as a result of future growth.

Here are points to keep in mind before buying an under-construction property.

• Always verify whether the project is RERA-approved or not.
• The property should have all the necessary approvals and licences.
• To understand the project’s viability and construction quality, all information relating to the other involved parties (such as bank institutions, advisers, etc.) must be gathered.
• Buyers must look for reviews of the project, builder, and area on the internet or social sites.

Also, check out the Top 4 Payment Plans For The Under-Construction Properties

FAQs