Homebuyers’ guide: Why owning a home involves more than just paying EMIs

Rohan Joshi, a Chandigarh resident, purchased an apartment in an upscale complex for ₹80 lakh in 2023. His equated monthly instalment (EMI) is around ₹75,000. Though he stretched his budget slightly, he ensured the EMI remained close to 35% of his take-home salary. He also allocated funds for the interiors. However, after moving in, Rohan realised that several additional expenses were creeping into his monthly outgo.

When purchasing a home, it’s important to account for these hidden or extra costs. And if you're planning to rent out your property, there are also certain deductions you should keep in mind.

Maintenance charges: “Maintenance charges, paid monthly to the housing society or developer, cover services like security, landscaping, and common area upkeep, and can run into a few thousand rupees each month,” says Amit Prakash Singh, co-founder and chief business officer, Urban Money, a loan advisory services firm.

Since his apartment is in a complex and offers several additional facilities, Joshi pays a maintenance charge of ₹7,000 every month.

Recently there has been some clarification on the GST to be paid on maintenance charges.

Resident Welfare Associations (RWAs) are liable to register under GST and charge it on monthly maintenance fees only if the amount exceeds ₹7,500 per member. However, if the total annual turnover of the RWA is below ₹20 lakh, GST registration is not required, even if the individual contributions are higher. It's important to note that security deposits collected for maintenance purposes are not treated as payments for services and therefore do not attract GST. RWAs must ensure they stay within both these thresholds to remain exempt from GST obligations.

Buyers should also budget for utility deposits and bills—initial charges and ongoing costs for electricity, water, and internet.

Insurance costs: Insuring your home is not mandatory but it is recommended. We have seen several recent instances of cities affected by floods and earthquakes. Not having home insurance can mean financial loss if the structure of the home or its contents are damaged. A comprehensive home insurance policy can cover against such damages. However, home insurance costs are relatively low and a comprehensive home insurance policy for a 3BHK apartment could cost you between ₹6,000 to ₹7,000 a year.

“These costs can vary significantly based on the property’s age, location, and construction quality, but they typically account for a modest share of your monthly outgo—often around 10% to 20% of your EMI. While this is a general benchmark, the actual amount may differ, so it's important for buyers to do their own due diligence,” says Singh.

Factoring these expenses into your affordability assessment early on leads to more accurate financial planning and helps avoid unexpected strain post-purchase.

When you are renting out property

If you rent out your property, you are eligible for additional deductions that help reduce taxable rental income. The regular maintenance charge would normally be paid by the tenant according to the rent agreement.

Here’s how the rental income is calculated.

“First is the Gross Annual Value (GAV) or the total rent received in a year. From GAV, subtract municipal/property tax paid to arrive at the Net Annual Value (NAV). Under Section 24(a), claim a standard deduction of 30% of NAV to cover maintenance and repairs,” says Deepak Kumar Jain, founder and CEO, TaxManager.in

For example, suppose your gross annual rent is ₹3,00,000 and you paid ₹15,000 in property tax.

• NAV = ₹3,00,000 - ₹15,000 = ₹2,85,000
• Standard Deduction u/s 24(a) (30% of ₹2,85,000 ) = ₹85,500
• Taxable rental income = ₹1,99,500 ( ₹2,85,000 - ₹85,500)

This amount is then added to your total income and taxed as per your applicable slab.

Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics