- How much is the stamp duty & registration fee on a home purchase?
- How are they calculated in India? Read this post to know all!
Home loans are secured with an equitable mortgage of the property you wish to buy. The mortgage is executed and remains with the lender in the form of a Memorandum of Deposit of Title Deed (MODT). To ensure the MODT happens successfully, you need to pay stamp duty and registration charges fixed by the state government. As a prospective home buyer, it’s only better to know such charges in advance so that you can arrange such an amount and buy a home successfully. Home loans don’t finance the same. So, you need to work on your savings more to create space for such charges in addition to the downpayment sum and processing fee. But how are they calculated? This is something you would love to know, right? We can help you know the same in this post. So, don’t stop reading!
What is Stamp Duty All About?
Stamp duty is an indirect tax levied by the state government on the purchase of the property. This could include an agreement to sale deed, power of attorney, conveyance deed, etc.
How Do State Governments Calculate the Stamp Duty?
Firstly, stamp duty varies from one state to another. It is dependent on the market value of the property, which is greatly assessed by the circle rate that varies from one location to another. It also depends on the type of land – agricultural or non-agricultural, the age of the property, the gender of the property owner. Besides, the government also checks the property in question – whether it is a residential property or a commercial one. It also checks whether the property is freehold or leasehold before deciding the stamp duty amount. The rate can also vary based on whether the property forms the part of a multi-storied apartment or exists as an independent unit.
Modes of Stamp Duty Payment
The payment can be made at the property registrar office. You can go to the designated office and ask for a non-judicial stamp paper on which the property details will be mentioned. The registrar authorities will check the details properly and okay the transaction only after verifying it successfully. There’s a franking method too wherein the paper printed with the details of the document is sent to the lender. This will include the stamp duty amount too.
After paying the applicable stamp duty, it’s time you pay registration charges so that the property is registered under the Registration Act, 1908. The registration charges are over and above the stamp duty. Mostly, these charges account for 1% of the market value or agreement value of the property. However, some states can impose a cap on the maximum amount that can be taken as the registration fee.
How is the Property Registration Process Getting Carried Out?
The property registration process involves the seller, buyer and lender. Here, the lender will not come, rather a lawyer appointed by it will come to see through the transaction. Now, it depends whether the lawyer comes or he/she tells his/her assistant to attend the registration process. For successful registration, two eyewitnesses from the buyer and seller are also required to come to the property registrar office where the registration will be carried out. As a buyer, you need to make a few photocopies of the property registration document. Keep one with you and hand one copy to the registrar office and one to the lawyer or his/her assistant whosoever be there. The lawyer or the assistant will take away the original document and hand it to the lender where you have applied for the home loan. The lender will then disburse the payment to the seller via a cheque. And, as a buyer, you’ll need to pay the home loan for the tenure you choose. Once the loan repayment is over, you can visit the branch of the lender with the loan statement showing the full payment of the principal and interest. The lender will check the statement carefully and release the property mortgage document to you.
The Sooner You Start Planning a Home Purchase the Better it is for You!
Stamp duty, registration charges, the downpayment sum and processing fee are some of the expenses that are not funded by home loans. All these, when added, can lead to quite a big sum. So, you should plan your home purchase sooner than later. Keep an eye on stamp duty and registration charges as they can change from time to time. Have a rough estimate of the amount you are likely to pay towards these expenses and accumulate your savings accordingly. Once you accumulate such a surplus, you should look to figure out the property that can come to your budget. With a budget, it means the stamp duty, registration charges and downpayment should come within the savings you will have accumulated. But the term ‘budget’ here is not confined to such charges only. You will also need to compare interest rates and processing fees of different lenders and choose the deal that you can afford considering your income and repayment capacity.