Properties around Uttar Pradesh's Jewar, where the Noida International Airport was inaugurated recently, continues to draw interest from investors. The airport has been a major force driving property prices up by up to 80% in the last five years.
While real estate is often pitched as a critical wealth-creation tool, buying property is not without challenges in India. First time buyers must understand that for such a purchase, there are multiple hidden costs that can significantly push your initial capital requirement.
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Hidden Cost Of Buying Land
Stamp duty: It is a state government tax on property transactions. It generally costs between 3% and 8% of the property's total value.
Registration fee: This is a flat fee at 1% of property value.
Brokerage: Typically 1-2% of the deal value. This is negotiable and depends on the broker.
You may also need to pay for lawyer, mutation, etc for legal and due diligence so that your name appears in revenue records.
Site costs: Fencing, boundary wall, levelling and security are some additional costs that you must consider while deciding to invest in a land.
These are some general extra costs that are associated while buying a land. You also need to consider taxes, TDS and long-term capital gains.
Example: Assuming you decide to buy Rs 1 crore land in the Jewar region.
Land price: Rs 1 crore
Stamp duty (7%): Rs 7 lakh
Registration (1%): Rs 1 lakh
Brokerage (1%): Rs 1 lakh
Legal expenses: Rs 50,000
Fencing and miscellaneous costs: Rs 50,000
Total initial cost: Rs 1.10 crore
This means that you are already 10% behind when starting on this investment. At a 1% sale brokerage, the land must rise roughly 11% (to about Rs 1.11 crore) just to recover your costs.
Future of Jewar Property Prices
While the prices in the region have already risen sharply between 40 and 80% in the last 5 years, experts are optimistic about further appreciation. Industry estimates suggest apartment prices in airport-led growth corridors could rise by nearly 22% over the next two years, while plotted developments could see appreciation of around 28%.
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Assuming these rates, your Rs 1 crore land could be worth about Rs 1.28 crore in two years. This is likely to help you recover your initial costs. However, your total gains are likely to be minor in early years. If you stay patient and have a long-term horizon, while the development pace in the region continues, you are likely to benefit with significant gains, assuming that land appreciation continues to happen at its current average of 9-10%.
However, returns from property prices are not guaranteed and past prices do not reflect future returns, so it is best to consult with an expert before making a significant financial commitment.
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