After weeks of searching for your ideal home, you have finally zeroed in on the one home that suited you the best – the home of your dreams.
The next thing you have to go through is advance payments for the home. What is this payment?
Advance payment on a new home is something every buyer needs to make when finalizing the deal for their new home. It shows that the buyer’s interest in the home is protected and also gives the builder a guarantee of the buyer’s interest in purchasing the home.
Let us look at the most basic types of advance payment that a real estate developer can ask of you during the finalization stage of the deal.
1. Token Money/ Booking Amount
During the interest stage of the buyer- when the buyer starts to show interest in purchasing the property- one might notice that some builders might not be too keen on discussing the terms and conditions of the deal. In order to be assured of the buyer’s confirmation, the builder might ask for payment by using the following terms :
- Booking amount
- Goodwill amount
- Token money
- Bayana
- Earnest deposit
All of these are just alternate words for this advance payment. The buyer will talk about finalizing the deal once this has been discussed.
This advance payment can be anywhere between INR 50,000 – 1,00,000.
2. Stamp Duty
As part of the law, a homebuyer is required to pay the stamp duty. However, since the stamp duty is not refundable ad non-transferable, make sure that you have confirmed buying that specific home before you make this payment.
Since stamp duty rate differs from property to property, you can ask your developer to check the price or you can check the same at the office of the sub-registrar.
3. Advance TDS Payment
As per the law, it is mandatory that a tax of 1% must be deducted from the total sale consideration that a buyer makes to the seller. This holds for any property that costs over INR 50,000.
The buyer needs to deposit this 1% TDS to the government along with PAN details of both parties – the buyer and seller on submission of form 26QB.
Note – Make sure you consult with your financial advisor before making this payment.
4. Home Loan Advance Payment
If the party selling the home has an ongoing home loan on the property concerned, he may ask the home buyer to make an advance payment that will enable the buyer to close this loan. This is a tricky one and the buyer should make an informed and wise decision before advancing this payment.
5. Advance Brokerage Payment
This kind of payment only comes up if a homebuyer chooses to engage the services of a real estate agent who will assist them in the property buying process.
Important: A homebuyer should add relevant clauses in the sale agreement to safeguard his financial interest, in the event of the deal being called off due to any unexpected or unforeseen events.