Planning to buy an apartment in a gated community by a real estate developer? While a monthly maintenance charge of around ₹5,000 may seem affordable, especially with a steady income, buyers should consider that such costs can become a burden during unemployment or after retirement without a regular pension.
Most homebuyers focus on the purchase price, but forget that recurring charges like maintenance (CAM) can significantly increase the true cost of ownership. It is important to evaluate the property’s lifetime cost, not just the upfront price.
This means accounting for all ongoing expenses, including monthly maintenance fees, GST, property taxes, and future repair and upkeep costs.
Total ownership cost
Homebuyers should evaluate a property’s total ownership expenses rather than just its initial price. “This requires accounting for all recurring costs, which include monthly maintenance fees, GST charges, property tax obligations, and upcoming maintenance and repair expenses,” says Pramod Kathuria, founder and CEO, Easiloan.
It is important to note that GST is charged on housing society maintenance when monthly charges per member exceed ₹7,500 and the society’s annual turnover exceeds ₹20 lakh. If both conditions are met, an 18% GST applies to the entire amount. If either condition is not met, no GST is charged on maintenance bills.
The annual expenses associated with these cash outflows should be calculated to determine their total cost over the time period the homeowner intends to keep the house. Buyers who combine ongoing expenses with the purchase price gain a complete understanding of their total financial obligation, which helps them choose between more sustainable options.
Most homebuyers focus on the purchase price, but monthly maintenance (CAM) can significantly alter the true cost of ownership. A simple thumb rule: every ₹1 per sq ft in maintenance translates to roughly ₹1,000 per sq ft in implied capital cost over time.
Higher maintenance isn’t always a drawback; it may support better amenities and services in large, efficient communities. However, in smaller projects, such costs often reflect unsustainable facilities that push up long-term expenses.
Buyers should also be wary of initially low maintenance charges, which tend to rise after handover.
Affordability check
Homebuyers should treat maintenance costs as a necessary component of their regular home expenses. Homeowners can determine their actual monthly expenses by adding their monthly maintenance costs, which include GST, to their home loan EMI payments.
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“Capitalising this expense using total maintenance projections for the holding period and subsequent present-value discounting enables them to understand the additional costs required for property acquisition. The assessment of affordability depends on sustainable cash flows, which extend beyond loan eligibility requirements,” says Kathuria.
If maintenance is treated as a quasi-capital cost, buyers should add it to their monthly outgo and test affordability on total cash flow, not just loan eligibility.
“This ensures the purchase remains sustainable over time. In some cases, initial maintenance projections may be understated. Buyers should benchmark against similar developments, account for GST, and build in a buffer for future escalation to avoid underestimating expenses,” says Pratyush Pandey, founder, AARE Consulting, real estate advisory platform.
Lifetime cost comparison
“A like-for-like comparison requires looking at the lifetime cost, not just the purchase price. Buyers should calculate the total maintenance outgo for each property over a defined period (e.g., 10 years), including escalation and GST, and add this to the acquisition cost,” says Kathuria.
The comparison becomes more precise as future expenses are discounted to their present value. The property with higher initial price but reduced maintenance expenses becomes more cost-effective than the cheaper unit, which requires higher ongoing costs.
“The right comparison is lifetime cost, not just purchase price. Evaluating maintenance on a per sq. ft. basis and projecting it over 5–10 years often reveals that a slightly higher-priced home with lower running costs can be more cost-efficient in the long run,” says Pandey.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
