Housing and Space Management

Housing And Space Management 3(2+1)

Lesson 29: Cost Of Home Ownership

Cost Of Home Ownership

• Home ownership involves a huge amount of money. While estimating the affordability of a house, one should consider that annual cost of home ownership is free from debt, the annual cost of upkeep and taxes, cost of financing any necessary loan for that period, the relationship between income and other annual commitments that go with the ownership of the house.
• One should also consider home ownership as a combination of buying shelter and investing savings and meeting the recurring expenditure carefully in order to avoid financial difficulties in the family.

Capital cost
The first parameter, i.e. the capital cost represents the initial, once for all payment, and is determined either by the market or conditioned by particular economic and social policies. This capital cost covers:

• The land on which the dwelling is to be erected, inclusive of all fees related to its acquisition or transfer i.e. registration taxes, professional services, agents, etc.
• The building itself
• The fees of designers and supervisors
• The connections to service networks, i.e. electricity, water, sewage etc.

Cost of construction:

• It depends on the quantity and unit price of material and components by the type of building desired, standard of quality and technology used
• The cost of constructing the building will also depend upon the quantity and unit price of materials and components which are in turn determined by the type of building desired, by the standard of quality, technology used, etc.
• The degree of mechanization, skills required and technology used will determine the wages and productivity of building labour, other building costs include the contractor's overheads and profits and the taxation and finance which are conditioned by Government and by market conditions.

Annual housing cost: Includes pertinent factors, like taxes, repair and maintenance, hazard insurance, obsolescence and interest on investment

Taxation: The rate of taxation for the type of items considered for levying tax for real estate differs among the cities. Two and a half per cent of the market valuation is estimated for the urban areas.