How Enhancement Fees in Real Estate Affects Property Prices?

Real estate is known for its twisted jargon which may come across as difficult for the inexperienced.

One such term is enhancement fees in real estate. The term ‘enhancement fees’ is often used in real estate articles without any explanation. Since the word also depends on the context of the article, ‘enhancement fees’ can confuse the ordinary reader.

So here’s a guide that explains everything you need to know about enhancement fees in the real estate sector.

What do you mean by enhancement fee: Definition!

The enhancement fee can have different meanings depending on the context. Etymologically, ‘enhancement’ refers to an increase. It means you have to pay extra, in addition to the actual amount. 

For instance, Rahul buys a property for 5 lakhs. He has to pay a certain percentage, say 5% enhancement fees in addition to the 5 lakhs.

What is the enhancement fee in real estate?

The enhancement fee is an increase in the land compensation that is given to the original landowners by the court. The landowners in this case might be farmers, or landlords. The fee is imposed if the court finds the compensation rate for landowners to be unfair or inadequate.

The enhancement fees in real estate can be understood from the following case in Gurgaon, Haryana:

The subject enhancement fees came into the spotlight because of the debacle in Gurgaon. The Haryana Shehri Vikas Pradhikaran (HSVP) imposed enhancement fees on property owners in 2021. The property owners would now have to pay an additional amount of almost four lakh rupees per flat.

Why did the HSVP impose an enhancement fee? Well, it dates back to 1990 when the HSVP acquired land from villages to build what is now known as Sectors 55 and 56 in Gurgaon. The landowners however were not very happy with the compensation and had appealed in the lower court. Thus, the HSVP is trying to reimburse the original landowners by imposing an enhancement fee on the property owners of Sectors 55 and 56.

Is enhancement fee mandatory?

Yes, enhancement fee is mandatory. In the case of the Gurgaon property owners, the HSVP has announced that they will shut down amenities and forbid property transactions until the enhancement fee is paid.

Frequently Asked Questions

• Is the enhancement fee a hidden charge?

It is not a hidden charge as the price is determined by the court, after giving sufficient warnings to the property owners. The HSVP is only imposing the compensation that was due for over 18 months. 

• How can enhancement fees affect real estate?

The price is ultimately paid by the property owner. Therefore enhancement fee increases the overall cost of the property for the owner or the homebuyer.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.