Self-promotion housing: why set aside a budget margin

If you are reading this, you have already seen the entry on self-promotion: keys to build your future home and you want to know more about why you should set aside a percentage of your budget for the construction of your home. If you have not yet read it, we recommend that you do so in order to have a better context of what we are going to explain here.

Below, we will detail the aspects and reasons that make it advisable to keep a margin of between 20% y 30% of your budget, “just in case”.

Perhaps you do not own the land yet and you need to acquire a plot. In this case, we suggest that you check if it has a charge or debt associated with it, the existence or not of connections, possible easements, accessibility, etc…

You will have to go to the Town Hall where you will be able to obtain a cédula urbanística with the urban classification of the plot. This certificate contains information about the type of land, make sure it is urban, and the urban conditions that the project must comply with, among which we can find: buildability or square meters that can be built, height of the building, the separation to boundaries, etc…

Apart from the price of the plot, you will have to take into account the costs of the deed and the derived taxes, which, between both, do not usually exceed 1,000 euros. The taxes you pay will depend on the type of buyer:

• Company. If you buy the plot from a company, you will have to pay the VAT (21%) and the AJD (Impuesto de Actos Jurídicos Documentales). This depends on the autonomous community and will vary between 0.5% and 2%.
• Particular. In this case, the amount of the ITP (Impuesto sobre Transmisiones Patrimoniales) must be paid to the Treasury, which also depends on the autonomous community and will vary between 6% and 11%.

Remember that normally the banks prefer not to mortgage the land, so a certain level of savings is often a prerequisite for acquiring the plot.

Make sure that the electricity, water and sewage supplies are already in place, or you will have to add the costs of executing the work.

It is also interesting to check the state of the plot. A plot full of trees will require felling, if it is not fenced it will be necessary to delimit its dimensions, if it is excavated it will have to be filled and if it has a steep slope it will be necessary to make slopes and accesses from the street to the entrance of the house.

All these tasks will increase the cost at the time of preparing the plot to start with the work.
and savings to acquire the plot.

In general, the work is going to be financed by a bank and they always retain an initial percentage, about 10%, until the first occupancy license is obtained. It is very important to take this into account if you do not want to have some moment of treasury tension in the economy of the work.

In a self-promotion, the client normally retains 5% of the amount of each of the certifications made by the builder. At the end of the work, the builder must be paid this 5% retained in addition to the 10% retained by the bank and already returned to the client.

Therefore, make sure that you have a certain margin regardless of the financing you request. In this case, we recommend that prior to contracting, you agree with the company awarded the contract how to resolve this situation.

It seems something very logical, but sometimes we forget that the budgets of the works are precisely that, assumptions made a priori. The final price of your future house will vary more or less depending on how the architect manages to capture exactly your requirements and tastes of the project, as well as how the company awarded has perfectly clear all the work to be done to carry out the construction of the project.

Often we tend to stay with the most economical budget. We recommend that you share the budgets you get and let yourself be advised by the professionals in charge of the construction management of the house.

Remember that what is not perfectly clear, or that in work you intend to modify, often carries a price above the market value, since it must be executed without foresight and replanning the work, which will mean a delay in the same. This delay entails a cost overrun that will penalize the price of the requested modification, which will be relatively higher than if this work had been considered at the beginning of the planning of the work.

The time parameter also considerably affects the budget of the work, due to the fact that currently the market of raw materials and supplies has undergone a process of inflation that causes, above all, insecurity in the construction companies.

In this case, since you start working with the team of architects in the first sketches, until you have the complete budget of the work with basic project and execution with the building permit, in extreme cases, 12 months can pass.

With this scenario, you have no choice but to be proactive. In the year 2022 many housing projects were not executed because they were budgeted with prices of 2021.

Therefore, it is very convenient that you make the appropriate inquiries to the agents involved in the construction, as well as to the City Council of the deadlines they handle, and already have a small margin “just in case”.

We invite you to contact us so that we can help you in the decision making process of your project, and that this path is as comfortable as possible.