Each one of us must deal with real estate in some form or another. Either we buy properties, or rent them, sell them or dwell in them. Real Estate is part of all our lives, except the most unfortunate.?
Yet, how well do we understand the concepts of Real Estate??
Warren Buffet once famously said, “Never invest in a business you do not understand.” Prop.Academy is PropertyAngel’s humble endeavor to ensure we all take the Oracle of Omaha more seriously. After all, 80% of India’s wealth is in real estate. In fact, we love real estate so much, we have bought more properties in London, than the English themselves!?
In this article we will share some terms & their explanations, which are commonly used in the Real Estate industry and are very useful to know. This is an excerpt from a course on Prop.Academy. It will set the context for our subsequent discussions.?
- FSI - FSI (Floor Spacing Index), also known as FAR (Floor Area Ratio) is defined as the maximum permissible area that can be constructed on a plot. It is defined as a ratio of the floor space covered in all building floors to the total plot area. FSI or FAR is determined by the local authority or municipal councils of the respective state and based on the National Building Code, FSI norms are set. It depends on the city zone, type of building, width of road in front of it, etc. Example, for a plot area of 5000 square feet, if the FSI is 5, then you can build 25000 square feet on the plot (with several other restrictions).
- Carpet Area/Built up area/Super built up area - This is often confusing. Carpet area, as the name suggests, is the area that you can put carpet on, or walk on. It’s the visible floor area. The Built up area also includes the portions of floor covered by walls, etc. So, clearly, the built up area is greater than the carpet area. The super-built up area is the built up area plus the common area share. Now, the common area is relevant to apartments in buildings and complexes. The common area includes the corridors, the pathways, the space where lifts are, where any facilities or club house is, etc. This common area is divided amongst all the apartments on a prorated basis, and that share is added to the built up area of an apartment to arrive at the super built up area. Thus the super built up area is larger than the built up area.
- TDR - Transferable development rights (TDR) refers to the grant of additional built-up area to a landowner in return for land taken from him for a public project. The landowner can choose to use this TDR when building something of his own, or can also sell it to someone else, who can then use it in their own construction (with some restrictions).
- EMI - This stands for “Equated Monthly Installments.” In the context of real estate, it is in context to a loan you take to purchase a property, and instead of paying the entire amount upfront, you pay a portion upfront, and the rest in Equated Monthly Installments, or EMIs. The EMI is calculated based on the interest rate agreed upon with your lender. There are various EMI calculators for you, that will calculate the EMI given the (a) loan amount (b) tenure of the loan (c) interest rate
- RERA - RERA stands for Real Estate Regulatory Authority which came into existence as per the Real Estate (Regulation and Development) Act, 2016 which aims to protect the home purchasers and also boosts real estate investments. A lack of regulation was adversely affecting home buyers, and this act was aimed to protect them. This Act requires builders to register with RERA before commencing a project; keep a minimum of 70% of the buyers’ and investors’ money in a separate account; sell properties based on carpet area and not super built up area; rectify any issue faced by the buyer within 5 years of purchase, and several others. However, each state can implement a modified version of RERA, as property in India is a state matter, and that has much diluted the effectiveness of the much required Act.
- Occupancy Certificate (OC) - Document certifying that the construction of the building complies with local laws, and is executed according to permissible plans. It is issued by the local municipal authority upon the completion of the construction of the building, signifying that it is ready to be occupied.
- Commencement Certificate (CC) - Document from the local municipal authority that permits the developer to begin construction of the project. This is granted, only after the developer has met the legal requirements and obtained the relevant sanctions for the building's plan.
- Title Deed/Sale deed - A Sale deed is a type of title deed. ‘Title’ is defined as the legal proof that you own a property. A sale deed is the document/agreement between the buyer and the seller containing all the terms of the sale transaction. The sale deed needs to signed and registered at a registrar’s office, and hence acts as a title deed since it a acts as a proof that you now hold the ownership over the particular property.
- Encumbrance certificate (EC) - contains a history of the transactions of a property. You can apply for an EC from and to a specific time period and this will tell you when and to whom the property was sold, if any loan was taken, etc. It is extremely important to get the most recent EC before buying a property to ensure the title is clear and there is no outstanding loans on the same. If there is a mortgage, the lender will add a “Lien” or a charge to the property to prevent the borrower from selling the property until the mortgage is paid in full.
- Stamp duty - is simply the tax you pay to the government when buying a property. This varies from state to state.
- Undivided share (UDS) - Undivided share is a part of land held by the buyer of the apartment in a residential complex on a plot on which the entire structure is constructed. Each and every flat built on that particular plot will have a share in the land on a pro-rata basis but will not have any defined boundaries. This is an important factor to consider when buying an apartment.
- MOTD (Memorandum of Deposit of Title Deeds) - This is an authorization a bank will take from you when collecting the title documents of any property you are mortgaging, which mentions that you have willingly handed these to the bank in lieu of a loan.
- OCR (Own contribution Receipt) - When taking a loan, Own Contribution is the down payment you make, and a receipt for the same is called OCR.
Hope you learnt something new. If most of these concepts were alien, then maybe its time you head over to propertyangel.academy and enroll yourself in a fresh course. If nothing else, it will keep you young, as Henry Ford once remarked!
