Before you kickstart the process of buying your dream home, it is important to understand the commonly used terminologies and jargons in the Indian real estate. Keeping yourself informed about real estate terminology not only facilitates smooth property transactions but also helps you save a fortune in the future. A fair knowledge on basics of real estate will play a huge role in ensuring a hassle-free journey. Before you make your next investment, check out our handy guide on essential real estate terms.
This is the first important real estate terminology that you need to consider while investing in an apartment. The part of your apartment which is actually put to use is called carpet area. In simple terms, it is basically the space where you lay your carpet. Larger the carpet area of your apartment, the larger floor space you have. Carpet area also takes into account the space covering your private terrace or balcony as part of your living area.
Built-up area is calculated by adding up your carpet area with the area occupied by wall and doors. In most residential properties, 15-20% of the area is enclosed by walls and doors, so the built-up area of a property is usually 10-20% higher when compared to carpet area. Built-up area is also referred to as plinth area. Built-up area is one of the key determinants for estimating the property value.
Super built-up area
Super built-up area is the area covered by the built-up area along with other common spaces of your apartment such as corridors, lifts, staircases, lobby and parking lots. One important point that you need to bear in mind about super built-up area is that it is not exclusive to your flat, but it is divided in appropriate proportions among all the occupants of your residential complex.
Floor space index
Floor space index (FSI) is the extent of area that can be used for construction in a plot of land. This is usually laid down by the Municipal Corporation and Urban Development Authority. The floor space index depends upon various factors such as location and road width. FSI does not take into consideration common areas such as lifts, parking areas and staircases. Ideally, FSI is calculated using the formula below:
FSI- Floor space enclosing all the floors of the building/ Total area of the plot.
If you are buying a property from another individual, title deed is an important document that needs to be verified. Title deed is a legal document that validates an individual’s ownership over a property. Once you receive the title deed from the opposite party, you need to thoroughly check whether the property is in the same name as that of the person you are dealing with. You can always obtain the title deed of a property from the appropriate registrar office.
To check whether the property that you are investing in is free from mortgage and financial dues, it is important to obtain an encumbrance certificate. You can get this certificate from the concerned sub-registrar office. You need to keep this document handy in case you are planning to apply for a home loan. This is crucial for banks to check whether any other loan has been availed for the same property.
Freehold property is one which has been sold or completely transferred to another owner using a sale deed. As the name suggests, the owner of a freehold property has complete authority on the property and he or she can use it for any purpose. Additionally, it also gives the owner the right to renovate, sell or transfer the property according to the necessary rules and regulations. The process involved in selling a freehold property is not complicated and requires less paperwork.
This is yet another real estate terminology that you need to bear in mind if you planning to invest in a newly launched or under-construction property. An allotment letter will contain details of your apartment unit, payment instalments and options, maintenance charges, construction plan and date of delivery. Usually, the allotment letter is issued by the developer once you pay 15% of the property value. This is also an essential document that you need to produce at the bank, in case you are applying for a home loan.
When a property deal is made between a buyer and a seller, the next step is to chart out a sale deed. It is a legal document that states that the seller has sold his or her property to a buyer at a particular day. It is an elaborate document that contains details such as property title, description, location, price, permanent address of the buyer, seller and two witnesses. The sale deed is not valid unless it is signed by both the buyer and seller along with the witnesses. The stamp duty and registration charges applicable for the property are also quoted in the sale deed.
Registration and stamp duty charges
These are mandatory taxes levied by the government on properties. The stamp duty is charged based on the value of the property mentioned in the agreement. Some state governments charge 3-4% stamp duty while others charge 8%. While calculating the value of your property, stamp duty is also taken in to consideration. For instance, the cost of stamp duty for a property worth 50 lakhs would be around Rs. 2-3 lakhs.
On the other hand, registration charges are levied when the property is being registered in the name of the buyer. These charges also vary from one state to another. In Maharashtra, 1 % of the property value is taken as the registration charge.
A basic understanding of the important real estate terms is crucial to maintain a good relationship between the buyer and the seller. In case, you have any clarifications regarding the basics of real estate, it is always advisable to consult a lawyer or a real estate expert.