Understanding real estate terms: The jargon demystified
Real estate is a major investment in India, and understanding key terminology associated with the market is essential. In this blog, we'll discuss common terms such as carpet area, super built-up area, ready-to-move-in property, and FSI so that you can make informed decisions when it comes to buying or renting a property in India.
Types of real estate
When entering the real estate market, it's important to understand the common terminology used to describe the various types of properties and the different stages of the buying process. In India, residential properties are called flats or apartments, while commercial properties are office spaces.
The Indian real estate market also includes plots of land for sale, known as plots. Additionally, the term "under construction" refers to properties or buildings that are in the process of being built. In contrast, the term "ready possession" refers to properties ready for immediate occupancy. Understanding these terms is essential for navigating the Indian real estate market and making informed decisions.
Built-up area and carpet area
Real estate jargon can be overwhelming and confusing for anyone unfamiliar with the industry. One of the most important terms to understand is "built-up area." A property's built-up area is the living space area, including bedrooms, bathrooms, balconies, and any other areas covered by walls. When looking at a property, the built-up area is covered by the walls, not the total land area. Another relevant term to understand is "carpet area." This is the actual usable area of the property and is the area that excludes the walls and other common areas. It is important to note that the carpet area is typically less than the built-up area. Knowing the various taxes and charges associated with buying a property is also important.
Ownership in India
In India, the term 'ownership' is used in many contexts and can have different meanings. In the context of real estate generally refers to the legal right to possess, use, and enjoy a piece of land and its associated resources. An individual, a company, or a group of people can hold ownership. Regarding real estate, there are several ways in which you can establish the ownership. India's most common forms of ownership include freehold, leasehold, and joint tenancy.
Freehold is India's most common form of ownership, where an individual holds absolute and exclusive rights over a piece of land. Leasehold is a type of ownership where an individual leases a piece of land from the owner and has the right to use it for a specified period. Joint tenancy is a type of ownership where two or more people jointly own a piece of land. Understanding the different types of ownership and their implications is important before investing in real estate in India.
Leasehold vs. Freehold
Leasehold means purchasing the right to occupy the land or property for a certain period. In contrast, freehold means purchasing the property outright, with no time limit to your ownership.
Leasehold is usually the more affordable option, but you will need to be aware of the lease agreement terms before committing to a purchase.
Freehold means you can own the property indefinitely, but it can be more expensive. It is important to understand the terms and conditions of leasehold and freehold agreements before entering into any real estate purchase in India.
Property tax and stamp duty
You need to be aware of two types of taxes when purchasing a property in India - property tax and stamp duty.
Property tax is an annual tax imposed by the government on the owners of immovable property. At the same time, stamp duty is a one-time tax paid when transferring property ownership.
Both of these taxes are essential for ensuring the smooth functioning of the Indian real estate market, and it is important to understand their implications before making any purchase. Property tax is calculated based on the property's value, while stamp duty is calculated based on the value of the transaction.
In addition, the stamp duty rate may vary depending on the state or union territory in which the property is located. It is thus important to research the applicable taxes in the state where you intend to buy the property. Furthermore, in some states, the stamp duty rate may vary depending on whether the property is being purchased for residential or commercial purposes.
Understanding the different taxes applicable in the state of your choice will help you make an informed decision and ensure that you are not taken aback by any unexpected costs.
Transfer of title
Transfer of title is the process of transferring property ownership from one person to another, and this process takes place through a deed. The term "title" refers to the right of ownership of a property, which is generally accompanied by a deed. A deed is a legal document that sets out the terms of the transfer of title and contains the details of the seller, buyer, and any other parties involved in the sale. It is important to note that the transfer of title requires a properly drafted deed and registration with the relevant authorities, as this is the only way to legally effect the transfer. Additionally, any taxes or fees associated with the transfer of title must be paid in full to the appropriate authorities before the transfer can be completed.