Planning to buy a house for a long-term stay with family across generations or as a temporary investment to save taxes and confused about the terms used in real estate advertisements?
Real estate, like every other sector, has a few terms of its own that can be quite confusing to anyone new to the world of real estate.
When dealing with the real estate sector, it’s important to be familiar with such real estate terms to avoid any complications or misunderstandings here is a list of the most common terms that are used in the real estate market by all the parties involved which could help sort out basic doubts related to the industry.
Real Estate Terms
- Freehold property
A property where the owner has complete & unconditional ownership of the land and also the building which stands on it.
- Joint Venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity.
They both exercise control over the enterprise and consequently share revenues, expenses, and assets.
When two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such a partnership can also be called a joint venture.
The Joint Venture agreement should be conditional upon obtaining all necessary approvals/ consents/ licenses /permissions of appropriate agencies of the Government of India like RBI/SIA etc within a specified period.
If any of the approvals are not received or received late, the agreement cannot be enforced and the joint venture cannot proceed on the basis of the Agreement.
Equity Home equity is the part of the property you actually own.
While you do “own” your home, your mortgage lender has an interest in the property until it’s paid off.
To calculate your home’s equity, subtract your outstanding loan balance from the current market value of your property.
Home equity will increase as you pay down your loan or the market value of your home increases.
Appreciation is the amount a home increases in value over time.
To calculate a home’s likely appreciation rate, add one to the annual appreciation rate, raise this to a power equal to the number of years you’d like to estimate, then multiply that by the current value of the property.
- Return on Investment (ROI)
Return on Investment (ROI) is a measure of the profit you get on an investment.
ROI is calculated by dividing the net profit by the total capital cost of investment.
The higher the ROI, the better the profit earned. ROI calculation helps you to decide whether an investment is profitable or not.
ROI = Net Income / Cost of Investment
- Clear title
Also known as a “just title,” “good title,” or a “free and clear title” — a clear title doesn’t have any kind of lien or levy from creditors.
It means there’s no question of legal ownership of the property such as building code violations or bad surveys.
- Cash Flow
Cash flow is the amount of money you can pocket at the end of each month, after all, operating expenses (including loan payments) have been paid.
If you spend less money than you earn, your cash flow will be positive. If you spend more money than you earn, your cash flow will be negative.
- Per square foot rate
This refers to the per square foot rate of the super built-up area that is determined by the builder and is used by him to state the flat’s price to the seller.
This rate is inclusive of the carpet and super built-up area and is also referred to as a saleable area.
- Credit score
This is the measure of an individual’s creditworthiness that is statistically derived from his/her past records of dealings with financial bodies.
- Down payment
The down payment is the upfront payment the borrower makes to the bank or non-banking financial company such as Bajaj Finserv.
According to the RBI rules, lenders in India can only provide 80% of the property value as a home loan, while the borrower has to arrange for a balance of 20%.
- Turnkey Property
A turnkey property is a home or apartment or a gated community villa home that is completely, or very close to move-in ready.
- Carpet area
This refers to that part of the house that can be actually used or the enclosed space within internal and external walls of the house that can be carpeted. The carpet area does not include the space used by walls, but it takes into account the area stretching across the balcony as a part of the main or the actual area.
- Built-up area
The built-up area of a premise is measured from the external perimeter wall surfaces. In some regions, this is referred to as plinth area, which is usually around 10-20 percent more than carpet area.
- Super built-up area
This comprises built-up area and common areas of the building like lifts, staircase, corridors, lobby, and clubhouse, which are divided proportionately between all the flats within the building.
- Stilt parking
A parking slot with a roof or a stilt over it is called stilt parking. Most premium apartments and shopping complexes are equipped with this kind of parking.
- Sale deed
A sale deed is an important legal document that proves the transfer of ownership from the seller to the buyer.
It legalizes the purchase process and registers the same with the concerned government authorities.
The full form of which is Real Estate Regulatory Authority, stands for transparency in the real estate industry.
It was brought to action to eradicate the existing discrepancies and problems within the sector.
We hope that the above-mentioned real estate terms will help you in understanding the real estate industry better.
More real estate terms will be updated on the page soon and if you have any further queries or confusions about any particular real estate terms feel welcome to share them with us as a comment below.