Planning on buying a home? Then get ready to be introduced to quite a few unique words whose meaning you might not be aware of.
RealtyNXT lists some of the top real estate jargon so that you have a complete understanding of these terms as and when you will come across them. Read on to get informed!
Appreciation
Appreciation is the value of the home that rises over time. This is calculated by adding one to the annual appreciation rate, increasing this to a power equal to the number of years one would estimate and multiplying that by the current value of the property.
Allotment Letter
A letter which the developer gives to a buyer which allows a specific piece of land or apartment unit to the buyer during the time the home is under construction.
Assignment
The property seller signs over the rights and obligations of the property to the buyer before the official closing.
Adjustable-rate mortgage (ARM)
In this mortgage, the interest rate for the pending balance is never constant.
Annual percentage rate (APR)
The annual percentage rate (APR) is the amount of interest charged on your loan every year.
Blanket Loan: A single loan amount that encompasses multiple real estate assets and is commonly used by developers and investors to invest in more than one property. It allows an individual to sell assets without the need to pay off the entire loan.
Built-up Area: Built-up area is the carpet area plus the thickness of the outer walls and the balcony. It is the actual area that will be used by the property buyer.
Building Bye-laws: These are mandatory rules and regulations laid down by the local authority to regulate ground coverage, height, architectural design and construction aspects of buildings in order to ensure planned and orderly development in an area.
Bridge loan: A short-term loan taken by a buyer against a property they already own to buy another property. The time frame to repay this loan is generally a few months to maximum of three years.
Carpet Area: The carpet area is the area that can be covered by a carpet. This area does not include the thickness of pillars and inner walls, balcony, terrace, common areas like lift, staircase, lobby area etc.
CAM Charge: Common Area Maintenance charge to be paid by occupiers for common areas such as lobby, elevators, parking, etc. and common services such as security, power backup, central air-conditioning, consumables utilised for various building aspects and creation of a sinking fund for equipment replacement.
Deed: A deed is a document that legally transfers the ownership of property to a new holder.
Deed-in-lieu of foreclosure: A deed-in-lieu of foreclosure is a document transferring the title of a property from a homeowner to the bank that holds the mortgage.
Default: If a homeowner defaults on their loan, it means they have not paid the sum they agreed to. Typically, a mortgage default means the homeowner hasn’t made a home loan payment in 90 days or more.
Down payment: The token cash a homebuyer pays at the time of closing of a deal. Typical home loans require a 20% down payment.
Escrow: Escrow is part of the home buying process. Mostly a bank or lender holds something of value during the transaction. This is returned to the seller once the sale process is successfully over.
Floor Space Index: FSI is also known as the Floor Area Ratio (FAR). This is the ratio of the total floor area of a buildingto the total Plot area. This numeric value indicates the total amount of area (on all floors) you can build upon a plot.
Foreclosure: If a homeowner doesn’t make a mortgage payment for more than three months, foreclosure is a legal process during which the owner gives up all his/her ownership rights. The last resort when payments are not made is the auction of the property.
Fixed Interest Rate: This is the interest rate charged on home loans. The fixed interest rate means that home loan has to be paid in fixed and equal installments as per the tenure of the loan. The advantage of this rate is that it would not change even if there are changes or fluctuations in Indian financial market conditions.
Floating Interest Rate: The floating interest rate is volatile and keeps on changing according to the market scenario. As compared to fixed interest rates, floating rates are comparatively cheaper.
Freehold Property: Freehold property is the one that is legally ‘free from hold’ of any entity other than the owner. It gives complete ownership to the owner of the house. The owner can use the land for any purposes but following local laws. He is free to pass on this property without any prior approval from anyone else.
Ground Coverage: It means the area covered by the building immediately above the ground level contiguous to the building.
iBuyer: This is a relatively new term and it refers to a company which specialises in the use of technology to make an instant offer on your home instantly. It is responsible for owning, marketing, and reselling your home.
IBC: The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. Insolvency and Bankruptcy Code provides the regulatory framework to resolve corporate bankruptcy issues in India within a fixed timeline, including those in the real estate sector.
Institutional Investor: Institutional investors are the big guys on the block. They are the pension funds, mutual funds, money managers, insurance companies, investment banks, commercial trusts, endowment funds, hedge funds, and also some private equity investors. Institutional investors generally invest for other people. If you have a pension plan at work, a mutual fund, or any kind of insurance, then you are actually benefiting from the expertise of institutional investors.
Hard Option: HardOption on a certain area of premises (i.e., I 00 sq. ft. or 1,000 sq. ft. or I 00,000 sq. ft.) offered by the lessor to the lessee over a fixed duration of time wherein the lessor will not market the area to another tenant/ party for that specific time frame. A hard option can either be free of cost or could have a holding cost of a bare minimum value.
Lease Agreement: A lease is a contract outlining the terms under which one party agrees to rent property owned by another party. It guarantees the lessee, also known as the tenant, use of an asset and guarantees the lessor, the property owner or landlord, regular payments for a specified period in exchange.
Occupancy Certificate (OC): This is one document that every home buyer must be shown and given while buying a home. An occupancy certificate is a document that is issued by a local government agency or planning authority when the construction work of a new project is over. An OC validates that the project has been built by following the legal building codes, relevant regulations and laws.
Per Square Foot Rate: It is a calculation of the value of each square foot of area of a building, house or any property. The condition of the property, size, area, etc. are among few factors that can affect the price per square foot.
Preferential Location Charge: This is an additional charge that is to be paid by a buyer for any residential unit that has a certain location advantage over other units in the project.
RERA: RERA is an act of the Parliament of India which aims to protect home buyers as well as boost investments in the real estate industry.
Real estate broker: A real estate broker works as an intermediary between the seller and the buyer. They usually charge a fee for their service which is called brokerage.
Rateable Value: It is the value upon which property tax is charged in India. The amount is determined by the tax authorities and thereafter the tax liability is charged to the owner(s) based on certain predetermined tax slab rates.
Stamp Duty: It is a tax that needs to be paid to the government on legal documents, usually in the transfer of assets or property. It acts as legal evidence of the ownership of the property.
Subvention scheme: Under this scheme real estate developer, home buyer and bank enter into an agreement where the buyer pays a limited upfront payment for the purchase of a property. The balance is paid by the bank on behalf of the buyer in pre-defined timelines to the developer. The developer then pays interest on the amount released by the bank or the financial institution on behalf of the buyer till the buyer takes possession of the property or till such time as mentioned in the buyer-developer agreement.
Tenant-favourable market: A market that offers favourable and more flexible terms for tenants due to to higher available space for lease in comparison to existing demand.
Term Renewal: Renewal of existing lease through a fresh agreement upon completion or expiration of the full term of the existing lease.
Title Deed: Title is a concept, the deed is a document. This document is issued by the relevant authority, pertaining to the ownership of a property and various terms and conditions of continuing ownership.
Underwriting: Underwriting is a method by which a person or organisation will take-up financial risk at a predetermined cost. The risk generally covers insurance, loans, and investments. Underwriting includes researching and estimating the level of risk of every person and organisation who has submitted an application prior to taking over that risk.
Yield: For anyone who is considering buying an investment property will surely be interested in what return the property will give – in other words, its yield A yield is based only on the rental income and does not include the component of capital gains from the property.
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