Guide

Annual Schedule of Rates

The Annual Schedule of Rates, is the government’s estimates of minimum property values in various locations. It is the minimum price, on which the government will charge stamp duty and registration fees. It is also known as Circle Rates or Ready Reckoner Rates.

Bare shell

Bare shell refers to a property, whose construction is completed and has basic building services in place. However, such properties have unfurnished interiors and lack heating, ventilation and air-conditioning (HVAC) systems, lighting, plumbing, and elevators.

Benami property

A ‘benami’ property is one, in which the property is purchased in the name of a person, who is not the real beneficiary. Such a person in whose name the property is purchased is referred to as a ‘benamidar’.

Brownfield project

A brownfield project is one, where the development work is based on prior work. It refers to a project, where an existing one is rebuilt, modified or upgraded.

Built-up area

The built-up area of a property refers to the carpet area, along with the thickness of the inner and outer walls and the balcony.

Bye-laws

The bye-laws (also called by-laws) refer to a set of rules established by a cooperative housing society and form the basis on which the society governs itself. The bye-laws that a society frames, have to conform to regulations provided by a higher authority. For example, in Maharashtra, a society’s bye-laws have to be consistent with the Maharashtra Co-operative Societies Act, 1960.

Capital gains

Capital gain refers to the profit that one earns through the sale of a capital asset, such as real estate, or even stocks or bonds. It is basically the difference between the selling price of the property and its purchase price. Depending on the period for which the property was held, the capital gain can be either a long-term capital gain or a short-term capital gain.

Carpet area

Carpet area refers to the space that is actually available for use, in a property. It is the area that is enclosed within the walls, or the area that is available to lay the carpet.

Commencement certificate

The certificate from the local municipal authority that permits the developer to begin construction of the project. The commencement certificate (or CC) is usually granted, only after the developer has met the legal requirements and obtained the relevant sanctions for the building’s plan.

Common areas

This includes the amenities and areas in the land/ building (such as swimming pool, gym, club house and other recreational facilities, as well as common corridors, staircase, lobby areas, parking areas, etc.), for which the maintenance expenses are shared by all the members of the housing society or home owners’ association.

Construction loan

People can avail of home loans to get their house constructed – either by themselves, or by employing a contractor to construct the house – on a plot that they own. Such loans are commonly termed as ‘construction loans’. The process of approval and disbursement of a construction loan, is different from that of a regular housing loan.

Conveyance

Conveyance refers to the act of transferring the title, ownership, rights and interests in a property from one entity to another.

Cooperative housing society

A type of home ownership, in which the residents of a housing complex own shares in the cooperative corporation that owns the land/ property, with each resident having the right to occupy a specific apartment or unit.

Coparcener

A coparcener is a person who inherits the rights in an ancestral property by birth and has the right to demand for the partition of the family property.

Credit score

A credit score is a numeric representation of an individual’s credit borrowing and repayment history. A higher credit score indicates that the person is a responsible borrower, while a low score indicates the opposite.

Crowdfunding

Crowdfunding refers to a financial model, wherein, a real estate project or venture is funded by raising monetary contributions from a large number of people.

Debt-to-income ratio

Debt-to-income ratio is the percentage of your monthly income that you spend, on repaying your outstanding liabilities. It is a ratio of all your monthly debt repayments (including mortgage, insurance, car loans, personal loans, etc.) to your gross monthly income.

Deemed conveyance

Deemed conveyance means that the land and building is deemed to have been conveyed to the housing society or any legal body of the flat purchasers, if the promoter fails to convey the land and the building to them, within the stipulated time. To obtain a deemed conveyance, the aggrieved party has to file an application with the competent authority with all the necessary documents.

Development control

Development control refers to the process through which of urban development is regulated, to achieve specific objectives. Development control regulations govern the development and use of land curbs on misuse and promotion of planned development.

Encumbrance certificate

An ‘encumbrance’ refers to any liability that is created on a property. An encumbrance certificate for a specific requested period, is a note of all the registered transactions pertaining to the property for that period. This certificate can be obtained from the sub-registrar’s office, where the property is registered.

Escalation clause – lease

The escalation clause in a lease agreement, refers to a provision that allows the lessor (landlord) to increase the base rent when the lease agreement is renewed at the end of its term. The quantum of escalation, is usually a percentage of the rent and is agreed upon by both parties.

Fixed rate home loan

In a home loan with a fixed rate of interest, the equated monthly instalments (EMIs) will remain constant over the tenure of the loan. However, fixed interest rates are usually higher than floating interest rates at any given time.

Floating rate home loan

In a home loan with a floating rate of interest, the equated monthly instalments (EMIs) will fluctuate as per the market dynamics, as interest rates increase or decrease.

Floor area ratio

The floor area ratio (FAR) number denotes the maximum floor space that you can construct on a given piece of land. In other words, it is a ratio between a building’s total constructed floor area and the land area. It is also known as Floor Space Index (FSI) in some markets.

Foreign Exchange Management Act (FEMA)

The Foreign Exchange Management Act (FEMA) of 1999, governs the laws pertaining to foreign exchange for the purpose of facilitating external trade and payments and to regulate the foreign exchange market in India.

Freehold property

A freehold property is one, where the owner/ society/ resident welfare association owns the building and the land that it stands on outright, in perpetuity. A freehold land is generally bought through an auction or lottery. The completed project, thus, will include the cost of land incorporated in the final cost of the units.

 

Gift deed

A gift deed is a legal document that describes the voluntary transfer of a property from the donor to the donee without any exchange of money. Section 122 of the Transfer of Property Act, 1882, governs the transfer immovable property through a gift deed. A gift deed has to be registered, to make it valid.

Greenfield project

A greenfield project is one, where the land on which the project is developed, has never been used and there is no need to rebuild or demolish an existing structure.

Ground

In some southern states in India, the area of a plot is often measured in terms of ‘grounds’, where one ground is approximately equal to 2,400 sq ft.

High street

High street (also known as ‘main street’) refers to the primary business street of a town. This is the usually the focal region for retailers, banks, shops and other businesses.

Holding period

Holding period refers to the time for which a property was held by the owner – from its acquisition to its sale. However, there are certain ambiguities when it comes to calculating the holding period for an under-construction property – whether it shall be calculated from the date on which the property was booked, or its possession date, or the date of allotment.

HVAC

HVAC refers to the heating, ventilation and air conditioning system installed in a building, to regulate temperature. This includes air conditioning plants, chillers and ducting systems, which ensure the uniform transfer of the cold or hot air, as the case may be throughout the building.

Indexation benefit

The Indexation benefit is available for long-term capital gains on a property. This benefit allows the cost of acquisition of the property to be adjusted, considering the cost of inflation. The indexed cost of acquisition is calculated with the help of the Cost Inflation Index, which is notified by the income tax department every year.

Inheritance

Inheritance is the process of passing on of the title, debt, rights and obligations in a property, from its owner to others, upon the death of the owner. Inheritance laws in India vary, according to one’s  religion – for example, the Hindu Succession Act for Hindus, the Islamic Law on Succession for Muslims, or the Indian Succession Act for Parsis and Christians.

Intestate

Intestate means that an individual has died without leaving behind a will. There are various laws that govern the succession of a property for a person who dies intestate, and for those who die after making a will.

Joint ownership

Joint ownership, or co-ownership, refers to a scenario where two or more persons hold the title to the same property.

Karta

A karta in a Hindu joint family, is the manager of the family and the properties owned by the family.

Lease deed

A lease deed is a contract or agreement between two parties – the lessor (owner) and the lessee (tenant). The lessor is the legal owner of the property and the lessee obtains the right to use the property, in return for regular rental payments. In a lease agreement (or rental agreement), there is a transfer of interest in the property, from the lessor to the lessee.

Leasehold property

Leasehold refers to a property tenure, where one party buys the right to occupy the property for a given length of time (30 to 99 years). In a leasehold land, the authority (usually, a government agency) remains the owner of the land and gives the land to builders, to develop apartment projects on leasehold a basis. Anyone who buys a residential flat, will own it only for the leasehold period.

Leave and licence agreement

It is an instrument/ agreement, where the owner of the property (licensor) allows the licensee to occupy and use a portion of the property for residential purposes for a temporary, pre-decided period, based on certain terms and conditions. In a leave and licence agreement, there is no transfer of interest in the property.

Load bearing

A load bearing element in a building structure, is one that supports an overlying part of the structure as well as its own weight and helps to transfer this load to the foundation.

Long-term capital gain

This refers to the gains arising from the sale of a property that has been held by the assessee for more than three years.

Margin money

A portion of the total loan amount that has to be financed with the buyer’s own funds, is called margin money. The percentage of margin money can vary from 10% to 25%, depending on the loan amount.

Mortgage

Mortgage refers to the conveyance of a legal or equitable interest in freehold or leasehold property, as security for a loan and with provision for redemption on repayment of the loan. The lender (mortgagee) has powers of recovery, in the event of default by the borrower (mortgagor). A mortgage is a form of land charge and can be either legal or equitable.

Nomination

The process of nomination, provides for the transfer of the name in the records of the housing society, in favour of the nominee. However, the nominee does not become a full-fledged owner of the flat and can only hold the property in trust for the real owners, for the purpose of dealings with the society. The legal heirs remain the beneficial owner of the property and the nominee cannot dispose the asset for his own benefit.

Occupancy certificate

This document, issued by the local authorities, certifies that a building is fit for occupation and has been constructed as per the approved plan and in compliance of local laws.

Patwari

Usually denotes the person appointed by a local government or land authority, to maintain and update land ownership records for a specific area, as well as to undertake the collection of land taxes.

Preferential location charges

A preferential location charge, is the additional cost that a buyer pays, for choosing a better location in an apartment complex. Hence, for example, to own an apartment that overlooks a park or is a corner plot, the buyer pays extra. It is levied on a per sq ft basis.

Probate

Probate refers to the legal process through which a will is proved in a court of law and accepted as a valid document that is the last testament of the deceased.

Property tax

Property tax is a levy that is applied on real estate, which consist of buildings and its appurtenant land. This tax is imposed on the owner and is collected by the local governing bodies. This tax is based on the annual rental value. For self-occupied properties, the annual rental value is calculated as a percentage of cost.

Ready reckoner

To avoid evasion of stamp duty through the undervaluation for agreements and to minimise the disputes on quantum of stamp duty, all state governments publish an area-wise rates of properties, on a yearly basis, known as ready reckoner rates.

Registration

Section 17 of the Indian Registration Act, 1908, makes is mandatory for all documents involving the transfer/sale of immovable property to be registered. Registration is the process through which such transaction is legally recorded at the sub-registrar’s office.

Registration charges

These are the charges levied, for registration of a property. The charge can vary from districts and states.

Rental advance

Rental advance, in a lease agreement, refers to a lump-sum payment of rent made by the tenant (lessee) to the landlord (lessor), at the beginning of the lease period. This lump-sum amount is thereafter adjusted against the monthly rent payable by the lessee. The advance amount may be the rent payable for one quarter or one year or any other period that is mutually agreed upon by the tenant and landlord.

Repo rate

The repo rate (also known as ‘repurchase rate’) is the interest rate at which banks borrow money from the Reserve Bank of India (RBI). A lower repo rate, means that banks can also lend money to home loan customers at a lower rate.

Reverse mortgage

A reverse mortgage scheme is the opposite of a home loan scheme. Under reverse mortgage, the borrower receives money in installments which is paid in full later on.

Semi-fixed rate home loan

A semi-fixed rate home loan is a combination of fixed and floating rates. The interest rates on such loans remain unchanged for a specified period of time, after which, the rate of interest is converted to floating.

Share certificate

In several states across India, which follow the concept of Cooperative Housing Societies, the premises is owned by the society, while the members own their flats by way of owning shares in the society. Hence, it serves as a proof of ownership of the flat/apartment for the member.

Short-term capital gain

If a property is held by an assessee for less than three years, the gains from the sale of such property are known as short-term capital gains.

Stamp duty

Stamp duty refers to the tax that is levied on documents – in this case, the transfer of property. The amount of stamp duty that is payable depends on the value of the transaction and varies from state to state.

Succession certificate

It is a legal document that authorises the person or people obtaining it, to represent the deceased individual, for the purpose of collecting debts and securities due to him or payable in his name.

Super built-up area

Super built-up area refers to the built up area along with a proportionate share of the common areas (such as the space occupied by the elevator shaft, lobby, stairs, etc.)

Teaser loan

Teaser loans refer to a mortgage scheme, in which the initial rate of interest (for the first few years) is fixed and is usually lower than prevailing rates. After the initial few years, the borrower’s EMIs are converted to a floating rate of interest.

Transfer charges

Transfer charges refer to the fee that is levied by cooperative housing societies, according to its byelaws, to transfer the shares of a member in the society to a buyer.

Tripartite agreement

A tripartite agreement is the key legal document involving the buyer, bank and seller. These agreements serve to assist buyers, with acquiring finance from banks against the planned purchase of a home from a developer.

Undivided share (UDS)

A home buyer who purchases an apartment or flat is essentially buying two things – the constructed part of the building where s/he will reside and the proportionate share of land, where the building is constructed. This proportionate share of the land allotted to the flat buyer is known as the undivided share (UDS) of land.

Valuation

Valuation is the process of ascertaining the estimated value of a property and is performed by a qualified valuer. The valuation of a property is important for determining the potential sale price, the stamp duty applicable on sale of the property and taxes.

Warm shell

A warm shell property is one, where the units have the necessary basic requirements to support the occupants, when they move in.

Written-down value

The written-down value (also called book value or net book value) of a property, is its value after accounting for depreciation or amortisation. The written-down value represents the property’s present worth and is equal to the property’s original value minus the accumulated depreciation or amortisation.

Yard

A yard is a unit of linear measurement and is equal to three ft (or 0.9144 metres). Consequently a square yard is equal to nine sq ft or 0.836127 sq metres.

Zone

A zone is a defined area of land, which is allocated for a specific purpose, use, or is subject to certain restrictions. For example, development plans define certain areas of land for a particular use (land designated for commercial development, or land for residential development.