By Krishna Kant Choubey

Published on: February 10, 2024 at 00:15 IST

A property purchase is a huge financial decision, and knowledge of the real estate sector can sometimes be hard to grasp, for first-time buyers, especially. The intricate terminology that is closely linked to real estate transactions is yet another major problem that often acts as an access barrier. Understanding the language of real estate brings much benefit along with being an essential aspect for a successful purchase.

Understanding real estate is like using a mighty instrument. The deep meanings of these idiomatic expressions will in fact have drastic effects on your finances, bargaining and very likely satisfaction with your business venture in real estate.

Purchasing a house is incredibly exhilarating but at the same time, it is so riddled with complicated phrases that are common in the language of the industry. There is a new language within the dynamics of the real estate and for many, purchasing a home becomes an overwhelming process. There is no need to worry because this Article acts as a compass, finding your way to the language zones of property transfers.

If you are on your path to becoming a property owner, this article serves as the definitive guide to the key concepts that characterize the real estate landscape. We hope that by decoding these complex languages, you, the buyer, will be able to safely explore the market. Let us study the language of real estate, uncover the meanings of the terminology, and ensure that you understand everything else important about real estate before you begin your journey.

Foundational Terminology

Understanding basic real estate terms in India is important for understanding the expanded property terrain and financial difficulties of the property related market. Knowledge with property types and mortgages helps you to make informed decisions and confidently begin on the property buying journey.

• Title

The term “title” refers to legal possession or the right to own property. It is an important factor that both buyers and investors should fully understand before finalizing their purchase of a property. The title is a legal notion that incorporates the set of rights that come with property ownership.

• Commencement Certificate

A Commencement Certificate is an official authorization from local authorities to start construction on a property, ensuring compliance with building regulations and codes. It protects property owners’ interests, ensures safety, quality, and adherence to guidelines, and is crucial for legal compliance. Obtaining a Commencement Certificate ensures project safety, protects investments, and facilitates the construction process. It promotes responsible construction practices and ensures legality.

• Occupancy Certificate

Occupancy certificates are issued by local government agencies to confirm that a building is built according to approved plans and is ready for occupancy. These certificates indicate that the building is equipped with civic amenities like sanitation, water, and electricity. Prospective buyers should ask for the certificate from the builder or seller, as a lack of it may indicate a violation of norms and plans. If the certificate is not produced, the property can be razed without prior notice, and the resale of the house is impossible. If the certificate is not available, it is advisable to avoid buying the property, as it is the final approval from the government that the house is legally built and safe for occupancy.

Important terminology Under RERA

Real Estate Regulatory Authorities (RERAs) are established in each state and union territory to oversee the real estate market.

Developers must register their projects with the RERA before advertising or selling, providing comprehensive details about the project. RERA addresses project delays by holding developers accountable for completing projects within a specified timeframe and compensating buyers in case of delays. It also restricts developers from demanding more than 10% of the property’s cost as an advance payment before signing a sale agreement.

RERA emphasizes transparency, with developers required to disclose project details on the official RERA website. Property prices are defined based on the carpet area, ensuring buyers are informed about the actual usable space.

RERA also addresses post-possession concerns by making developers responsible for rectifying structural defects or poor workmanship within a specified period.

Some important terminology in RERA Act is as following

• Build-up Area

The built-up area is the total floor area of a structure, including living spaces, hallways, staircases, and common areas. It is crucial in real estate and construction to measure development on land. It differs from the carpet area, which is the usable area within walls. The built-up area includes walls, balconies, and other common areas, and is used in property transactions and projects to calculate property costs. Understanding both is essential for informed decision-making and transparency in real estate dealings.

• Carpet Area

The carpet area of an apartment refers to the space that a carpet can cover, including the dining hall, kitchen, living room, balcony, and toilets. It is crucial for homebuyers to accurately measure the apartment unit and determine the usable area. The Real Estate Regulatory Authority (RERA) Act defines carpet area as the net usable floor space and distance between inner partition walls, excluding external walls, under service shafts, private balconies, and exclusive terrace areas. Buyers can receive a refund if the promised carpet area differs from the actual value after construction, but the increase cannot exceed 3%.

• Planning Area

A “planning area” refers to any area designated by the government or competent authority for future planned development under Town and Country Planning laws. This includes areas such as development areas, local planning areas, and regional development plan areas. The law relating to Town and Country Planning updates this definition from time to time.

• Appraisal

An appraisal is a valuation of property by an authorized person, typically used for insurance, taxation, or determining a possible selling price. Appraisals are crucial in various transactions, including real estate, as they help determine the appropriate value of an item or property. Appraisals can use various methods, such as comparing market values, and can also be used for tax purposes, determining the value of charitable donations, and resolving estate conflicts.

• Escrow

In escrow refers to a legal holding account for items, such as money or property, that are transferred to a third party on behalf of a buyer and seller. These items are typically held until predetermined conditions are met, typically in real estate transactions. The escrow agent, typically a lawyer, manages the assets until contractual obligations are fulfilled. During the escrow process, the buyer cannot take possession of the property, and the escrow agreement outlines the conditions and responsibilities of each party involved.

Financial Terminology

In the constantly shifting context of Indian real estate, an accurate understanding of numerous financial concepts is essential for anyone considering property. These phrases constitute the foundation of real estate transactions, influencing everything from the first down payment to the complications of mortgage agreements. In India, where the real estate market is broad and

constantly evolving, understanding these financial terminology is not only useful, but also necessary for making well-informed judgments that link with your financial goals.

• Down Payment

The down payment is the buyer’s initial initial payment, given as a percentage of the total property purchase price. Understanding the value of a down payment is essential for planning the financial strategy. A greater down payment can result in better loan terms and cheaper monthly mortgage payments.

• Closing Cost

Closing costs include the different fees and charges associated with closing a real estate transaction. Stamp duty, registration fees, legal charges, and even Goods and Services Tax (GST) may be levied on under-construction buildings. Anticipating and accounting for closing fees is critical for property buyers seeking to prevent financial surprises throughout the property purchasing process.

• Amortization

Amortization is an accounting technique that lowers the book value of a loan or intangible asset over time. It involves paying off debt through regular principal and interest payments and spreading out capital expenses for accounting and tax purposes. Amortization is similar to depreciation in asset applications.

Conclusion

This article provides a comprehensive guide on essential property purchasing terminology, enabling individuals to make informed decisions during the property buying process. It covers fundamental terms like “down payment” and “title,” enhancing financial literacy and mitigating potential challenges.

Understanding these terms helps navigate negotiations, comprehend legal documents, and make a confident path to acquiring a property. The summary emphasizes the importance of being well-versed in the terminology that forms the backbone of property transactions, ensuring a smoother and more successful journey into real estate investment.