News: Home buyers must know these terms and concepts before buying a property-19-09-2020
https://economictimes.indiatimes.com/wealth/real-estate/home-buyers-must-know-these-terms-and-concepts-before-buying-a-property/articleshow/78461233.cms
Synopsis
How much do you know the mind behind your potential property? Homebuyers should get familiar with jargon used by builders in order to make an informed choice. ET Wealth explains the terms and concepts to prospective buyers before they embark on a real estate journe
Often when looking for houses or property to purchase or take on rent, you might nd being given the numbers of two or more types of areas. And that can be confusing. For instance, real estate portals also list carpet areas and super builtup areas. Now which of the two do you factor in while calculating how much of the space is livable? Figures and terminology like the above can be confusing and sometimes even deceiving. Buying property is a massive nancial decision, which is why homebuyers must understand and get familiar with the property jargon used by builders in order to make an informed choice. ET Wealth explains the terms and concepts to prospective buyers before they embark on their real estate journey. How much space are you buying? Carpet area: This is the actual habitable area measured from the inner faces of walls. It implies the area of an apartment which can be carpeted and includes the balconies. It is now mandatory for developers to disclose the carpet area of all units in brochures and website. Built-up area: This refers to the total area of a at. It includes the carpet area, the space covered by the thickness of the walls and ducts. Typically, it is 10-15% more than the carpet area. Super built-up area: This is the total ‘saleable’ area, adding a markup over the builtup area for common spaces such as lifts, staircases, entrance lobby, corridors, etc. It includes all common infrastructure (excluding parking space) not directly charged to the buyer, but divided proportionately between all the ats. The unit price per square foot is charged on the super built-up area. hatis the loading factor? The dierence between the super built-up area and carpet area is known as ‘loading’. The loading factor is the extent of non-livable common area (space around staircases, elevators, lobby and terrace) added to the carpet area and charged to the buyer.
The cost of additional amenities provided by the developer is usually passed on to customers in the form of loading charges. Invariably, loading will be higher for larger projects, where more space is allotted to amenities and common area. Calculate it right It is important that a buyer understands how loading is correctly calculated. Else, you will end up paying more for less space.
hatis the oor space inde? It is the ratio of the total area covering all the oors in a building to the total plot area. It essentially indicates maximum amount of construction allowed on a given plot of land. For instance, if the FSI is 1 for a plot measuring 4,000 sq ft, the total oor area of a multi–storied building cannot exceed 4,000 sq ft. If the FSI is 3, the total built up area can be 12,000 sq ft. A project with a higher FSI allows the builder to oer a larger livable area even if the plot is small. The permissible FSI diers from place to place, depending on plot size, type of building, width of adjacent road and availability of electricity, water and sewage lines. hatis the ready reckoner rate? Also known as the circle rate, this is the minimum price at which a property has to be registered in case of its transfer. A property has to be registered on the declared transaction value or the minimum rate set by the government, whichever is higher. The stamp duty is calculated as a percentage of this value. hat happens if property is bought at below ready reckoner value? The buyer has to pay additional stamp duty based on the higher ready reckoner value. If dierence in price is more than Rs 50,000, it is taxable as income in the hands of the buyer under Section 56 (2)(x) of the Income Tax Act, 1961. If the dierence in price is more than 10%, the seller has to pay additional capital gains tax on the notional value. Scenario 1 Purchase/sale price: Rs 95 lakh Market price: Rs 1 crore Buyer pays stamp duty on: Rs 1 crore Buyer pays tax on: Rs 5 lakh Since discount not more than 10%, no tax incidence for seller Scenario 2 Purchase/sale price: Rs 88 lakh Market price: Rs 1 crore Buyer pays stamp duty on: Rs 1 crore Buyer pays tax on: Rs 12 lakh
Since discount more than 10%, seller also pays tax on Rs 12 lakh Getthe papers in order No objection certicate: Issued by the local authority specifying that construction plans are in order and conform to the guidelines. Encumbrance certicate: Issued by Registrar of Assurances or Sub-Registrar’s oice after due verication of relevant documents certifying that the property is free from all encumbrances. Occupancy certicate: Issued by the local municipal body to the builder or owner of a house specifying that it is t for occupation, after ensuring that the building complies with all permissible construction plans and local laws. Sale agreement: Contains a promise to transfer the property in future, on satisfaction of certain terms and conditions. An agreement for sale does not, in itself, create any ownership interest in a property. Therefore, the purchase of a property is not complete without a conveyance deed. Sale deed/conveyance deed: A contract in which the seller transfers all rights of the property to the buyer, providing the buyer the absolute and undisputed ownership of the property. Essentially, it becomes freehold property in the hands of the owner.
