Important Real Estate Jargon Every Buyer and Seller Must Know

Real estate in India is not a small investment and there are too many legal as well as financial terms involved that one can easily get lost into. To sail through real estate conversations with ease—no matter at what level of familiarity you are at with the industry—you need to be familiar with some widely and frequently used keywords and phrases. In this blog we aim to discuss some of the most commonly used terms in the Indian real estate market in order to ensure that you no longer get confused, and always make informed decisions.

1. Carpet Area

Carpet area is the actual floor area of the apartment, excluding walls and thickness of other areas. This is the place where you can literally put a carpet, that’s why we call it the Carpet Area. The carpet area helps buyers understand the exact living space that they are being charged for, and is not only limited to larger spaces such as built-up or super built-up areas.

2. Built-Up Area

The built-up area includes the Carpet Area + Width of outer and inner walls along with certain other non-usable spaces such as balcony, terrace etc. This is usually 10-15% larger than the carpet area. This distinction confuses many buyers and does not allow them to compare properties effectively.

3. Super Built-Up Area

It also includes the built-up area and a proportionate share of common areas like lobbies, staircases, corridors. Apartment complexes are sold based on super built-up area — which means when you buy an apartment, it’s often sold based on this larger area. So, for example, if an apartment is listed as being a certain number of square feet, it includes both your personal space and a portion of the common areas. It’s important for buyers to know what parts of the space they will actually use versus what is included in that total number. This helps you understand exactly what you’re getting when you buy a home..

4. Circle Rate 

The ready reckoner rate, also popularly known as Circle Rate, is the government-notified minimum cost at which a particular property must be registered in any area, and it helps states calculate revenue generation tax on assets built. It varies from city to city and it creates a base value for property transactions. This rate acts as a floor price below which the transaction value cannot be placed at and stamp duty is levied depending on this ready reckoner price or sale price, whichever is higher.

5. Sale Deed

It is the sale deed which constitutes a legal document that affects the transfer from seller to buyer. Which includes the information about who, how much and what along with a brief description of property. If yes, you know how important it is to register the sale deed as without doing so your transaction will not be legally binding.

6. Encumbrance Certificate

An encumbrance certification or EC is a guarantee that the property you are buying has no legal or financial liabilities like unpaid loans, disputes etc. You may think of it like a clean bill of health for the property. If the EC is clear, it means you can buy the property without worrying about any hidden debts or legal troubles that could cause problems later on. It’s an important document to check before making a purchase or signing a deal.

7. Agreement to Sale

This document is signed before the sale deed between the buyer and the seller and it is a prepaid payment. This agreement to sale, outlines the terms and conditions under which a property will be transferred, including payment schedules, total price (including tax), date of possession.

8. RERA (Real Estate Regulatory Authority)

RERA (Real Estate Regulation & Development), set up under the Real Estate (Regulation and Development) Act of 2016, is intended to ensure more transparency and accountability in land deals. Developers must now compulsorily register their projects with RERA, allowing buyers to log in and track project progress easily so that they do not land up behind unrealistic delivery timelines and unnecessary troubles in relation to legalities and hand overs.

9. Power of Attorney (PoA)

A Power of Attorney is a way for one person to give another individual the power to make decisions about your financial matters on their behalf or in connection with legal and financial transactions. It is very helpful in real estate if the property owner or buyer can not reach to sign documents or complete sale, etc. On the other hand, PoA has been misused in India with some cases of fraud and hence it should be handled carefully when dealing with properties under PoA.

10. Average Ground Floor Area (AGF)

Average Ground Floor Area (AGF) is the average area of a property’s ground floor. It gives a rough idea of the coverage on ground which can be really good results for both who deal with properties commercially and residentially. AGF is particularly helpful for comparing properties in densely populated urban areas where real state space efficiency counts largely.

11. Stamp Duty

Stamp duty is a tax levied by the government on property related transactions, and it can be an ad valorem (a Latin term that means “according to value”) rate that is specified as per market value or circle rate- whichever is higher in nature. Non-compliance in paying stamp duty could lead to some legal complications and penalties, thus you have to also consider this along with your budget for property acquisition.

12. Registration Charges

The charges which the buyer pays to register his property in his name are known as Registration Charges. These costs are in addition to the duty and differ from state to state. The most significant aspect of the sale deed is that, without it being registered, ownership cannot be transferred legally

13. Home Loan Sanction Letter

A home loan sanction letter is an assurance by the bank or financial institution that they have granted a specific amount of money as loan for accommodation to you. Sanction letter lays down the terms of loan like interest rates, repayment tenure etc. and is a must have document for home buyers who take housing loans.

14. Occupancy Certificate (OC)

Occupancy Certificate is  issued by the local municipal authority once construction is completed and that too as per building codes, structures are built up to in accordance with the required safety benchmarks for a particular occupation. For any buyers, it is important to make sure that the property they are willing to buy has an OC (Occupancy Certificate), because only based on OC, one can seamlessly acquire the water and electricity connections. 

15. Frequently Used Units of Land Measurement In India

To Avoid Difficulty in Calculating Land Area Measurements:

You would have definitely noticed that different units are used to calculate land area in various parts of India such as acre, bigha or gaj, hectare etc. Some of the generally used units are:

Square Feet (sq. ft.): The primary unit used by urban real estate builders to measure their carpet and built up land areas

Square Meter (sq. mt.):  a unit of government measure especially in connection with the purchase or sale of larger plots area

Acres: For measurement of the larger tracts (mostly in rural & semi-urban regions of India).

Bigha: A measure of land traditionally used in Northern India— especially popular in states like Punjab, Haryana & Uttar Pradesh. A bigha can be as big or small depending on the region.

Gaj: Also known as ‘yards’, a gaj is commonly used in North India to measure smaller plots of land, especially for residential purposes. One gaj is equal to 9 square feet. It is often used in the context of measuring properties for construction, especially in urban areas.

16. Mutation

Mutation is a process of altering the title ownership when any property (Land/Buildings) are sold or transferred. It is very important for the buyer as it guarantees that he or she will be able to establish the property under their name and pay taxes, not counting future disputes.

17. Token Money

Token money or Earnest Money, as the name suggests, is a payment done in advance by the buyer to establish that he/she really wishes to buy the property in question. That typically falls between 1% and 3%, carried over to the final price once paid.

Conclusion

It is very important for any buyer or seller in the Indian real estate market, looking for a home to buy either for residential, commercial or investment purposes, to understand these key real estate terms. Almost every new buyer faces a culture shock when it comes to real estate jargon like these and as you are about to make one of your biggest financial commitments, knowing these terms not only prevents any misunderstandings but also helps the transaction become smoother for you. From knowing what that lease says to figuring out exactly how you are being charged for space, this information empowers the process. Property Souk aims at simplifying your real estate journey and thus strives to serve as a guide offering valuable resources, insights, and tools tailored for the Indian real estate market and its enthusiastic buyers. With detailed listings and expert guidance, it ensures that you have all the information you need at your fingertips, making your search for the perfect property easier and more informed.