20 terms which will Super Charge your Real Estate knowledge !

The biggest tool an investor has is knowledge on his side. But when it comes to real estate, we can see a lot of investors do not pay a lot of attention to smaller details which can create big problems for them. Today I want to hand over to you a real estate terminologies toolkit, which will explain various things to you in most simple and shortest way. When you go out to buy your home next, you will not need anyone on your side to have conversation with the builder and you will give him the feeling that you know more than him. It should help in someway.

Real Estate Terms and Termninologies

18 terms which will super charge your Real Estate knowledge

Here are those 18 terms and terminologies.

1. Carpet Area – When you buy a flat, you actually area on which you can lay carpet is called as “carpet area”. Note that builders advertise the property based on other parameters, but as a buyer this is what you are going to actually use for next many decades. Higher the Carpet area, better space you get.

2. Built up area – Built up area is the area which covers Carpet Area and the Walls and doors . A good 15-20% of space goes into walls and doors and your super built up area is generally 20% higher than carpet area. Ideally the rate quoted by builders is based on “built up area”.

3. Super Built up Area – A lot of times you will come across a term “Super Build Up area” , which is nothing but built up area along with all the space common to all the residents of society like Corridors, staircases, parking area etc . So Super Built up area is higher than Built up area. A lot of builders also use “super built up area” to advertise the projects which gives an artificial picture of property. Never rely on that

4. Sub-Registrar Office – For Registrations of Properties, there is an official department called “sub registrar office” , you can visit it to get your properties registered and also obtain any legal documents related to properties and land. If any officer tells you to “pay for Chai Pani” there, tell him you are filing a RTI and putting his name in the application for the “request” he made to you and ideally he behave properly with you. Note that you can get sub registrar office address online. Example – for Delhi its here

5. Capital Gains – When you sell a property after 3 yrs, the amount of profit you make is called “Capital Gains” . Tax will be applied on this Capital gains after applying Indexation. Also you can avoid paying this tax if divert the profits part in another property or another way of saving tax on that amount is investing in NHAI or REC bonds.

6. Encumbrance Certificate –  Encumbrance Certificate is an evidence of free title or ownership of property. This document clearly tells you if there is any legal or monitory dues on property. So if you are going to take a home loan against a flat, bank will need Encumbrance Certificate to be sure that there is no other loan going on for the same property. You can get the Encumbrance Certificate from the Sub-Registrar Office (where registration of properties take place). You can ask for upto 30 yrs of data (if available) . It takes around 15-20 days at times to get it after you have put a request to get encumbrance certificate . Read more about Emcumbrance certificate here

7. Title Deed – A title deed is a legal document used to prove ownership of a piece of property. So if you are buying property from Mr. Manish Chauhan, make sure you check the title deed. Title deed is something which you can get from Registry office of the concerned jurisdiction. Title deed is something which one must always obtain and check if you are buying an old property, because at times land and property is owned by some one old and children claim that its in their name just to speed up the process, but at times it gets ugly later. Important Tip – Never rely on Xerox Copies of the Title Deed, get it examined in original because sometimes the seller might have taken a loan and given in the original deed to lender (and does not tell you about this) .

8. Stamp Duty – Real Estate Stamp Duty is the tax collected by Govt . The stamp duty payable differs from one state to another. In some states its 3-4% and some has it at 8% also. The Stamp duty is payable on Agreement Value. So a lot of times buyers and sellers do the property agreement at lesser value and involve black money in the transaction. Its important to factor in stamp duty cost as per of your home purchase plan, because its quite a huge amount . For a Rs 50 lacs property, it can be in range of Rs 2-3 lacs. Important point is that women in many states have to pay lesser stamp duty compared to men.  For instance, in Delhi, a women need to pay a stamp duty of 4% compared with 6% for men. Thats 2% saving and for a 50 lacs house, its a saving of Rs 1 lacs” .

9. Franking Charges – When you go for home loan, there is a small charge called as “franking charges” paid you buyer to Bank . Franking (incase of real estate transaction) is actually the activity to stamping a document which proves that the Stamp duty has been paid to govt. Its an official seal kind of thing which is to be done in sub-registrar office for a small fees (Few Hundreds), this is done by the bank and they collect those charges from buyer.

10. Registration Charges – Just like you pay Stamp Duty, you also pay Registration Charges when you register the property in your name and the charges again depends from state to state . In Maharashtra, the registration charges are 1% of property or Rs 30,000
whichever is lower.

11. Gift Deed  – Generally you “sell” the property in exchange of money. But when you have to transfer the property rights to some one without taking the money like what happens in families, then you should to pass it on as GIFT and a Gift Deed should be prepared to document the process. Note that Stamp duty is to be paid even if the property is transferred through Gift Deed. Learn more about income tax on gifts here

12. Power of Attorney – A lot of times you will find that someone is trying to sell you land or a flat, based on power of attorney, which is a legal way of transferring your rights to someone else. But Supreme court has now banned all the real estate transactions based on power of attorney. So next time someone tells you that the owner of land is outside India and hence assigned him power to sell the flat, do not get fooled, only deal with someone with clear title deed.

13. Sale Deed – A sale deed is one of the most important legal documents in a purchase or sale of a property. Once its signed by the seller and buyer only then the sale is assumed to happen legally. The registration of property and stamp duty payable is based on sale deed only. A sale deed will also contain property details , measurements and other important details.

14. Service Tax and VAT – Service tax needs to be paid only for under construction properties untill complition certificate has been obtained by builder. Because till the flat is under construction, its regarded as “service”, so service tax is applicable (3.09% at the moment). But once the construction is over and complition certificate has been obtained by Builder, then the property like “goods” , where the service tax is not applicable. In the To be Paid for Under Construction Flats. VAT again is applicable for under construction properties, but only in those states where state govt has asked for VAT. Not all states have VAT applicable.

15. Conveyance Deed – Conveyence Deed is a legal document which a builder executes in order to transfer the land title to Housing socities formed. This is generally done once all the flats are sold in a project. This step is extremelly important because if this is not done, the title of land still remains with Builder and incase in future something happens, there is unnecessary legal battles. So make sure that once the society is formed, the conveyance deed is executed.

16. Completion Certificate – Once the project is completed, the local authority visits the site and inspects the construction and various things and awards completion certificate to Builder. so Completion Certificate is kind of certificate from local authority, that now the work is complete. This is the moment a builder can officially declare about the project completion. There still can be few last minute things which might need to be addressed.
17. Possession certificate – Possession letter is issued by the Builder which is actually the official permission to take possession of property. Generally its given to those who booked property during under construction. If its a ready to move in flat, the sale deed is enough and will work just like possession certificate. Note that a builder can give possession certificate only after he has obtained completion certificate.

18. Ready Reckoner Rates or Guidelines Value – For each area, there is a official govt defined rates for property which acts like the  base price. The minimum registration and stamp duty charges has to be on those guidelines value. Builders generally charge premium over these guideline values . Read more here

19. FSI (Floor Space Index) – It is the ratio specified by local authority (generally municipal corporation or urban development authority) which governs how much area one can build over a specific plot of land. i. e. if FSI for an area is 2 and you have a 1000 sq ft plot, you can build (2 X 1000) 2000 sq ft building over it. Generally, common areas like staircase, lift, passage leading to the flat door, service ducts outside toilets and kitchens, etc. are not considered in this 2000 sq ft FSI area, which means, you can construct these areas over and above the permitted FSI area. At macro level, this magic ratio called FSI determines how much construction will come up in a city.

20 – OC (Occupancy Certificate) – Well, generally CCs (Completion Certificates) are issued by municipal corporation in stages. i. e. a 25 floors high building may be issued CC for every 5 floors depending on its design. However, building is considered to be ready-for-occupation after builder has not only completed the construction but has also made it habitable by bringing in all services like electricity, water supply, drainage connection and fire fighting facilities. The corporation, after receiving NOCs from all concerned dept. will issue OC. Ideally, builder should / can issue Possession Letter only after receiving the OC. In reality though, several (not few) buildings have OC even after years of completion and being occupied. Buildings not having OC have higher outgo towards water bill, electricity charges and property tax.

Thanks Mehul for adding last 2 points as contribution

Please add more terms

If you are aware about some other thing which you have come across or feel can be added here, please add it in comments section.

Also let us know if you feel like a “pro” now in real estate terminologies or not ?

108 CommentsAdd Comment

  1. bharat shah

    thank you for the article compiling terms for property transaction. one more terms i like to state is the land underlying the estate , which is , as per my impression, mentioned in the sale deed. it is important, because the intrinsic value of the property at the time is function of the land cost plus cost (depreciated cost, in case of old property) of the construction. some have impression that they can latter build more floors on the ground floor house as they wish , but that is limited to floor space index(=total built up area allowed/the land underlying the property) allowed in that area and other rules and regulation. so the land underlying the property is important .

  2. Sushil Girdher

    Sir
    Very Good Articles….Almost all the terms was already known to me….except a little confusion………..what is the diffrence between sale deed and conveyance deed……….as far as i think…conveyance deed is when property is registered in the name of first time buyer from govt authority like HUDA in Haryana…..and sale deed is when it is further sold to third party by original allotee….am i right?

  3. Dhiraj Bathija

    A couple of other terms:
    1. There is some document called “saat baara” (7/12 ). I think it’s applicable for land transactions
    2. search report

  4. Chandrashekhar Chandvale

    Dear Sir,
    Very important and informative definitions are neatly given. Many thanks for this article.

  5. S.Sivaram

    Dear sir

    Many Thanks can you all tell us as to what Documents are to be obtained from the home loan provider once the Loan is fully paid off
    Can u also explain whether at the fag end of closing the Home loan is it worth to pledge Jewels and pay off the Home Loan
    Please sir I expect reply here itself in the Forum for the benefit of others

  6. mux

    Hi Manish

    It will be good to clarify that if a person is holding a new under construction property for 3 years and has yet not got the possession certificate, then the long term capital gains would be applicable. But once the possession certificate is received, then one needs to hold the property for another 3 years for long term capital gains to be applicable.
    Can you please confirm if this is correct.

    regards
    mux

  7. S.Sivaram

    Dear sir

    Another Important thing which I noticed when we apply for Encumberance Certificate for say 10Years in Tamilnadu it just gives the Name of the Previous Owners but on any ground it does not highlight whether any loan is subsistiting thereby buyer can be aware as to go ahead with the property or not.I dont know how other states gives the encumberance certificate which is a very important document can u please elobrate much as to how to go about it for the benefit of every investors in real estate

      • muralikrishnan

        Hi Manish,
        Generally after releasing full loan amount, all banks will register this mortgage details is sub-register office.It is called as MOD. So if any one check Encumbrance Certificate for that property, it will contain that mortgage details.Once the loan is fully paid, bank will cancel that mortgage details Note: Normally these process is followed by all banks and NBFC. If the owner got the loan from the private parties these details might not be registered and EC wont show that details.
        Thanks,
        Murali

  8. S.Sivaram

    can you dwell upon

    Monthly Simple Interest Vis a Vis Monthly Compound Interest
    Jewel Loan Vis a Vis Home Loan in the light of the above

  9. vivek

    Can anybody will add the term FSI or Floor Space Index ( Chatai Nirdeshank) as now days this term is very popular,but very few people are known to it?

  10. Mohammad

    I am confused whether to invest in real estate or mutual funds. Currently, all i have is fixed deposits. I know i should do better, for i am only 25 years old. What is your opinion, Manish? Does real estate give as good returns as mutual funds?

    • Cant answer that, because they are not guaranteed. there are various time frames where one has beaten another in terms of returns. So there are many angles for taking that decisions

  11. Sreedhar

    Nice article. It is very informative. Specially for the people who are curious to buy home, but doesnot know the fundamentals of realestate and taxes.

    thank you very much.

  12. SK Ray

    Dear Manishji ,

    Thank you so much for this splendid article on Real Estate. I had zero knowledge on real estate sector. But your article on this subject has really enhanced my knowledge on this sector. thank U once again,
    with regards,
    S K Ray

  13. Joel Trinidade

    Dear Manish,

    Two more words that could have been added to the list which get thrown around quiet frequently by builders are 1) Loading 2) Development charges.

    Regards
    Joel

  14. Sundeep

    Enlightening article. But every state has some terms in the local language. For example which of these documents is “khata” , a term used in Karnataka?

  15. Sujit Agarwal

    Thanks Manish!
    I have a few more things to add.
    1. During possession, the purchaser should ensure that he has indeed got the carpet area that he paid for (mentioned in the agreement). It is seen in Pune (not sure about other cities, but I guess situation may not be very different) that some builders (I am talking about renowned ones) give as less carpet area as 100 sq ft. for a flat of 943 sq ft. I.e. the owner ends up paying about 15% more than what he gets. One can register an FIR, or go for consumer forum with his case. Unlike Civil courts, Consumer Courts give time bound rule, and most of the time its from consumers side. There are Govt. certified Architects who give you on Affidavit (which can be used in Court) Design flaws & other issues in the flat (and entire society, if you wish), at a cost, which are against the Govt. prescribed Norms (Construction Rules, DO Rules, etc.)
    2. Builders delay Society formation as much as they can. This is because, they get Flat Owners Corpus Money to be used, freely. So flat owners need to help form the society as soon as possible
    3. As per Supreme Ruling, Builder should give Car Parking free of cost

    regards,

  16. Chhaya S.

    Thanks Manish for valuable information.

    There is one more called “Indemnity Bond” which created in favour of Transferee by Transferor to indemnify the Transferee against any loss/ damage caused on purchase of the property and/or to indemnify for any charge, lien and mortgage created on the purchased property.

    The “Power of Attorney” in case of purchase of property should always be “Irrevocable Power of Attorney”.

    Chhaya S.

  17. There are many more that can be added to the list, particularly for the properties that are under-construction stage:

    – Space Buyer Agreement
    – Builder Buyer Agreement
    – Allotment Letter/Card
    – No Objection Certificate
    – Tripartite Agreement
    – Demand Note/Letter
    – Payment Schedule
    – Offer of Possession Letter
    – Signature Verification Certificate
    – Affidavits
    – Payment History
    etc etc…

    • hari

      Hi Manish,

      Thanks for initiating this thread.
      Can you please add the above mentioned words also to the list.
      Some more ..

      1) occupancy certificate
      2) A-Khatha , B-Khatha (these two terminologies are used in karnataka)
      3) List of all the NOCs required and buyer should know
      4) UDS (undivided share in the land)
      5) Approved Plan
      6) Voilations: General Voilations builders make
      7) Survey Number & how to validate them
      8) JD (Joint development)

      Thank you
      Srihari

  18. SK

    I purcahsed a new flat from a builder in a mutistoried apartment at a city in Manahrashtra (but Not in Mumbai). I have got the Sale-deed registered with my photograph and finger-print. I got the the builder’s name replaced with my name in the city’s municiple corporation’s tax records and now the tax demand note comes in my name. Howveer, in the the tax demand note there is a footnote which says” This is not a proof of ownership”

    I wish to know “what is the proof of ownership in this case”. Is the “sale-deed” proof of ownership by me? Does the law in Maharashtra require me to obtain some other document as proof of ownership?

  19. Ramesh

    Thanks for the details. Is 7/12 not a required document or this is only required when we purchase a plot/land. Do we have some other specific documents to look for when we purchase a plot or farm land. Also one different question not sure whether addressed before – What are the various types of NA land and its purpose.

  20. tsashok

    Very nice article.

    Few more things to be considered.

    1. While purchasing the flat, please ask for amenities. My builder has given the Flat with Walls and doors as like in the building plan. Not provided any shelfs even i told him that i was ready to pay. As i had done many works after construction, i had spent more money.
    2. if he does not complete the house in time, we need to pay EMI as well as rent for the existing house. So, we need to put a clause in the deed(!!) that if he does not give the house within this time, he needs to pay Rs… per month until he handsover the house. (many builders are giving the house after 3 years after giving the advance..)

  21. Nikunj

    Service tax has been further increased with effect from 9th may.

    In the recent Finance bill 2013, for the purpose of service tax computation the taxable value the service tax has been increased from 25% to 30%. According to Finance bill the taxable value shall remain 25% where the carpet area of residential unit is upto 2000 square feet. or the amount charged is less than One Crore Rupees., taxable portion for service tax purpose will remain as 25%; in all other cases taxable portion for service tax purpose will be 30%.

  22. Hi Manish, great blog shared above. Thanks for sharing information about real estate investments. Really a great help for real estate investors. Awaiting for more blogs like this.

  23. Bhuvanesh

    What is AGPA? Agreement and General power of attorney.

    I hear from the builder that this has cost of 6% whereas registration would cost 8%. Since I am planning to sell this flat in few months…..i was thinking of going with AGPA…..can I sell using that?

  24. A Jain

    A commercial complex builder is have started selling to second floor without construction by measuring area. Which exact document should I ask from him to verify if the second floor construction is legal and there are no FSI issues in that complex ? Or is there any document (blue print or approved map kind of stuff ), I can obtain & which govt department ?

  25. Sandeep

    Thanks Manish for sharing valuable information. one must have knowledge of this terms before buying or selling property.

    good one.

  26. Mehul

    I come from real estate background (now, don’t hit me, ok?), so here are my two cents:

    FSI (Floor Space Index): It is the ratio specified by local authority (generally municipal corporation or urban development authority) which governs how much area one can build over a specific plot of land. i. e. if FSI for an area is 2 and you have a 1000 sq ft plot, you can build (2 X 1000) 2000 sq ft building over it. Generally, common areas like staircase, lift, passage leading to the flat door, service ducts outside toilets and kitchens, etc. are not considered in this 2000 sq ft FSI area, which means, you can construct these areas over and above the permitted FSI area. At macro level, this magic ratio called FSI determines how much construction will come up in a city.

    OC (Occupancy Certificate): Well, generally CCs (Completion Certificates) are issued by municipal corporation in stages. i. e. a 25 floors high building may be issued CC for every 5 floors depending on its design. However, building is considered to be ready-for-occupation after builder has not only completed the construction but has also made it habitable by bringing in all services like electricity, water supply, drainage connection and fire fighting facilities. The corporation, after receiving NOCs from all concerned dept. will issue OC. Ideally, builder should / can issue Possession Letter only after receiving the OC. In reality though, several (not few) buildings have OC even after years of completion and being occupied. Buildings not having OC have higher outgo towards water bill, electricity charges and property tax.

    Carpet Area / Usable Carpet Area: Well, Usable Carpet Area is another ‘innovative’ term. Loading is done on Carpet Area to arrive at Super-built up area (Sale-able area), and since these loading figure nowadays is going in the ‘senior-citizen’ range, builders add areas where you can’t actually lay the ‘carpet’ but may be able to step down, like flower beds, chhajjas, architectural bands projecting out of the floors, etc. to carpet area and call the sum area as ‘usable carpet area’!

  27. astrosunil

    Thanks for the nice article , Can you also write a flowchart of the same, the documents which come into picture at various stages for an under construction appt. I have booked an appt, advocate has said all ok with documents. Builder said he has applied with SBI/HDFC etc & waiting for approval document. What is this document called ? With this document if I approach the same bank, will my loan be approved faster ?

  28. Chetan Ambi

    This is very very good article on real estate. Very informative!! I am planning to buy a site and started reading article on real estate in jagoinvestor from few days. Jagoinvestor is the encyclopedia of personal finance in India.

    [On a lighter note] I have been seeing quality articles on real estate recently from you. Are you buying flat/site in Bangalore or you bought it already? :)

    • Yea Chetan

      I got one in Pune recently :) . Thats the reason I am writing more these dasy on Real estate :) . Also , I reside in Pune now , not bangalore ! . It was 3 yrs back when I was in Bangalore, now I am shifted to Pune

  29. Satish P

    Dear Manish,
    Thanks for the wonderful atricle.

    I have a question regarding the Service tax& VAT.
    Is it applicable if flat registration done before obtaining O.C or C.C from
    Cidco,Navi mumbai.

    Please reply!!

  30. Vikas

    Dear Manish,
    I would like information on CFC , Area reserved for Common Facility Centre/Services in a building project. What would be rate of construction in CFC plot ? Who is owner of CFC area ? Builder or Municipal Corporation or Proposed Society of the Project ? If Municipality is owner of CFC area what should be allotment policy and rate / rent etc ? If a builder sold construction on CFC area directly to private party or corporate is a legal transaction ? In this case title of whole project land may be in trouble ? waiting for your comments.
    Thanks,
    Vikas

  31. Rona kukie

    About Conveyance Deed-
    Our Father divided property among 3 sons, each having 1 floor each.I have the gift deed.Do I also need conveyance deed in this case?
    Grand father has a share in society in which the property is located.But I think the share in society gets useless after all the land in the society has been alloted,which is the case in our society too (which is 40 year old)

  32. RAHUL KUMAR

    Hello, I am from ranchi(jharkhand) I have seen atownship project here which just being soft launched by a Noida based company(RSIZONE ELANZA) can I pay them booking amount and what improtant documents should I ask for while booking.please help me

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