A Guide to Essential Real Estate Terms for Homebuyers in India!

11. Home Loan: When you’re looking to buy a home in India, getting the right residential loan is crucial. 

• • Eligibility Criteria: To qualify for a residential home loan in India, you’ll need to meet certain criteria, including a minimum age, stable employment, and a good credit score. Lenders assess your repayment capacity based on your income and financial stability.

• • Loan Amount: The loan amount you can get varies based on your eligibility and the property’s value. Typically, banks in India can fund up to 80-90% of the property’s cost. The remaining amount is expected to be covered by your own savings.

• • Interest Rates: Interest rates on home loans in India can be fixed or floating. Fixed rates remain constant for the entire loan tenure while floating rates fluctuate based on market conditions. It’s essential to compare rates from different banks and lenders to find the most favourable one.

• • Loan Tenure: Home loans in India usually have tenures ranging from 5 to 30 years. The longer the tenure, the lower your monthly EMI (Equated Monthly Installment), but you end up paying more interest over the life of the loan.

• • Processing Fees: Banks typically charge a processing fee when you apply for a home loan. It’s essential to understand these fees and factor them into your budget.

• • EMI Calculation: You can use online EMI calculators to estimate your monthly EMI based on the loan amount, interest rate, and tenure. This helps you plan your finances effectively.

• • Tax Benefits: In India, you can avail of tax benefits under Section 24(b) and Section 80C of the Income Tax Act for the principal and interest components of your home loan, respectively.

• • Prepayment and Foreclosure: Some loans allow you to make prepayments or foreclose the loan before the tenure ends. It’s essential to understand the terms and charges associated with this.

• • Credit Score: Maintaining a good credit score is crucial as it affects your loan eligibility and the interest rate you receive. Ensure your credit report is error-free.

• • Documentation: Be prepared to submit various documents, such as proof of identity, address, income, property documents, and bank statements, during the loan application process.

12. Loan Eligibility: Loan eligibility refers to the maximum amount of a loan that a financial institution is willing to lend to an individual or entity for a specific purpose, such as buying a home. In real estate, it determines how much you can borrow based on your financial circumstances, creditworthiness, and the lender’s policies.

• • Factors Influencing Loan Eligibility:

• • Income: Lenders assess your income to determine your ability to repay the loan. A higher income often results in higher loan eligibility.

• • Credit Score: A good credit score demonstrates creditworthiness and can impact the loan amount and interest rate you qualify for.

• • Existing Debt: Lenders consider your existing debts when calculating your loan eligibility, as they affect your ability to make mortgage payments.

• • Age: Your age can influence loan eligibility, as it affects the loan tenure and retirement considerations.

• • Property Value: The value of the property you intend to purchase also plays a role, as lenders may finance a percentage of the property’s cost.

• • Loan-to-Value Ratio (LTV): Lenders typically provide a percentage of the property’s value as a loan. For instance, if the LTV is 80%, you would need to provide the remaining 20% as a down payment.

• • Pre-Approval: Before house hunting, it’s advisable to seek pre-approval from a lender to understand your loan eligibility. This can help you narrow down your property search within your budget.

13. EMI Calculator: An EMI (Equated Monthly Installment) calculator is a tool that helps borrowers estimate their monthly loan repayments, including both principal and interest, based on the loan amount, interest rate, and tenure.

• • How it Works: Users input the loan amount, interest rate, and loan tenure into the EMI calculator. It then calculates the monthly instalment amount, helping borrowers plan their budget and assess affordability.

14. GST (Goods and Services Tax): In India, GST applies to various aspects of the real estate sector. It is primarily applicable to the sale of under-construction properties and commercial properties. The rate of GST on real estate can vary, depending on factors such as the type of property, location, and the affordable housing category.

• • Impact on Buyers: Buyers of under-construction properties are typically liable to pay GST on the property’s value. However, buyers of ready-to-move-in properties are generally exempt from GST.

15. Sanction Plan: A sanction plan is a blueprint or architectural drawing that has been approved by the local authorities or municipality. It outlines the layout, design, and construction details of a building or property. This plan must be approved before construction can begin to ensure compliance with local building codes and regulations.

16. Commencement Certificate: The commencement certificate is a vital legal document that confirms that the construction of a property has received the necessary approvals from local authorities and can begin. It ensures that the construction adheres to the approved plans and complies with building regulations.

17. Occupancy Certificate: The occupancy certificate, also known as the OC, is issued by local authorities after a property’s construction is completed and inspected. It confirms that the building is safe and habitable, with all essential services like water, electricity, and sanitation in place. It is crucial for property owners when taking possession of a property.

18. Legal Clearance:

• • Legal Due Diligence: Legal clearance involves a comprehensive review of all legal aspects related to the property. This includes verifying that the property adheres to zoning laws and land use regulations in the area.

• • Clearance of Liens: Legal clearance ensures that there are no outstanding liens, mortgages, or unpaid taxes on the property. Any such issues must be addressed and cleared before the sale can proceed.

• • Property Documents: Legal clearance involves a thorough examination of all property-related documents, including sale agreements, land records, and building permits, to ensure they are in compliance with the law.

• • Verification of Seller’s Credentials: It’s also important to verify the identity and legal status of the seller to ensure they have the right to sell the property.

19. Per Square Foot Rate: Per square foot rate, often denoted as price per square foot, is the cost of a property or space measured in terms of its square footage. It is a common way to express property prices, especially in real estate listings. Buyers can use this rate to compare the prices of different properties.

20. Payment Schedule:

A payment schedule is a detailed plan that outlines when and how much money should be paid over a specific period. The schedule specifies the dates on which payments are due. These can be monthly, quarterly, annually, or according to any other agreed-upon frequency.

21. Allotment Letter: An allotment letter is a document issued by a developer or builder to a buyer confirming the allotment or allocation of a specific property or unit in a housing project. It typically includes details about the property, payment terms, and the schedule for possession. The letter signifies that the buyer has been allocated the property as per the terms of the agreement.

22. Agreement to Sell: An agreement to sell is a legally binding contract between a seller and a buyer that outlines the terms and conditions of a property sale. It specifies the sale price, payment schedule, possession date, and other essential details. It is a precursor to the sale deed and is signed before the actual property transfer takes place.

23. Sale Deed: A sale deed, also known as a conveyance deed, is a legal document that transfers ownership of a property from the seller to the buyer. It is executed after all the conditions in the agreement to sell have been met. The sale deed is a critical document for establishing ownership and is registered with the local land or property registration authority.

24. Breach of Contract: Breach of contract occurs when one party involved in a legally binding agreement fails to fulfil their obligations as outlined in the contract. In a real estate context, this could involve a failure to pay, transfer ownership, or meet other contractual terms, leading to potential legal consequences.

25. Cancellation of Property Booking or Agreement:

• • Booking Cancellation: When a buyer decides to cancel their booking for a property (often in the pre-construction phase), they typically need to follow the cancellation process outlined in their booking agreement with the developer.

• • Cancellation Terms: The booking agreement or sale agreement typically includes terms and conditions related to cancellations. This can include the timeline within which cancellations are allowed, cancellation fees or penalties, and the process for initiating the cancellation.

• • Cancellation Fees: Developers often charge cancellation fees, which can vary depending on the stage of the project and the terms of the agreement. These fees are meant to compensate the developer for costs incurred and potential losses due to the cancellation.

• • Refunds: After cancellation, the buyer may be eligible for a refund of the amount paid towards the property, minus any applicable cancellation fees. The refund process is usually outlined in the agreement.

• • Legal Documentation: Cancellation should be communicated in writing to the developer or seller, and it is essential to keep copies of all relevant documents, including the cancellation request and acknowledgement of the cancellation.

26. Bare Shell: A “bare shell” typically refers to a property that is sold or leased in its basic, unfinished state. It usually includes the structural framework, walls, floors, and ceilings but lacks interior finishing, fixtures, and fittings. Buyers or tenants are responsible for customizing and completing the interior according to their preferences.

27. Common Area: Common area refers to spaces within a housing complex or building that are shared by all residents or property owners. This can include hallways, lobbies, elevators, parking areas, gardens, swimming pools, and other communal spaces. Common areas are typically maintained and managed by a homeowners’ association or society.

28. Super Built-Up Area: A Super built-up area is commonly used in the real estate industry to describe the total area of a property, including not only the actual floor area of the apartment or house but also the proportionate share of common areas and amenities in a building or housing complex. Here’s a breakdown:

• • Actual Floor Area: This is the area inside the walls of your apartment or house, including the living room, bedrooms, kitchen, and bathrooms. It’s the space you can use for your own purposes.

• • Common Areas: The super built-up area also includes a share of the common areas of the building or complex. These common areas can include hallways, stairwells, elevators, lobbies, parking areas, and any other shared spaces that are available for the use of all residents.

• • Amenities: In many cases, the super built-up area may also include a proportionate share of the amenities offered within the complex, such as a clubhouse, swimming pool, gym, or landscaped gardens.

• • Calculation: The super built-up area is typically calculated by adding the actual floor area of your unit to a proportionate share of the common areas and amenities. This calculation can vary from one developer to another and may even differ between projects.

• •  Purpose: It’s important to understand the concept of a super built-up area when purchasing a property, as it can affect the overall cost of the property and your maintenance charges.

29. Carpet Area: The carpet area is the actual usable floor area within the walls of an apartment or house. It includes the space that you can carpet or cover with flooring material. It is the most straightforward and essential measurement, representing the area where you can place furniture, and appliances, and live comfortably.

• • What’s Included: The carpet area includes rooms, hallways, and sometimes balconies and verandas, but it excludes walls, common areas, and amenities.

• • Purpose: Carpet area is essential for determining the actual living space and is often used to calculate the cost of flooring, furniture, and interior design.

30. Built-Up Area: The built-up area includes the carpet area plus the thickness of the inner and outer walls of the property. It represents the total area that is “built up” and covered by walls.

• • What’s Included: In addition to the carpet area, the built-up area includes the thickness of walls, common areas like hallways, and sometimes a portion of amenities like staircases and corridors.

• • Purpose: The built-up area is used to calculate the cost of construction and is important for builders and developers to determine the total space they are constructing. It’s also used to calculate property taxes and other charges.

31. Market Value: Market value, also known as fair market value, is the price at which a property, asset, or product would sell in a competitive and open market between a willing buyer and a willing seller. It represents the current prevailing price based on the forces of supply and demand.

• • Factors Affecting Market Value: Several factors influence the market value of real estate, including location, property condition, size, amenities, economic conditions, interest rates, and recent comparable sales (comps). Appraisers use these factors to determine a property’s market value.

• • Importance: Market value is crucial in real estate transactions, as it helps buyers, sellers, lenders, and appraisers determine the fair price of a property. It is often used for property taxation, insurance, financing, and in legal matters.

32. Price Appreciation: Price appreciation, often referred to as capital appreciation, is the increase in the market value or selling price of a property over time. It means that the property is worth more than it was when it was originally purchased.

• • Factors Influencing Price Appreciation:

• • Supply and Demand: An increase in demand for properties in a particular area can drive up prices.

• • Location: Properties in desirable or well-developed locations tend to appreciate more rapidly.

• • Economic Conditions: The overall economic health of an area, job opportunities, and economic growth can impact property values.

• • Infrastructure Development: Improvements in infrastructure, such as new roads, public transportation, and amenities, can enhance property values.

• • Interest Rates: Lower interest rates can make mortgages more affordable, potentially increasing demand and property prices.

• • Market Sentiment: Market sentiment, investor behaviour, and speculation can also influence property prices.

33.Capital Gains: Capital gains refer to the profit earned from the sale of a capital asset, such as real estate, stocks, or other investments. In India, capital gains can be categorized into two types: short-term capital gains (STCG) and long-term capital gains (LTCG).

Short-Term Capital Gains (STCG): Short-term capital gains are the profits earned from the sale of a capital asset held for a short duration, typically less than 36 months. 

• • Taxation: Short-term capital gains in India are taxed at the applicable slab rates of the individual taxpayer.

Long-Term Capital Gains (LTCG): Long-term capital gains are the profits earned from the sale of a capital asset held for an extended duration, typically more than 36 months. 

• • Taxation: Long-term capital gains on the sale of listed equity shares and equity-oriented mutual funds are taxed at a rate of 20%. However, there may be exemptions under certain conditions, and the tax rules can change over time, so it’s advisable to consult a tax expert or refer to the latest tax regulations.

34. Lock-in period for resale or assignment: The lock-in period usually refers to a period during which the original buyer (the one who purchased the property from the developer or the previous owner) is restricted from selling or transferring the property to another party. This period is often stipulated in the sale agreement or builder-buyer agreement.

• • Duration: The duration of the lock-in period can vary widely, depending on the terms and conditions set by the developer or seller. It could range from a few months to several years.

35. Title Ownership: Title refers to legal ownership of a property. When you buy a property, you want to be certain that the seller has the legal right to sell it to you. A clear title means that there are no outstanding claims, disputes, or liens that could prevent the sale.

36. Acre: An acre is a unit of land measurement commonly used in real estate, particularly in countries like the United States and India. It equals 43,560 square feet or approximately 4,046.86 square meters. Acreage is often used to describe the size of large land parcels or properties.