Real Estate Terms You Must Know Before Investing

In the real estate industry, there are also several real estate investing terms that you must know before investing. This article is very useful to beginners who are going to enter into the real estate market.

  1. Sale Agreement: Sale Agreement is an agreement which is entered in between the parties dealing with the property and which creates a right to obtain a sale deed mentioning the property. Generally, it precedes a sale deed and normally it fixes a time for completion, payment of earnest money or part payment of purchase consideration.
  2. Sale Deed: This is an instrument in writing which transfers the ownership of the property/properties in exchange for a price paid or considered. This document is required to be registered compulsorily.
  3. Stamp Duty: It is the duty/fee payable on the different instruments / documents as per the prescribed rate. The adequacy of stamp duty should be ensured to make a document valid and enforceable.
  4. Statutory Charges: Charges like stamp duty, sales tax, etc., that are imposed by the government.
  5. Built-up Area: Built-up area refers to the entire floor area of the home or apartment, including the carpet area, internal & external wall thickness and balcony area.
  6. Carpet Area: ‘Carpet Area’, as the name suggests, is the space where one can spread a carpet i.e., the net usable floor area in building/apartment. ‘Built-up Area’ is the carpet area plus the areas covered by inside and outside walls, balconies and verandas attached to the unit for exclusive use.
  7. Floor Area Ratio (FAR): Floor area ratio is the ratio of a building’s total floor area to the size of the piece of land upon which it is built. It is a ratio between a building’s gross floor area and the land area. It is also known as FSI (Floor Space Index).
  8. Appreciation: Appreciation in real estate refers to an increase in the value of property over a period of time. It depends on like good location, high property demand, limited supply, inflation, etc can cause value appreciation of properties.
  9. Down payment: If you are going to buy property through loan then the Banks require the borrower to fund at least 20% of the value of the property as the down payment.
  10. Loan Agreement: A written contract between a lender and a borrower that specifies the rights and obligations of each party regarding a specified loan.
  11. Loan to Value (LTV) and Loan to Cost (LTC): They are terms used by various housing finance institutions to signify the home loan amount that a person is eligible for on the total value as well as the total cost of the property. There is a limit on the maximum loan amount that a person can get for a property irrespective of the home loan eligibility. The balance amount for purchase of the property is to be funded by the customer from his own sources.
  12. Collateral (or security): Personal property pledged as a guarantee that you will repay your home loan. Property such as houses, cars, savings accounts, bonds, or certificates of deposit are commonly used as collateral.
  13. Credit History: A record of an individual’s credit payment and debt history, a credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.
  14. Credit report: A report about an individual’s payment history that is supplied by a credit bureau.
  15. Floating rate: In a floating rate the interest rate charged by the lender keeps changing with respect to the rates in the market over the tenure of the Home loan
  16. Pre-Launch offer: It means an offer to sell at a discounted price before formally starting the project.
  17. Due Diligence: It  refers to a buyer’s investigation of the various aspects of a property, either before making an offer or (more often) within a specific timeframe between entering into the contract and closing.

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