Top 8 terms to understand real estate better

Sandeep Singh

Jul 08,2024

Here are 8 key terms that may help you understand the real estate market. 

Understanding these terms is essential for navigating the Indian real estate market, whether buying, selling, or investing in properties.

Carpet Area

This is the actual usable area within the walls of a property. It excludes common areas like walls, corridors and balconies, and is basically the actual space you can use inside your walls.

Built-up Area

This area includes the carpet area and the thickness of outer walls and common areas shared among all residents of a building. Basically, it’s the carpet area plus the space taken up by the walls and other common areas like stairs.

Floor Area Ratio (FAR)

This ratio defines the permissible limit for construction on a plot, indicating how much area can be built upon relative to the plot size. It tells you how much you are allowed to build on a plot of land relative to its size.

Circle Rate

It is the minimum value set by authorities for properties in a particular area, used to calculate stamp duty and registration charges. It is used to decide the taxes you pay when buying or selling property.

Real Estate Regulatory Authority (RERA)

It is the regulatory body established to protect the interests of homebuyers and regulate the real estate sector. RERA ensures that property buyers are treated fairly.

GST

This is an indirect tax applicable to realty transactions for under-construction properties, with different rates for affordable and non-affordable housing. Different rates apply to cheaper and more expensive homes.

Leasehold vs Freehold Property

While a leasehold property is leased from the government or landowner for a specified period, a freehold property grants ownership indefinitely. Leasehold means you rent the land for a set time, whereas freehold means you own the land forever.

Capital Gains Tax

It is the tax levied on profit from selling a property, categorised as short-term (held for <3 years) or long-term (held for ≥3 years). If you make money by selling property, this is the tax you have to pay on that profit.

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