Essential Real Estate Terms Every Buyer Should Know

Published on: 19 Jan 2024

For those who do not belong to the real estate industry, there are many words and phrases that can be very confusing. Whether you’re a seller or a home-seeker, there are certain terms you must be familiar with in order to avoid complications and misunderstandings.
So, are you ready to advance your real estate expertise? Take a look at these terms below to improve your knowledge, especially if you’re a first-time buyer.

Channel Partners: Channel partners are companies that handle the entire sales process for real estate projects. According to the Real Estate Act (RERA), channel partners must always be registered with the regulatory authority for the safety and convenience of homebuyers. As compared to local brokers, channel partners can also act as counsellors for the benefit and convenience of home seekers.

Sanction Letter: A document provided to a borrower by a bank or lending institution, a sanction letter is used to ensure that a house loan has been approved. It lays forth the terms and conditions under which the loan will be granted and contains crucial information such as:

• Home loan amount.
• Applicable interest rate (fixed or floating).
• The base rate for interest calculation.
• Loan repayment tenure.
• Mode of loan repayment.
• Mode of loan repayment.
• Validity of the loan sanction letter.
• Tax benefits.
• Special scheme (if applicable).

Rate Appreciation: The increase in the value of a real estate property over time is referred to as price appreciation in real estate. One of the objectives of real estate investing is to achieve a positive return on investment when the investor decides to sell the property later.

Title Deed: A legal document that proves the right to ownership of a property, the title deed is compulsory to possess as it holds the description of the property, & the name of its owner. When a buyer seeks to purchase a property, they must ensure that the seller’s name is included in the title deed.
This document can be obtained from the urban/ municipal authorities in whose jurisdiction the property is located. To receive the title deed, one must submit other important documents like the sale deed, registration certificate, tax receipts, etc.

Floor Space Index (FSI) or Floor Area Ratio (FAR) - FSI/FAR is calculated as the ratio between the total built-up area and the available plot area permitted by the government. This is regulated as per each specific locality. A higher FSI usually has a higher built-up area. FSI is calculated using the formula -

FSI = Total area of each floor / Area of the plot

Every city and area has a limited area set for development in order to avoid undue pressure on the land or infrastructure. The government fixes the FSI based on demographics, population growth patterns, and various regulations.

Stamp Duty, Registration fees -

When a movable or immovable property changes hands, the buyer is required to pay stamp duty and registration charges to the state government in order to have it stamped and registered in legal records. These are known as stamp duty and registration charges
The Maharashtra Stamp Act establishes which assets and instruments are subject to stamp duty payment to the state government. In addition, the Act specifies the amount of duty that must be paid to the government.
The stamp duty prices in Maharashtra range from 3% to 6%, depending on a variety of circumstances, while the registration fees are 1% of the entire cost for properties under Rs 30 lakhs and capped at Rs 30,000 for properties beyond Rs 30 lakhs.

Credit Score: A score to derive a buyer’s creditworthiness, the term “credit score” is used by money lenders to know the likelihood of a person repaying his/her debts. This score is normally based on a person’s past credit history.

Due Diligence: This term refers to the time given or to the specific period provided to the buyer to examine the property before its purchase. Since the buyer needs to inspect the property thoroughly to ensure they are getting what they pay for, due diligence offers a lot of clarity between buyer and seller.

Non-Disclosure Agreement: A non-disclosure agreement or NDA is a legal arrangement between parties. It is used to enlist confidential information, knowledge, or any kind of valuable information that is shared between agreed-upon parties for business purposes. This document is frequently used in commercial real estate when there are leases and other arrangements with third parties that are not to be shared with the general public.

Occupancy & Completion Certificate: Completion certificate or occupancy certificate (OC) is issued by the municipal corporation in stages, for eg - a 25-floor building may rely on a completion certificate for every 5 floors, depending on its design. However, a completion certificate is received only when a building has been made habitable by the builder. This includes electricity & water supply, drainage system, fire fighting facilities, etc. This certificate is received only when the corporation receives a NOC (No Objection Certificate) from the concerned departments. Buildings that do not possess an OC have a higher payment towards water bills, electricity & property tax. Hence, home seekers must always enquire about the completion certificate from the builder of a property.

Familiarising yourself with real estate terms can be a difficult task, especially if you’re a first-time buyer. Contact us for our timely & expert services, and you’re sure to get the right information, including the best deals in home buying.
Feel free to reach out to us with any questions! Contact EstateMint today.