Property Glossary

Below, is a comprehensive list of Real Estate terms, which will be updated regularly. Readers are encouraged to become familiar with the terminologies used in context of Real Estate Transactions.

Title to a property that is free of any hindrances or encumbrances. Absolute title gives undisputable right of ownership to the owner, and cannot be disputed or challenged by anyone else. This is opposed to titles with liens, attachments or judgements against them. It is also known as perfect title or clear title.

A title search is usually conducted at the local registry office and can unearth any problems with regard to the title of a property.

A document provided by the seller of a property that clearly states the status of potential legal issues involving the property or the seller. The affidavit is a sworn statement of fact. For example, someone looking to sell a piece of real estate would have to provide an affidavit of title indicating that the property is truly owned by the seller, that the property is not being sold to another party, that there are no liens against the property and that the seller is not in bankruptcy proceedings.

An affidavit of title is designed to protect the buyer from outstanding legal issues that might be facing the seller

An agreement between the buyer and the seller that details the price and terms of the transaction. This Agreement should not be confused with Sale Deed/ Conveyance Deed. It precedes the execution of Sale Deed and acts as the basic document on which a Sale Deed is drafted. It is also referred to as Agreement for Sale.

A letter issued by the developer or city development agency allotting a particular plot or unit in an under development or under construction project. It includes all details regarding the unit, payment options and any extra charges that the buyer will have to pay in case of maintenance or additional facilities. It also includes construction schedule, house plans, delivery date and other booking terms. This letter is generally superseded by builder-buyer agreement once that is signed.

Facilities or structures of real estate that enhances its attractiveness and increases the occupant or user’s satisfaction. For example, Parks, swimming pools, clubhouses, gyms, party rooms, and other facilities offered by builders of planned developments.

The loan payment consists of a portion, which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off in the specified time.

A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.

A long-term loan, often a mortgage that has one large payment due upon maturity. A balloon loan will often have the advantage of very low interest payments, thus requiring very little capital outlay during the life of the loan. Since most of the repayment is deferred until the end of the payment period, the borrower has the flexibility to utilize the available capital during the life of the loan. The major problem with such a loan is that the borrower needs to be self-disciplined in preparing for the large single payment, since interim payments are not being made. Balloon loans are often undertaken when refinancing or when a major cash flow event is anticipated.

A bare shell usually includes basic flooring and plastered walls. Apart from this, pantry and toilet facilities may also be operational in such condition.

Reserve Bank of India replaced Benchmark Prime Lending Rate (BPLR) system with Base Rate system with effect from July 1, 2010. Base rate is the interest rate below which banks cannot lend. The Base Rate includes all those elements of the lending rate that are common across all categories of borrowers. Banks are allowed to determine their actual lending rates on loans and advances with reference to the Base Rate and by including such other customer specific charges as considered appropriate. All categories of loans are priced only with reference to the Base Rate.

Bridge loan is a type of gap financing arrangement wherein the borrower can access short-term loans to meet short-term liquidity requirements.

This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term, normally up to one year, with high interest rates and are backed by some form of collateral such as real estate or inventory.

A broker is a person or a company who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.

Local authority control of building standards aimed to regulate and control the usage of land, property and areas in cities and towns.

Based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

A contract between an owner or occupier of land and a building contractor, setting forth the terms under which construction is to be carried out, basis of remuneration, time scale, and penalties, if any, for failure to comply with terms of the contract.

Built Up Area or Plinth Area is the total covered area of the apartment or commercial property unit i.e. area within & including outside walls of the unit. It can be calculated by adding carpet area, areas of utility ducts within property unit and internal & external walls of the unit.

Any short-term, financing option (5 to 7 years) that requires a balloon payment at the end of the term and anticipates that the loan will be refinanced in order to meet the balloon payment obligation.

These loans are riskier because the homeowner’s equity in the property doesn’t increase over time.

An increase in the value of a capital asset that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. Long-term capital gains are usually taxed at a lower rate than regular income.

The actual usable area of an apartment minus wall thickness. Simply put, it is that area within the walls where you can actually lay a carpet.

Commercial area and its immediate radius of 6 kms, typically located towards the city centre, which forms the hub of all major commercial activity in a city. Most of the larger corporate entities, large retail outlets and financial institutions would be located in this area. The Real Estate prices here would be the highest compared to all the other locations in the city.

The official record of ownership of a property or asset. The chain of ownership gets its name from its successive nature; a chain of title traces historical title transfers from the current owner back to the original owner. Due to their critical importance in establishing ownership of a property or asset, rigorous and accurate title records are generally maintained by the Registrar’s Office.

Also known as clean title, a clear title is a title without any kind of lien from creditors or other parties and poses no question as to legal ownership.

The expenses, over and above the price of the property that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan processing fee, title searches, surveys & site visits, taxes, stamp duty, registration charges and credit report charges.

A party or individual who cosigns a mortgage loan. Co-borrowers are jointly liable with the other borrower for the balance of the loan period. Often the co-borrower will also receive a portion of the ownership in the asset in exchange for assisting with the loan. However, it is not necessary to be a co-owner of the mortgaged property in order to be a co-borrower.

When there are more than one owner for an immovable property, the status of the property is known to be of the Co-ownership or Joint Ownership type.

An asset that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

A percentage of the sale price of a property paid to a real estate agent or broker for negotiating a real estate transaction.

The maintenance fee that is paid collectively by the owners of individual units for the maintenance and upkeep of the common areas of a real estate complex. These areas are generally managed and maintained by Residents’ Welfare Association or an outsourced Facilities Management Company.

Common areas are the undivided parts of the commonly owned premises like parking lot, lawns, swimming pool, clubhouse, corridors, lobbies, elevators, etc. These areas are not owned by a single individual owner. The responsibility for upkeep and maintenance of these areas is either by the housing society, homeowners association or management.

A certificate/ statement issued by the local development authority certifying that all necessary works have been completed and that the property is fit for occupation. In case of private development, such certificate can be given by the builder to individual unit owners at the time of possession. Owners require a completion certificate to claim tax benefits.

A loan borrowed to finance the construction of a home and typically only interest is paid during the construction period. Once the construction is over, the loan amount becomes due and it becomes a normal loan. The money is advanced incrementally by the lender during construction, as construction progresses.

The act of transferring an ownership interest in real property from one party to another. Conveyance also refers to the written instrument, such as a deed or lease that transfers legal title of a property from the seller to the buyer.

Cooperative Housing is a form of housing scheme promoted by most states in which the land is purchased, developed and constructed by a Cooperative Housing Society. A group of people can form a cooperative housing society by registering with the state government department and apply for land. Land is generally allotted to the cooperative housing society by the state development agency on a first come first serve basis at concessional rates. Once, the land is allotted to a society, it appoints a construction contractor and upon completion of construction, individual flats are allotted to society members based on a draw system.

A legal document conveying title to a property.

Failure to make payments on time or comply with other requirements of the agreement.

A letter sent to the buyer by a builder requesting due payment. Also, a letter sent to the borrower by lender requesting an overdue payment.

A sum of money given to bind the sale of Real Estate or a sum of money given to ensure payment or an advance of funds in the processing of a loan. Deposit could also be the deposit paid to a property owner as part of a rental transaction.

A company that initiates and oversees the development of a property. The main activities carried out by a developer include land acquisition, procurement of relevant approvals, fund raising, design, construction and marketing of the project.

The part of the purchase price of a property that the buyer pays in cash and does not finance with a loan.

Equated Monthly Installment (EMI) is a fixed payment amount made by a borrower to a Bank at a specified date each month. Equated monthly installments are used to pay off both interest and principal each month, so that over a specified number of years, the loan is fully paid off.

A situation in real estate where a property owner violates the property rights of his neighbor or the public land by building something or by allowing something to overhang onto the neighbor’s property.

A claim against a property by another party. Encumbrance usually affects the transferability of the property and can restrict its free use until the encumbrance is removed. The most common instances of an encumbrance occurs in real estate such as an outstanding loans, unpaid property taxes or easements.

A certificate issued by the Sub-Registrar’s office after due verification of the relevant documents certifying that the property in question is free from all encumbrances such as loans, leases, easements or restrictions.

Interior permanent furnishings required in a property including HVAC ducting, fire protection system, establishment of workstations and telephone/computer cabling among others, in order to make the property fit for usage.

An interest rate on a loan that either remains fixed for the entire term of the loan or for part of the term and does not increase or decrease with market fluctuations.

An interest rate that is fixed for a predetermined period after which it converts to a floating interest rate.

An interest rate that is allowed to move up and down with the rest of the market or along with an index.

Floor Space Index or Floor Area Ratio is the ratio of the combined gross floor area of all floors (excepting areas specifically exempted under regulations) to the total area of the plot. Higher FSI or FAR tends to indicate higher density in construction.

A situation in which a homeowner is unable to make principal and/or interest payments on his or her property loan, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the loan agreement.

A property where title has conveyed the property in favor of the purchaser by conveyance/ sale deed with no restriction on the right of the holder of the property to further transfer the property. Record of ownership of the freehold property can be verified from the office of the sub-registrar and can be transferred by registration of sale deed.

A power of attorney is a legal document that authorizes another person—called an agent—to act on behalf of the person who created the power of attorney—known as the principal—in the event that the principal cannot make those decision his or herself. A general power of attorney gives broad authorizations to the agent. The agent may be able to make medical decisions, legal choices, or financial or business decisions. Also check special power of attorney.

A person who agrees to indemnify the holder of a loan for all or a portion of the unpaid principal balance in case of default by the borrower.

Home Loan Insurance is like any other life insurance term plan. The difference is that, in case of death of the borrower, instead of paying the nominee, the insurer settles the claim with the bank to close the loan on the policyholder’s behalf. Most home loan insurance cover size is linked to the outstanding loan amount and the sum assured reduces along with the liability as one repays the loan.

Refers to the heating, ventilation and air conditioning system installed in a building to regulate temperature.

Includes land, buildings, rights to ways, or any other benefit that arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth.

Any physical changes that are done to enhance the capital value of land or buildings. These may include additional buildings, extensions to existing buildings, central heating and air conditioning and any infrastructure works.

A legal statute, which provides for the payment of stamp duty in case of all real estate transactions to the local government. This duty is paid by purchasing non judicial Indian Stamp Paper, on which the lease/sale agreements are documented.

An obligation of an entity arising from past transactions or events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future. Debt is a form of liability.

A legal claim against a property that must be paid off when the property is sold.

The amount of loan an individual is eligible based on the net salary he earns.

A fee paid to a bank to process a loan application. This fee is charged by the bank to cover its administrative and other application related costs.

Loan servicing is the process by which a bank collects interest, principal and escrow payments from a borrower.

When a buyer books an under construction property with a builder, some builders put the lock-in clause which means that the buyer cannot sell the property for a particular time period or till the handover. Such time period is known as lock-in period.

A type of construction contract requiring the general contractor to complete a building or project for a fixed cost normally established by competitive bidding. The contractor absorbs any loss or retains any profit.

Charges payable by the owners / occupants of a development (apartment complex / commercial complex / plotted development etc) towards upkeep & maintenance of all common areas and facilities. It is normally a monthly charge and the amount payable is dependent on the kind of amenities that are part of the project. Also called Common Area Maintenance (CAM) charges.

A Master Plan is the long term perspective plan for guiding the sustainable planned development of a city, an area or an infrastructure project. This document lays down the planning guidelines, policies, development code, layouts and infrastructure & space requirements for various socio-economic activities during the plan period.

A written instrument creating an interest in real estate and that provides security for the performance of a duty or the payment of a debt. The borrower (i.e., mortgagor) retains possession and use of the property.

Mutation is the process of recording the transfer of title of a property from one person to another in the revenue records. The documentation procedure to be followed and the fee payable vary from State to State. The mutation in the municipal records is for the purpose of payment of property tax, and it does not mean a legal title for the person in whose name the property has been mutated in the municipal records.

A certificate issued by the concerned local authority that the plans are in order and conform to the guidelines and rules in force. In other words, the authority concerned has NO OBJECTION to the commencement of construction.

A formal written notice to a borrower by the lender that a default has occurred and that legal action may be taken. If the borrower does not pay, the lender may initiate foreclosure process by issuing public notice of default followed by notice of sale for the property.

A certificate issued by the local development authority certifying that all necessary works have been completed as per the sanctioned plans and that the property is fit for occupation. The OC is issued after clearance from the water, electricity, sewerage, fire departments, etc.

Also known as built-up area, is the total covered area of the apartment. In other words, it is the area within and including outside walls of the unit. It can be calculated by adding carpet area, areas of the utility ducts within property unit and internal & external walls of the unit.

A power of attorney is a legal document that authorizes another person—called an agent—to act on behalf of the person who created the power of attorney—known as the principal—in the event that the principal cannot make those decisions himself or herself.

A property in a project, which is in the planning stage and does not have all the approvals but is, soon expected to obtain all approvals. Generally, in order to raise public funds, many developers offer huge discounts or “early bird” specials in the pre-launch stage. However, investors should aware of the risks involved and approach such projects with caution.

An evaluation of a potential borrower by a bank to determine whether the borrower qualifies for a loan, or the maximum amount that the bank would be willing to lend. The process involves a thorough examination into the income and expenses of the borrower, including a verification of the borrower’s credit report and score.

A PLC is an additional cost that a homebuyer would pay for booking a housing unit, which has an advantage over others in terms of location. A preferred location within the apartment complex may mean an apartment that faces the park or is a corner plot near to the main road.

The amount borrowed or still to be repaid. The part of the monthly payment that reduces the balance of the loan.

A written promise to repay a specified amount over a specified period of time.

Property insurance provides protection against risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance.

The administration of residential, commercial and/or industrial real estate. The property manager acts on behalf of the owner to preserve the value of the property while generating income. Managed properties include residential and vacation properties, commercial retail space or industrial warehouse space. Property managers are typically paid a fee and/or a percentage of the rent brought in for the property while under management.

A property tax is a levy on property that the owner is required to pay. The tax is levied by the local municipal body of the state in which the property is located. All states have different tax structures and rates.

An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a loan over a specified time period. Generally, such locked-in interest rate is slightly higher than the floating market rate.

A property, which is complete in all respects including all utility connections and has received completion certificate and is ready to be occupied.

A loan where the borrower can make additional payments to reduce interest amount and then access those funds when required. There may be a minimum redraw amount.

The process of paying off one loan with the proceeds from a new loan using the same property as security.

A legal documenting and subsequent recognition of a transaction at the regional sub registrar’s office of the local municipal authority.

A renovation loan is a loan taken to cover the repairs and/or renovation of residential property.

Generally referred to an under construction property which is put in the market for sale by the investor.

Revenue department of a state carries out diverse variety of functions including magisterial matters, revenue courts, issue of various statutory documents, registration of property, conduct of elections, relief & rehabilitations, land acquisition and various other tasks.

A type of mortgage (loan) in which a homeowner can borrow money against the value of his or her home. No repayment of the loan (principal or interest) is required until the borrower dies or the home is sold. This product is particularly useful for retired people who can convert the equity in their home into cash and use that cash to meet their expenses. The loan is called a reverse mortgage because the traditional mortgage payback stream is reversed. Instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.

A loan secured by collateral to reduce the risk associated with lending. For example, home loan is secured by house mortgage as collateral towards the loan. If the borrower defaults on repayment, the bank seizes the house, sells it and uses the proceeds to pay back the loan.

The distance from a curb, property line or other reference point, within which building is prohibited.

Settlement (Closing) is the final step in executing a real estate transaction when final payment is made by the buyer, sale deed is signed, title is transferred to the buyer by registration of sale deed, loan documents come into effect, costs are paid and the new owner takes possession of the property.

A drawing of an area of land, on a horizontal plane, showing the boundaries and physical extent of the land included in a particular parcel. It may also show any existing buildings or the proposed layout of a development.

A soft launch is the release of a real estate project to a limited audience. In this stage, usually, all approvals are in place for the project but construction is yet to start. Soft-launching is a method for gathering feedback on a project, its pricing and acceptance in the marketplace, before making it generally available as a hard launch or grand opening. Generally, prices offered in the soft launch stage are slightly lower than the actual planned launch.

A power of attorney is a legal document that authorizes another person—called an agent—to act on behalf of the person who created the power of attorney—known as the principal—in the event that the principal cannot make those decision his or herself. A special power of attorney narrows the choices the agent can make. One can even make several different POAs, with different agents for each.

A state tax on conveyance or transfer of real property calculated on the total value of the property or the circle rate of the area, whichever is higher. Stamp duty charges vary from State to State and generally range from 4% to 10% of the property value or the circle rate.

Super Built- Up Area means built up area of a unit plus common areas proportioned to a unit. Common areas that are included in the super built up area are lobby, lift ducts, staircases, pipe ducts/ shafts, air ducts, covered community centres/ clubs, other covered common facilities. It does not include open areas such as parks, gardens, roof terrace etc.

A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features

Revenue authority or officer empowered to impose and collect revenue from a particular jurisdiction.

A legal document demonstrating a person’s right to or ownership of a property.

Insurance that protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.

An investigation of public records into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.

A property, which has received all necessary approvals from authorities, raised funds from private investors or financial institutions, appointed the construction contractor and is currently under construction. From investment perspective, such properties are less risky than properties, which are at development stage and have not received all approvals and more risky than ready to move properties.

An asset or property that is free and clear of any encumbrances such as creditor claims or liens.

The private or public service facilities such as gas, electricity, telephone, water, and sewer that are provided as part of the development of the land.

The process of making an estimate of the worth of real property or other assets for a particular purpose like purchase, sale, audit, rating, compulsory purchase or taxation.

A variance is a deviation from the set of rules a municipality applies to land use and land development, typically a zoning ordinance, building code or municipal code.

The set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project.

A defined area of land or part of a building, which is allocated for a particular purpose. For example, development plans may allocate areas of land for different uses like Residential Zone or Commercial Zone.

In planning terms, the dividing of an area by a local planning authority into zones for particular uses or activities.