Glossary

A notice served on the owner(s) or occupier(s) of a property from which a private nuisance arises, warning them of the intention to enter on the land in order to abate the nuisance. It is a legal order to refrain from carrying out an activity that creates a statutory nuisance such as smoke or noise pollution, parking in unauthorized areas etc.

A unit of area equivalent to 43,560 square feet or 4,047 square meters approximately. It is a commonly used term for larger land parcels in India.

A clause in the loan agreement that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

In a sale transaction, it is the amount paid by a buyer to the seller at the time of signing the Agreement to Sell (ATS) to secure the transaction. It usually ranges between 10% and 20% of the transaction amount. It is also known as earnest money. It is not same as token advance.

In a renting transaction, it is the amount paid by the tenant to the landlord before signing the rent agreement to secure the transaction. This amount is usually equivalent to one month rent which is adjustable against first month rent. Not to be confused with security deposit or token advance.

A document provided by the seller of a piece of property that explicitly 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. If an issue arises in the future, the buyer has a physical document made by the seller that can be used in legal proceedings.

An agreement between the buyer and the seller that details the price and terms of the transaction. 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. Also referred to as Agreement for Sale.

A letter issued by the developer (private or state 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 important in availing loan from banks. It is generally superseded by builder-buyer agreement once that is signed.

Features of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction e.g. Parks, swimming pools, health-club facilities, party rooms, bike paths, community centers and other enticements 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 (amortized) 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 written report of the estimated value of a property prepared by a certified Real Estate appraiser or a valuer.

An increase in the value of a property due to changes in market conditions or supply and demand, etc.

A method of resolving a dispute in which a third party renders a decision.

The listed price of the property but may not always be the selling price. The owner may be willing to negotiate.

The valuation placed on a property for the purposes of taxation by an authority.

A resource with economic value that has the potential to provide future benefits. In simple monetary terms, an asset is something that can generate cash flow, regardless of whether it’s a company’s manufacturing equipment or an individual’s real estate producing rental returns.

A method of assessing the worth of a company, real property, security, antique or other item of worth. Asset valuation is commonly performed prior to the sale of an asset or prior to purchasing insurance for an asset.

Common methods for determining an asset’s value include comparing it to similar assets and evaluating its cash flow potential. Acquisition cost, replacement cost and deprival value are also methods of asset valuation.

A person in whose name the rights and interests of a property are transferred.

The transfer of a property interest, especially a lease, from one party to another by signing a deed of assignment.

A person, usually owner, who transfers rights and interests of a property.

A public sale of a property or real estate that is sold to the highest bidder.

Depicts the condition of any property after completion of construction activity and installations of basic building services. A bare shell includes basic flooring – tiled, mosaic, cement or granite and plastered walls. Apart from this, pantry and toilet facilities may also be operational in such condition.

Bridge loan is a type of gap financing arrangement wherein the borrower can get access to short-term loans for meeting 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 (up to one year) with relatively 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.

Commission paid to a broker.

The activity of a broker in bringing together two parties in a transaction.

Basic Sales Price. It can be arrived at by multiplying basic per square feet rate with the area of the property in square feet. To arrive at the final price of a property, the buyer should add all other charges such as parking charges, preferential location charges, registration charges, common area maintenance, EDC, IDC etc.

A situation in which supply exceeds demand, giving buyers an advantage over sellers in price negotiations. Contrast with seller’s market.

An interest rate that is allowed to fluctuate, but which cannot surpass a stated interest cap. For example, a 10-year loan may be issued to a borrower at 10%, but with a capped rate of 12%. The interest rate can thus fluctuate up and down, but can never go higher than the 12% capped rate. Capped rates are supposed to provide the borrower with a hybrid of a fixed and variable rate loan.

Commercial area and its immediate radius of 2 – 3 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.

Credit Information Bureau (India) Limited (CIBIL) is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications.

A clear title is a title without any kind of lien or levy from creditors or other parties and poses no question as to legal ownership. Also known as “clean title,” “just title,” “good title” and “free and clear title.”

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.

An asset (such as property or car) 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.

Real estate property that is used for business activities. Commercial properties fall into many categories and include office space, retail shopping centers, or even vacant land.

A proportion (usually a percentage) of the sale price of a property paid to a real estate agent/ broker for negotiating a real estate transaction.

Common areas are the undivided parts of the commonly owned premises. The areas such as the parking lot, lawns, swimming pool, community centers, corridors, lobbies, elevators, etc are not owned by a single individual owner. The responsibility for upkeep and maintenance of these areas is collective.

The contribution or fee 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.

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.

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.

Terms, conditions and restrictions noted on the title. A covenant may affect future plans or resale of the property.

A record of an individuals current and repaid debts which is usually used by a lender to assess the risk of a potential borrower. In India, credit history is managed by CIBIL.

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 decline in the value of property brought about by age, physical deterioration, functional or economic obsolescence, etc.

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

The disbursement of loan funds provided by the Bank.

An entrepreneur or company that initiates and sees through 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.

Equated Monthly Installment (EMI) is a fixed payment amount made by a borrower to a lender at a specified date each calendar 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 hang over onto the neighbor’s property.

An escrow account is a temporary pass through account held by a third party during the process of a transaction between two parties.

The total of all the real estate and personal property owned by an individual at the time of death.

The lawful expulsion of an occupant or tenant from real property.

Facility management or facilities management is an interdisciplinary field devoted to the coordination of space, infrastructure, people and organization, often associated with the administration of office blocks, arenas, schools, convention centers, shopping complexes, hospitals, hotels, etc.

The price that a given property or asset would fetch in the marketplace, subject to the following conditions:

Prospective buyers and sellers are reasonably knowledgeable about the asset; they are behaving in their own best interests and are free of undue pressure to trade.

A reasonable time period is given for the transaction to be completed.

Given these conditions, an asset’s fair market value should represent an accurate valuation or assessment of its worth.

An interest rate on a loan that remains fixed either 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 allowed to move up and down with the rest of the market or along with an index. Also known as variable market.

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. It varies from locality to locality depending on the surrounding infrastructure to support the development. Higher FSI or FAR tends to indicate more urban (dense) 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 paramount has conveyed the property in favour 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 ascertained from the office of the sub-registrar. It can be transferred by registration of sale deed.

Frontage is the full length of a plot of land or a building measured alongside the road onto which the plot or building fronts.

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 plans provide a reducing cover. That is, the cover size is linked to the outstanding loan amount and the sum assured reduces along with the liability as one repays the loan.

Inventory or stock refers to the real estate area in square feet or number of property units that a company or individual holds for the ultimate purpose of selling or leasing.

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.

A landlord is the owner of a house, apartment, condominium, land or real estate which is rented or leased to an individual or business, who is called a tenant (also a lessee or renter).

A letter of intent (LOI) is a document outlining an agreement between two or more parties before the agreement is finalized.

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.

A fee paid to a lender (bank) for processing application of a loan. This fee is charged by the lender to cover its administrative and other application related costs. Also known as loan application fee or establishment fee.

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

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.

The price at which a seller is happy to sell and a buyer is willing to buy. This assumes that there is sufficient activity in the marketplace to generate enough buyers and sellers so that neither party controls the price.

Market rent is described as what a willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay for the tenancy, in comparison with rent levels for similar properties in similar areas.

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.

The lender in a mortgage agreement.

The borrower in a mortgage agreement.

Borrowing money to buy an investment asset without receiving enough income from the investment to cover the interest expenses and other costs inolved in maintaining it.

Income after taxes are deducted.

Net worth is the total assets minus total outside liabilities of an individual or a company. Put another way, net worth is what is owned minus what is owed.

In a time series of cash flows, the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

A person in whose name title to property is held but who is not the actual proprietor or holder.

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.

The use of a property which does not conform to the allocation of the area for planning purposes. Such a property may have been built in conformity with the planning requirement at the time and a policy change ensued; more usually, the property was constructed before planning control was introduced.

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.

In case of a lease, a formal written notice to the tenant conveying the default in rent payments or breach of agreement terms and that further legal action may be taken by the landlord.

A written notice to a tenant to vacate the property.

That which cannot be legally enforced, as with a contract provision that is not in conformance with the law.

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 fighting authorities etc.

Conveyed intent by one party to form a contract, which may have conditions and stipulations, with another party.

Any person who has a valid and legal right, title and interest in the property.

Percentage Lease is a lease where the tenant has to pay base rent plus a percentage of the tenant’s revenue. It is a term used in commercial real estate. Percentage lease agreements can often decrease the base rate while simultaneously providing the lessor with additional upside potential.

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.

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

A PLC (preferential location charges) is an additional cost that a plot buyer would pay for booking a plot which has an advantage over others in terms of location. A Preferred location within the community may mean an apartment that faces the park or is a corner plot near to the main road.

A property in a project which is in planning stage and does not have all the approvals yet but is soon expected to get all approvals. Generally, in order to raise public funds, many developers offer huge discounts in the pre launch stage. However, investors should be cautious of the risks involved.

The process of determining how much money a prospective home buyer will be eligible to borrow before he or she applies for a loan.

The satisfaction of a debt or installment payment before its official due date. A prepayment can be for the entire balance or for any upcoming payment that is paid in advance of the date for which the borrower is contractually obligated to pay it. Examples of a prepayment come in the form of rent or early loan repayments.

Additional fee imposed by some loan agreements where a borrower retires a loan before its scheduled pay-off date. It is meant to compensate the lender for not realizing the anticipated interest income and for the possibility of reinvesting the loan amount at a lower interest rate. The penalty is usually based as a percentage of the amount pre-paid.

A rent above the level which a property could reasonably be expected to command in the open market on normal terms. Sometimes a tenant may be particularly anxious about the property and hence may pay premium rent. Such rents may be justified in instances where the tenant receives a present or future benefit against the market. Eg. in inflationary conditions where upward-only rent reviews are normally required at three-yearly intervals, the tenant may be prepared to pay a higher rent if fixed for a longer period of say, 5 years.

Market of new properties. Investing in primary market would mean purchasing a property directly from the developer.

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

The sale of a property by the owner without the services of a real estate agent.

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

Property insurance provides protection against most 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.

The unified management of a group of properties which are held in one ownership. Decisions taken in respect of any issue are reached on the basis of achieving the maximum benefit for the owners, having regard to the effect on the portfolio as a whole rather than on an individual property.

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 ready to occupy i.e. which is complete in all respects including all utility connections and has received completion certificate.

Physical or tangible assets that have value, due to their substance and properties. Real assets include precious metals, commodities, real estate, agricultural land and oil.

Land and anything permanently affixed to the land, such as building, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items that would be personal property if not attached. Real estate can be grouped into three broad categories based on its use: residential, commercial and industrial.

A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

Any property that is attached directly to land, as well as the land itself. Real property not only includes buildings and other structures, but also rights and interests. Real property can be either rental or residential.

A general term used for Real Estate professionals including real estate brokers, salespeople, property managers, appraisers, counsellors and other real estate professionals.

Real property: property consisting of houses and land

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. Both rental and capital transactions can be registered after paying registration charges, which vary from state to state.

A renovation loan is a loan taken to cover the repairs and/or renovation of residential property. It is primarily disbursed to carry out civil work like plumbing or doing up the kitchen or painting of the flat.

Refund. The act of returning money received previously.

An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation.

The formalized Request for Proposal represents a compilation of the many considerations that a tenant might have and should be customized to reflect their specific needs. Just as the building’s standard form lease document represents the landlord’s wish list, the RFP serves in that same capacity for the tenant.

A process where the buyer requests additional information about the title of the property from the vendor.

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

A market where sellers sell goods or services directly to the end user.

An arrangement whereby a freeholder or lessee sells his interest in a property for an agreed sum and takes back a lease on the whole or part of the property from the purchaser, generally either at a rack rent or at some lesser rent related to the price paid.

A loan secured by collateral to reduce the risk associated with lending. For eg. 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.

In lending, security refers to the collateral given, deposited or pledged to secure the payment of the loan.

A monetary deposit given to a lender, seller or landlord as proof of intent. Security deposits can be either refundable or nonrefundable, depending on the terms of the transaction. As the name implies, the deposit is intended as a measure of security for the recipient.

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 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. Also check general power of attorney.

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.

A tract of land divided into individual lots for a housing development.

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.

Any activity that leads to an exchange between two parties – buyer and seller/landlord and tenant etc.

A value of the property that is lesser than the fair market value.

A term generally used in financial services industry refers to the process by which a large financial service provider (bank, insurer, investment house) would accept some of the risk on a given venture (say initial public offering of shares) in exchange for a premium. In real estate, underwriting is a process by which an underwriter commits to the developer of a project to sell a certain number of units within a specified period of time at a specified rate else the underwriter has to purchase a certain number of units itself.

A person who claims the right to a piece of property after the death of an owner without a will.

A loan that is not backed up by collateral.

The process of making an estimate of worth of real property or real property or other assets for a particular purpose eg.letting, purchase, sale, audit, rating, compulsory purchase or taxation. The purpose and the relevant circumstances determine assumptions and facts that are appropriate and hence the process used.

The income return on an investment. Usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. For eg. Rental yield refers to the rental returns with reference to the investment cost or current market value of the property.

A defined area of land or part of a building which is allocated for a particular purpose, eg. development plans may allocate areas of land for different uses or values of property may distinguish between areas of floorspace of a building and ascribe different values to them.

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