NRIs can make a lot of money by investing in real estate in India. In the long run, real estate is also a solid investment. However, before making any type of investment, it’s critical that you do your research and understand the fundamentals of what each term means. If you’ve engaged a property manager, you might hear them say things you don’t understand and find yourself nodding along to their updates without knowing what they’re talking about.
As a property owner, you should be familiar with the following terms:
The carpet area is the house’s net usable area. The thickness of the inside wall is included; however, the balcony or patio is not. The more carpet area you have, the more space you have. As a first-time property investor, you should be aware of this word since, under the Real Estate (Regulation and Development) Act of 2016 (RERA), it is now essential for developers to inform buyers of the carpet area. The carpet area must be used to determine the property’s price.
The total area measured on the property’s exterior line, including the balcony, terrace, and so on, is referred to as the built-up area. This is the space that encompasses the carpeting as well as the walls and doors. As a property investor, you should be familiar with this word because the built-up area includes the carpeted area as well as the sections enclosed by interior and exterior walls. This has a significant impact on the property’s size and price.
A title deed is a legal deed or document that serves as proof of ownership of a specific piece of property. This is an important concept to understand because when purchasing a property from a seller, you must ensure that the buyer’s name appears on the title deed. This helps to avoid legal complications and concerns throughout the registration process.
When a property is sold and registered to a new owner, the government collects a levy known as stamp duty. You should be aware of this because anytime a moveable or immovable item changes hands, the buyer is required to pay a tax to the state government to have it stamped. The stamp duty varies by state and depends on the location of the property and the type of deed. Stamp duty is normally levied on the higher of the transaction value or the circle rate. For example, if the property is worth INR 1 crore and the stamp duty is 3%, the buyer will have to pay INR 3 lakhs in stamp duty as tax.
Proof of funds is a statement from a financial institution, such as a bank, confirming that the buyer has sufficient cash to proceed with the seller’s offer. As a newbie real estate investor, you should be familiar with this word because evidence of money lowers the risk of investment.
A clear title in real estate refers to the absence of any claim or legal right against the property from others that calls into question the asset’s legal ownership. In other words, a property with a clear title is one that is free of encumbrances from third parties. A buyer who purchases a property with a clear title is entitled to complete legal protection.
After deducting property expenses, net operating income is the annual income earned from an investment property. Property tax, property management fees, and utilities are examples of such costs.
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act of the Indian Parliament that aims to safeguard homebuyers while also assisting in the growth of real estate investments. The Rajya Sabha approved the bill on March 10, 2016, and the Lok Sabha approved it on March 15, 2016.
A freehold property is one in which the owner has entire ownership of the home. In other words, it is free of any entity other than the owner’s control. The owner of such assets has unrestricted ownership and can use the land for whatever purpose they like, as long as they follow local rules. The owner is able to pass on the success property without seeking permission from anyone else.
Capital expenditure, often known as CapEx, is the amount spent on an investment property in order to extend its lifespan and enhance its value. Renovations such as rebuilding a roof, adding an extension, or repainting a room are examples of capital expenditure. These are one-time, large expenses that a buyer must invest in order to increase the property’s worth in the long run.
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