The ability to provide jargon is the art of giving layman terms a complicated name! Some industries specialise in jargon – finance, construction to name a few. A non-professional, however well educated, may feel completely lost with the amount of jargon he has to deal with while attempting a real estate transaction. If you have been on the petrified side of the table, this glossary of words might help.

“Our area has an FSI of 1.33. Your flat will have a built up area of 1450 sq feet and a carpet are of 1200 sq. feet”, says one builder. How do you compare this with another one saying “Premium FSI 20%, built up area of 1400 sq feet and carpet area of 1250 sq. feet”?

Let us make sense of the terms used here –

FSI (Floor Space Index)

For the mathematically inclined Floor Space Index or Floor Area Ratio (FAR) is calculated using the formula - Total covered area on all floors of all buildings on a certain plot/Area of the plot

In plain English this means, the buildable area on a plot of land. An FSI of 1 means that the area of construction should be equal to the area of the plot—for example, a plot of 10,000 sq ft can only have a built-up area of 10,000 sq ft and no more.

An FSI of 1 can be illustrated as below:

The FSI is not common for the whole country. Municipalities and governments allow only a certain FSI depending on the geographical location, population density and certain other factors. This is to avoid problems like parking, traffic etc. that can happen if tall buildings are constructed in narrow lanes. For example, the FSI in Mumbai suburbs is 1.33, in Chennai city it is 1.5, suburbs could go right upto 2.5.

If you own a piece of land where FSI is revised upwards, the value of your land is likely to go up. Many old buildings go in for redevelopment based on the FSI revisions that happen. If you are going to purchase a new flat, it is important to be aware of the maximum permissible FSI in the locality and check with your builder whether the rules are being adhered to. This is important to stay legally safe in future.

Premium FSI refers to obtaining permission to build extra floor space by paying a premium. For eg: if the normal FSI in the area is 1.5 the builder can pay premium FSI charges (a certain % of the guideline value of land) and build area more than 1.5 times the plot area. This would help builders better utilise space where the price of land is prohibitively high, resulting in extra value for the buyer.

Built up area : When they say built up area, this includes the area inside the house plus the area occupied by the walls, lobbies and corridors, basements, atriums, in some places lift areas, staircases, generator & electricity rooms etc. Normally while purchasing a flat you will have to pay for the built up area where as you will get to occupy or use exclusively only the carpet area.

Carpet area: Carpet area is the usable area within the walls of the dwelling unit. Ever wondered why the sum total of the size of all your rooms is not the same as the so-called size of your flat for which you paid? This, you should clarify. Normally in huge societies with many common amenities, the carpet area could be as less as just 2/3rd of the built up area.

Guideline value vs. market value

Commonly encountered jargons relating to the valuation of the property are guideline value and market value.

Guideline Value of a land is the value of the land as determined by the Government, based on the facilities and infrastructure growth in that locality. The stamp duty and registration charges for registering a property deal, is based upon this Guideline Value. The Guideline Values are revised periodically to have them in sync with the Market Value. The guideline value and the market value act as pointers to each other.

Market value as the name denotes is determined by the demand and supply forces in the market and factors like type / age of property, quality of construction, location, infrastructure and amenities available, maintenance etc. Market value of the property is the price that the property commands in the open market. This will invariably be the price, which you will pay for your property.

Depending upon the location and the city the difference between guideline and market value can be low or high. Generally the difference is around 30%.

Some charges that are payable to transfer ownership of the property are stamp duty and registration charges

Stamp duty: Stamp duty is a type of tax collected by the Government. The stamp duty is paid to obtain the stamp paper on which the sale deed is written and signed by both the parties prior to registering the same. The payment of proper Stamp duty on instruments like sale deed bestows legality on them. Such instruments get evidentiary value and are admitted as evidence in Court of law. The instruments which are not properly stamped are not admitted as evidence. Stamp duty is payable usually by the transferee / purchaser, or if agreed by both the seller and buyer equally.

Registration charges: These are the fees associated with getting the legal title registered in the buyer’s name. This legal activity is conducted in the sub-registrar's office in the local court.

A charge that is payable after possession of the property and is recurrent is the Common Area Maintenance (CAM) charges

Common area maintenance charges is the specified share of certain defined costs that include maintenance, repair, replacement, inspection, improvement, operation, and insurance of the common area shares by all the residents of the building together with any costs allocated to administration and overheads. These are necessary to maintain the overall space and are usually calculated as under - (All common expenses / Gross leasable area) * Built up area of the individual dwelling unit.

(The author is CEO, BankBazaar.com)

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