Archives for September 2019

Carpet Area, Built-Up Area & Super Built-Up Area the terms and jargon used by Agents and Realtors uselessly most of the time . While buying a house, terms such as carpet area, built-up area and super built-up area mostly evade our realm of understanding, or at least cause some confusion. In every residential complex, there are these three ways of calculating the area, or the square footage. They may not all sound very different, but there is in fact a BIG difference between carpet area and built-up area!

TS- RERA Licensed Real Estate Agent from Hyderabad

What is the Difference

Carpet area is the area that can actually be covered by a carpet, or the area of the apartment excluding the thickness of inner walls. Carpet area does not include the space covered by common areas such as lobby, lift, stairs, play area, etc. Carpet area is the actual area you get for use in a housing unit. So when you are in search of a house, look at the carpet area and then make your decision, because that is the number that will give you an idea of the actual space at your disposal. Focusing on the carpet area will help you understand the usable area in the kitchen, bedroom, living room, etc. Nowadays, many builders don’t even mention carpet area at first, and usually charge on the basis of built-up area or super built-up area. Carpet area is usually around 70% of the built-up area.

Built-up area is the area that comes after adding carpet area and wall area. Now, the wall area does not mean the surface area, but the thickness of the inner walls of a unit. The area constituting the walls is around 20% of the built-up area and totally changes the perspective. The built-up area also consists of other areas mandated by the authorities, such as a dry balcony, flower beds, etc., that add up to 10% of the built-up area. So when you think about it, the usable area is only 70% of the built-up area. So, if the built-up area says 1200 square feet, it means around 30% (360 square feet) is not really usable, and the actual area you will get to use is only the remaining 840 square feet.

Super Built-Up Area

It is the area calculated by adding the built-up area and common area that includes the corridor, lift lobby, lift, etc. In some cases, builders even include amenities such as a pool, garden and clubhouse in the common area. A Developer/Builder charges you on the basis of the super built-up area which is why it is also known as ‘saleable’ area.

Now let us consider this case – the rate is Rs. 2,000 per square foot and the super built-up area is 1,200 square feet, then the base cost will come up to 24 Lakhs.

When there is more than one apartment on a floor, the super built-up area is calculated in a different manner. Let us assume this is the case.

• The area of Apartment 1 is 1000 square feet
• The area of Apartment 2 is 2000 square feet
• he total common area is 1500 square feet, out of which the share of Apartment 1’s common area is 500 sq. ft. while the share of Apartment 2’s common area is 1,000 sq. ft

Then the super built-up area of Apartment 1 is 1,500 square feet and of Apartment 2 is 3,000 Square feet. The super built-up area, as seen in this example, is divided in the ratio of the apartments’ built-up areas (in this case 1:2)

Considering the fact that Builders and Developers usually price their apartments based on super built-up or ‘saleable’ area, being unaware of the fundamental difference between carpet area and built-up area and other terms leaves one running blind. Often the actual usable area is much lower than the super built-up area. Some Builders take into account the carpet area while charging you, but this is only in the rarest of the rare cases. 90% of the developers calculate the base cost on the basis of the super built-up area; the more the amenities the higher the super built-up area.

Gift Deed or a Will: Properties can be transferred to someone you love, without any consideration, by way of a gift or through a will

TS- RERA Licensed Real Estate Agent from Hyderabad

Transfer of property by way of Gift Deed

If you wish to transfer a property, so as to make the donee enjoy the property immediately, this can be done by way of a gift. You can gift a self-acquired property to anyone, as long as you are competent to contract, as per the provisions of the Indian Contract Act. Any person who is of sound mind and not a minor, can enter into any contract, as long as he is not an undischarged insolvent. An immovable property can be gifted, by executing a gift deed. You need to pay stamp duty on the market value of the property, as on the date of execution of the gift deed.

Transfer of property through a Will

A transfer of any property can also be made by way of execution of a will but the vesting of the property will take effect, after the death of the person executing the will. As per the prevalent laws, a will is neither required to be stamped, nor is it required to be registered. So, a will is the cheapest mode of transferring your property, to the persons whom you wish to.

Gift Deed versus Will: Which option should a property owner choose?

The answer to this question is difficult, as circumstances for every person are different. However, one can consider certain points, before deciding on a specific course of action. If your wish is only to ensure that the assets owned by you pass on to persons of your choice, only after death and you want to enjoy and have control over those assets during your lifetime, then, bequeathing your assets through a will is advisable. A will is also advisable when you want to ensure a smooth succession of your assets after your death and where your purpose is to let your nominees inherit your properties.

Pre-launch and a Soft-launch, Developers often use these terms but do they clarify their meanings? Here’s a guide to keep you well-informed

TS RERA Licensed Real Estate Agent from Hyderabad

Property developers often use jargon that the buyers find hard to comprehend. In this feature, we will focus on the two most common terms used in the realty market: ‘Pre-launch’ and ‘Soft-launch’. “Both are meant to attract potential buyers’ attention on the new project being launched by a developer

Pre-launch: A builder makes an announcement about his project when the approval processes are not initiated or still in progress.
Soft-launch: The approval processes are underway, ensuring all the requisite clearances and approvals.
Usually, both pre-launch and soft-launch of a project, starts with the invitation of bookings from old customers and local property agents

Pre-Launch and Soft-Launch offers: Legal validity

• Pre-launches have almost no legal validity and the risks are very high
• Soft-launches fall into a grey area, but are legal as most of the permissions have been already obtained

As there are no regulatory bills in place that can clearly define the norm on when a developer can start selling, the validity factor remains ambiguous. Whatever the case may be, seek legal opinions, and make sure you seek agreement and appropriate receipts in both the cases to protect your investments.

That said, the pre-launch involves the maximum amount of risk. Experts caution that home buyers should never invest in a property during the pre-launch phase because:

1. There is no visibility about project completion, which can lead to funds getting locked in for an extended period
2. There is no legal protection at this stage
3. The buyer can lose all the money invested in the absence of legal recourse.

The promised returns during the pre-launch stage are often high: between the 20-25% range, or even more, to attract the potential buyers. Potential home owners must be wary about the developers’ approvals as some might even pitch a pre-launch as a soft one to raise easy funds, which puts the buyers at a high risk again. Make sure that all the requisite permissions are in place and emphasise on documentary evidence. Ensure that you at least get an agreement to sell, done at this point, so that there is some legal recourse to get your money back in the event of a dispute.

Usually, it’s wealthy and large investors that conduct transactions at the pre-and soft-launch stages. If you are really looking to take advantage of a soft-launch, then opt for a reputed developer with a sound track record of delivery. Both, end-buyers and investors, can put in money during the soft launch, but with a certain amount of investigation and caution.

Agricultural Land buying, as opposed to a regular plot, requires additional due diligence. We examine the things to watch out for and the procedure to use the land for non-agricultural purposes

TS- RERA Licensed Real Estate Agent from Hyderabad

Buying a piece of land, for many, is the first step towards building one’s own home. Hence, it is important to confirm that the land has a clear and marketable title, to avoid falling into legal hassles. While buying agricultural land in India, one has to confirm that there are no disputes or legal hassles and the process of registering has to be hassle-free. Procedures for buying agricultural land vary from state to state.

In some states like Telangana, anyone can buy agricultural land, regardless of whether or not they are farmers. However in other states, like Karnataka, only registered farmers or those from farming families can buy agricultural land. Therefore, one should be aware of the rules in the state, prior to buying agricultural land. Given below are some of the points that one should consider, for buying agricultural land in India.

Title deed of the Agricultural Land

The title of the property confirms the seller’s name and also verifies whether the seller has an absolute right to sell the property. The original present deed and previous deeds, should be examined by a lawyer, to verify that the seller has not allowed access to others through this land. If there is more than one person owning the land, it is important to have the release certificate from the other participants involved, before registering the documents.

Agricultural Land Agreement

After the verification of all the documents, a written agreement on the cost, advance payment and the time within which the actual sale will take place, is made. The agreement must be drawn by a lawyer and should be signed by both the parties and two witnesses.

Stamp duty on the land

Stamp duties are government taxes and vary from state to state. A stamp duty paid shall be considered a legal document and can be admitted in court, as evidence.

Registration of the Agricultural Land

Registration is the process by which a copy of a document is recorded and the title of the immovable property is transferred in the name of the buyer, at the registrar’s office. As per the Indian Registration Act 1908, the deed should be registered at the sub-registrar’s office, within four months of the date of the execution of the document. Details such as original title deed, previous deeds, house tax receipts and two witnesses for registration of the property, should be provided in the document.

Conveyance deed or sale deed of the land

A sale deed is a document that transfers the title of the property, from the seller to the buyer. This document will help you to determine ownership of the property, where the property is located and the details such as site measurement, boundary details, etc.

Encumbrance certificate

An encumbrance certificate may be obtained from the sub-registrar’s office, for the last 13 or 30 years, to ensure that the land has no legal duties or complaints.

Measuring the land

A recognised surveyor can ensure that the measurements of the plot and its boundaries are accurate and as indicated in the title certificate.

Changing the title of the land in the village office

The entire legal procedure for the purchase of the property is completed, only if the name of the new owner is added to the village office record. An application can be made to the village office, together with a copy of the registered deed.

Purchasing land from NRI land owners

A person staying abroad can sell his or her land in India, by authorising a third party to sell the land on his or her behalf. In such cases, the power of attorney should be witnessed and duly signed by an officer in his province’s Indian embassy.

NRIs A non-resident Indian who wishes to buy a property in India, should be aware of the regulations that govern the acquisition and sale of property, as well as income earned from the property.

TS- RERA Licensed Real Estate Agent from Hyderabad

Important FEMA rules that NRIs must keep in mind

In order to attract more foreign investment, the Reserve Bank of India has made the rules simple for NRI investments. Real estate transactions fall under the purview of the Foreign Exchange Management Act (FEMA).

An NRI or person of Indian origin (PIO), as defined in FEMA, can acquire by way of purchase, any immovable property in India, other than agricultural land/plantation property/farm house. This is under a general permission that has been given by the government of India. However, no person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan, shall acquire or transfer immovable property in India, other than lease, not exceeding five years, without prior permission of the Reserve Bank

Types of properties where NRIs can invest

An NRI is allowed to invest in both residential and commercial properties in India. However, any agricultural land, farm house and plantation property can be owned, only if it is inherited or gifted to the NRI.

Financial transactions

When it comes to property transactions in India, NRIs/ PIO can make payments out of:

• Funds remitted to India through normal banking channel.
• Funds held in NRE/ FCNR (B) / NRO account maintained in India.
• No payment can be made either by traveller’s cheque or by foreign currency notes.
• No payment can be made outside India.

NRIs can earn returns from their investments in real estate, in the form of rental income and short or long-term gain and NRIs are taxed, for profit earned from real estate investments

Buying Property for investments in Hyderabad city other than one’s own require a lot of research and preparation, they can definitely be extremely profitable. Here’s an essential checklist you should follow, before proceeding

The tendency of most property investors in Hyderabad, is to focus on the areas that they actually live in. This is because they are already familiar with the locations that have highest demand and who the reliable and reputed developers are. Also, most people will have a fairly broad network of people within their city, who can advise them on potential property investments.

Nevertheless the question that arises is: How advisable or safe is it, for a non-resident to make a real estate investment in a city that he or she is not familiar with? This question becomes even more important, when one considers that lower property prices and better appreciation are in such a city’s emerging corridors, rather than its established real estate precincts. Hence, the first thing that such a prospective investor needs to do, is establish what kind of demand is driving such a location.

Buying Property: Demand drivers

The primary driver for residential demand, is job creation. If an identified city, town or periphery is seeing a lot of demand for homes from people who are attracted by a good job market, then, it can be a good residential property investment bet. The other important variable is affordability. Quite a few non-metros as well as peripheral areas of larger cities, currently qualify on these parameters.

Again taking the example of Hyderabad – this city’s economy and job market, are driven by information technology and BPO firms, its vast manufacturing belt and a thriving services sector

Where to invest?

Buyers should fully investigate they can reach RERA Licensed Real Estate Agent like us to get reliability and market standing of developers active in such a market. Although the Real Estate Regulation bill may eventually weed out all fly-by-night operators, the fact is that many unscrupulous developers have historically been active in emerging locations. Such developers may not have obtained all the necessary clearances for their projects, or even have clear ownership of their plots. They may also engage in shoddy construction and often lack the capital to complete their projects on time. Such developers often offer lower property rates, to attract demand. Investors should only patronise reputed developers who have been delivering quality projects on time, so that they can avoid unforeseen risks to their investments.

Property deal need not always culminate in the execution and registration of an agreement. Sometimes, the deal may not go through and may be abandoned halfway, after the payment of token money or even after some of the payments have been made. The deal may be cancelled by either the seller or the buyer, for any reason.

Treatment of token money under the income tax laws, if a property deal is cancelled

In case of deals for the purchase of any real estate, the buyer generally pays some amount as token money, when the other terms and conditions for the transfer of the property are agreed upon. The amount of token money may vary, from being merely a token to a substantial percentage of the value of the property. If the seller backs off from his commitment to sell his property, there are no immediate financial implications, except that the buyer gets a right to file a suit for specific performance in the courts of law. However, this is generally not resorted to.

If the buyer backs out from the deal, the seller has the right to forfeit the token money paid. With respect to such forfeited token money, the buyer cannot claim any income tax benefit, as this is treated as a capital loss under the tax laws. However, the advance money/earnest money that is forfeited, becomes an income of the seller in the year in which the deal is called off. Such forfeited earnest money is taxed under the head ‘income from other sources’ and not under the head ‘capital gains’, even though the income is received with respect to a capital asset. Before the amendment of the law in 2014, the amount of forfeited earnest money was required to be deducted from the cost of acquisition of the asset with respect to which it was received, in the year in which the asset, which is the subject matter of the deal, was sold.

Commission offered to home buyers, while it is alright to have some incentive for the loyal home buyer who recommends friends and family, exchange of a cash component, is not ethical as the referred home buyer will think that the amount should have actually been discounted with his home purchase

Word-of-mouth publicity and its by-product – referral marketing, may sound like the ideal methodology for the Indian real estate market. However, it could also be a double-edged sword. In cities, it’s quite preferable to live in a like-minded neighbourhood but it also brings into focus, the privacy concerns of home buyers. For developers, though it has the potential to be a great sales channel and brand driver.

Commission offered to home buyers, for referring other buyers because of the concept of friends and family living together or nearby, is firmly rooted in Indian traditions and history. It is not just a small town phenomenon but even expat Indians coming to metro cities like Hyderabad are rebuilding communities by populating buildings and neighbourhoods with extended families. Settling in the same building and creating a social bond, seems to be a win-win situation for all. However, this artificial creation of a neighbourhood is today, more than a social need for the home buyers.

Hence, the developers are leaving no stone unturned to make sure they create a social profile of their project, to attract buyers.

A friend’s endorsement goes a long way. They are going to believe their friends before they believe the broker. If their friend tells them it is a great project to live in and the social ambience is good, they are going to believe it. However, like with any other relationship, this ‘artificial neighbourhood’ needs to be nurtured carefully. Failing this, if one gets tempted by the developer’s offer to invite others for a price, it leads to bad blood with neighbours in the future.