Glossary Of Real Estate Terms

Glossary    :   A

Abatement notice

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.

Absolute title

Right of ownership of a mortgage deed, which gives the right, in certain specified circumstances, to demand repayment in full, of the outstanding debt before the due date.

A clause in a deed or contract, which provides for the early termination of an interest in land, in certain specified circumstances, thereby advancing the future interest. 

Agreement for lease/sale 

A contract to enter into a lease (or sale), which in order to be enforceable either must be evidenced in writing and signed by the person against whom action is taken for the breach of the alleged contract and there must be a sufficient act of part performance.

Alternative user value 

Value of land and buildings from a proposed use which is different from that of current use.

Amortization

Payment of a debt in equal installments of principal & interest, & not of only interest .

Anchor tenant 

One or more departments, variety chain stores or supermarkets, introduced into a shopping center in key positions to attract the shopping public into the centre for the purpose of encouraging other retailers to lease shops en route. Larger the developments more the anchors required.

Annuity 

A sum of money paid each year during the life of the recipient. An annuity is usually paid as a legal obligation under a contract or undertaking, as through a pension scheme, and may be paid in installments more frequently than once in every twelve months.

Asset valuation 

In the property market this expression is applied to the valuation of land and buildings or plant and machinery. The term is often used to describe an expert opinion on the worth of a property which may be incorporated into company accounts, where the ownership of the asset is not necessarily to be transferred but the valuation is required for the company takeovers, share flotation or mortgages.

Assignment 

Transfer of a property interest, especially a lease, from one party to another.

Atrium

Entrance hall of a building, often in multistory building and containing lifts, reception areas and plants. Originated from Roman Language & is the hall or main room of a Roman house. 

B

Balloon payment 

Repayment of a loan or bond usually, but not necessarily, the final payment which is larger than other installments.

Bare shell 

Depicts the condition of a property after completion of construction and installation of basic amenities. 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. 

Basic rent 

Monthly rental, net of maintenance and interest costs, charged or quoted by landlords for any property. The base rent comprises of only the payment made for usage of the subject property under a lease agreement. Imputed costs such as holding & fit out costs and building service charges are not usually included in the base rent. 

Bayana 

An Indian term used to denote the token money given to the landlord to informally freeze negotiations on a particular property, after the initial terms and conditions have been finalized. 

Breach of contract 

An act or omission contrary to enforce specific performance, to rescind the contract and/or to claim damages. Remedy available depending upon the nature of the breach. 

Broker/dealer 

A person or a company who acts as a mediator to bring seller and proposed buyer together to complete a transaction. 

Brokerage

Commission paid to a broker.

Building bye laws 

Local building codes framed to regulate and control the usage of land, property and areas in cities and towns. 

Building(Construction) contract 

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. 

Business center

Commercial premises used by the occupiers for a short period on fee/membership basis of the centre. Usually, a business centre charges for the full service accommodation, which is generally substantially higher than the rental of a standard office space and usually includes cost of HVAC, housekeeping, electricity, and security systems. 

Business Park 

A landscaped area containing amenities for conducting business, and different from High-tech Park or a Science Park. Building density is lower than what would be in a traditional industrial estate. Business parks are preferentially located where road, rail and air transportation are in close proximity. 

C

Capitalization

A method of calculating a final purchase price for a development using an agreed formula to convert actual, or assumed, income from initial lettings into a capitalism. Such capitalized sums may be offset against a purchasing fund's interim finance payments, any excess being paid to the developer.

In relation to a company's reserves, the conversion into capital of money, which is then distributed as a capitalization issue.

Catchment area

The area of land from which finds its way into a particular watercourse, lake or reservoir.

By analogy, the area which contains those people who can be expected to obtain goods, services, employment or other benefits from a particularly property.

More especially related to retail premises, where the success of forecasting depends on the accuracy of estimating the number of purchasers (catchment population) likely to be attracted from the different parts of the area and the average expenditure which might be expected from them.

Central business district 

The functional center around which the rest of a city is comparison shopping, office accommodation, leisure facilities, buildings for recreational use, public museums, art galleries and governmental functions. Generally the area of highest land values within a city.

Clearance area 

An area which is to be cleared of all buildings. Generally promulgated by way of a government declaration, which is normally followed by the acquisition of the land and the clearance of the area. 

Completion certificate/statement

A certificate issued by the local development authority certifying that all necessary works have been completed and that the property is fit for occupation.

Condominium 

A building or a structure of two or more units, the interior space of the individually owned and the balance of the property (both land and building) being owned in common by the owners of the individual units.

Conveyance 

A document transferring title to land from one person to another.

Current yield 

The remunerative rate of interest which is, or would be, a appropriate at the date of valuation, assuming the property to be let at its full rental value. It will be the same as the reversion yield where the reversion is to full rental value, and the same as the term yield where the rent receivable under the lease is full rental value. 

D

Developer 

An entrepreneur, who has an interest in a property, initiates its development and ensures that it is carried out as planned. This development can be for occupation or investment. He from the outset accepts the responsibility for providing the requisite funds needed to finance the whole project. 

He generally is involved in marketing of this property as well if it is as an investment to earn profits by selling developed units.

Development control 

The powers of a local planning authority to control the development and use of land, which includes inter alia:- 

-    Refusal or grant(with or without conditions)of planning/ development permissions.

-    Issue of enforcement notices.

-    Drafting of revocation, modification or discontinuance orders.

-    Demarcation of conversion areas.

Development yield 

In a valuation to ascertain a ground rent, the rate at which costs are recapitalized to find the annual deduction from the occupation rents. It comprises: 

-    an investment yield

-    an annual allowance for developers risk and profit and, in some instances

-    an annual sinking fund element

Discounted cash flow

Methodology used in investment and development appraisal whereby future inflows and outflows of cash associated with a particular project are expressed in present-day terms by discounting. The most widely used forms of DCF are the internal rates of return (IRR) and net present value (NPV). The techniques may be used for such purposes as the valuation of land and investment, the ranking of projects or their components. 

E

Effective rent 

The gross rent payable per month by the occupiers which includes the base rent, maintenance charges, imputed costs of loss of interest on security deposit and rental advance. The effective rent indicates the total cash outflow of an occupier every month on account of leasing any property. 

Escalation clause 

Specified in lease agreements wherein renewals of lease period are built in. It involves an increase in the base rent at every renewal of a lease agreement and is generally a percentage of base rent that is either pre agreed or negotiated before the renewal of the lease agreement. 

F

Fail rent 

The rent determined by a rent officer (or, on appeal, by a rent assessment committee) under a regulated & registered tenancy.

FERA 

Foreign Exchange Regulation Act ( FERA), an act to regulate payments dealing in foreign exchanges, securities, the import & export of currency and acquisition of immovable property by foreigners.

Under Section 31 (1) of the Foreign Exchange Regulation Act ( FERA) of 1973, it is mandatory for foreign corporations, which are not incorporated in India to obtain permission from the Reserve Bank Of India (RBI) to acquire, hold, transfer or dispose off in any manner

(expect by way of lease for a period not exceeding five years) any immovable property in India.

Fire certificate 

A certificate of safety from Fire required under the legislation for hotels, houses, factories, offices shops and railway premises, having more than a minimum number of employees, as specified in law. In order to obtain a fire certificate, one must apply to a fire officer, who then inspects the building and issues a list of requirements like Fire escape doors/stairways, firefighting equipment, width of approach roads etc.

Once the fire officer is satisfied that these requirements have been met, will issue the fire certificate. It enables fire officers, in the case of an emergency, to have prior knowledge of the number of people on each floor, approach routes for firemen, escape routes for occupants etc..

Fit-outs 

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

Flatted factory 

An industrial building of more than one storey, usually with two or more goods lifts, and constructed or converted for multiple occupation. The building is subdivided into small, separately occupied units which are used for manufacturing, assembling and associated storage.

Force majeure 

A force, which cannot be resisted, in other words, something beyond the control of the parties involved. It includes acts of God like earthquake, floods, storms etc.  and acts of man like Riots, strikes, arson. In many contracts and insurance policies, specific provision is made for damage or injury arising from force majeure.

For example, the financial liability of a building contractor for failure to complete by a specific date may be relieved to the extent it was caused by force majeure. This is a common clause in most property contracts.

Frontage (line) 

The full length of a plot of land or a building measured alongside the road on to which the plot or building fronts.

G

Green Field Site 

An area of land, usually on the edge of a town, city or away from substantial urban areas, hitherto undeveloped but for which development is now proposed.

H

Hi-tech Building (high Technology Building)

Primarily a modern industrial building which is particularly suited to the flexible uses and space needs of business organizations engaged in modern technologies. Such activities usually require more office or laboratory space than a traditional factory and also more sophisticated and adaptable installations for services and communications. 

High point loading 

Abnormally heavy load at a particular point. Places in a building or other structures where extra support may be required. 

HVAC 

Heating, ventilation, air-conditioning systems installed in a building to regulate temperature. This includes air conditioning plants, chillers and ducting systems, which ensure the uniform transfer of the cold or hot air, as the case may be throughout the building.

I

Indian Stamp Act, 1899 

An act, which covers the payment of stamp-duty on all Real Estate transactions to local Government. The value of the stamp duty depends on the rental payable and the lease term or the sale value as the case may be. This duty is paid by purchasing non judicial Indian Stamp Paper, on which the lease/sale agreements are documented.

Improvements 

Generally, physical changes which enhance the capital value of land or buildings. These may include additional buildings, extensions to existing buildings, installation of new services, e.g. central heating & air conditioning, woodwork, flooring etc.

On the other hand, mere replacement by a modern equivalent if something worn out would normally be regarded as a repair rather than an improvement. The distinction has legal and taxation consequences.

Institutional investors 

These include banks, pension funds, insurance companies, unit trusts and investment trusts, which are together commonly referred in the investment field as the "Institutions".

Investment yield 

The annual percentage return which is considered to be for a specific valuation in an investment being expressed as the ratio of annual net income (actual or estimated) to the capital value. It is therefore a measure of an investor's opinion about the prospects and risks attached to that investment.

The rate of interest (expressed as a percentage) at which all-future cash flows (positive and negative) must be discounted in order that the net present value of those cash flows should be equal to zero. It is found by trial and error by applying present values at different rates of interest in turn to the net cash flow. It is something called the discounted cash flow rate of return.

A good Investment Yield is that rate of interest ( expressed as a percentage) at which funded cash flow generated should be sufficient to repay the original outlay at the end of the project life.

J

Joint agent 

Two or more agents instructed by a principal to act jointly on his behalf. In the case of Real Estate agents this is normally on the basis that if any one of the agents closes a sale, other joint agent(s) will share the remuneration in agreed proportions. It is customary for the joint agents to share any commission earned on an agreed basis, irrespective of which agent effects the sale or letting.

None of these agents would be entitled to a commission if the transaction is concluded as a result of someone else's introduction. 

K

Kiosk 

A small enclosed retailed outlet, normally without toilet facilities and in a retail area. Generally located in a public concourse or other place where it may remain open only during working hours and be closed securely when market closes. Kiosks are now sometimes included in managed shopping schemes. 

L

Land assembly 

Process of creating a single Land Parcel from a number of lands, usually for eventual development or redevelopment.

This will include acquisition of individual interest and the eventual development or redevelopment, removal or discharge of any restrictive covenants or other encumbrances and obtaining physical possession, when required, from occupiers. 

Landlord 

The owner of an interest in land/building who, in consideration of a rent or other payment (e.g. a premium), grants the right to exclusive possession of whole or part of their land/building to another person for a specific or determinable period by way of a lease or tenancy.

Lease agreement 

An agreement, usually written, between the lessor and the lessee, which allows for the conveyance of property to the tenant under a contract, and confers usage and control rights to the tenant for the duration of lease. Apart from financial terms and conditions, several clauses describing the other binding terms and conditions of the agreement are also documented.

License

Lawful grant of a right to do something which would otherwise be illegal. It may be gratuitous, contractual or coupled with an interest in land. The grantor of license is the licensor and the grantee is the licensee. A gratuitous ("mere" or "bare") license can always be revoked (i.e. cancelled), but revocability of a contractual license depends on the terms of the contract.

A license coupled with an interest in land may be irrevocable and unlike the other two categories, may be binding on successors in title of the licensor.

One example of license is permission, usually required in writing, given specifically by an owner to a tenant, enabling something to be done which otherwise would be in breach of a term of the lease.

A license does not itself transfer any interest in the land but may authorize the licensee to use the licensor's land for some specific purposes as detailed in license.

Load bearing 

The capacity of an element in a building structure to support a weight in addition to its own, whether vertically or laterally. Thus a load bearing wall is one which supports part of the structure in addition to its own weight. 

M

Maintenance 

In property terms, the keeping of a building, structure or other physical feature in a specified & proper condition. The approved cost of maintenance may be deductible for income tax calculations.

Mattha 

Frontage of a building with the main road.

Mortgage 

The conveyance of a legal or equitable interest in freehold or leasehold property as security for a loan and with provision for redemption on repayment of the loan. The lender (mortgagee) has powers of recovery in the event of default by the borrower (mortgagor). A mortgage is a form of land charge and can be either legal or equitable.

N

Negotiation 

Discussion, written or otherwise, between two or more parties of different sides, the aim being to reach a common agreement.

Non conforming use 

The use of a property which does not conform to the uses allowed for the area. 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.

Net present value method

(NPV) A method used in discounted cash flow analysis to find the sum of money representing the difference between the present value of all cash inflows and outflows associated with the project by discounting each.

O

Open market value

The best price which might reasonably be expected from a property at the date of valuation, subject to any statutory assumptions which may be required.

Outgoings Costs

Incurred by the owner of an interest in property, usually calculated on a yearly basis. E.g. management, repairs, insurance, maintenance and rent payable to the holder of a superior interest, as appropriate to his contractual or other liabilities. It is prudent to make annual provision for future items involving expenditure at intervals of more than one year.

P

Patwari 

Usually denotes the person appointed by a local government or land authority to maintain and update land ownership records for a specific area as well as to undertake the collection of land taxes.

Penal rent 

A financial punishment of a tenant for failing to honor his obligation to pay rent at the proper time, taking into consideration the  highest figure being payable during the period of default.

Pre-stressed concrete 

A type of reinforced concrete in which all or some of the ordinary steel reinforcement is replaced by high-tensile steel bars or wires which are tensioned by 'pre-tensioning' or 'post-tensioning'.

The number and positioning of wires or tendons can be arranged to eliminate all tension in the concrete, thereby preventing cracking and so rendering the concrete water-tight and gas-tight as well increase in durability. Pre-stressed concrete structures have longer lives and can carry higher load.

Premium rent

A rent above the level which a property could reasonably be expected to command in the open market on normal terms. Such rents may be justified in instances where the tenant receives a present or future benefit against the market. E.g. 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.

Private treaty 

The most common method of disposal of property, in  which negotiations are carried out between the seller and prospective buyers (or their respective agents) privately and in comparative secrecy, normally without any limit on the time within which these must be completed, before contracts are exchanged.

Project management (development management) 

A role which plans, budgets, co-ordinates, monitors and controls the operational contributions of property professionals, and others, in a project involving the development of land in accordance with a client's objectives in terms of quality, cost and time.

Property management 

The range of functions concerned with looking after buildings, including collection of rents, payment of outgoings, maintenance including repair, provision of services, insurance and supervision of staff employed for services.

Property portfolio 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.

Pugree 

An Indian term used to describe an interest free security deposit given to landlords which is refundable at the expiry of the lease term to the outgoing tenant by landlord or successive tenant.

Q

Qualified Covenant 

A restriction contained in a legal document which limits the rights of a person having an interest in the land but, by its wording envisages the possibility of removing the limitation on terms agreed between the parties e.g. a covenant by a lessee not to assign or sublet without the landlord's written consent. In certain cases, such as the one quoted, statute law strengthens the applicant's position by importing such words as "such consent not to be unreasonably with-held". 

R

Rack-rent 

A rent representing the full, or nearly the full, letting value of a property on a given set of terms and conditions.

Ratable value 

The figure upon which property tax is charged in India. This value is determined by the tax authorities and thereafter the tax liability is charged to the owner(s) of the property on the basis of certain pre-determined tax slab rates.

Refurbishment 

Improvement and modernization of a building falling short of rebuilding or redevelopment and thus not normally requiring planning permission (other than for alterations to the external appearance), except in the case of listed buildings.

Registration and mutation

It is mandatory for the sale deed of all high value property transactions to be registered at the regional sub registrar's office of the local municipal authority. Thereafter, the buyer has to apply for mutation, which involves a change in the title records to incorporate the name of the buyer of the property.

In order to complete the transfer of property, it is mandatory for the seller to furnish or arrange a valid "certificate of completion" issued from the local municipal authority to the buyer.

Renewal 

As distinct from repair, this is "reconstruction of the, not necessarily the whole, subject matter".

Rent Act (s) 

Legislation promulgated by various states in India, which regulates the terms and conditions of the rental market with a view to curb profiteering and hoarding. Though its restrictive nature has led to  market inefficiencies.

Rent free period 

An agreed period, usually for several weeks or months, during which a lessee is allowed to occupy the subject premises without payment of rent in consideration for the tenant incurring expenditure on such matters as fitting out premises or carrying out repairs or improvements.

Rentable area 

The area of floor space for which rent is calculated even though other areas, within or outside the premise, are lawfully used by the tenant. For example, in an office building it is customary to exclude from the direct calculation of rent the space used for corridors, atrium, lifts and stairways.

Rental advance 

Comprises a lump sum payment to the landlord at the beginning of the lease term, which is thereafter adjusted in equal installments over the lease term against the monthly base rental payable by the tenant. The advance amount generally ranges between 3 to 18 months depending on the city, type, location of property and the period of the lease.

S

Sale and leaseback 

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.

Science park 

A development of an industrial nature suited to accommodate high technology industries, with supporting amenities. It can be close to a higher educational research establishment to provide cross-fertilization of ideas between entrepreneurs and researchers for the purpose of enabling academic knowledge to be applied to effective commercial use.

Security deposit 

Comprises of an interest free lump sum payment to the landlord at the commencement of the lease, which is refundable at the end of the lease term. Though the deposit amount varies depending on city, property type, location and the period of the lease, it may range anywhere between 2 to 18 months of monthly rental.

It is not uncommon for some landlords to provide a bank guarantee to the tenant as security for the repayment of the initial deposit amount.

Serviced accommodation 

Offices or rooms where the landlord provides a range of services within the individual premises. These Extend beyond the traditional ones associated with the maintenance and management of the building. These include furniture, telephone, broadband connection, air conditioners, refrigerator,   fax machine, room cleaning, and/or provides centralized specialized services, such as a receptionist and secretarial and communication facilities.

Shopping Mall 

A group of retail outlets designed and built with ways for pedestrians on one or more levels to form a unified whole under one roof.

Site Plans 

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

Speculator 

A person, usually a dealer or investor, who buys a property in expectation of high profits but with a risk.

Sub Leasing 

A method wherein, the primary lessee of a property has the right to further lease out a part or whole of the property to another occupier or lessee. Essentially, the right to sub lease is decided beforehand at the time of signing the main lease agreement and is with the consent of both the lessor and the lessee.

Suspended ceiling 

A ceiling, not being part of the structural framework of a building, installed below roof. Commonly used to provide space for services e.g. cables, recessed lighting and piping; to reduce the cost of heating in a room; to improve the acoustics; or to give aesthetic looks.

T

Tax clearance (37-1) 

The Income Tax Act, 1961 specifies that any lease transaction for more than 12 years or any sale transaction, above a prescribed transaction value, has to undergo a clearance process from the appellate body known as the Income Tax Appropriate Authority, constituted under the Income Tax Act.

A joint application by the parties involved in the transaction is submitted along with processing fees to the Income Tax Authority, which takes up to a maximum of three months to grant the clearance, without which the sale transaction is not complete. This procedure is popularly known as the 37-(I) clearance, which is the application form number used for this purpose.

Technology Park 

A landscaped development usually comprising of high specification office space as well as residential and retail developments, designed to encourage localization of high technology companies such as information technology, software development etc., thereby giving each the benefit of economies of scale. Usually, technology parks are located outside the inner city areas as these are quite land intensive in nature.

Tenancy

An arrangement, whether by formal lease or informal agreement, whereby the owner (the landlord) allows another (the tenant) to take exclusive possession of land in consideration for rent, with or without a premium.

Town and country planning 

The determination of policy for the development and use of land and the control of its implementations in urban and rural areas by district and country planning authorities.

Turnover rent 

A rent which is calculated as a proportion of the annual turnover of the lessee's business. Usually, it does not fall below a base rent. More commonly used in the USA, although in recent years being applied with increasing frequency in the Europe and the mature markets of Asia, especially in the case of the more profitable retail outlets.

U

User

The use or enjoyment of a property or of a right over property.A person who uses, enjoys or has a right over a property.

V

Vaastu shastra 

A traditional Indian architecture and design system, which specifies the detailed methodology of designing buildings, buying land etc. in order to maximize benefits, from the same by the occupier. This system relies in harmonizing any Real Estate development with the five elements of Indian Mythology namely air, water, earth, fire and space. 

Valuation

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

Vertical slice participation 

A method of multi-participation in a venture, usually a development, whereby each of the participants owns a separate legal interest in property concerned by way of the freehold, head lease or a subordinate interest.

The documentation normally ensures that rental and other income and /or capital receipts as well as the cost of any revenue or capital liabilities are shared by the participants in predetermined percentages related to their respective contributions, whether financial or otherwise.

W

Warehouse Premises

Designed and built for the purpose of bulk storage of raw materials or finished or partly finished goods, pending either onward transit or division into smaller batches and subsequent distribution.

Willing seller-willing buyer 

An assumption sometimes made for valuation purposes that the owner of the property concerned is willing to dispose of his interest therein and that there is at least one genuine purchaser in the market for that interest, whether or not such is actually the case on the date of valuation.

Written-down value

At a given time, the result of making one or more annual or periodic deductions for depreciation against capital cost or worth.

Y

Yield up 

To give up possession, especially by the tenant at the end of a lease.

Z

Zone 

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

Zoning 

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