Must Know Terms – IOD, CC and Society Forms for the Real Estate Business in Mumbai!

Dec 24 2018

The real estate market in Mumbai is soaring these days with construction activity. Real estate developers are setting up their best housing and commercial projects in Mumbai due to the rising demand for various real estate occupations.

Amidst all these, if you’re in the realty business, you might come across completely unheard terms from time to time.

The lack of knowledge can contribute eventually lead to legal misinterpretation which sometimes invites problems for the concerned individuals. Especially after the inception of RERA in India in 2016, several new laws have been incorporated.

The Mumbai property scene has been littered with legal cases where RERA penalized builders for not adhering to the aforementioned laws. Hence, obtaining a keen understanding of these rules is inevitable for the participants of this business.  

The realty business in Mumbai is quite organized as opposed to other parts of the country and everything requires various permissions, allowances from the in-charge authority at various steps.

An overall understanding of these terms will help you keep things in check, whether you’re a buyer, builder, seller or agent.

Let’s start with the various types of property assets and the terms related to these.

Must know terms for the Real Estate Builders

Related to Construction

Loading Factor

Loading Factor is a mathematical number that describes how much extra area is available to a flat owner except the carpet area.

This number is decided by the extra area that is usually available to a flat owner in a housing society just around the flat. This area is also called the super built-up area.

The loading factor determines how much super built area will there be in the project and it is essential to calculating the net amount of space occupied by the construction. The factor comes in handy while explaining the additional common area in a given building.

Loading factor is usually described by a given number. Suppose a building has 25% super built-up (area in addition to the carpet area), then the loading factor becomes 1.25.

With the knowledge of the right loading factor, the developer can make accurate estimates of various little things that count in the development cycle.   

  • Super Built-up Area – It is the area available to the resident that is not included in the built-up area of the house. It usually includes the area covered in lobbies, elevator hallways, corridors etc.
  • Carpet Area – Carpet area is the enclosed area of a flat or construction available to a resident inside the flat. The carpet area is devoid of the thickness of the wall. Hence it’s marginally lesser than the actual area of the flat.
  • Common Area – In a real estate construction, common areas are those that are used by the occupants commonly. Such areas are shared spaces and no one owns them exclusively. Some examples of these are the parks, hallways etc.

Open Space Ratio

Open Space Ratio is the ratio of open space available in a land parcel to the total space available in a land parcel. Hence, it defines how much open space a real estate project has in it.

OSR is calculated by keeping several things in mind. Not all uncovered spaces can be treated as open spaces in the real estate terminology. Usually, parking lots, open parks and areas that can be directly used by the occupants are considered as open spaces.

It goes by saying that a healthy open space ration is somewhere above 80%.

Floor Space Index

Floor Space Index is the ratio of the total built-up area of the construction in ratio to the total area available for construction.

The ration basically tells that how much of the constructible area needs to be left open and is usually under the discretion of the local authorities of a locality.

It is also known by the name of Floor Area Ratio and is represented by a number. For instance, if the constructible land is 100 square meters, and the FSI value is 0.8, then construction is allowed on 80% of the land.

Per Square Foot Rate

It is the price of the property per square foot. The price is used as comparison measure to compare the prices of various properties. If a property has the same per square foot rate, then the area covered by the accommodation unit is measured.

The term encloses the built-up area in itself.  

Related to the Authorizations

Intimation of Disapproval (IOD)

Wondering what is IODIt is called the intimation of disapproval but here disapproval refers to an authorization or permit. Matter of fact, it is also called building permit or IOD in construction.

The IOD provides a clearance to the builder to start the construction process after several checks from local authorities are done. 

These checks are carried out during the site inspection process, where it is determined if the land parcel is fit for construction or not. Engineers at the Building Proposal Office determines the eligibility of the project before issuing the IOD.

The IOD certificate usually takes about a month to month and a half to complete as there are 40 different checks made before issuing. Several local authorities sanction permissions such as Fire Clearance, Permission from Traffic and Coordination Department, Environmental Department, Sewerage Department etc.

An IOD is an initial permission given to the builder for the developer and the actual architectural plan is separately checked.

Commencement Certificate (CC)

CC full form in construction is Commencement Certificate, which is given by the local authorities to a real estate builder as a sign of commencement of the construction.

In comparison to IOD CC is an official permission for the commencement of construction. The IOD is an approval for the buildable land, where CC is recognized as the letter of approval for the building.

It is handed out after the builder has submitted the architectural plan for the building and various checks have been made for the same.

From the perspective of the buyer, it’s important that you check the commencement certificate before investing in a building project. If the builder doesn’t have this certificate, chances are that the project is being developed illegally.

Building Layout Approval  

Building layout approval is used to determine the layout plan of the construction project which is checked for compliances to the existing layout laws. The terms that we used earlier such as FSI and FAR values are checked for the project, in order to approve it.

Usually, the Municipal Corporation is responsible for providing approval to the building layout of the project. The layout approval is the part of building approval procedure where the building plan is checked for compliances.

The building layout approval is mandatory before building anything on the given land. Even if you have IOD, you can’t start construction until you have building layout approval first with you as these both look at different aspects of the same thing.

Building layout approval affects the projects in the later stages as well. For instance, at the time of redevelopment, the Mumbai authorities have certain rules that work in this sector.

Recently, re-development in some parts of Mumbai has taken off as a business and the factors that control the redevelopment directly affect how this is compensated to the owner of the property.

Society Transfer Form

In a cooperative society real estate, if you wish to transfer the ownership of a flat to someone else, you have to obtain prior permission from the managing authority of the cooperative society.

In order to make this transfer a society transfer form set is used which defines the details of the transferer and the transferee in written.

You can find forms related to forms for transfer of flat in a cooperative housing society here.

New RERA Rules That Must be Kept in Mind For the Builders

In the wake of malpractices adopted by the developers in various parts of the country and to substantiate buyer interest in real estate again, RERA had released some important rules for the developers.

These rules are designed in the favor of the buyer and several penal actions have been taken against developers who have not been able to meet these rules. It makes it all the more important to follow these rules, hence, they’re worth mentioning in the article.

These new rules are primarily made to avoid delays in the delivery of real estate units to buyers which is an ongoing nuisance in the property scene.

Affidavit by the Promoter

It has been made compulsory to submit a written affidavit in order to promote properties. The promoter must include the date of completion of the project clearly in the affidavit or they’d be penalized for the same.

Recently, RERA fined seven real estate developers for not adhering to RERA rules in Maharashtra, which goes as a clear warning to everyone.

Strength of Possession Date

From a long time, the possession date has been tossed around like a vague term that often didn’t meet the expectation. But this is going to change now.

The agreement of sale will be made to carry the possession date clearly defined as per norms. If a project gets delayed and the possession date goes out of sync, the developer will be liable to pay the interest for the days elapsed in the delay.

Land Title should be Clear

Many a time, the land title of the project isn’t given by the promoter which hides the fact if the land is under some kind of dispute or not. Disputes often lead to delay of the project and in such a case, you’re not allowed to promote the offer. This has been done to keep the buyer in the right light.

Separate Account Needed

RERA has made it mandatory to open a separate bank account in a scheduled bank to deposit the money extracted from the buyers for the development of the project.    

Any money that is withdrawn from this bank account shall be used only for the development purposes or to cover the value for the land. Even the withdrawals made from this bank account shall be under scrutiny for the legitimacy of the progression of the project.

What if the rules are not followed?

These rules are made with strong conviction in mind. If the developers fail to follow any of these rules, there would be penalties imposed and the developers also stand the chance to lose the registration depending upon the gravity of the action.

In case a developer fails to deliver the project on “the possession date”, they’d be penalized for not completing the project on time and would also have to pay interest to the buyer for subsequent days of delay.

The buyer also has the right to withdraw the full amount of money from the builder in case they wish to.

Must know terms for the Real Estate Buyers

Real estate buyers are the biggest concern for the moment in Mumbai as all the focus in on them for all kinds of real estate activities. If you’re new the real estate business, you must come to know the basic terms that govern the market.

As a buyer, you must understand your rights and duties correctly so that you can make a safeguarded buying decision in the process. Here are a few terms that will help you do this.

Buyer’s Agent

When you go out to buy property, you will encounter two types of real estate agents. One would specialize in the sale of properties, and the other in the purchase. in your regards, you will need the buyer’s agent, a person who is typically expert at helping people buy properties.

These professionals are well rehearsed with all the legal formalities required for the purchase of property and would help you in finding the best deal for you.

The other type is called the listing agent, who specializes in the sale of properties, wherein most businesses who want to sell a property, enlist their real estate.  

Closing

Closing is basically the phase when the real estate transaction gets completed. It is also referred to as the closing date when the buyers complete all the formalities such as the signing of deals and the payment of the sum to the owner of the property.

When you’ve successfully bought a property and all the rights to the property have been transferred to you, you can say that you have made the closing.

Earnest Money Deposit

Earnest Money Deposit is a token money that is given to a prospective property owner to show that you’re interested in the deal and you’d like to book it before paying the full amount.

Earnest Money is different from down payment. Down payment is usally of the magnitude of 10-20% of the property but Earnest money is somewhere between 5-10% or as deemed appropriate by the property seller.

Real Estate Realtor

Realtors are fundamentally real estate brokers who facilitate real estate deals and make the necessary formalities for you in order to close a deal but not every real estate agent can be referred to as realtor.

Realtors are usually members of a real estate association that recognizes them under the national status. For instance, Spacio Realtors are ISO 9001 certified.

Certificate of Occupancy

Certificate of occupancy is obtained by the real estate developer which signifies that the property is fit for occupancy. It is issued by the MC of a locality after making several checks on the property for the developer.

As a buyer, you must seek for CO in order to ensure that the property you’re buying, especially a flat, is fit for living. The CO is given as a sign that the hygienic factors associated with the property are well amended to.

Allotment Letter

Allotment letter is provided by the real estate developer to the buyer issuing that the property has been allocated to the buyer by the developer. The property may or may not be complete at the time of allocation but the letter must be there.

It is often done after the deal has been closed between the two parties.

Encumbrance Certificate

It is a certificate that verifies any encumbrances held by the property at the time of property buying. It basically clears the property of any encumbrances that may hinder the deal or cause a delay. It is usually issued by the registrar in order to ensure the smooth flow of the deal.

If you want to protect your interest in the deal, you can obtain this encumbrance certificate so as to be sure of the deal from your end.

Joint Ownership Agreement

If you’re going to buy the property in partnership with someone else, you can sign a joint ownership agreement which will help you clearly define the rights of the other person over the property.

Joint ownership are necessary in order to safeguard your end of the deal whenever a dual arrangement is made.

Conclusion

The real estate market is full of terms that are not self-explanatory and can lead to consequences if not explained correctly. With this article, you’d be able to inform yourself of the various terms that relate to the developer and the buyer alike.

For detailed property advice and how to initiate a deal, you can contact Spacio Realtors.


A Quick Guide on Registering Property in India

Dec 21 2018

So, you’ve made the decision and found the perfect home for you. All that’s left is registering with the government to become the lawful owner of your beloved piece of property.

There is a process to do this that you must follow to invite least amount of trouble in the future and secure your new purchase without any issues. Let’s follow this procedure step by step so that you can pull this off accurately.

Pay Stamp Duty

Stamp duty is a kind of tax that is paid to the government for exercising control over some asset or a right. The stamp papers act as a living proof of the this act and serve as the legal tender for the person who commits the action.

The first step along the line is to pay the stamp duty for registration documents of your new property. The duo of Stamp Duty Act and Registration Act lay down the rules for this process. The amount to be paid for stamp duty is based on the total evaluation of the property and varies from state to state.

Registration of Documents

After the stamp duty has been paid to the government, the property will be registered to your name. There will be a separate fees for registering documents which is liable to be around 1% of the total value of the deal. It also varies from state to state.

Once registered, your documents are kept with Sub-registrar for future reference.

Evaluating Stamp Duty and Obtaining Stamp Papers

You must already be wondering that how much is the stamp duty and how to evaluate it. Here’s the process.

Firstly, obtain an estimate of the property by taking the circle rate into consideration. You will get an estimate value for the property.

Now check if the actual deal price that you have settled for is higher or the circle rate evaluation is higher. Whichever is the higher, will be considered for paying the stamp duty.

You can confirm the stamp duty percentage for your state from the registrar office and get the exact amount. After that you have to buy the stamp papers.

These papers can be bought online or offline from registered stamp vendors. This is a step based on convenience. We recommend buying in person.

Signing the Deed

Once you have the stamp papers ready with you, you would have to get them typed for the deed. The matter would depend upon the nature of the deal such as mortgage, purchase, sale etc.

After the documents are ready to be signed, you would be obliged to mark your presence at the sub-registrar’s office. The same applies to the person involved in the deal with you, i.e. the seller of the property.


Reasons to buy a property before 2017 ends

Dec 18 2018

Do you plan to buy a property anytime in the future?

If the answer is yes, you are doing the wrong thing by waiting.

Making a real estate investment is indeed a critical thing!

Frankly, it takes away all your savings at once.

However, don’t you think the returns are worth it?

We have all faced the dilemma of planning but the constraints seem more binding every month. Again, the expenses increase, and they are always 10% more than the current salary. But, still we manage to save some and we manage a lot of things too.

You can not afford to sit back home unless it is making you big bucks.

See for yourself, how much renting even a single room earns you especially in a metropolitan city. Nowadays the paying guests, and there are so many other ways that house, your one-time investment makes you money.

Yes, obviously, it is a big investment to work.

No, my friend, you wouldn’t regret it anytime in the future.

On our viewer’s request after a recent post, Spacio Realtors bring you top 6 Reasons to buy a property before 2017 ends:

1. Price is the lowest they can be anywhere in the future

Whilst the prices keep on increasing, now is the lowest they can be anytime in the future. With all the development projects, new laws, plus, increasing population, what do you expect?

Even in the past, 95% of all the times, prices have only shown a straight rise

Reading ahead, you would know why will there be a significant one in the coming future.

There has been a prominent increase in foreign investment and Indian real estate is expected to touch the US $180 Billion by 2020 according to Indian Brand Equity Foundation.

2. Influence of Demonetization

Most of the real estate transactions were made in the form of cash prior demonetization. It is no secret how much black money influenced the business, on the top of which there was zero transparency. The banning of 500 and 1000 Rupee notes, came as a shock to all.

With demonetization coming into action, there is some decrease in the property prices.

You can check the property trends of Mumbai by clicking here.

Post demonetization, the demand dropped significantly creating a bigger room for negotiations. For obvious reasons, when the demand is bigger, you can not really expect the price to be dropping.

3. Smaller interest rates

From 8.25 in 2011 to 6.25 in 2017, The Reserve Bank of India decided to keep the repo rate unchanged for the year.

A recent report by RBI, from the weekly update of statistics made, is evidence of this.

To comprehend this better, you should be very clear about the investment made in Renting and purchasing, especially for the latter. You must have a very clear picture of how much basic investment i.e. liquid money you are required to have to make a purchase and how much will it cost you later including the hidden prices.

Must Read: Rent or purchase, things to consider before making a choice.

4. You will be thankful for your decision a year from now:

Property investment, especially in Mumbai, the city which has been on the top of the list for being the most benefit in terms of Real Estate investments.

You can check this research report to know how much growth potential Mumbai, and Pune properties hold.

And, for the matter of fact, we have seen some significant rise in NRIs looking to make property investments in Mumbai specifically.

Taking into consideration the many reasons there are, I bet, you will look back in a year and be thankful for the decision you made today.

Post Demonetization, transaction value and quoted value are prophesied to be close to guideline value.

5. India’s development pace

Haven’t you heard about the GDP yet?

Indeed, it decreased in the recent past, but with the same government, it was more than expected in 2016.

Post demonetization, Income Disclosure Scheme 2016 and Make In India project, you can well imagine what is going on.

The purchasing of foreign goods became more expensive with the drop in the value of Indian Rupee, then the export price reduced.

Clearly, export is benefited!

In current fiscal, GDP dropped to 6.1%

And, this is the reason that the value of Indian Rupee is expected to increase in coming future, and GDP is expected to reach 7.1-7.7% in 2017-2018.

Our growth rate is more than that of China’s!

6. RERA empowered the buyers:

Lately, we have been posting a lot about RERA on our blog.

Needless to say, that it empowers the buyers by bringing much-needed transparency in real estate transactions.

With the Real Estate (Regulation And Development Act), 2016, buyers can finally feel secure about their investment made.

Plus, it also obligates the builder to be more conscious about what he confirms and what he delivers to the investee.

You can read our post about, Rights of home buyers under RERA, where we have discussed the many ways buyers are
benefited.


Can you buy property from your father?

Dec 17 2018

Thinking of buying property from your father or someone in blood relation?

Wondering if Indian property law allows that?


Legally, yes you can buy property from your close relative. But it doesn’t make any sense to buy property from father as its better to take GIFT from him.

In India, the Gift Tax Act has been abolished . Any  gift from close relatives which includes father is exempt from tax. ( Read proviso to section 56 (2)(vii)).

Further , in Maharashtra, there in no stamp duty on transfer of immovable property to close blood relations which includes Father-Son.

Related ArticleWhat is stamp duty?

Have more doubts or questions related to property laws and tax? At Spacio Realtors, we’ll be happy to consult you. Our real estate advisory services are ISO 9001 certified and our office is headquartered in Mumbai, India.

Spacio also has a dedicated NRI Desk to assist Non-resident Indians and PIOs with all aspects of real estate including broker services, advisory services and property management services in Mumbai.

We look forward to helping you with your real estate needs. 


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