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ganesh ji
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BASICS OF REAL ESTATES

12/04/14

05:35 PM

FSI Index:The FSI Index is the index by which the total constructible area can be calculated. It is the index by
which the land area is multiplied so as to get the constructible area. This index is fixed by the government body and
varies from area to area, such that the FSI Index near a prominent road will be significantly lower than the interiors.
Also the FSI Index will be significantly higher in the case of a redevelopment project, as the builder has to build a
rehab area also. The government gives an additional FSI, since the builder has to recover costs of constructing rehab
buildings (Redevelopment FSI Index varies from 2.5 to 2.7). An example will help to understand the FSI Index
concept better: Say land area is 100,000 sq.ft, and the FSI Index is 1.7, the constructible area can be calculated with
the equation:
C( Constructible area) = L(Land area) * F(FSI Index)
Thus from our example, we get a constructible area of 170,000 sq.ft.
Ready Reckoner Rate:The Ready Reckoner Area is the rate the Government body (MCGM in Mumbai Region)
fixes for a particular region of the city. Valuation experts calculate the value taking into consideration the various
developmental criterions of the specific region. No buyer can register a property for a lower rate than the ready
reckoner rate for the region. If a builder has to purchase additional fungible FSI, itwill be available at 60 per cent,
80 per cent and 100 per cent of the ready reckoner rates for residential, industrial and commercial premises
respectively.
Fungible FSI:As per new DC Regulation, any area near/inside an apartment, not included in the carpet & which
can be enclosed inside, for eg: flower bed area, dry area, passage etc has to be taken into consideration while
submitting approval plans, and these areas would be included in FSI. A builder can buy maximum of 35% area(in
case of residential development) as fungible FSI by paying the ready reckoner rate of the region. Do note that this is
over and above the total FSI consideration. Thus here the equation for the constructible area becomes as below:
C= L * (F+35%F)
Free of FSI: As per the new DC rules, the only areas that will not be considered inside FSI are Car Parking, Meter
rooms, DG rooms, thus being free of FSI.
Carpet Area: As per new DC rules, any area inside the apartment, and adjoining it can be considered to be the carpet
area of the apartment, this would not include the common area, but will include internal areas such balconies, dry
area, etc & passage area to the apartment.
Saleable Area Concept:In conventional terms saleable area of an apartment includes the built up area (wall
thickness + carpet area) & the common area of the floor in which the apartment is located, the common area can also
include the common lobby & lift area as per the developers discretion .Thus giving rise to the equation:
S.A (Saleable Area) = B.A (Built-up Area) + C.A (Common Area)
The thumb rule used by most developers to obtain Saleable area is Carpet Area + 40 %(Carpet Area), This 40% is
called the upward loading on Carpet Area.
FSI Efficiency:The FSI Efficiency is the index used by the builder so as to calculate efficient use of FSI in the plan.
The more the FSI Efficiency, the more the returns from the project. FSI Efficiency can be equated as below:

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FSI Efficiency = S.A (Saleable Area)/Carpet Area


New Development Control Rules:Under new DC Rules, announced by chief minister Prithviraj Chavan, in any
new construction the areas of balcony, flower beds, terraces, voids, niches, etc, will now be counted in the FSI given
to the builder. Earlier these areas were not part of the FSI granted to the builder. To compensate for the loss of free
FSI areas, the government has allowed compensatory fungible FSI to the extent of 35% for residential development
and 20% for industrial and commercial developments. Fungible FSI will be usable like any other FSI which can be
used for making flower beds, voids, etc, or can be used for constructing bigger habitable areas. No premium will be
charged for fungible FSI to be used for the rehabilitation component under redevelopment of cessed buildings.
Builder would also be able to offer 25% more parking area.
Downward Loading:Downward loading percentage calculates what percent the carpet area is as compared to the
saleable area. It is given by the below equation:
D.L (Downward Loading) = ((S.A (Saleable Area) Carpet Area) / Saleable Area) * 100
Example:Saleable Area of an apartment is 1820 Sqft, and its Carpet Area is 1081 Sqft. Thus here the Downward
Loading or D.L will be calculated as = ((1820-1081)/1820) * 100, which gives us a downward loading of approx
40%.
Upward Loading:Upward loading percentage calculates what percent the saleable area is as compared to the carpet
area. It is given by the below equation:
U.L (Upward Loading) = ((S.A (Saleable Area) Carpet Area) / Carpet Area) * 100
Example:Saleable Area of an apartment is 1820 Sqft, and its Carpet Area is 1081 Sqft. Thus here the Upward
Loading or U.L will be calculated as = ((1820-1081)/1081) * 100, which gives us an upward loading of approx 68%.

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BASICS OF REAL ESTATES

12/04/14

05:40 PM

http://indianrealtyblog.wordpress.com/2012/06/20/definition-saleable-area/

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Saleable Area Definition


How does adeveloperarrive at the saleable area for their apartments?
Its truly a magical figure for customers, since they are charged on the basis of the saleable figure. Most people think
that the architects decide upon on the saleable area, and there are also those who think that the builder just makes up
the saleable area without any consideration. Both the assumptions are not true. There is a definite scientific approach
in arriving at the saleable number. Since this post would involve certain technicalities associated with the real estate
industry, I will request the novice to read my earlier posts before reading this one.
The Three definite methods are :Loading as per Market Standards:
The percentage of loading on the carpet by various developers in a specified locality is studied, & a proportional
amount is added into the carpet area to arrive at the saleable area. People who need more understanding on the basics
terminologies like loading, carpet etc can refer to my earlier post Basics of Real Estate. For e.g., say in a Metro
city like Mumbai or Bangalore, different areas would command different percentage of loading, localities like
Andheri in Mumbai & Indira Nagar in Bangalore would command an upward loading of around 50%-60% on the
carpet. Areas where land costs are steep are bound to attract more loading on the carpet, so that the builder makes
profit. Any prospective builder in this scenario would analyse the market offerings, and would reach a loading figure
comparable to the market & which is in sync with the market scenario.
Considering Entire Constructible Area:
In this scenario, The entire constructible area, including the common area(which includes entrance lobby, service
floors, amenities, ducts, refuge floor etc) and the lobby areas(individual floor lobbies) are taken in, and the areas are
divided proportionally and added into the carpet area of each individual apartment. For eg, say a builder plans to
build 10 floors, with 2 apartments per floor. One is a 2 BHK of carpet area 600 sqft, & the other is a 3 BHK with
carpet area of 800 sqft. Lets assume the individual lobby area per floor is 400 sqft, & the total common area of the
entire building is 7000 sqft. Here the carpet area has to be added with a proportionate share of the common area &
lobby area to arrive at the saleable figure.
Lobby Area(10 Floors) = 400 x 10 = 4000 Sqft
Total Carpet Area(10 Floors, assuming no refugee floor) = (800+600) x 10 = 14000 Sqft
Total Extra Area = Total Lobby Area + Total Common Area = 11000 Sqft
Now to find the proportionate share of individual apartments,

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Saleable Area of 2 BHK = Carpet Area + ((Carpet Area/Total Carpet Area) x 100)% x Total Extra Area
~ 600 + ((600/14000) x 100)% x 11000) = 600 + 471 = 1071 Sqft
Adding Lobby Areas & 50% of Common Areas into the Carpet/Built-up
Here the methodology of option 2 will be considered, but while the entire lobby area will be taken, only 50% of
common area will be considered in the proportion.
Thus, Total Extra Area (as per the figures given earlier) = Total Lobby Area + 50% Total Common Area ~ 4000 +
3500 = 7500
Now, this figure will be added proportionately as per the technique shown in the 2nd Method into the individual
carpet areas or built-up (Built up Area ~ carpet + wall thickness + (dry area if applicable)).

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BASICS OF REAL ESTATES

12/04/14

05:45 PM

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http://indianrealtyblog.wordpress.com/2012/07/05/floor-space-index-fsi-magical-number/

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Floor Space Index (FSI): MagicalNumber


Floor space Index or FSI is truly a magical or golden number for developers across the world. Basically this index
denotes how much a developer can build at a piece of land, thus naturally how big a developer can benefit from a
particular land parcel. For the novice in real estate, FSI is basically an index, which when multiplied with the land
area gives the total built up area that the developer is allowed to build in that particular area. The Floor Space Index
is dictated by the government through its authorised agencies. It varies from area to area, and is also transferable
from one area to another. A developer who doesnt consume the whole of his FSI in one land parcel, can build
additional area in another so as to compensate for it.
FSI in Mumbai: The Floor space index in mumbai varies depending on the development ensued upon. Generally an
FSI of 1.5-1.6 is considered in the island city, and FSI of 1 in the suburbs. But for redevelopment, slum
rehabilitation, making common recreational areas, construction low range apartments etc, the Government helps
compensate the builder by providing additional FSI, so that the developer can benefit out of rehabiliating old
constructions, making more public usability areas etc. Developers can also buy an additional 35% of FSI by paying
60% ready reckoner rates, so as to build dry areas, flower beds etc. To know more about ready reckoner rates, do
refer to my older post Basics of Indian Realty.
FSI in South India:The Floor space index is in the range of 1-2 depending on whether the area falls under
metropolitan authority or village/panchayat. Buildings near main roads generally get lesser FSI, and also those near
water bodies, weak mountainous terrain etc.
FSI Example: Consider plot area to be 10000 Sq Ft, & FSI alloted for the area to be 1.5, The total areabuild ableis
simply 1.5 x 10000 = 15000 Sq Ft.

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ganesh ji
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BASICS OF REAL ESTATES

12/04/14

06:26 PM

http://indianrealtyblog.wordpress.com/2012/08/31/indian-real-estate-industry-terms/

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Indian Real Estate IndustryTerms


The idea behind this article is to make the readers understand what each real estate abbreviation/technical term
stands for. Many of you would have been perplexed when builders use terms such as OC, IOD etc. Find below
description of all major terms associated with the Real Estate Industry (mostly Mumbai region).
CC :-Commencement Certificate, i.e Permission to start the development
Developable Area :- The total area which we develop in each of our projects, including carpet area,common area,
service and storage area, car parking and other open areas on which we may undertake any development
Efficiency Ratio:- It is the ratio of the Internal Floor Area and Saleable Area.For the portion of project that has

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already been sold or leased, it is calculated on the basis of actual obligations of the respective owner or tenant. For
the portion of project that has not been sold or leased, it is based on management estimates subject to various factors,
such as prevailing market conditions, location of the project and efficiency ratios achieved in portions of the project
which have already been leased or sold.
FSI Floor Space Index :-Which means the quotient of the ratio of the combined gross floor area of all floors,
excepting areas specifically exempted, to the total area of the plot
Internal Floor Area:- Internal floor area is fixed for our Completed projects. For Ongoing and Planned projects,
internal floor area is determined on the basis of maximum FSI and assuming maximum TDRs that can be utilised in
the project (TDRs may not have been actually acquired by us at the time of this calculation).
IOA :- Intimation of Approval
IOD:- Intimation of Disapproval, a double negative document approving the building plans
LOI :- Letter of Intent, used to express intent to buy property
MCGM :- Municipal Corporation of Greater Mumbai
MHADA :- Maharashtra Housing Area Development Authority
NA Order :- Non Agricultural Order
OC :- Occupation Certificate
Occupancy Level :- The combined Saleable Area of the occupied units of a project as a percentage of the total
Saleable Area of the project available for lease
Saleable Area:- The part of the developable area related to economic interest in each property and for which the
respective owner or tenant is obliged to pay or for which we estimate that respective owner or tenant will pay
SRA :- Slum Rehabilitation Authority
TDR :- Transferable Development Rights, which means, when in certain circumstances, the development potential
of land may be separated from the land itself and may be made available to the owner of the land in the form of
transferable development rights

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ganesh ji
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BASICS OF REAL ESTATES

12/04/14

06:38 PM

http://indianrealtyblog.wordpress.com/2012/08/17/vaastu-shastra-for-apartments/

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Vaastu Shastra forApartments

The word Vaastu is derived from the sanskrit word Vaas which means dwelling. The dwelling referred to that of
both Man & God. Vaastu Shastra or in literal meaning The Science of Dwelling basically consists of rules of
planning & construction of Residences based on the cardinal directions of North, East, West & South. Asian
civilizations in general always have had sciences to dictate their dwellings since homes were considered a sacred
abode. Feng Shui in China developed 3000 years ago, almost at a similar time of the development of Vaastu Shastra
in India.
The Cardinal Directions & its influencers are as given below
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The North-East (NE) is assigned to Water :


Its the ideal place to have anything consisting of a water body, like a storage tank, even decorative aquariums &
other water themed items.
The South-East (SE) is assigned to Fire :
Ones kitchen, pantry, furnace, or boiler should be here.
The North-West (NW) is assigned to Air :
One can have a guest-room bed room or a store for finished goods .
The South-West (SW) is assigned to Earth :
Being the most stable , this is the best place for the Master Bed Room.
The Centre is assigned to Space :
Have the least possible activity in this area. Keep as few items here as possible. If you have a small apartment, place
a small coffee table.
The Cardinal Directions owe their powers due to various factors.
1) The East Direction:The East side belongs to the Lord Indra. The sun risesfrom the East & this direction is
given the first position.The principal God of the East direction is Lord Indra. Itgives prosperity and wealth.
2) The West Direction:The West direction belongs to the Lord Varuna who hascontrol and power over the rain
and water.
3) The North Direction:The principal God of this side is Kuber who hasincalculable stores of wealth and
prosperity. This direction is considered to be very auspicious, with the Godsgiving happiness and prosperity.
4) The South Direction: Lord Yama is the principal god of this direction. The South direction is thus banned for all
auspiciousfunctions.
5) The South East Direction:Agni (fire) is the principal God of this side.This direction is used for Hom
Havan ( oblations byfire to a deity in a pit) The kitchen should always be in this direction.
6) The South -West Direction:Nairuti, a demoness is the authority of this direction. Therefore,it is banned for all
auspicious functions. This direction should be filled with heavy unmovable goods. Pits, wells, septic tanks, water
storage tank, toilets or bathroomsshould not be constructed in this direction. This is because water in these
directions have the risk of getting contaminated by dark energy and thusprove harmfulto man.

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ganesh ji

BASICS OF REAL ESTATES

12/04/14

06:52 PM

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http://indianrealtyblog.wordpress.com/2012/07/23/2080-scheme-know-more/

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20:80 Scheme: KnowMore!


20:80 Scheme as some of you would have heard, is a scheme wherein a builder asks only for 20% of the total cost at
the time of booking, and the rest 80% is asked only after the project is constructed. Doesnt it sound great!. Many
people would love to invest into these Angelic builders, who play fair. Well, Know the truth below:
It involves the builder factoring in the cost of pre-emi into their launch price. Say, a builder plans to launch a project
at 11,000 p.sqft. They would launch the same at 12,000 p.sqft , with discounts(ranging from 500 psft to 1000 psft)
offered to clients who dont go ahead with the 20:80 scheme. This higher launch rate is basically factoring in the
pre-emi that the builder will pay monthly to the bank on behalf of the customer. The bank basically charges a higher
rate of interest, say 1.5% higher than the base rate (11.5% today for most banks) for the scheme towards the
customers. Builder can tie up with the bank for a period of 12, 24 or 36 months, depending on the time of
possession. The customer has to pay the balance within the term period or possession, whichever is earlier (Most
builders reveal this fact at a later stage), likewise the Builder will not get any other payment from the bank until the
expiry of the term period or possession whichever is earlier.
In the scenario of delay in possession by the builder, there are basically two options:
1. The customer has the responsibility of paying the pre-emi to the bank until possession, if the term period stated by
the builder expires & he has not given possession.
2. The builder makes the customer compulsorily sign an ADF option with the bank if he/she wants to opt for 80/20,
thus enabling the builder to get the entire 100% irrespective of the possession of the building.
Basically both the options are builder friendly.

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BASICS OF REAL ESTATES

12/04/14

11:08 PM

http://indianrealtyblog.wordpress.com/2012/06/12/save-tax-indexation-method/

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Save Tax: IndexationMethod


Found an article on indexation in the Wealth Issue of Economic times June,2012. Its a very interesting technique to
save on long term capital gain tax when you sell your property. Find Below how its done. Hope it helps!
Download COST INFLATION INDEX.
Source:Wealth, Economic Times June 2012.

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ganesh ji

BASICS OF REAL ESTATES

12/04/14

11:29 PM

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S. N.

Financial Year

Cost Index

1
2
3
4
5
6
7
8
9
10
11
12
13
14

1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95

100
109
116
125
133
140
150
161
172
182
199
223
244
259

15
16
17
18
19

1995-96
1996-97
1997-98
1998-99
1999-2000

281
305
331
351
389

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20
21
22
23
24
25
26
27
28
29
30
31

2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
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406
426
447
463
480
497
519
551
582
632
711
785
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BASICS OF REAL ESTATES

12/04/14

11:31 PM

http://indianrealtyblog.wordpress.com/2012/06/12/valuing-a-property-the-income-method/

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Valuing a Property: The IncomeMethod


With Property Priceson an upward trend, its always difficult to assess whether you are paying the right price for
the property you intend to purchase. An easy method of valuing a property is go by what the market says, say you
intend to purchase a 2 BHK apartment of 1000 sqft, and if a nearby property is selling at 9000 rs per sqft, then you
decipher a market price of +-9000 rs per sqft. But market valuations cant always give the right picture. If the area
has a larger percentage of real estate agents, the market pricing can be grossly inflated. The income method of
valuation is a better way to value a property in this case. This is how it works.
Say the market price of a 2 BHK apartment in June, 2012 is Rs. 90,00,000/-(90 Lakhs). Calculate the property
appreciation value in the area for past 10 years, lets say a conservative estimate turned out to be 50% up, if the
market conditions are favorable in the next 10 years, we can assume the same level of growth. So through the
assumption, we can say that the property will appreciate to Rs. 1,35,00,000/- (1.35 Crores) by June, 2022. Consider
a discount of 9% annually on the property value.
SalePresent Value: 13500000/(1+0.09)10 which equals Rs. 57,20,338/Nows Lets take the income that can be generated by the property in five years. Lets assume that the apartment has
been given for rent, and gives a return of Rs. 300,000/-(3 Lakh) per annum, The Annual Maintenance & Other costs
of the apartment is Rs.1,00,000/-(1 Lakh), So the present net income value is Rs.200,000/-. Assuming that the
property is not sold for 10 years, the total income value becomes:
200000/(1.09)1 + 200000/(1.09)2 + .200000/(1.09)10 which equals Rs.13,07,189/- approx.
Thus Ideal present Value through Income Method will be = Sale P.V + Income P.V, which equals
5720338+1307189 = Rs. 70,27,527/-

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BASICS OF REAL ESTATES

10

13/04/14

12:32 AM

http://indianrealtyblog.wordpress.com/2012/08/31/indian-real-estate-industry-terms/

IndianRealEstateIndustryTerms

Like received: 0
The idea behind this article is to make the readers understand what eachreal estate abbreviation/technical term stands
for. Many of you would have beenperplexed when builders use terms such as OC, IOD etc. Find below descriptionof
all major terms associated with the RealEstate Industry (mostly Mumbai region).
CC :-Commencement Certificate, i.e Permission to start the development
Developable Area :- The total area which we develop in each of our projects,including carpet area,common area,
service and storage area, car parking and other open areas onwhich we may undertake any development
Efficiency Ratio:- It is the ratio of the Internal Floor Area and SaleableArea.For the portion of project that has
already been sold or leased, itis calculated on the basis of actual obligations of the respective owner ortenant. For the
portion of project that has not been sold or leased, it isbased on management estimates subject to various factors,
such as prevailing market conditions, location ofthe project and efficiency ratios achieved in portions of the project
whichhave already been leased or sold.
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FSI Floor Space Index:-Which means the quotient of the ratio of the combined gross floor area of allfloors,
excepting areas specifically exempted, to the total area of the plot
Internal Floor Area:- Internal floor area is fixed for our Completedprojects. For Ongoing and Planned projects,
internal floor area is determinedon the basis of maximum FSI and assuming maximum TDRs that can be utilised
inthe project (TDRs may not have been actually acquired by us at the time of thiscalculation).
IOA :- Intimation of Approval
IOD:- Intimation of Disapproval, a doublenegative document approving the building plans
LOI :- Letter of Intent,used to express intent to buy property
MCGM :- Municipal Corporation of Greater Mumbai
MHADA :- Maharashtra Housing Area Development Authority
NA Order :- Non Agricultural Order
OC :- Occupation Certificate
Occupancy Level :- The combined Saleable Area of the occupied units of aproject as a percentage of the total
Saleable Area of the project available forlease
Saleable Area:- The part of the developable area related to economicinterest in each property and for which the
respective owner or tenant is obligedto pay or for which we estimate that respective owner or tenant will pay
SRA :- Slum Rehabilitation Authority
TDR :- Transferable Development Rights, which means, when in certaincircumstances, the development potential of
land may be separated from the landitself and may be made available to the owner of the land in the form
oftransferable development rights

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