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Your Best Guide to the Basics of Real Estate

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Best Guide to the Basics of Real Estate

Let’s be honest to ourselves, the specific kind of language and phrases used by Realtors and Agents leave us clueless on more occasions than we can admit. When real estate terms like built-up area, carpet area and super built-up area are spoken out loud, it usually passes over our heads, leading us into a state of uncertainty. We can’t even tell that it’s three different ways as to how one can calculate the square footage or area in a residential complex. They probably don’t sound different at all, but there actually is a massive difference between built-up and carpet area!

Being unable to tell the difference grants Developers an opportunity to take advantage of your unawareness. We’d just like to let you know that it isn’t as complex as a math equation. In fact, a little bit of light reading and you’ll turn into a pro. Here are a few basics about Real Estate that you should get yourself acquainted with.

carpet_area

Carpet Area

Carpet Area is the space in a residential complex that can be covered by actual carpet, or it could be better explained as the area of the apartment with which the thickness of the inner walls are excluded. It does not include the areas occupied by common areas such as stairs, lobby, play area, lift, etc. Therefore, carpet area makes up for the area you get to use in a residential apartment. When you are in the middle of your search for a perfect home, make sure you pay attention to the carpet area of the apartment and then base your decision around it, as that particular number will give you an estimate of the actual area you have access to. Focusing on that very number will aid in your understanding as to how you can utilize the space available in the bedroom, kitchen, living room, etc. In this day and age, many builders do not bother mentioning the carpet area in the first place, charging prices based on the super built-up and built-up area. Carpet area consists of 70% of the built-up area.

Built-Up Area

Built-Up Area

Built-up area consists of the space that follows after adding on the carpet and wall area. Here, the wall area does not imply the surface area. Instead, it consists of the thickness of the inner walls of an apartment. The area that makes up the walls comes up to around 20% of the built-up area which in turn alters the perspective. It also consists of other spaces that have been mandated by the concerned authorities, such as flower beds, dry balcony, etc. which add another 10% to the built-up area. Therefore, if a built-up area states that it consists of 12,000 square feet, at least 30% of it is not usable, making only the remaining 840 square feet permissible to use.

Super Built-Up Area

Super Built-Up Area

Super Built-up area is a builder’s BFF! 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.

Every builder has a best friend, namely the Super Built-up area. This area is calculated by adding together the common area, including the lift, corridor, lobby, etc. with the built-up area. In special cases, builders also include the amenities that are tied to the residential apartment such as the garden, pool and clubhouse into the common area. For this reason, a builder/developer charges each person based on the super built-up area, hence giving it the name of ‘saleable’ area.

Let’s consider an example – Rs. 2,000 is the rate per square foot and the super built-up area comes up to 1,200 square feet. Therefore, the base price will stand up till 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.

If there happens to be more than one apartment present on a floor, the calculation of the super built-up area is processed in a different method. Let’s just assume that this is the case.

—Apartment 1’s area comes up to 1000 square feet

—Apartment 2’s area comes up to 2000 square feet

— The complete common area would come up to 1500 square feet, for which Apartment 1’s common area share would come up to 500 sq. ft. while Apartment 2’s share would be 1000 sq. ft.

Therefore, Apartment 1’s super built-up area would come up to 1,500 square feet while Apartment 2’s super built-up area would come up to 3,000 square feet. As highlighted in this example, the super built-up area is divided based on the ratio of the apartments’ built-up areas, which in this case would be 1:2.

Seeing as how developers and builders usually base their price their residential apartments based on the super built-up or ‘saleable’ area, not knowing the vital difference between built-up and carpet area along with other terms tends to leave one fumbling around in the dark. In fact, the usable area is actually way lower than that of the super built-up area. There are builders who consider the carpet area while deciding the charge, but very rarely occurs. Almost all the developers decide the base cost based on the super built-up area, i.e. more amenities means more super built-up area.

Admittedly, there are complications when it comes to Real Estate, for which practices and rules cannot be changed. However, you would be capable of making an informed decision once you have been made aware of the various types of estimations of square footage.

Hopefully, this should clear up any confusion that exists for you, therefore, helping you to make easier questions. We’ll always be right here if you have any doubts.

Constellos 

A complex  which consists of best of served residential units mostly suites clubbed with Retail, Fitness, Office, Entertainment zones inside one premise.

Mumbai Real Estate News

Reforming The Realty Market: RERA Redefines Carpet Area

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Reforming The Realty Market

To bring consistency in the sale of flats in the real estate sector, the Maharashtra Real Estate Regulatory Authority (MahaRERA) has issued a circular, redefining the carpet area calculation and instructing the developers to adhere to this standard, refraining away from selling on the built-up area, while creating sale agreements.

The new carpet area will be the net usable floor area of an apartment with the internal partition wall but excluding the terrace, veranda, external wall and the balcony. Built up area being the sum of carpet area, wall thickness, ducts, exclusive balcony and verandas. Super built up area is the sum of built up area and common facilities like veranda, staircase, lift etc.

Despite the mandate by the Maharashtra Ownership of Flats Act, earlier there was no mechanism to enforce the carpet area selling rule. But now after the implementation of the Real Estate (Regulation & development) Act, RERA and the establishment of the regulatory authority, this rule will help buyers to get the value of their money.

Adding class to the realty sector, this reform will set a specific calculations of area measurement for every builder instead of their own definitions of built up area. Maharashtra is among the first of the states to implement RERA and fulfil all the norms set up by the Central government for a smooth transition.

These set of new rules will increase the per square foot rate in certain areas, prices of apartments should remain unchanged. Till now the built-up area, larger than the carpet area, was the basis of the calculation of the sales price, taking down the price per sq. ft. area. Now as the carpet area been deemed as the basis for the price calculation, the prices are anticipated to be raised up to retain the profit margin.

Stopping the unprincipled developers from misleading buyers, this new definition will bring more transparency in the system. With a higher loading factor, the developer can inflate the saleable area. This allows him a room to lower the rate per sq. ft. on the inflated saleable area. This can be highly misleading as consumers easily can get attracted to a seemingly better-than-market offer. However, only the loading factor has changed and not the flat size.

“We gladly receive this move by RERA as it defines carpet area as the standard. Now each builder has to walk the same path. Earlier, various builders used to confuse the buyers by ‘setting up’ their own carpet area, built up area and super built up area” said Shirish Deshpande, executive president Consumer Rights Group, Mumbai Grahak Panchyat.

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GST Real Estate

Real Estate: Revamping The Business Model

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real estate revamping business model

Real Estate has always been the top choice to create an investment. This investment was always advised to be early as possible, with a guaranteed return. But recently it has gone down a slow path as potential buyers and investors are opting to wait for a better opportunity. Real estate in India has undergone a big change, beginning with Demonetization which effectively pointed it away from cash transactions. “Demonetization coupled with the imminent implementation of RERA and GST resulted in a major slow-down in terms of real estate sales. It was a domino effect – by the time RERA was in place, it was time for GST to be implemented, so till July this year, things were very slow, across segments of Indian real estate,” explains real estate Czar Dr Niranjan Hiranandani.

Last year the number of units sold were lesser than the new residential projects. Most of the states have fallen in line at the initiation of the implementation of the Real Estate Regulation & Development Act (RERA). This landmark law had enforced the transparency and accountability requirements for developers into the system.

The Goods and Services Tax (GST) also had a major impact on how many developers run their businesses. Demonetisation have affected the older ways of working, but did not affect self-governing developers with the right products targeted at the working masses. The rest have realised it is time now to revamp their existing business models if they want to remain in business at all.

India is finally finding its affordable housing scheme in action. One crore houses are to be built in rural India by 2019, and this vital segment will now see cheaper sources of finance – including external commercial borrowings. Re-financing by National Housing Banks can give a further boost to the sector. 

The parameters for affordable housing were also revised on carpet area rather than saleable area in the four main metros and non-metros respectively. This effectively boosts the affordable housing sector across India. Moreover, the demonetization of high-value currency notes will cause land prices to ease in the next few years – especially in far-flung areas around Indian metros and the Tier-II and Tier-III cities.

The rise in wealth influx in the real estate market pertains also to the rise in jobs. The employment sector is set to increase by more than 80% by 2025 as the potential opportunities in the sector are expected at 17.2 million jobs by 2025 up from 9.2 million in 2016, showed a CREDAI-CBRE joint report. All the industries dependent on each other will see a boost Large scale projects will boost construction and inter-dependant allied industries. It will open up new micro markets and peripheral locations of metro cities. As infrastructure is essential for growth of realty market.

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Real Estate Carpet Area

Under the PM Awas Yojana Centre Increases Carpet Area Of Middle Income Group Houses

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pm awas yojana centre

On Thursday, a proposal to increase the carpet area of houses eligible for interest subsidy under the credit-linked subsidy scheme for the Middle Income Group (MIG) under the Pradhan Mantri Awas Yojana (Urban) was cleared by the Union cabinet chaired by Prime Minister Narendra Modi.

After the cabinet meeting, justice minister Ravi Shankar Prasad told reporters that from now on the carpet area of an MIG-I will be increased from 90 sq mts to up to 120 sq mts and for MIG-II category it will be from 110 sq mts to up to 150 sq mts.

Prasad further added, that the move will give buyers in MIG category a wider choice in developers’ projects and boost the sale of ready flats in the affordable housing segment.

A government statement said, “The limit of 120 square metres and 150 square metres is seen as a reasonable enhancement and would cater to the market generally scouted by the MIG belonging to the two income categories specified in the scheme”.

The credit-linked subsidy scheme (CLSS) for MIG is a pioneering step to empower the middle income group to get the benefits of an interest subsidy scheme.

Jaxay Shah, CREDAI’s President said, “Housing for All by 2022 has taken a huge leap forward by the increase in the unit size of MIG Houses under Credit Linked Subsidy Scheme. The average middle class would now be able to afford bigger and better quality homes than before in smaller towns and cities”.

The CLSS for middle income group covers two income segments, Rs 600,001 to Rs 1,200,000 for MIG-I and Rs 1,200,001 to Rs 1,800,000 for MIG-II per annum. In the MIG-1, an interest subsidy of 4% has been provided for loan amounts up to Rs 9 lakh, while in MIG-2, an interest subsidy of 3% has been provided for loan amount of Rs 12 lakh.

According to the government statement, “The interest subsidy will be calculated at 9% NPV (Net Present Value) over a maximum loan tenure of 20 years or the actual tenure, whichever is lesser. Housing loans above Rs 9 lakh and Rs 12 lakh will be at non-subsidised rates”. The CLSS for MIG would be effective up to March 31, 2019.

NAREDCO chairman Rajeev Talwar and president Niranjan Hiranandani both agreed that this move would help in meeting the aspiration of millions of MIG home buyers.

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