Glossary

We at OpenMinds, have attempted to prepare a comprehensive property glossary to help you familiarize yourself with various terminologies/jargons used in this industry.

Absolute title: The ownership of a property free of any encumbrances

Agreement for Sale: This is the contract that once signed by the buyer and seller binds both parties to the sale and purchase of the property.

Agreement for Lease: A contract to enter into a lease, which in order to be enforceable by either parties must be evidenced in writing, duly registered and signed by both the parties.

Amenities: Features that enhance the value or desirability of a property, e.g. Swimming Pool, Garden, etc.

Amortize: To pay a debt in periodic amounts until the total amount, including any interest, is paid.

Annual Reducing Balance: In this system principal is reduced annually at the end of the year so you end up paying interest even for the portion of principal you have actually paid back

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 every twelve months.

Appraisal
When selling your house an estate agent will 'appraise' your property to determine its current value.

Appreciation
An increase in market value of the property

Arbitration
A process where disputes are settled by referring them to a fair and neutral third party called arbitrator. The disputing parties agree in advance to agree with the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.

Atrium An entrance hall of a building, often rising through a number of storeys and containing lifts, reception areas and plants. Originally the hall or chief apartment of a Roman house.

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 of 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
The refers to the transfer of ownership from one person to another. For example if you buy a leasehold property, the ownership is 'assigned' to you via the contract.

Bankruptcy
Legally declared unable to pay your debts. Bankruptcy can severely impact your credit and your ability to borrow money.

Base Rate
From July 1, 2010 banks will move to a new, more transparent regime of loan pricing by using base rate, which has replaced the Benchmark Prime Lending Rate (BPLR). It is sued for pricing of loans and is determined using an explicit formula that factors in a bank's cost of deposits, operating costs (expenses of running its branches, for instance), the cost of statutory drafts on bank funds imposed by the Reserve Bank of India (the Cash Reserve Ratio and Statutory Liquidity Ratio) and the profit margin.

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 formalised.

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

Broker/dealer
A person or company who acts as a medium of bringing owners and proposed buyers together with a view to complete a real estate transaction.

Brokerage/Commission
Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange, or lease of property.

Building bye laws
Local authority control of building standards promulgated to regulate and control the usage of land, property and areas in cities and towns.

Building 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 centre
Commercial premises usable by the occupiers for a short period on a 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 high tech, other amenities for business purposes, as distinct from high-tech park or a science park. Building density is lower than would be usual in a traditional industrial estate. Business parks are preferentially located where motorway, rail and airport communications are within a short distance.

Buyer Agent
He is an agent who represents the buyer in a real estate transaction.

Collateral
Your house is 'Collateral' when used as a guarantee that you will repay a loan to your lender. If you do not keep up with repayment your house could be sold by the lender to get back the lent money.

Completion certificate
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 (Condo)
Individual ownership of a portion of a building, with common areas shared by all owners. Maintenance fees called "assessments" are paid to the condominium association to maintain, repair, or improve the property.

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

Co-operative (Co-op)
An arrangement in which a corporation made up of residents owns a building. The buyer owns a proprietary lease, rather than real property, and a corresponding number of shares in the corporation.

Counter Offer
A new offer as to price, terms, and conditions, made in response to a prior, unacceptable offer. A counter offer terminates an original offer.

Covenant A requirement by law on the owner of a property to either do or not do something with their property

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.

Deeds
The legal documents regarding a property

Default
This is a term used when you do not do as you agreed, eg. failing to make a mortgage payment. If you fail to make mortgage payments (or default), your home could be repossessed

Deposit
In terms of mortgages a deposit is the initial lump sum payment the buyer contributes towards the total purchase price of the property. ( In case of rental )

Developer
An entrepreneur who has an interest in a property, initiates its development and ensures, that this is carried out ( for occupation, investment or dealing) and from the outset accepts the responsibility for providing or procures the requisite funds needed to finance the whole project.

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

• the refusal or grant (with or without conditions)of planning permission.
• the issue of enforcement notices.
• the making of revocation, modification or discontinuance orders.
• the grant or refusal of listed building consents.
• the designations of conversion areas.
Disbursement
This refers to actual transfer of sanctioned loan amount from the financial institution onto the buyer of the property or directly to the seller’s account.

Disclosure
Revealing what previously was private knowledge. Any statement of fact that is required by law.

Discounted cash flow analysis
Techniques 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.

Down Payment
A percentage of the purchase price, the buyer pays in cash.

Dual Agent
An agent representing both parties in a transaction

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. (language)

EMI
Equated Monthly Installment till the loan is paid back. It consists of a portion of interest and the principal

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

Escrow
The closing of a real estate transaction through a neutral third party who holds funds and/or documents for delivery after specific conditions have been met.

Facilities management
The co-ordination of many specialist disciplines to create the optimum working environment for staff.

FERA
An act to regulate certain payments dealing in foreign exchange, 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 covering matters of safety required under the legislation for hotels, boarding houses, factories, offices shops and railway premises, excluding those buildings containing less than a minimum number of employees. 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 (eg. Fire escape doors/stairways). Once the fire officer is satisfied that those requirements have been met he will issue the fire certificate. It enables fire officers, in the event of an emergency, to have prior knowledge inter alia of the permitted number of people on each floor; it also informs officials if any authorised inflammables /explosives materials are found on the premises.

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

Fixed Rate Home Loan
A mortgage which has a 'fixed' rate of interest throughout the loan tenure

Fixtures and Fittings
These are the items in a house that are a part of the sales agreement. For example lighting fixtures, bathroom fittings, carpets and so on - these should be agreed / confirmed before a sale.

Floating Rate Home Loan
As the name suggests these loans do not have a fixed rate of interest. The lending institution can change the interest rate charged on these loans with changing macroeconomic environment.

Force majeure
A force, which cannot be resisted, in other words, something beyond the control of the parties involved . It includes acts of God and acts of man, eg. 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.

Freehold
Complete ownership of a piece of land and the property that is on it

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. In the case of contiguous buildings individual frontages are usually measured to the middle of any party wall.

Gearing
This refers to using loaned funds to make investments. For example, buying a house with a small deposit and the rest with a mortgage.

Guarantor
A person who agrees to guarantee that he/she will pay a debt or loan if the person taking the loan defaults on payment.

Household Inventory
This is a list of all the items in the property and provides a record of their condition before you move in. This can be checked again on the day you move out. If, for example, the carpets were new when you moved in and stained when you moved out, you will probably have to pay for that damage out of your deposit. But if the carpets were stained when you moved in, you have a record of this and cannot be held responsible for the damage.

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, eg. central heating and air conditioning and infrastructure works. 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.

Indenture
A deed between two or more parties, each party having his own copy. Originally copies were all included in a single document from which each part was torn or cut along a wavy (intended) line.

Indian Stamp Act, 1899
A legal statute, which provides for the payment of stamp duty in case of all real estate transactions to duty to the 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.

Inheritance Tax
This is a tax which is applicable to inherited property

Inspection
An examination of a property by the buyer, agent or any other interested party

Institutional investors
These are generally taken to include banks, pension funds, insurance companies, unit trusts and investment trusts, which are together commonly referred to in the investment field as the "institutions".

Internal rate of return (IRR)
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.

Inventory
This is a listing of the contents of any given property. This can include things like kitchen utensils and garden equipment etc. As well as the condition a property is in and the structural fixtures, fittings and power points etc.

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 better the prospects and lower the risks, the lower the expected yield and thus the greater the capital value. The required yield from an investment is estimated in the light of such factors as:

• the security in real terms of the capital invested.
• the security in real terms and regularity of income.
• the ability to adjust the income to reflect market conditions.
• the complexity and cost of management.
• the ease and likely cost of realizing the capital.
• the tax position.
Joint/Several Liability
This is when there is to be more than one adult living in a rented property. The Leave & License Agreement will normally say something like they are ‘jointly and severally liable for responsible’. This means that they are all liable and individually each tenant is responsible for payment of all rent and all liabilities.

Kiosk
A small enclosed retailed outlet, normally without toilet facilities and in the retail area, frequently located in a public concourse or other place where it may remain open only during peak times and be closed securely when there are no customers. Kiosks are now sometimes included in managed shopping schemes.

Landlord
The owner of an interest in land who, in consideration of a rent or other payment (eg. a premium), grants the right to exclusive possession of the whole or part of their land 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.

Leasehold
Land or property is 'leasehold' when the owner has to pay the freeholder an annual sum of money.

Leave & License Agreement
A legal document detailing an agreement made between a property owner and those occupying their property for a specified period of time. It lists all the conditions which the latter must abide by and what the owner’s responsibilities are.

Lender
It refers to the person or company that lends money for an agreed period of time. They expect to have the money repaid along with interest.

Lessor
This is the person etc. that grants a lease.

License
The lawful grant of a right to do something which would otherwise be illegal or wrongful. 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 (ie. 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 authorise the licensee to enter the licensor's land for some specific purposes of the license; the licensor may enter the land and use it in any way not inconsistent with the rights of the licensee. However, a landlord may authorise by license some act or omission by a tenant, which would otherwise be a breach of the terms of the lease.

Lien
This is a term used for the legal right of one person to hold the property of someone else as security for a debt.

LTV
It stands for Loan to Value Ratio. It tells us what amount of housing loan one can expect as a % of the property value. For instance, if LTV is 80%, then on a property worth Rs. 1 Cr, loan of Rs. 80 lakhs can be given by the lender. The RBI & NHB (National Housing Bank) are the regulatory bodies that announce LTVs related norms.

Maintenance Charge
The society of a building charges the annual maintenance of a property which is included in the property agreement as well. This is used to keep the amenities provided in the building in good order including outside of the property, gardening, club area, etc.

Monthly Reducing balance
In this system interest reduces monthly with repayment of Principal amount

Mortgage Loan
Money borrowed from a lender to buy a property. The borrower agrees to use his or her property as security against it until the loan is repaid.

Mortgage Deed
A document which has the details of a mortgage arrangement

Mortgagor
The individual who is borrowing money for the purpose of buying a property

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

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 inflows and outflows of cash associated with the project by discounting each at a target yield.

Non conforming use
The use of a property which does not conform to the allocation of the area for planning purposes. 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.

Open market value
The best price which might reasonably be expected to be obtained at arms' length for an interest in 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. Eg. management, repairs, rates, insurance 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.

Penal rent
A financial punishment of a tenant for failing to honour his obligation to pay rent at the proper time, taking the form of a vastly higher figure being payable during the period of default.

Pre-payment Charge
This is a charge or 'fee' payable if you pay part of your mortgage loan earlier than agreed. This is used to compensate the lender for interest that would have been paid if the mortgage had run for the full time period agreed.

Processing charge
It's a fee payable to the lender on applying for the loan

Project management (development management)
The leadership 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 investment trust
A public company, having certain tax advantages and complying with rules applicable to its operation and investment activities, managed by a professional specialist team and established for the purpose of acquiring mainly shares in property companies-public or private. To such an extent, as is permitted legally, without prejudicing its beneficial tax treatment, it may invest in other securities, own property directly or undertake development. It provides shareholders with an interest in a wide ranging portfolio and the reassuring knowledge that investment policy is in the hands of experts.

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, together with negotiations with tenants or prospective tenants. The extent of and responsibility for management between landlord and tenant depend on terms of the lease(s). The landlord may delegate some or all of these functions to managing agents.

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 the successive tenant.

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 eg. 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".

Real Estate Investment Trust
A legally constituted organisation (entitled to preferential tax treatment) which enables investors to own and transfer shares of an interest in a property or properties; the shares can be dealt with in a manner similar to corporate stock. In order to qualify, a trust must be formed by at least 100 shareholders and invest most of its capital in real estate loans or properties and receive income from them. The special feature is that such a trust reduces its own taxable income by a distribution to shareholders with no tax deducted, but this is taxable income in the hands of shareholders according to their own tax status.

References
This is what is done to check a potential tenant’s suitability to rent a property. Such things as contacting previous landlords, present employer and doing a general credit check can come under this category.

Refurbishment
Improvement and modernisation 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 entirely meaning not necessarily the whole subject matter"

Rent
This is price paid, usually monthly, for occupying someone else’s property by the person using it to the property owner.

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 not allowed owners to enjoy economic returns from same categories of property, thereby allowing market inefficiencies.

ROI
Return On Investment - how much returns you get out of the amount of money that you put in

Security Deposit
Comprises of an interest free lump sum refundable 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 6 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.The owner is under an obligation to return this amount when the property is vacated, after deducting any amount due to him.

Services/Utilities
This covers thins like gas, electric and water. In most cases the tenant pays for these

Serviced accommodation
Suites of offices or rooms where the landlord provides a range of services within the individual premises extending beyond the traditional ones associated with the maintenance and management of the building itself or the operation and maintenance of the installation or plant therein eg. furniture, telephone, fax machine, room cleaning, and/or provides centralised specialised 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 extent of the land included in a particular parcel. It may also show any existing buildings or the proposed layout of a development.

Sole Selling Rights
This is where one agent has complete control over the sale of a particular property. This agent is generally entitled to a fee.

Stamp Duty
Tax paid to the government on the purchase of a property. It is charged as a percentage of the agreement value with a cap on the maximum amount.

Studio flat/apartment
This is a flat or an apartment with the bedroom/living room all in one. It will normally have either a separate kitchen or a kitchen in the corner of the main room. It will still have a separate bathroom and toilet.

Sub-agent
A salesperson who works for an agent

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.

Tax clearance (37-1)
The Income Tax Act, 1961 specifies that any lease transaction for not less than 12 years or any sale transaction, above a prescribed transaction value limit tax, 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 upto 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.

Teaser home loans
A home loan with low interest rate in the initial period, may be 2-3 years with a clause to reset the interest rate after the end of initial pre-determined timeframe to the then prevailing market interest rate.

Technology Park
A landscaped development usually comprising of high specification office space as well as residential and retail developments, designed to encourage localisation 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
1. Strictly speaking, the interest of a person holding property by any right or title.

2. More usually, an arrangement, whether by formal lease or informal agreement, whereby 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, either:

• for an agreed period of
• on a periodic basis until formally terminated

Tenant's improvements
Improvements to land or buildings to meet the needs of and carried out wholly or partly at the expense of the tenant.

Title
The legal right to ownership of a property

Title Deeds
A Document that shows ownership of a property

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.

Urban Land Ceiling and Regulation Act (ULCRA)
A legislation promulgated in 1976 as a social equity measure with a view to curb profiteering and hoarding in the urban land market as well as prevent urban congestion.

Vaastushastra
A traditional Indian architecture and design system, which specifies the detailed methodology of designing buildings, buying land etc. in order to maximise benefits, from the same for the occupier. This system relies in harmonising any real estate development with the five elements of Indian Mythology namely air, water, earth, fire and space.

Vacant Possession
This is when the property is vacant. The previous occupants of the property must vacate the property before you move in.

Valuation
A service by an estate agent or independent expert to determine the value of a property in the current market

Value
The price that might an interested in property or some other asset might reasonably be expected to fetch if disposed of at right (language)

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.