Real Estate Essentials: Understanding Key Terms for New Homebuyers

By LODHA

Have you ever found yourself in the stands of a game, surrounded by passionate fans, yet feeling utterly lost because you don't understand the rules or the play unfolding before you? If so, you can empathize with the experience of many first-time homebuyers.

For seasoned real estate agents, builders or buyers, the language of escrow, amortization, and so on may roll off the tongue effortlessly. However, for those buying their first home, mention of unfamiliar real estate phrases can feel like being thrown into a game with unfamiliar rules.

Since buying a property is an expensive effort, understanding these terms is crucial for making informed decisions and ensuring a smooth home-buying process. In this guide, we'll explore 15 terms from the real estate dictionary that every first-time homebuyer should know.

Real Estate Terms to Know: Your Essential Vocabulary Guide

Here's a list of some common real estate terms and definitions that will help you easily navigate your first home-buying journey.

1. Commencement Certificate (CC)

One of the many abbreviations in real estate, a CC is an important approval for building construction that certifies that the builder has received all the official approvals and is authorised to start the work.

2. Cost Sheet

A basic real estate term is a cost sheet list that includes all the costs involved in buying an apartment, including the breakdown of apartment costs and payment schedule. Agreement value, stamp duty, additional charges, registration fees, and taxes are among the various elements.

3. Occupancy Certificate (OC)

A must in your real estate vocabulary, the occupancy certificate document certifies a building's readiness for occupancy, constructed in adherence to approved plans and local regulations. This legal document ensures property safety and is essential for selling a property at a desirable price.

4. RERA

The Real Estate (Regulation and Development) Act, which was passed by the Indian Parliament in 2016, attempts to improve accountability, transparency and efficiency in the real estate industry while also protecting the interests of homebuyers. 

5. Carpet Area

The term 'carpet area' indicates the actual living area of an apartment as measured from the inside walls. This covers the portion that can be carpeted and extends to cover balconies.

6. Built-up Area

The built-up area constitutes the overall space within a flat. It covers the carpet area, considering the wall and duct thickness. It is typically 10-15% bigger than the carpet area.

7. Floor Space Index (FSI)

Essential to any real estate glossary, the Floor Space Index (FSI) is the ratio of a building's floor area to the plot area, regulating urban density. Calculated by dividing the total floor area by the plot area, FSI varies by city rules.

8. Pre-EMI

The pre-equal monthly instalment or pre-EMI, is a real estate payment plan in which the buyer only pays the house loan interest while the home is being constructed. Once completed, regular EMIs, covering both principal and interest, commence. This is common for properties that are still under construction.

9. Earnest Money

Often called a 'good faith deposit', earnest money is a sum of money paid by a buyer to a seller to signify their commitment to a transaction. This deposit, which is often a small portion of the entire purchase price, is kept in an escrow account until the completion or cancellation of the transaction.

10. Escrow

Escrow is a process where a neutral third party, usually an escrow company, holds funds or assets during a transaction. Before releasing the money or assets to the designated party, the escrow agent makes sure that all terms in the purchase agreement are fulfilled, ensuring a safe and efficient closing procedure.

11. Fit-Out Possession

Fit-out possessions are like soft possessions and are given by developers to enable buyers to complete basic interior and civil work.

12. Preferred Location Cost (PLC)

When a homebuyer books a unit with a location advantage over others, they are required to pay an extra cost known as the preferential location price or PLC. For instance, apartments facing a park.

13. Floor Rise Cost

As the number of floors in a high-rise building increases, most developers apply an increased charge per square foot, known as floor rise cost. The cost for the first floor is lower than that for the fifth floor and is known as floor rise.

14. Amortization

Once a home loan is approved, the repayment is structured over a set period. Amortization refers to the predetermined schedule within which the borrower gradually pays off the debts over the specified duration.

15. Contingencies

A real estate agreement typically includes several contingencies. In real estate terminology, a contingency refers to a clause in the agreement outlining a condition. The contract only becomes legally binding if the specified condition is fulfilled.

In a nutshell, first-time homebuyers need to understand the above-mentioned basic real estate marketing terms. Equipped with this understanding, first-time home purchasers can confidently navigate the complexities of real estate for a successful homeownership journey.