Real Estate Glossary

A

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.

Anchor tenant

One or more department or variety chainstores, or supermarkets, introduced into a shopping centre in key positions to attract the shopping public into the centre for the purpose of encouraging other retailers to lease shops en route. The larger the developments the more anchors required.

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.

Agreement for lease/sale

A contract to enter into a lease (or sale), which in order to be enforceable either must be evidenced in writing and signed by the person against whom action is taken for the breach of the alleged contract and there must be a sufficient act of part performance.

Absolute title

The right of ownership of a mortgage deed, which gives the right, in certain specified circumstances, to demand repayment in full, of the outstanding debt than the due date. Or a clause in a deed or contract, which provides for the early termination of an exciting interest in land, in certain specified circumstances, thereby advancing the future interest.

Abatement notice

A notice served on the owner(s) or occupier(s) of a property from which a private nuisance arises, warning them of the intention to enter on the land in order to abate the nuisance.

Assignment

The transfer of a property interest, especially a lease, from one party to another.

Alternative user value

The value of land and buildings which reflects a prospective use which is different from that of the current use.

B

Bare shell

Depicts the condition of any property after completion of construction activity and installations of basic building services. A bare shell includes basic flooring – tiled, mosaic, cement or granite and plastered walls. Apart from this, pantry and toilet facilities may also be operational in such condition.

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.

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.

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.

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.

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.

Basic rent

A monthly rental net of maintenance and interest costs charged or quoted by landlords for any property. The base rent comprises of only the payment made for usage of the subject property under a lease agreement. Imputed costs such as holding costs, fit out costs and building service charges are not usually included in the base rent.

Bill Of Material

A parts list of material accompanying a structural drawing.

C

Clearance area

An area which is to be cleared of all buildings. Generally promulgated by way of a government declaration, which is normally followed by the acquisition of the land and the clearance of the area.

Completion certificate/statement

A statement prepared by solicitors, usually those acting for a purchaser and a vendor respectively, following the conveyance of an interest in property, giving a schedule of sums received leading to a balance being the final amount due to the vendor. In some case the statement is prepared at a later date and may show a figure recoverable by the purchaser from the vendor.

Catchment area

The area of land from which finds its way into a particular watercourse, lake or reservoir.

Central business district

The functional centre around which the rest of a city is comparison shopping, office accommodation, leisure facilities, buildings for recreational use, public museums, art galleries and governmental functions. Generally the area of highest land values within a city.

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.

Conveyance

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

Capitalisation

At a given date the conversion into the equivalent capital worth of a series of net receipts, actual or estimated, over a period.

D

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.

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 yield

In a valuation to ascertain a ground rent, the rate at which costs are decapitalised to find the annual deduction from the occupation rents. It comprises:

Development control

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

E

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.

Equity linked mortgage

A mortgage whereby the interest on the principal in part or in whole is calculated, usually yearly, by reference on the security, eg. It may reflect annual increase or possible decreases, in the annual return on, or the value of, the property in which the mortgage is secured.

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.

F

Flatted factory

An industrial building of more than one storey, usually with two or more goods lifts, and constructed or converted for multiple occupation. The building is subdivided into small, separately occupied units which are used for manufacturing, assembly and associated storage.

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.

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.

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.

Fail rent

The rent determined by a rent officer (or, on appeal, by a rent assessment committee) under a regulated tenancy and registered.

Freehold

In general parlance this is used as shorthand for the tenure of an estate in fee simple absolute in possession. Strictly speaking, however, freehold includes fee simple, entailed interests and tenancies for life.

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.

G

Green field site

An area of land, usually in the edge of a town or city or away from substantial urban areas, hitherto undeveloped but for which development is now proposed.

Greased lease back

The disposal by a freehold or leasehold owner of his interest on a property or leasehold interest where the rent payable is geared to a fixed percentage of some variables, often rack-rental value.

H

High point loading

A concentration of abnormally heavy floor-loading at one point or more. Particular places in a building or other structure where extra support may be required.

High Street

High street retail as a term is used for the primary business street of cities, which is usually a focal point for retailers. Also known as Main Street or Front Street in some countries.

Hi-tech building

(high technology building) Primarily a modern industrial building which is particularly suited to the flexible uses and space needs of business organisations engaged in modern technologies. Such activities usually require more office or laboratory space than a traditional factory and also more sophisticated and adaptable installations for services and communications.

HVAC

Refers to the heating, ventilation, air conditioning system installed in a building to regulate temperature. This includes air conditioning plants, chillers and ducting systems, which ensure the uniform transfer of the cold or hot air, as the case may be throughout the building.

I

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.

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.

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.

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.

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\”.

J

Joint agent

One or two or more agents jointly instructed by a principal to act on his behalf. In the case of estate agents this is normally on the basis that if any one of the agents effect the sale, letting or other joint agent(s) will share the remuneration in agreed proportions. None of these agents would be entitled to a commission if the transaction is concluded as a result of someone else\’s introduction.

Joint sole agent

One of two or more agents jointly instructed as the only agent entitled to represent the principal. It is customary for the joint agents to share any commission earned on an agreed basis, irrespective of which agent effects the sale or letting.

K

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.

L

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.

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.

Land assembly

The process of forming a single site from a number of lands, usually for eventual development or redevelopment. This will include acquisition of individual interest and the eventual development or redevelopment, removal or discharge of any restrictive covenants or other encumbrances and obtaining physical possession, when required, from occupiers.

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.

Load bearing

The capacity of an element in a building structure to support a weight in addition to its own, whether vertically or laterally. Thus a load bearing wall is one which supports part of the structure in addition to its own weight.

M

Mortgage

The conveyance of a legal or equitable interest in freehold or leasehold property as security for a loan and with provision for redemption on repayment of the loan. The lender (mortgagee) has powers of recovery in the event of default by the borrower (mortgagor). A mortgage is a form of land charge and can be either legal or equitable.

Mattha

Frontage of a building with the main road.

N

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.

Negotiation

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

O

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.

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.

P

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.

Project 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 portfolio management

The unified management of a group of properties which are held in one ownership. Decisions taken in respect of any issue are reached on the basis of achieving the maximum benefit for the owners, having regard to the effect on the portfolio as a whole rather than on an individual property.

Premium rent

A rent above the level which a property could reasonably be expected to command in the open market on normal terms. Such rents may be justified in instances where the tenant receives a present or future benefit against the market. Eg. in inflationary conditions where upward-only rent reviews are normally required at three-yearly intervals, the tenant may be prepared to pay a higher rent if fixed for a longer period of say, 5 years.

Pre-stressed concrete

A type of reinforced concrete in which all or some of the ordinary steel reinforcement is replaced by high-tensile steel bars or wires which are tensioned by \’pre-tensioning\’ or \’post-tensioning\’. The number and positioning of wires or tendons can be arranged to eliminate all tension in the concrete, thereby preventing cracking and so rendering the concrete water-tight and gas-tight as well as increasing in durability. Pre-stressed concrete structures can achieve greater spans and carry higher loading.

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.

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.

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.

Private treaty

The most common method of disposal of real property, in which negotiations are carried out between the vendor and prospective purchasers (or their respective agents) privately and in comparative secrecy, normally without any limit on the time within which they must be completed, before contracts are exchanged.

Patwari

Usually denotes the person appointed by a local government or land authority to maintain and update land ownership records for a specific area as well as to undertake the collection of land taxes.

Q

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\”.

R

Rentable area

The area of floor space for which rent is calculated even though other areas, within or outside the premise, are lawfully used by the tenant. For example, in an office building it is customary to exclude from the direct calculation of rent the space used for corridors, atrium and stairways.

Rent free period

An agreed period, usually for several weeks or months, during which a lessee is allowed to occupy the subject premises without payment of rent:

Renewal

As distinct from repair, this is \”reconstruction of the entirely meaning not necessarily the whole subject matter\”.

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.

Rack-rent

A rent representing the full, or nearly the full, letting value of a property on a given set of terms and conditions

Rateable value

The figure upon which property tax is charged in India. This value is determined by the tax authorities and thereafter the tax liability is charged to the owner(s) of the property on the basis of certain pre-determined tax slab rates.

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.

Rental advance

Comprises a lump sum payment to the landlord at the beginning of the lease term, which is thereafter adjusted in equal installments over the lease term against the monthly base rental payable by the tenant. The advance amount generally ranges between 3 to 18 months depending on the city, type, location of property and the period of the lease.

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.

T

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.

Turnover rent

A rent which is calculated as a proportion of the annual turnover of the lessee\’s business. Usually, it does not fall below a base rent. More commonly used in the USA, although in recent years being applied with increasing frequency in the Europe and the mature markets of Asia, especially in the case of the more profitable retail outlets.

Tenancy

Strictly speaking, the interest of a person holding property by any right or title.

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.

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.

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.

U

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.

User

The use or enjoyment of a property or of a right over property.

Urban centers

cities were classified into categories such as A, B and C and a ceiling on the maximum permissible usage on land by respective owners was set under provisions of the act.

Uplifted rent

A rent which reflects lease terms which are more beneficial to the tenant than prevailing commercial terms, eg. a higher rent to reflect, say, 14-yearly reviews, rather than the more common five-yearly reviews.

V

Vertical slice participation

A method of multi-participation in a venture, usually a development, whereby each of the participants owns a separate legal interest in the whole of the property concerned by way of the freehold, head lease or a subordinate interest. The documentation normally ensures that rental and other income and /or capital receipts as well as the cost of any revenue or capital liabilities are shared by the participants in predetermined percentages related to their respective contributions, whether financial or otherwise.

Valuation

The process of making an estimate of worth of real property or real property or other assets for a particular purpose eg.letting, purchase, sale, audit, rating, compulsory purchase or taxation. That purpose and the relevant circumstances will determine assumptions and facts that are appropriate and hence the process used.

Value

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

Vaastu shastra

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.

W

Written-down value

At a given time, the result of making one or more annual of periodic deductions for depreciation against capital cost or worth.

Willing seller-willing buyer

An assumption sometimes made for valuation purposes that the owner of the property concerned is willing to dispose of his interest therein and that there is at least one genuine purchaser in the market for that interest, whether or not such is actually the case at the date of valuation.

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.

X

Xystus

A covered colonnade, as originally used for exercise by Greek athletes. Or a garden walk, usually bordered by trees.

Y

Yield up

Give up possession, especially by the tenant at the end of a lease.

Z

Zoning

In planning terms, the dividing of an area by a local planning authority into zones for particular uses or activities.

Zone

A defined area of land or part of a building which is allocated for a particular purpose, eg. development plans may allocate areas of land for different uses or values of property may distinguish between areas of floorspace of a building and ascribe different values to them.

Credits – MoneyControl

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