Tag Archives: escalation clause

Real Estate Terminology 4

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Adding on to the previous set of posts, here is a collection of more terms of Real Estate.

Property Terms – D & E

Developer

An entrepreneur who has an interest in a property, initiates its development and ensures, that it 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 a land.

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.

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.

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. 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.

We will continue updating you on more such terms in the coming week.

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Know the terms about your property-Part 2

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In continuation with the previous blog on real estate terminology, this blog briefs you on the terms that will help you understand things better.

Encumbrance Certificate: A report issued by Registrar of Assurances or Sub-Registrar’s office after due verification of the relevant documents certifying that the property in question is free from all encumbrances such as mortgages, leases, easements or restrictions.

Efficiency ratio: Efficiency ratio is expressed as a share of carpet to super areas of the property.

Floor Space Index (FSI): Floor Space Index is the quotient of the ratio of the combined gross floor area of all floors excepting areas specifically exempted under these regulations to the total area of the plot.

Maintenance charges: These are charges taken by the maintenance society towards the maintenance of the property which includes costs of generator sets, security, landscaping, and common areas.

Market value: Valuation process evaluates the market value of the property. Demand and supply forces in the market and factors like type of property, quality and construction, its location, infrastructure and available maintenance are taken into consideration. Market value of the property is the price that the property commands in the open market.

Occupancy Certificate or OC: A certificate issued by the local development authority certifying that all necessary works have been completed as per the sanctioned plans and that the property is fit for occupation. The OC is issued after clearance from the water, electricity, sewerage, fire fighting authorities etc.

Registration charges: The fees associated with getting the legal title registered in your name. This legal process takes place in the sub-registrar’s office in your local court.

Super area: This is as a rule regards to the entire area of the building which includes carpet area, lobbies and corridors, walls, lifts, staircases, basements, and other atrium and utility areas.

Stamp duty: Real Estate Stamp duty is a type of tax accumulation by the Government of India. Stamp duty is established on the agreement value or on the market value whichever is greater.

Sale deed: Sale deed provides the buyer the absolute and undisputed ownership of the property. With this law, the seller transfers his right of property to the buyer. Subsequently, it is executed to the execution of the sale agreement and after compliance of various terms and conditions detailed in the agreement.

Title: The document that provides legal evidence that the person has the right to the possession of the land.

Know the terms about your property!

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It is really important to understand the real estate terminology as it helps an individual to know more about the properties. If you want to understand real estate development, you need to know the key terms used to describe properties whether you’re developing the properties from the ground up or acquiring and renovating them.

  1. Real Estate Broker –A real estate broker or real estate agent is a person who acts as an intermediary between sellers and buyers of real estate/real property and attempts to find sellers who wish to sell and buyers who wish to buy.
  1. Common Area Maintenance (CAM) – This is the amount of additional rent charged to the tenant to maintain the common areas of the property shared by tenants. Typical examples include such work as landscaping, snow removal, exterior lighting, as well as insurance and property tax.
  2. Usable Square Footage –USF is how much actual space you will be able to use. Rentable square feet is how much space you’re paying for, including shared common areas. The measurement called a load factor is the difference between RSF and USF, expressed as a percentage of USF
  3. Escalation Clause – A clause in a lease which allows the landlord to increase the rent in the future to reflect changes in expenses paid by the landlord, such as real estate taxes, operating costs, etc. This can take three forms: 1) fixed periodic increases, 2) adjustments based on the Consumer Price Index (cost-of-living increases), and/or 3) an increase tied to the increased costs of operating the property.
  4. Tenant Improvements –The real estate definition of Leasehold improvements, also known as tenant improvements (TI), are the customized alterations a building owner makes to rental space as part of a lease agreement, in order to configure the space for the needs of that particular tenant.
  5. Full Service Rent – This refers to an “all-inclusive” rent that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.

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