Understanding Key Terminologies in Indian Real Estate: From Enemy Properties to Fractional Ownership | Nikhil Pattani
The Indian real estate industry is filled with technical jargon and concepts that can be difficult to navigate, especially for new buyers, investors, or developers.
1. Enemy Properties
Enemy Properties refer to the properties left behind by people who migrated to Pakistan or China following wars between India and these nations. After partition, the Indian government seized these properties under the Enemy Property Act of 1968. The government of India continues to maintain ownership of these properties through the Custodian of Enemy Property for India (CEPI). Enemy properties cannot be sold or transferred without government approval.
Relevance in Real Estate: These properties remain a legal gray area for buyers and developers as they require extensive permissions and can’t be treated like ordinary assets.
2. Pagdi System
The Pagdi System is a rental system that is unique to India, especially prevalent in older parts of Mumbai and other metros. In this system, tenants pay a substantial one-time deposit to the landlord but are then charged extremely low rents. In return, the tenant receives certain ownership rights and may even sub-let the property. However, the landlord maintains ownership of the building.
Relevance in Real Estate: Redevelopment of old Pagdi properties has become a lucrative business for developers, as they are often situated in prime locations with the potential for new, high-rise residential or commercial buildings.
3. Anchor Tenants
An Anchor Tenant is the main or most important tenant in a commercial property, typically a large retail chain, supermarket, or a well-known brand that draws significant foot traffic to the location. Shopping malls and large commercial buildings rely on anchor tenants to attract other businesses and increase the property’s overall value.
Relevance in Real Estate: Anchor tenants usually receive favorable leasing terms as they play a crucial role in attracting smaller tenants and boosting the economic viability of the commercial space.
4. Corpus Fund
The Corpus Fund in real estate refers to a fund collected from residents or owners of a housing society or building to cover long-term expenses such as maintenance, repairs, and major upgrades. This fund is collected as part of the initial payment when purchasing a flat or unit.
Relevance in Real Estate: A well-managed corpus fund ensures that the housing society has enough reserves to cover future repairs or upgrades, reducing the financial burden on residents.
5. House Hacking
House Hacking refers to purchasing a property and using part of it to generate income, typically by renting out one or more rooms or units. This strategy allows homeowners to reduce their mortgage burden or cover expenses.
Relevance in Real Estate: House hacking has become popular among first-time buyers who want to make their property investment more affordable by generating passive income through rent.
6. Reverse Mortgage
A Reverse Mortgage is a financial product where senior citizens (above 60 years old) can borrow money against the value of their home while still living in it. The bank provides a steady income to the homeowner in exchange for eventual ownership of the property after the borrower’s death, or the sale of the property upon default.
Relevance in Real Estate: Reverse mortgages provide a way for elderly homeowners to unlock the value of their homes for daily living expenses, without having to sell their property.
7. Joint Venture (JV)
A Joint Venture (JV) in real estate involves two or more parties (such as a developer and a landowner) partnering to develop a property. The landowner provides the land, while the developer takes care of the construction, financing, and sales.
Relevance in Real Estate: JVs allow for the pooling of resources and expertise, making it easier for large projects to be undertaken without the burden falling entirely on one party.
8. Intimation of Disapproval (IOD)
The IOD is a provisional approval issued by local authorities, such as the municipal corporation, for real estate projects. It gives developers the green light to start work, provided they meet certain conditions and obtain further permissions.
Relevance in Real Estate: Developers cannot commence construction without obtaining an IOD, making it a crucial document in the real estate development process.
9. Share Certificate
A Share Certificate is a document issued by a housing society to a member, indicating ownership of shares in the society. In most cooperative housing societies, members are issued share certificates as proof of their stake in the society.
Relevance in Real Estate: Share certificates are crucial for housing society members as they represent their legal ownership rights and entitle them to vote in society matters.
10. Coastal Regulation Zone (CRZ)
The Coastal Regulation Zone (CRZ) rules regulate construction activities along India’s coastline to protect the environment. These rules restrict real estate development within a certain distance from the coastline.
Relevance in Real Estate: Developers must adhere to CRZ guidelines when constructing properties near coastal areas. Violating CRZ norms can lead to penalties, project cancellations, or demolition of properties.
11. Real Estate Investment Trusts (REITs)
REITs are investment vehicles that allow people to invest in real estate without actually buying property. They pool money from many investors to invest in income-generating real estate assets like commercial properties, shopping malls, and office buildings. Investors earn returns based on rental income or property appreciation.
Relevance in Real Estate: REITs have made real estate investment accessible to a broader audience by allowing small investors to benefit from high-value commercial real estate.
12. Fractional Ownership
Fractional Ownership is a method of property ownership where multiple individuals own a percentage of a property. This is common in high-value real estate where the cost of ownership is shared among multiple investors.
Relevance in Real Estate: Fractional ownership allows investors to own and profit from luxury properties or commercial real estate without having to bear the full financial burden.
13. Agreement Value
The Agreement Value refers to the final price agreed upon by the buyer and seller for a real estate property. This is the value that is mentioned in the sale agreement and is the basis for calculating taxes and other legal fees, such as stamp duty and registration charges.
Relevance in Real Estate: The agreement value determines how much tax needs to be paid and is an important figure in ensuring a legally sound real estate transaction.
Understanding the terminology used in the real estate industry is essential for navigating the complexities of the Indian property market. Whether you're an investor, a first-time buyer, or a developer, these terms can help you better grasp the intricacies of transactions, legalities, and financial aspects.
Nikhil Pattani, the brains behind Destiniva Realty and Scholars' Takshashila, is shaking up the real estate world with 28 years of game-changing expertise across India and the UAE. Known for his bold sustainability moves, like launching India’s first Green Realtor Certification, Nikhil has helped 3,000+ families find their dream homes. With his ‘Sales Chanakya’ smarts and 1 lakh-word real estate manifesto, he's setting new rules for the industry. Ready to see what the future of real estate looks like? Nikhil's already built it.
Destiniva Realty, Who??
Destiniva Realty is a trailblazing real estate firm reshaping India's property landscape with innovative solutions and a passion for excellence. From sustainable projects to top-tier client service, they deliver value that lasts. With a forward-thinking approach and a dynamic team, Destiniva is setting new benchmarks in the industry. Ready to unlock the future of real estate? Destiniva has the key!
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