Basics of Real
Estate.
BY CA. RAMESH S. PRABHU
Stakeholders in Real Estate Sector
Competent
Competent
LAND Stakeholders Authority
Authority
OWNER
Financial
Financial
Intermedi
Intermedi
aries
aries
DEVELOPER
DEVELOPER Estate
EstateAgent
Agent//
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Architect/ Contractor
Contractor
CA/ /Vendor/
/Vendor/
Engineer/ Material
Material
PMC Customer/
Customer/
Supplier
Supplier
Investor
Investor
PROPERTY
Moveable Immovable
WHAT IS A “PROPERTY”
The Transfer of Property Act 1882 (“TPA”)
does not define the word “Property”.
Many other statues define the word “Property”
on the basis of their objects, e.g:
Sale of Goods Act, 1930: Property
means the general property in goods, and not
merely a special property.
WHAT IS A “PROPERTY”
Income Tax Act, 1961, Section 64 (2), Expln I : The
expression “Property” includes any interest in property, movable or
immovable, the proceeds of sale thereof and any money or investment for
the time being representing the proceeds of sale thereof and where the
property is converted into any other property by any method, such other
property.
Section 2(t) of the Securitization and
Reconstruction of Financial Assets and Enforcement
of Security Interest Act 2002 (“Securitisation Act”) defined
the word “Property” exhaustively as follows:
Property means :- (a) Immovable property; (b) Movable property
(c) Any debt or any right to receive payment of money, whether secured
or secured, (d) Receivables, whether existing or future, and (e)
Intangible assets, being know-how, patent, copyright, trade mark, licence,
franchise or any other business or commercial right of similar nature.
WHAT IS A MOVEABLE AND
IMMOVABLE PROPERTY”
TPA-1882 defines the word “Immovable Property” as
follows:
Immovable Property does not include standing crop, growing crops or grass.
General Clauses Act 1897 defines the word “Immovable
Property” as follows:
Immovable Property shall include land, benefits to arise out of land and
things attached to earth, or permanently fastened to anything attached to earth.
General Clauses Act 1897 defines the word “Movable
Property” as follows:
Movable Property shall mean any property of every description except
immovable property.
WHAT IS IMMOVABLE PROPERTY?
• Immovable object : an item of property that cannot
be moved without destroying or altering it which
is fixed to the Earth, such as land or a house.
• has a fixed address, determined by the
jurisdiction where it is located.
• According to Section 2(6) of the Registration Act,
1908, "Immovable Property includes land, building,
hereditary allowances, rights to ways, lights, ferries,
fisheries or any other benefit to arise out of land,
and things attached to the earth or permanently
fastened to anything which is attached to the earth but not
standing timber, growing crops nor grass".
Real Estate Sector
Infrastructure
LAND BUILDING
Real estate is Property comprised of land,
buildings on it and infrastructure development.
Real Estate is Immovable Property
REAL ESTATE PROJECTS
(1) Acquiring an agricultural or open
land
(2) Develop a park, hotel, farm house,
second home , industry etc.
(3) Develop Infrastructure i.e highways,
bridges, drainage etc.
(4) Develop Housing Complex or
Commercial complex or industrial
or Malls
REAL ESTATE PROJECTS
(5) Redevelopment Existing housing
projects for different types of land like
MHADA land, Collector land, Cess
Buildings, chawls, SRA, Private Land,
Tenanted buildings, CRZ land etc.
(6) Reconstruction of existing building or
carrying the major repairs or minor
repairs.
REAL ESTATE PROJECTS
(8) Interior decoration of the existing office,
house or new houses, industrial estates etc
(9) Any other projects involving the civil,
furniture work can be called as real estate
development projects.
(10) Any activity where something has to be
created without anything on it.(Creation).
CLASSIFICATION OF IMMOVABLE
PROPERTY –Real Estate ”
Interest: Freehold or Leasehold Property
Usage: (a) Residential,
(b) Commercial,
(c) Agricultural,
(d) Industrial,
(e) Special Economic Zone (SEZ) etc
Tangibility: Tangible or Intangible Property
Ownership: Private or Public or Joint or HUF property
or Cooperative
Document made to invite bids for a
project, or to accept a formal offer
Informative Document used for
Advertising and Marketing of a
particular entity or an object.
Provides all important decisions,
necessary for the buyer to arrive at a
decision.
Document brings out the intention of
both parties regarding the purpose for
which agreement is to be prepared.
Arrangement between an owner of
the land and developer where land
owner provides land and developer
undertakes construction.
Booking Amount is Quantum of Money
that buyer pays to book his property.
Margin Money is Quantum of Funds
that needs to be arranged as self-
finance or own funds.
Letter is primarily written
communication and commitment that
a developer enters into with a buyer
that a particular apartment is assigned
to him.
MOU is formal agreement between
two or more parties intending to
eliminate any dispute that may exist
between them.
Agreement is an understanding
between two or more parties for a
specific purpose.
Contract is an agreement, enforceable
in a court of Law.
Terms and conditions of a
prospective is enumerated along with
proposed consideration and details of
payment.
Sale Deed transfers right associated
from parties to another.
RM: Charge is created with Sub Registrar.
After borrower repays, title of property
given back by cancelling charge.
EM: Depositing Title Deeds in the custody
of the lender. Property is not required to
be registered with Sub-Registrar.
Agreement grants tenant license to
temporary occupation, with an option
for periodic renewal.
Legal Contract between at least two
parties that outlines confidential
material, knowledge that parties wish
to share with one another for certain
purposes, but wish to restrict access to
third parties.
Act of transferring an ownership
interest in a Real Estate Property
including land and building from one
party to another.
Buyer needs to approach
competent authority to obtain
conveyance by following requisite
procedures.
Describes the property that is leased
out, the monthly rent to be paid by
the lessee to the lessor and all tax
liabilities that may arise due to the
transaction.
Minimum value at which sale or
transfer of a plot, house, apartment or
a commercial property can be done.
Benchmark to calculate true market
value of a property in a particular area.
Estimated Price that is arrived at
when person who has fair knowledge
of the property and is willing to buy it
without any pressure.
Assessed Value is the ascertained price
arrived for the property by
Government or Private Agencies.
Generally, Assessed Value is less than
actual or market price of property.
Fees collected by Developers from
Apartment Owners in order to pay for
the cost of infrastructure required to
provide municipal services to a new
development.
Refers to Paying a Premium to the
Authority and Obtaining Permission to
build extra floor space.
Stamp Duty is a tax that is levied on
documents.
Registration is a system by which
matters concerning ownership,
possession or other rights in land can
be recorded.
Increase in the value of a capital asset
(herein real estate) that gives it a higher
worth than the price at which it was
purchased.
Gain is not realized until until the asset
is sold.
Activity done to search land records
for nay sort of encumbrances that may
be present in particular part of the
property.
Legal Document that specifies all
particulars of land.
Is a Proof for the land belonging to the
land owner and entitles him for any
development with prior permission
from local authorities.
Extract from the land register
maintained by revenue department of
the government.
Ownership of a plot including rights on
land, can be established in rural areas,
where there are limited means for it.
Mutation is transfer or change of title
entry in revenue records of local
municipal corporation.
Once after Mutation, name of current
owner appears in all property records.
Extract which one gets after registering
the document of an immovable
property.
Mentions the amount of Stamp duty
along with details of registration.
Report prepared after an extensive
title search in public records.
It provides an overview of history of
ownership, encumbrances and other
relevant description of the legal
history.
Permission received from Collector’s
office stating that land that is under
development or proposed to be
developed, is not an agricultural land.
Approval given to a developer to
develop a real estate project
mentioning all parameters to be
followed and adhered to.
Term IOD has now been changed to
IOA.
Floor Plan prepared by architect
showing number of apartments in a
particular floor along with area of each
apartment.
Completion Certificate is a document
which is issued at the end of the
construction of a property by a local
government agency.
Once the property has received its OC, it
becomes safe and legal to occupy.
Encroachment means gradually
intruding into areas of a property
beyond permissible and desired limits.
• Symbolic Possession is a procedure to
affixture a notice on the mortgaged
property due to non adherence of
financial obligation.
• Physical Possession means to exercise
actual and absolute control of a tangible
property.
Legal entity where a group of house owners
within a residential complex, usually
consisting of one or more buildings, come
together for a common cause.
Must be registered with Registrar of CHS.
Form of Real Estate, which is divided
into several units that are each
separately owned.
Common areas are jointly owned.
Rule established by an organization
or community to regulate itself, as
provided by a higher authority.
