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B
Balloon Payment
A repayment of a loan bond, usually but
not necessarily the final repayment, which is
larger in amount than other installments.
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.
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 formalized.
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.
Broker/Dealer
A person or company who acts as a medium
of bringing owners and proposed buyers together
with a view to complete a real estate transaction.
Brokerage
Commission paid to a broker.
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.
Buy-Out Rate
In a funding agreement between a developer
and a prospective purchaser, the pre-determined
investment yield which will be used to capitalize
the annual income receivable at the time of sale
to determine the buy out price.
C
Capitalization
At a given date the conversion into the
equivalent capital worth of a series of net receipts,
actual or estimated, over a period.
Clearance Area
An area that 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 certificate issued by the local development
authority certifying that all necessary works
have been completed and that the property is fit
for occupation.
Conveyance
A document transferring title to land
from one person to another.
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.
D
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 Control
The powers of a local planning authority
to control the development and use of land, which
includes inter alia, a. the refusal or grant (with
or without conditions) of planning permission,
b. the issue of enforcement notices, c. the making
of revocation, modification or discontinuance
orders, d. the grant or refusal of listed building
consents and e. the designations of conversion
areas.
Development Yield
In a valuation to ascertain a ground rent,
the rate at which costs are de-capitalised 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
rate 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.
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, e.g. 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
A 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 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
Facilities Management
The coordination of many specialist disciplines
to create the optimum working environment for
staff.
Fair Rent
The rent determined by a rent officer
(or, on appeal, by a rent assessment committee)
under a regulated tenancy and registered.
FEMA
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 Management Act (FEMA) 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.
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 certificate,
one must apply to a fire officer, who then inspects
the building and issues a list of requirements
(e.g. Fire doors). 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 authorized
inflammables /explosives materials on the premises.
Fit Outs
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 other, in order to make the property fit
for usage.
Force Majeure
A force, which cannot be resisted, in
other words, something beyond the control of the
parties involved. It includes acts of God and
acts of man, e.g. Riots, strikes, arson. In many
contracts and insurance policies, specific provision
is made for damage or injury arising from force
majeure. For example, the financial liability
of a building contractor for failure to complete
by a specific date may be relieved to the extent
it was caused be force majeure. This is a common
clause in most property contracts.
Foreclosure
The legal process by which a mortgagee
can sell the mortgagors interest in the property
to satisfy debt.
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.
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.
G
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.
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.
Gross External Area
(GEA)
The aggregate superficial area of a building
taking each floor into account. As described in
the RICS/ISVA Code of Measuring Practice (UK),
this includes: external walls and projections,
internal walls and partitions, columns, piers,
chimney-breasts, stairwells, and lift wells, tank
and plant rooms, fuel stores whether or not above
main roof level and open-sided covered areas and
enclosed car-parking areas, terraces etc.
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.
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
was torn or cut along a wavy (intended) line.
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".
Investment Yield
The annual percentage return, which is
considered to be for a specific valuation in an
investment being expressed as the ratio of annual
net income (actual or estimated) to the capital
value. It is therefore a measure of an investor's
opinion about the prospects and risks attached
to that investment. The better the prospects and
lower the risks, the lower the expected yield
and thus the greater the capital value. The required
yield from an investment is estimated in the light
of such factor as -
>> the security in real terms of the capital invested,
>> the security in real terms and regularity of
income,
>> the ability to adjust the income to reflect
market conditions,
>> the complexity and cost of management,
>> the ease and likely cost of realizing the capital
and
>> the tax position.
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.
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 agents 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.
L
Land Assembly
The process of forming a single site from
a number of land, usually for eventual development
or redevelopment. This will include acquisition
of individual interest the eventual development
or redevelopment. This will include acquisition
of the individual interests, removal or discharge
of any restrictive covenants or other encumbrances
and obtaining physical possession, when required,
from occupiers.
Landlord
The owner of an interest in land who,
in consideration of a rent or other payment (e.g.
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.
Lease Agreement
An agreement, usually written, between
the lessor and the lessee, who 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.
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 (i.e. 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. One example
of license is permission, usually required in
writing, given specifically by an owner to a tenant,
enabling something to be done which otherwise
would be in breach of a term of the lease. A license
does not itself transfer any interest in the land
but may authorize the licensee to enter the licensor's
land for some specific purposes of the license;
the licensor may enter the land and use it in
any way not inconsistent with the rights of the
licensee. However, a landlord may authorize by
license some act or omission by a tenant, which
would otherwise be a breach of the terms of the
lease.
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
Maintenance
In property parlance, the keeping of a
building, structure or other physical feature
in a specified e.g. Wind and weather tight, condition.
The approved cost of maintenance may be deductible
for income taxation.
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.
N
Negotiation
Discussion, written or otherwise, between
two or more parties no different sides, the aim
being to reach a common agreement.
Non Confirming 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.
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.
O
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.
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.
P
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.
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.
Permitted One
>> A use authorized by a grant of planning
permission or
>> A use allowed by the deemed grant of planning
permission under the local development control
norms.
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.
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.
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.
Project Management
(Development 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 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.
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.
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.
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.
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 withheld".
R
Rack Rent
A rent representing the full, or nearly
the full, letting value of a property on a given
set of terms and conditions.
Refurbishment
Improvement and modernization 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.
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.
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 -
>> in consideration for the tenant incurring expenditure
on such matters as fitting out premises or carrying
out repairs or improvements;
>> to reflect market conditions which favour tenant
eg. where the space available for letting exceeds
the total tenant demand in that area
>> or by virtue of both a and b.
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.
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.
S
Sale and Leaseback
An arrangement whereby a freeholder or
lessee sells his interest in a property for an
agreed sum and takes back a lease on the whole
or part of the property from the purchaser, generally
either at a rack rent or at some lesser rent related
to the price paid.
Security Deposit
Comprises of an interest free lump sum
payment to the landlord at the commencement of
the lease, which is refundable at the end of the
lease term. Though the deposit amount varies depending
on city, property type, location and the period
of the lease, it may range anywhere between 6
to 18 months of monthly rental. It is not uncommon
for some landlords to provide a bank guarantee
to the tenant as security for the repayment of
the initial deposit amount.
Site Plans
A drawing of an area of land, on a horizontal
plane, showing the boundaries and physical extent
of the land included in a particular parcel. It
may also show any existing buildings or the proposed
layout of a development.
Sub Leasing
A method wherein, the primary lessee of
a property has the right to further lease out
a part or whole of the property to another occupier
or lessee. Essentially, the right to sub lease
is decided beforehand at the time of signing the
main lease agreement and is with the consent of
both the leasor and the leasee.
Suspended Ceiling
A ceiling, not being part of the structural
framework of a building, installed below the level
of the underside of the floor above or of the
roof. Commonly used
>> to provide space for services eg. cables, recessed
lighting and piping;
>> to reduce the cost of heating in a room;
>> to improve the acoustics;
>> or to produce more aesthetically pleasing proportions.
T
Tax Clearance [37-(I)]
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.
Tenancy
The interest of a person holding property
by any right or title or an arrangement, whether
by formal lease or informal agreement, whereby
formal lease or informal agreement, whereby the
owner (the landlord) allows another (the tenant)
to take exclusive possession of land in consideration
for rent, with or without a premium, either: for
an agreed period of on a periodic basis until
formally terminated.
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 he more profitable retail outlets.
U
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.
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. Urban centers i.e.
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.
User
A person who uses, enjoys or has a right
over a property.
V
Vaastu Shastra
A traditional Indian architectures and
design system, which specifies the detailed methodology
of designing buildings, buying land etc. in order
to maximize benefits from the same for the occupier.
This system relies in harmonizing any real estate
development with the five elements of Indian Mythology
namely air, water, earth, fire and space.
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.
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 he 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.
W
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.
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.
Y
Yield Up
Give up possession, especially by the
tenant at the end of a lease.
Z
Zone
A defined area of land or part of a building
which is allocated for a particular purpose, e.g.
development plans may allocate areas of land for
different uses or values of property may distinguish
between areas of floor-space of a building and
ascribe different values to them.
Zoning
In planning terms, the dividing of an
area by a local planning authority into zones
for particular uses or activities.
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