7 Real Estate Terms you should know before investing in Property

7 Real Estate Terms you should know before investing in Property



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Are you a newbie in real estate sector? If yes, you must be unaware of the common real estate terms and terminologies. Talking with a real estate marketer might be a real headache for you.

However, if you are planning to make buy luxury flat in Mohali or diversify your investment portfolio, you need to learn these common terms and acronyms beforehand. So, the next time you hear these terms you understand the meaning and significance.

We have compiled a list of 7 most common terms that you must know.

ROI – Return on Investment

Return on Investment, as the name suggests, is a term that measures the profit you have received on the investment. It is calculated by dividing the net profit by the total capital cost of the investment. The higher the ROI, the higher is profit.

ROI decides whether the investment turned out to be profitable or not.


ROI = Net Income/Cost of Investment



BSP – Basic Sale Price or MV – Market Price

Both the terms indicate the base rate per sq ft at which the property is listed by the seller. The base rate does not include any additional charges such as Goods and Service Tax (GST), amenity charges, preferential location charges or any other maintenance fees. These additional charges calculate up to 20% of the BSP.



Cash Flow

Cash Flow indicates towards the net amount of cash earned from the property every month after deducting basic operation costs. Basically, it is the net difference between the money coming in and going out from your asset. If the income of the assets is more than the money you need to maintain it, then it proves that the property is profitable. It will help you maintain a profitable cash flow.

But, when expenses are more than the total income, you will experience a negative cash flow. Ideally, these are the rental incomes that ensure maintaining a positive cash flow.


HOA – Home Owner’s Association

HOA stands for a self-governing organization that comprises of a particular subdivision, apartment or planned housing community. HOA has all the rights to enforce rules for maintaining the property and collecting maintenance fees from the house owners. When you buy a property within a specific HOA, you will automatically become a member of the association and thus liable to pay the defined HOA charges.



EMI – Equal Monthly Installment

When the borrower takes a loan, he has to pay the amount in monthly installments, known as EMI. It is available for any buyer who is ready to take the loan to buy 3 BHK flat in Mohali.

The amount for EMI depends on various factors including the total amount of loan, you income, rate of interest, loan tenure, credit history etc. It is always better to take loans from reputed banks to avoid any scam.



Built Up Area

Built up area refers to the entire floor area of the home or apartment including the thickness of the wall and balcony area. We need to know, in most of the cases, 30% of the area of a flat is used in making walls, verandah, open terraces or balconies.



Carpet Area

As per RERA rules and regulations, carpet area is the net usable floor area of the flat. It excludes the area of the covered by the eternal walls, areas under service shafts and balconies. Basically, it is the area that can be covered by the carpet.



In current situation, real estate is considered as one of the most profitable investments. Being familiar with all the terminologies will cut out the confusion and help you crack a beneficial deal.