Tuesday, May 28, 2013

Difference between Carpet Area, Super Built-up Area, Built up area, Plinth Area and more

Real estate is a difficult business and even seasoned professionals find it tough nut to crack. A normal home buyer will always  get confused due to number of jargons, like covered area, carpet area, built up area, super built up area to name a few, used by real estate agents. It is easy to get lost by such rhetoric but it is the most common way employed by builder and broker community to cheat home buyers. Many of us are unaware of these terms and thus end up paying more than the actual worth of property.
Here is a note to remove the confusion regarding the frequently used area terms in Real Estate business in a concise yet comprehensive manner so that you do not get confused and knows what to ask for while evaluating the property:
Plot Area: Well this is most basic of all areas and easiest to understand. It is actual ground area typically measured in square feet for apartments, square yards or square meters (independent houses), acres or hectares (for large projects), bighas or malas or kilas (for agricultural land).
  • Plot area area is relevant for buyers of row houses or independent villas or an agricultural property as one is essentially purchasing the whole land parcel. The circle rate is also charged on the basis of plot area, normally quoted as Rs XYZ per sqm of plot area. For a large project, a builder typically aggregates small land parcels (typically agricultural land from villagers) and then change the land use to commercial, residential or mixed-use project.
  • From an investor perspective, the change in land use is the most value accretive with returns in the range of 10-100x (1,000%-10,000%) depending on the location of land parcel. Most Indian developers have made money by aggregating agricultural land and then sold it to foreign investors at hefty valuations.
  • For apartment complexes or builder floors, UDS or Undivided Share is the relevant term. It is part of the land which is associated to an individual apartment and registered in the name of the apartment's owner(s). This share of land has no specific boundaries within the total extent of the land on which the apartment is built. Each and every flat in the apartment complex will have an associated UDS. The sum of all the UDS will be equal to the total land area of the apartment. It is usually calculated as a % of the apartments super built-up area to the total super built-up area of all apartments.
FAR or FSI Area: FAR and FSI represent the same thing and they stands for Floor Area Ratio or Floor Space Index. It is a numeral factor applied on land area to arrive at total developable area for a project. FAR Area refers to the maximum gross floor area (including balconies) of the parcel of land upon which it is built (open areas such as terraces which are areas without roofs are not considered in FSI area). The term also refer to limits imposed on such a ratio. Here are some of key aspects of the FAR
  • As a formula: Floor area ratio = (Total covered area on all floors of all buildings on a certain plot)/(Area of the plot). Thus, an FSI of 2.0 would indicate that the total floor area of a building is two times the gross area of the plot on which it is constructed, as would be found in a multiple-story building.
  • It is the most important area as it used by developer, investor or authorities when they buy (or sell through auctions) undeveloped land parcel. It is linked to project mix as it varies with type of asset class and depends on location since it is decided by the local government & varies from state to state.
  • Sometimes, Government allows higher FAR for a project in order to incentivize developers to build more on a same land parcel. For example, IT buildings can have a higher FAR than a commercial building as Government wants to bring IT companies to setup their offices in its city in order to bring new employment opportunities. Basement parking area is typically excluded from FAR area. Sometimes, developer gets additional FAR area if they build higher parking area than the minimal parking norm requirements.
  • It is important to know about FAR in cases where Government changes the FAR norm and gives permission to develop extra even for already developed properties. For example, recently Delhi Government has proposed to increase FAR due to land scarcity. In such cases, the owners of free hold properties can expand their apartment up to their undivided share of extra FSI area.
  • Housing projects generally have lower FSI in the range of 0.5 (Row Housing Townships) to 3 (Apartment Group Housing) in order to control the population density since higher FAR means higher area and thus more people living in same area.
  • For commercial projects, the FAR normally starts from 1.5 and can go up to any limit (For example, Singapore has maximum permissible FSI of 25 in CBD). The maximum FSI is normally governed by the height restriction applicable and the FSI allowed at the time of project approval by the government.
TDR Area: It stands for transferable development rights area. Sometimes, a developer is not able to (or do not wish to) use permissible area due to various reasons (height restrictions, project design, local bye-laws) etc. It can apply to local authorities to use the undeveloped FAR (Known as TDR) in some other project within the same municipal jurisdiction. It can also sell the TDR to other developers. For example, HDIL, a leading Mumbai based developer of slum rehabilitation and redevelopment projects, has large amount of TDR which it monetizes by selling it to other developers since  it is unable  to utilize all TDR due to lack of capital, demand and other such constraints.
Plinth Area (or Covered Area): Plinth area is the area on which the structure is to be developed. For example, before construction commencement, the plot needs to be leveled and the leveled area is the plinth area.
  • It is governed by local bye-laws as all developers have to adhere to maximum ground coverage limit (typically 80%) or minimum open area requirements.
  • So for our model project, builder has to develop 4.3M sq ft and 1.1M sq ft land on maximum of plinth areas of 32 acres and 8 acres of land parcels, thereby leaving at least 20% as open spaces, which can be used for landscaping, open parking, temporary fixtures etc.
  • The Term covered area is occasionally used and refers to gross area under the roof. It is same as plinth area from whole structure perspective, but from an apartment perspective, it is net outer area of the apartment (including balconies etc).
Built-up Area: Built-up area is referred to total constructed area of an apartment (or of the whole project complex). Built-up area includes columns, internal or external wall thickness area as well as common facilities such as stair case, verandah, flower beds, dry balconies etc. Please note that utility areas (lifts, shafts etc) are sometimes excluded from built-up area calculation. Also, sometimes built-up area is same as plint area and can be used interchangeably
  • Built-up area is very important as local authorities charge property tax or stamp duty on the basis of built-up area of apartment. For terrace, typically half of terrace area is considered as chargeable area for various purposes. Thus, Built up area is Carpet Area + Area of walls and ducts + 1/2 the Area of terrace. Built-up is usually 10% more than the carpet area.
  • From builder perspective, built-up area is approximately equal to FSI area (or may be 5-10% higher than FSI area). The actual built-up area for the Project is estimated from architectural drawings and the Project contractors will charge builder on the basis of Project area. While I am not sure, I think most developers actually mention built-up area in sale deed as against super built-up area which is advertised and promoted everywhere.
  • Please note that the most sale-purchase agreements have disclaimer that actual area of apartment may vary by upto ±10% than agreed area due to various reasons beyond developer’s control. However, it is an serious issue to be considered by end users and not for investors since all re-sales typically executed on the basis of area as mentioned in agreement.
  • Typically, construction cost is linked to built-up area as it is the actual area that is being built. Approximately, construction cost of building structure varies from Rs 500/ sq ft (average structure) to Rs 1,500/ sq ft (high end projects) based on 2012 prices. Please note that these are approximate construction cost (including labor and material) per sq ft of built up area and cost of fixtures is excluded in this computation.
Carpet Area (Net Effective Area): Carpet Area is the net usable area available for actual use within the internal walls of an apartment (i.e., excluding wall thickness areas). It is measured from wall to wall (excluding walls thickness, columns, doors etc but including area under stairs, balconies, toilets, AHU etc) within the apartment and translates into actual floor area which can be carpeted, if required. Thus, it is roughly built-up area minus wall thickness area and is usually 10-20% less than built-up area. In short, it is the net usable area within the apartment. The equivalent term for commercial project is net floor area.
  • While it is the most relevant area from buyer’s perspective and the only area which can actually be measured by layman, it is the most difficult to get an accurate estimate since most developers resist quoting actual carpet area. Instead, they provide the room dimensions and expect home buyer to estimate areas themselves. A better percentage of the Carpet Area with respect to the Super Built-up Area, translates to a bigger living space.
  • It is easy to measure the carpet area yourself, just divide the floors of all rooms (Kitche, bedroom, bathrooms, lobby, terrace area @ 50%, common passage  etc) into rectangular blocks and compute their respective areas (Length x breadth) and add the areas to arrive at carpet area of apartment.
  • There is no fixed ratio of super built-up to built-up or carpet area. Usually, Carpet Area is expressed as a % cut of Super Built-up Area and the cut varies from 20% to 50% of super built-up area. As a rule of thumb, carpet area can be converted into built up area by multiplying with 1.1 and into super area by multiplying with 1.25.
  • A good and fair cut is 20-30% and any project with higher cut is looting the customers. This is most common way to charge more from customers while still keeping rates comparable to market rates in the micro-market. For commercial areas, actual carpet area is typically 50% of saleable (or leasable area) due to higher share of corridors, lobbies etc.
  • Similar to western countries, some of the states in India (such as Maharashtra and Gujarat) have recently made it mandatory to quote carpet area for all units. The developers, however, have resisted charging on the basis of carpet area as it reduces their flexibility on manipulating rates. To comply with norms, they are mentioning carpet area along with super area, but all rates are still charged on the basis of super built-up area.
  • In case if a developer is charging you for anything other than carpet area than one can complain against him in consumer courts. Also, one should ask developer to clearly mention carpet area in the sale deed. The upcoming real estate regulation bill proposes to make it mandatory for all developers to clearly highlight carpet area as well charge customers on the basis of carpet area. This would make all projects easily comparable and a significant step towards making real estate sector an organized sector.
Super Built-up Area: It is the most important area and is also referred to us Super Area or Saleable Area. Super Area is the term usually referred by builders when they mention the size of apartments.
  • Super Area is normally estimated by Project Architect as Built-up Area plus the proportional share of the common amenities like building corridors, circulation areas, lobby, elevators, stairs, community halls, shafts, security/servant quarters, motor room, park and recreational areas, basement, sub-station, garbage chutes, window projections, generator areas or any other shared services area etc. Some developers even include swimming pool and club house while charging for these services separately as one time membership fees.
  • Super Area, however, is  applicable only for multi-dwelling units, such as flat complexes as independent homes do not have common amenities or shared services. Also, super area is always sold along with proportionate undivided share (UDS), interest and right on the land parcel on which the building is constructed.
  • However, there is no way one can judge whether the super area charged by the developer is same as estimated by the Architect. Usually, all developers arrive at maximum area they deem acceptable by end consumers. There is no authority or legal relevance of super area as no authority uses super area for their uses. Thus, it is an arbitrary area, more of a marketing gimmick, used by developers to promote their projects.
  • The difference between the Super Area and Carpet Area is call loading. Typically, Super Area is calculated by multiplying carpet (or built-up or FAR area) by a factor known as Super Area Loading. An acceptable loading factor is 20-30% but most developers are now charging loading as high as 40-60% (similar to commercial properties) for their projects.
  • Please note that different builders employ different method to compute super area and higher super area does not always mean higher carpet area. Also, review the facilities offered by developer carefully since you may opt for project that offers bigger carpet area as compare to the one that offers facilities which you do not care for.
Case Study: Chintel Group, a leading land aggregator in North Gurgaon with land bank of 500+ acres has aggregated agricultural land from local populace since 1980s at throwaway prices. The region has gained prominence after announcement of Dwarka Expressway in 2008. As Chintel do not have expertise in building development, Chintels have tied-up with other prominent developers such as Uppal, QVC, Sobha, 3C among others to quickly develop its vast land bank. It has also launched a project in its own brand in order to gain development experience as well.
  • Land Area: To understand other building development related areas, let’s assume a developer has purchased 50 acres of land from Chintel along Dwarka Expressway and wish to launch a mixed-use project on this land parcel.
  • FAR Area: Let’s assuming developer wants to launch residential project on 80% land and commercial office space on remaining 20%. For Gurgaon, FAR for residential and commercial is 2.5 and 1.75 respectively. Thus, total Project FAR is 5.4M sq ft which is estimated as sum of residential FAR (50*80%*2.5*43,560 = 4.3M sq ft) and commercial FAR (50*20%*1.75*43,560 = 0.7 M sq ft).
  • Built-up Area: Based on architect drawing, the built-up area will be calculated. As developer will maximize the FSI utilization, the Built-up area will be slightly higher than FAR area since it includes FSI exempted areas such as dry balconies, shafts etc. Assuming 10% non-FSI area, built up area is approximately 4.8M sq ft and 0.8 M sq ft respectively.
  • Carpet Area: The carpet area is again as per architect drawing and it is typically close to FSI area. Thus, Carpet area will be nearly equal to 4.3M sq ft and 1.1 M sq ft.
  • Saleable Area: Assuming loading of 30% for residential and 50% for commercial project, our saleable area for residential and commercial property will be 5.6M sq ft and 1.1M sq ft respectively.
Asset Mix
Plot AreaFSIFAR AreaLoadingSuper Area
AcresSq ft%
Sq ft
Residential
40
2.5
4,356,000
30%
5,662,800
Commercial
10
1.75
762,300
50%
1,143,450
Total
50

5,118,300

6,806,250

  • Project Mix: Assuming developer decides to leave 40% as open area, the project needs to be developed on residual 60% area. If the average apartment area is 1,850 sq ft and there are 4 apartments per floor, there will be 3,000 apartments spread over 30 towers of approx. 25 floors each. Similarly, floor plate size can be estimated for commercial area.
Quick Notes
  • Make sure that the ratio of carpet to super area is at least 75%. Also, Higher super built-up area does not always mean higher carpet area.
  • Make sure that loading is applied on carpet area excluding terraces, dry balconies etc
  • Always calculate total cost per sq ft of carpet area to compare multiple projects

End Notes
  • You home is the most precious space and every square foot of your house costs a fortune. Thus, it is important to understand the relevance of different areas since various important documents such as marketing brochures and legal documents refer to different areas such as Carpet Area, Plinth Area and Super Built-up Area.
  • We hope this article helps you in clarifying all the confusion regarding various areas. Some of the questions we have tried to answer through this article are as follows: What are the differences between Plinth area, Carpet area, Built-up area, FAR area and Super area? How to compare different real estate projects with varying areas? How to convert Built-up area to carpet area?
  • If you have any comments or additional questions on this topic, please leave it in comment and we will try to answer it in a best possible manner.

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