Many of you might not have heard of Loading Factor, Floor Space Index, or Open Space Ratio which are the crucial terms in real estate. There are many agents and real estate dealers who, while explaining you about the properties, will also come up with some terms that you might not even heard earlier. This is quite obvious because you are not into real estate at all.  Real estate as many terms that are related to different stages of buildings and processes involved. OSR, FSI, and loading factor are some of the important terms on which you are usually charged while purchasing a property. Even if the base cost is something different but the end result will cost you while including the above-mentioned terms.

All About Loading Factor, OSR and FSI:
• Loading Factor:
It is the area of the property which includes the share of the common area of the flat. It is determined by multiplying it with the carpet area. Generally, builders include the space that you get around the elevators and stare case. Thus, such factor is a combination of carpet area that also gives the super built area of the flat.

• Construction Stages:
There are different parts included in the construction stages such as Finishing Work, Masonry Work, Sub Structure Work, Ground Work, Mobilization, Super Structure Work, Services Work, and last is the Completion. These terms will be relevant to you only if the property is under construction.

• FSI (Floor Space Index):
This is another term which is also known as Floor Area Ratio (FAR). To calculate this area, the ratio of built up area with the total plot area is calculated. It is the duty of the municipal corporation to establish the FSI so that size of the building and the amount of the construction is well regulation.

• OSR (Open Space Ratio):
This type of term is used is more used for the residential areas development. When the total amount of the open space is divided with the total area of the land parcel, what you get is the open space ratio. The areas that are included in this sector are the private lots such as recreation areas and parking lots.

Understanding these terms in real estate is mandatory while purchasing a property so that the agent or dealer shall not levy unnecessary charges. You will be quoted the right amount for the property in which you will be investing. Such terms must be familiar to you so that while investing in property, you will have a clear idea about every terms and stage involved in construction.

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Extra Development Charges (EDC) In Real Estate
Real Estate investment is very tough for those who are investing for the first time and do not have core knowledge on investment in real estate and are illiterate to the terms EDC and IDC charges in real estate. Unfortunately, these terms are not even in common use so that a buyer can find out about EDC and IDC. Not even the builders nor government has given the attention in educating the buyers with these charges in real estate.

Once you are going to invest your money in the real estate, there are lots of charges and expenses that you need to incur. Among those certain kinds of charges, EDC charges are crucial. For the beginners, it is important to understand the market, the charges and why they have to pay them. Mainly, these EDC and IDC charges are very common in Haryana as the government is opposing charges on the properties which are under constructed after 2012. This is applicable to every city like Gurgaon and Faridabad.

A buyer should be familiar with the charges in real estate and its reason for deductions so that he can ask from the builders for exemption or if excess is charged then he can ask for the refund. One thing which everyone needs to know is that here the charges from all builders that government asks for is same and there is no change.

EDC Charges:
The abbreviation stands for External Development Charges. The charges are collected by the government through builders or developers so that they can carry on the external development in order to create a township or society. These external developments include electricity, water supply, roads, drains, sewage schools, hospitals, fire-stations, sub-stations, stadium/sports complex etc. Many other external features are included as the parts of external development which are to be established at the periphery or proximity of the project. Development of such civic amenities are taken care by state government and hence, they charge builders  for these amenities as External Development Charges.

It is mandatory for every builder to provide this charge to the government and somehow builders do not offer any proper information to the buyers, which in turn keeps them perplexed all the time while purchasing a property. They, in fact, do not educate to the buyers about the EDC in detail but charge them extra for the same. Not only the government officials are so active in informing about such charges, but also providing a rough calculation of what a client has to pay.

The government claims builders for the EDC as land use fee, scrutiny fee and institution fee along with fees related to permission, license and infrastructure. These fees are collected by the government so that they can carry on the development of the area where the township is proposed and in its vicinity.

Internal Development Charges (IDC) in Real Estate:
These are the charges that are parallel to the EDC charges and again these are charged by the government. This fund is utilized by the government in building the infrastructure and in the improving of socio-economic sectors of the state that includes highways, transportation systems, water supply facilities, electricity facilities and much more.

Unfortunately, not every builder pays these charges from their own pocket so they impose these charges on the customers as in per sq. ft. charges which they need to pay. Additionally, they are also considered as hidden charges which they actually pay to the builders.

How EDC Is Calculated?
Different state governments collect these charges in different ways.  For instance, these charges are collected on the basis of per gross acre in Gurgaon by the state government. Nevertheless, the builders calculate the EDC charges on the basis of per square feet so as to levy these charges on the buyers accordingly. Here, one needs to that these charges increase year after year and they are different for commercial and residential purposes.

EDC Calculation on Per Sq. Ft Basis

By understanding about FAR (Floor Area Ratio) of the area, it will be easy to understand the calculation on the basis of per sq. ft.

Ratio of total floor area of all buildings is to the area of the plot is referred as FAR. For instance, a plot with 1,000 sq. ft. area is permissible to cover the maximum of 3,000 sq. ft. of plot area if the fixed FAR is 3. Who decides this value? The development authority or planning department of the town and the country. This is so decided on the basis of enduring infrastructure of the locality or town.

Currently, For Gurgaon, FAR  varies between 1 -1.65 for residential plots.

Example:

Let’s consider FAR = 1.65
1 Acre = 43560 sq. ft.
Thus, total allowed built-up area = 1.65 x 43560 = 71, 874 sq. ft.

Taxes
EDC or IDC is itself a government taxes and taxes on taxes are levied by the government and thus, a buyer needs not to pay any service tax on the EDC. These charges do not fall under the service tax slab also. However, if a builder is asking for the service tax on EDC or IDC then the buyer should immediately ask for the return.

Conclusion:
Keep up-to-date knowledge of current FAR,  EDC and IDC charges in your locality and beware of the frauds imposing different charges at the same location. Get more ideas from the builders as well as from the government. Use RTI Act if required.

Moratorium Period
While going to apply for a loan, people must have heard about Moratorium Period. This term is very common for the people who are applying for education and home loans. However, this is really not possible for everyone to understand the meaning of this term and they get confused with it. The moratorium period is very simple and easy concept.

The term Moratorium Period stands for the time period during the loan cycle when the borrower need not to pay or repay the principle amount but have to pay the interest amount only. Generally, this period starts from the day when the loan was disbursed in the account of the borrower and during this time, he gets principle holiday and till the EMI starts, he just needs to pay the interest. There are basically two types of holidays that borrowers enjoy during this time:

1. Principle Holiday where the borrower is not required to pay the principal amount back during the Moratorium Period.

2. Interest Holiday is where the borrower has to choose if he is willing to pay the interest to the bank or financial institution during that period or not. This offers a leverage to the customer, but it all depends upon the banks as they have different products and based on the products if they require to pay interest or not. There might be cases where borrowers are not required to pay interest during the Moratorium Period and thus is termed as interest holiday.

Why Loan Is Taken?
Generally people take loan to pay their dues or to purchase anything that doesn’t fit their budget. Loan is said to be an amount that banks or financial institution grants after checking the credit score of the borrower and offers him to pay in easy installments. Interests are charged over the principal amount for the time period loan is taken. It is a legal credit, which is recommended for those who are in need of immediate money. Loan has become a very common term these days and certain middle class people, businessman take loan for their expenses to be covered.

Benefits Under Moratorium Period
Yes, there are lots of benefits that one can enjoy under the moratorium period and the major one is that you don’t need to pay the principal amount. This is really easy for a person to pay only interest as many banks also offer concession in interest rates, which lowers the amount that you need to pay. All this is possible if you are paying within this period. However, on the other end, if you are not paying the interest amount regularly then it will be capitalized. In this context, if a borrower fails to pay his amount of interest regularly, quarterly, or may be annually, then at the end of the year, the interest will be capitalized and will be added to the principal amount which will make EMI more payable to the banks.

Why Moratorium Period Is Granted
People after knowing about the advantages of the moratorium period should know about why it is offered. This period is offered for a time being to a person or an asset where the income producing ability is low or nil. The best example you can understand is education loan. Here, the student is not going to earn money after taking a loan and he has to complete his education. Thus, for him, moratorium period is granted so that he needs not to worry.

Under education loan, it depends upon the course that the student is taking and what is the duration of it. If a student is going for Masters which is for 2 years, he can start repaying the amount once he gets the job. Maximum leverage time that banks offer is 8 months additionally to cover his unemployment expenses.

Next example could be a person who has to construct his house. There are other expenses which are to be paid so in that context, the principal amount is levied and some time is granted so that the house owner can repay the amount easily. There are certain conditions depending upon the type of property one is taking, if you are ready to move into property is there, then a maximum of 18 months is granted to repay the amount. In case of under construction, property, maximum time is 3 years and in case of construction, property, maximum time is 18 months. It all depends upon the CIBIL score of the borrower and credibility of the banks.

If banks are offering you an interest holiday during moratorium period, then the interest is compounded which will affect your EMI.

Taxes
Under both the scenarios, taking tax benefit is possible. Talking about educational loan, an individual can claim tax benefit on the interest paid once he starts earning and start paying interest. In case of home loan, there is a tax to be paid during the construction of houses on the interest to be paid.