Buying an apartment? The undivided share of land allotted to you will actually determine your property’s worth many years down the line. We tell you how.
Buying a new house requires a holistic approach, irrespective of whether you need a Home Loan or not. From choosing the right location and size to the right developer, there are a lot of factors that a buyer needs to address to get the perfect property.
Many buyers often decide on their purchase based on the built-up area offered and the additional amenities attached to the flat. However, the most important factor in any real estate purchase, which is the actual land that one will own, is often overlooked. This is more so in the case of apartments.
When you purchase an apartment, a certain value of the land will be allocated in your name. This is known as ‘undivided land share’. Let us take a look at this important aspect of real estate, its significance, and legal importance.
Understanding Undivided Share of Land (UDS)
When you buy an apartment, you are technically buying two things. The first component is the constructed part of the building where the owners will actually reside, while the second is a proportionate share of the land on which the property is built. The latter share of land allotted to the flat buyer is known as an undivided land share or UDS.
Significance of UDS
The building itself isn’t exactly a great investment because the value of the constructed area depreciates. The older the construction, the lower the market value of the property. On the other hand, the prices of land keep escalating over time and may offer substantial returns for the landowner.
This appreciation in the overall value of any property is due to the increase in the land rate and not the constructed area. Essentially, it is the undivided land share allotted in accordance with the built-up area of the apartment that determines the future monetary value of the property. In case the landowner has no undivided land share, he or she may not be able to sell the property or enjoy good returns on the investment.
Additional Reading: Home Loan Document Checklist
Legal Implications of UDS
The legal implication of undivided land share makes it an intrinsic part of any real estate deal. Suppose the building in which you reside is to be demolished for reconstruction ten years down the line or comes under a government acquisition project and made available for demolition, the compensation administered to the flat owner will depend on the percentage of the undivided land share in the property.
The sum of all the undivided shares for each apartment owner must be proportionate to the area of the land in which the apartment has been constructed. In case of co-operative housing societies, the UDS must legally be in the name of the society since the flat owners are the shareholders of the society.
UDS calculation is determined by a simple formula. It can be calculated by multiplying the total land area with the size of the individual apartment and dividing the result by the total area of all apartments in the project.
Illustration for UDS Calculation
Let us assume 5 equally sized apartments of 1,000 square feet are built on land that measures 3,500 square feet. The UDS can be calculated by multiplying the total land area with the size of the individual apartment (3,500*1,000) in this case and dividing the result by the sum of areas of all apartments which is 1,000*5= 5,000.
Hence UDS = 1,000*3,500/5,000 = 700 square feet.
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UDS and Ownership of Parking Space
Some real estate builders and developers have been guilty in the past of selling open or stilt car parking areas to individual house owners. As per Indian law, an open car parking can only be sold as part of a common area and cannot be legally included as part of the floor area for individual apartments.
Checking Validity of UDS while Purchasing Property
While paying an advance for any property, make sure the builder or the seller provides you with the agreement copy. The agreement copy between the builder and the seller holds all the important details of the property in question including the details of the undivided share of land.
There is usually a dedicated section in the agreement that gives the details regarding the UDS share, which is often mentioned in either percentage terms (for example 0.75%) or in exact square feet terms. Make sure the agreement clearly mentions your undivided share in the land. The same figure should be mentioned in the title deed when the registration is done.
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