Owning a flat or a Villa has a different kind of property ownership compared to freehold land ownership. In a gated community, the ownership of the property is divided into shares. Defined as an Undivided Share of Land, let’s understand more about how this asset ownership works.
Buying an asset in the form of a house or a villa in a gated community needs a logical approach more than an emotional one. There are a lot of factors that go into evaluation such as Location, size, developer, facing, garden lawn, clubhouse, etc. Along with these on-ground factors, the financing option also makes impacts such as external debt, a Loan against property, or a Home Loan.
Buyers looking for residential assets in Urban areas often look at the Built-up area and the additional amenities that come with the property. However, while purchasing such real estate assets the actual land ownership one will hold is overlooked. This is a general case in Apartment projects.
When one purchases an apartment or a villa, a certain value of the land will be allocated in your name as shares. This is known as ‘undivided land share. In this article, Let us take a look at this important aspect of modern real estate, its legal importance, and its significance.
Undivided Share of Land (UDS)
When you buy an apartment or a villa, you are technically buying two things. The first is the constructed part of the building where the owners reside, while the second is a proportionate share of the land on which the property is built. The share of the land on which the property is built allotted to the flat or a villa buyer is known as an Undivided Share of Land (UDS).
Significance of UDS
The value of the building depreciates while the land value keeps appreciating. The valuation of the construction keeps falling which is compensated by the escalating land price and t is why Apartments and Villa gated communities are preferred residential investments.
This overall property value is appreciated due to the increase in the land rate and not the built-up or the constructed part. Necessarily, it is the undivided land share (UDS) allotted in accordance with the apartment’s built-up area that determines the future economic value of the property. The apartment owner won’t is able to sell their asset without the right number of shares of their property or even enjoy appreciated returns on investment.
Legal Implications of UDS
The legal implication of undivided land share makes it a mandatory part of any real estate deal in gated constructions. Suppose your residing building is to be demolished for reconstruction years down the line or comes under a government acquisition and made available for demolition, the compensation to the flat owner will depend on the undivided shares you own in the property.
The sum of all the undivided shares for each apartment owner must be in proportion to the area of the land in which the apartment has been constructed. In the case of housing co-operative societies, the UDS must be in the name of the society as the flat owners are the society’s shareholders.
UDS calculation is determined using a simple formula. UDS can be calculated by multiplying the total land area with the area of the individual apartment and dividing the result by the total area of all apartments in the apartment or villa project.
Illustration for UDS Calculation
Let us assume 10 equally sized apartments of 1,200 square feet are built on land that measures 4800 sq. ft. The UDS can be calculated by multiplying the total land area with the size of the individual apartment (4800*1200) in this case and dividing the result by the sum of the areas of all apartments which is 1200*10= 12000.
Hence UDS = 1200*4800/12000 =480 sq.ft
Parking space Ownership
Some real estate developers have been accused in the past of selling parking areas to individual house owners. As per Indian law and regulations, an open parking area can only be sold as part of a common area. It cannot be legally included as part of the individual apartment’s floor area.
Checking the Validity of UDS
Make sure the builder or developer provides you with the right sale agreement before making any advance payment. The sale agreement between the property developer and the seller holds all the key details of the property in transition including the details of the ownership shares.
There is generally a dedicated clause or section in the sale agreement that gives the details regarding the UDS share, which is often mentioned either in exact square feet terms or percentage terms (for example 1%). Make sure the sale agreement clearly mentions your UDS shares in the property. The same figures should be confirmed in the title deed when the property registration is done.