September 2007
Many companies do not specify whether area is 'net or gross'

Even as the authorities are doing their level best to protect consumers by tightening rules and regulations in the fast-growing property sector, there are still grey areas where buyers could be taken for a ride, property experts said.

Though the price of a property per unit area, square foot or square metre as the case may be, is clearly mentioned, sources argue, many property companies do not mention whether the area specified is 'net area' or gross area when an apartment is sold in a multi-storey building or tower.

While the net area is construed to be the usable area or 'carpet area' in realty lexicon, the gross will include proportionate area added from the common space or the public utility area such as verandah, lifts and so on.

Since there could be a 25 per cent difference in space between a flat or apartment purchased on gross area basis and net area basis, the buyer could end by paying 25 per cent extra if the price is calculated on a gross area basis.

Miscalculating prices
There is no regulation which requires the property developers to mention whether they are selling net area or gross area. "There is a tendency to compare the prices of two developers who sell apartments in the same location with almost the same features. But many do not verify how the price is expressed - net or gross, and end up miscalculating the price of an apartment to the extent of 25 per cent," said a leading developer during an interview.

The 25 per cent difference could be the most favourable scenario for the buyer. Calculation of gross could take the unit area by as high as 35 and upwards. In Mumbai of India, the gross itself is divided into two - built-up area and super built-up area.

"A 1,000 square feet of super built-up area could work out to around 550 to 650 square feet area of net space and hence expressing net and gross makes a huge difference," said an Indian developer who has many business interests in Dubai.

He said more than any other laws and regulations, the authorities should make sure that the developers sell the apartment space at uniform unit price either gross or net, and let them make it clear what the buyer is getting.

By C.L. Jose

© The Business Weekly 2007