What Is The Floor Area Ratio in Real Estate?

Introduction

Of the many jargon that one would invariably come across in real estate transactions, are FAR and FSI (floor space index). The two terms, which stand for the same thing, confuse many buyers, sometimes because of their complexity. Let us try to understand it in more simple terms and know more about the floor area ratio formula and FSI calculation formula.

Table of Contents

• What Is the Floor Area Ratio in Real Estate?
• Calculating Floor Area Ratio
• Understanding the Floor Area Ratio Formula
• Difference Between Floor Area Ratio and Floor Space Index
• What Is the Premium Floor Space Index?
• Residential Buildings: Importance of Floor Area Ratio

What Is the Floor Area Ratio in Real Estate?

Floor Area Ratio (FAR) is the relationship between the building floor area allowed to be used and the plot area on which the building is constructed. A high floor area ratio indicates an urban or dense structure. FAR guidelines are determined by municipalities. Similar to stamp duty, they differ from one region to another.

Floor Area Ratio (FAR in real estate) or Floor Space Index (FSI) refers to the maximum floor space that can be built on a plot of land. FAR in real estate is the ratio between the total constructed floor area of a building and the land area.

Calculating Floor Area Ratio

Floor area ratio is basically the ratio between the total area of all floors of a building and the plot area. For example, for a specific plot area of 10,000 square meters, if a floor space index (FSI) of 1 is assigned, it means that 10,000 square meters of construction is allowed for the project.

Similarly, if the floor space index -FSI is 1.5 and you have 1,000 square feet of land, you can build a covered structure of up to 1,500 square feet. The FAR calculation formula is very simple:

• Plot Area x Floor Space Index = Built-up area 

Note: FAR of 1.5 is expressed as an FSI of 150%

Understanding the Floor Area Ratio Formula

In real estate, a project’s FAR refers to the plot area ratio to a building’s total floor area. That is the area covered by all the floors of the building divided by the area of land on which the project is being constructed. Real estate or floor space index is decided by municipal corporations or development authorities as per FAR Development Control Regulations (DCR). Moving from one city or region to another.

Difference Between Floor Area Ratio and Floor Space Index

Floor Space Index (FSI) also known as Floor Area Ratio (FAR) is the ratio of the total built-up area to the total area of the plot. FAR and FSI are used interchangeably. The only difference is that while floor area calculation is expressed as a ratio, floor space index is an index and FSI calculation is expressed as a percentage.

Calculate FSI determines the size of the structure in a particular area. The municipal council of a particular area is responsible for setting the FSI limit in a particular area, to regulate the size of buildings in that area. Since FSI is a measure that combines the height and footprint of a building, controlling it ensures flexibility in building design.

What Is the Premium Floor Space Index?

Recently, the Brihanmumbai Municipal Corporation (BMC) has increased the land value premium. The payment of 20% of the Ready Reckoner Rate (RRR) for conversion of industrial land to commercial or residential use. This is done at the time of obtaining the Commencement Certificate (CC).

Technicalities aside, this premium payment means that regardless of the exact location zone or building type, the premium FSI will help you with the allowable extension. The premium floor space index is a fee paid to the government to allow flexibility.

Residential Buildings: Importance of Floor Area Ratio

The FAR value is decided by the local municipal corporations. To ensure the best possible living conditions for the residents of the area, the population density was considered.

Each is determined keeping in mind the availability of open spaces, the environmental impact of the project, and readiness in natural conditions.

Although the methods of calculation of FAR differ from one city to another using hazard and distance calculation formulas. The value usually does not exceed 2.5.

Conclusion

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Also read: What is Real Estate Regulatory Authority (RERA) in Real Estate?