All you need to know about floor area ratioMarch 31, 2022 . Home Buying Insights . 10 min read
Floor Area Ratio, or FAR: what it means, how it is calculated, and why it is important to know? The floor area ratio of a building is the total covered area divided by the size of the plot of land on which the building is being raised, multiplied by 100.
How is it calculated?
Suppose you are building a house on a plot of 1000 ft² (hypothetically). If you cover the area of 700 ft² and leave the remaining 300 ft² uncovered, the ratio is 700 ft² divided by 1000 ft² multiplied by 100, that is 70%.
This doesn’t necessarily mean that you build just a single floor. If you build multiple floors of 700 ft², this adds to your floor area ratio. For example, if you decide to build three floors of 700 ft², your ratio is going to be (700×3)/1000 x 100 = 210%.
This is not calculated randomly. You cannot decide on your own how much area you are going to use when constructing a house or a developer constructing a building. Different cities and districts have differently permissible FAR.
How does floor area ratio affect you as a buyer or a property owner?
It depends on whether you are buying a property in a multistoried building (for example a gated community) or a freehold property.
The planning authority of the city decides how much-built area is available for constructing houses, apartments, and facilities, whether it is a single-storied construction or a multistoried building.
If you live in a colony or an area where you have freehold houses, an increase in the permissible floor area ratio will increase your property value because it means that more floor areas can be constructed, consequently, creating more living spaces and more facilities, or more plot area can be covered, allowing residents to build additional rooms.
Although it isn’t necessary, in a multistoried building or in a gated community, the increase in the permissible ratio means that the developer can build more apartments and more floors. This creates a high-density residential settlement – more residents share the common benefits such as parking areas, recreational facilities, lifts, and a common playing area for the kids. This may decrease your property value.
On the other hand, if an increase in the permissible floor area ratio results in the development of more facilities, such as a tennis court, or a cafeteria, this may increase your property value.
Since in almost all the cities and towns it is the authorities that decide the floor area ratio, carefully study the laws of the district of the city before investing in property, especially when you are buying an apartment in a multistoried building. This will help you calculate the final price of your property.
Do you have direct control over the floor area ratio?
Not in terms of permissible limits, but profits are known to have doubled when the planning authority increased the FAR of a particular city. Neither the landowner nor the builder can randomly decide how much floor area ratio the construction site is going to have.
How does the municipality decide what FAR your construction may have? It uses multiple factors such as population density, other construction-related activities going on, the growth aspects of the area, and the nature of the land on which the building is to be constructed, or something that has already been constructed.
What all are included in the floor area ratio?
Is the parking included in the floor area ratio? What about the staircase? The elevator shafts? The unoccupied basement? These are not included in this ratio. The floor area ratio is the part of the building where people live or work. Suppose there is a residential building and flats have been constructed on five floors. There is a boundary wall that surrounds the plot area of the building. Between the boundary wall and the main building, there is a parking lot and a driveway. The parking lot and the driveway are not included in the floor area ratio.
Maybe there is a garden and playing area for children. These places too are not included either. If there is a basement for parking, that is excluded. On the other hand, if your residential complex has a community hall, it is included in the floor area ratio.
Why is it important to know what is included in the floor area ratio when constructing a building or when evaluating the value of a property? This helps design the establishment. This also tells you actually how much living space or working space you are going to have inside the building.
Why do municipalities have a floor area ratio?
Mostly to control population density in urban areas. It allows local governments to divide the city into various zones and control the density of the population in those zones. This is because the ratio of living areas available decides how many people can live in a building and consequently, in the district.
The floor area ratio may have different significance for different stakeholders. For a buyer it may affect the quality of life; for an investor, an increase or decrease in floor area ratio may have an impact on the market value of the property, for a city administration or municipality it is all about how much population they are going to have to manage, and for a builder, it may affect how much living space can be eked out and how spartan or luxurious can the construction be.
Why you should know about cap rates in residential real estate?
Things to know before signing a home loan agreement
Take your next steps
Sign up to explore the benefits and take a more informed
step towards homebuying.