You may have come across terms like real estate and real property. People use them interchangeably, however these two terms are different. Understanding each term helps you decode the terms for better decision making.
What is real estate?
Real estate is any land, including all the permanent natural attachments and artificial improvements. All the natural features attached to the land are real estate. These attachments include water, trees, mineral deposits, oil, etc. Besides natural attachments, all the artificial improvements, such as buildings, fences, and sidewalks, also come under the real estate.
There are two types of real estate – residential and commercial.
Residential real estate
Residential real estate is a term primarily used to define a leased property. But broadly, it is the property for human habitation and owned by a single or multiple families. So, residential real estate may be owner-occupied or leased.
Commercial real estate
Commercial real estate includes property types such as shopping malls, restaurants, office buildings, etc. Such real estate is dedicated to doing commerce and is either owner-occupied or leased.
Industrial activities such as manufacturing, production, warehousing, assembly, etc., take place in the commercial real estate.
Major commercial real estate types:
Commercial real estate can further be classified into many subcategories.
Specialized Properties
Specialized properties are used for a specific purpose—for example, agricultural land for farming or other related activities. Vacant lands to be used for development projects, and more.
Mixed-Use Properties
Properties used for multiple purposes also are classified as commercial real estate types. For instance, such properties may have both commercial and residential units. There may also be some retail spaces.
Industrial Properties
Industrial real estate is about creating warehouses, manufacturing, and research and development facilities.
Hospitality Properties
Hospitality properties include resorts, hotels, motels, and other permanent and temporary accommodations.
Healthcare Properties
Healthcare real estate includes medical facilities such as hospitals, clinics, and nursing homes.
Educational Properties
Another commercial real estate term is related to educational facilities. These facilities include educational institutions such as schools, colleges, and universities.
Government Properties
Several government properties can be categorized as commercial real estate. Such properties may be at local, state, and central government levels. Government offices, police stations, courthouses, and all the public infrastructure are government properties.
What is real property?
Real property is a term that deals with not only the property attached to a land but also all the ownership rights of a property owner. So, when you buy 3 BHK large flats in Lucknow, you intend to buy a real property as you get its legal rights. These rights include the right of the owner to possess the property, sell and lease it, and use the land.
So, natural formations and artificial additions to it, such as a house, a garden, a driveway, etc., attached to the land, are real property. That means if you own a piece of land, every structure attached to it is your real property. You are automatically the owner of all such structures.
Real property includes real estate and the entire gamut of property owner’s rights. That means the owners can use the property as they wish.
Here is the bundle of rights that are associated with real property for the owners:
- The right to possess- It is about the right to occupy the property owned.
- The right to control – It gives the owner the right to control the property regarding its use per the owner’s interests.
- The right to enjoy – This right lets the owner use the property and enjoy it without any interference from outside.
- The right to exclude – That means the owner can refuse others from using or showing interest in the property.
- The right to dispose – It gives the owner the right to sell or give the property to another party.
Note that all moveable properties are tangible personal properties, not real ones. For instance, the car is tangible personal property, not real, since the car can be moved.
Key difference between real estate and real property
Both real estate and real property are related to land and anything attached to it. So, in this way, both seem to be interchangeable. But, there are some significant differences between the two.
Here is the significant difference between the usage of the terms real estate and real property:
Physical asset vs. legal rights
A major difference between real estate and real property is the nature of the assets. Real estate is about being a physical asset, which is a tangible asset. So, it is a piece of land and all things permanently attached to it.
On the other hand, real property is a broader term that includes the physical asset and its legal rights. That means when we talk about real property, it concerns things related to the transaction and other laws. So, real property includes the bundle of rights involved in the property.
Real estate is a broader term used for any land and things attached to it. But when it comes to the rights, interests, and benefits regarding the land and its attachments, the lawyers know it as real property.
So, the difference between real estate and real property is helpful from a legal point of view.
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Wrapping Up
Real estate and real property are commonly used but have different meanings and legal applications. Real estate is any piece of land and all the natural and artificial structures attached to it. However, real property is a natural and artificial structure plus carries a bundle of rights for owners related to the property.
