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Floor Area Ratio

Updated on March 26, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Floor Area Ratio?

The floor area ratio or floor space ratio refers to the relationship between the overall useable floor area that a building is authorized to have and the overall area of the piece of land on which that building is constructed. Local governments utilize this code for zoning codes.

For eg:
Source: Floor Area Ratio (wallstreetmojo.com)

Besides accounting for a building’s footprint, this ratio accounts for the structure’s entire floor area. The exclusions from the square footage computation are elevator shafts, stairs, parking garages, and other unoccupied areas. This ratio indirectly restricts the total number of individuals a building can hold without influencing the structure’s external shape. Also, it directly restricts building density.

Key Takeaways

• The floor area ratio refers to a ratio that denotes the correlation between a structure’s overall floor area that is permitted to be utilized and the total plot area. Usually, a higher floor space ratio indicates a denser or urban construction.
• Municipalities govern the regulations concerning the floor space ratio. Hence, the ratio varies across different localities.
• Individuals must divide a property’s total usable floor area by the size of the piece of land on which it stands to calculate the floor area ratio.
• Property buyers can know a project’s density by knowing this ratio.

Floor Area Ratio Explained

The floor area ratio refers to a metric denoting the maximum floor area of a property that one can construct on a plot of land. Local governments utilize the floor space ratio to establish zoning codes. A higher ratio indicates an urban or dense construction is occurring. That said, one must remember that structures with varying stories can have the exact floor space ratio.

When the development starts, developers can know the ideal size of yards or lot coverage percentage using the zoning codes. This is why the ratio is extremely useful for zoning codes. Every locality has restricted capacity or limited space. Utilization beyond that capacity puts excessive stress on them. The maximum capacity is the safe load factor.

This ratio varies due to construction activities, growth patterns, and population dynamics. Moreover, the variation in the characteristics of the space or plot causes the ratio to differ. Non-agricultural, agricultural, commercial, industrial, and residential spaces have varying safe load factors. Hence, they generally have different floor space ratios. Local governments introduce new regulations and impose certain restrictions to determine this ratio.

This metric helps determine a nation’s development. Typically, a low flow space ratio deters construction and economic growth. Various industries, especially real estate, look for an increase in this ratio, which implies that the industry loos to open up land resources and space for developers.

An increased ratio allows developers to finish more high-density building projects. This, in turn, leads to lower expenses per project, increased sales, and higher supply to fulfill demand.

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Formula

One can use the following formula to calculate the floor area ratio.

Floor Area Ratio Formula = The Total Useable Building Floor Area ÷ Gross Plot Area

Examples

Let us look at a few floor area ratio examples to understand the concept better.

Example #1

Suppose an apartment building is available for sale in Boston, Massachusetts. The asking price for this property spanning 16,000 square feet, is \$2 million. The area of the plot on which the structure stands is 72,000 square feet. Therefore, one can compute the building’s floor space ratio utilizing the above formula.

Floor Space Ratio = 16,000 square feet ÷ 76,000 = 0.22 (approx.)

Example #2

The Karnataka government’s Urban Development Department in India permitted the BMRCL or Bangalore Metro Rail Corporation Limited or a floor space ratio of 5 for the forthcoming Nagawara Metro Station. It is the sole station out of the 131 metro stations of Phase 1 and Phase 2 to have received the go-ahead for such a high value. This greatly boosts the organization’s efforts to raise non-fare revenue.

Importance

One can go through the following points to understand the importance of the floor area ratio.

• Local governments can take the help of this ratio to split the land areas into different zones to restrict urban density.
• It gives buyers an idea of a project’s density.
• According to the available floor space ratio, developers get the approval for towers’ or buildings’ heights.
• The ratio directly limits structure density.
• It determines a structure’s overall capacity on a piece of land.
• This ratio indirectly limits the total number of people allowed inside a property without having any control over the building’s external shape.
• Another key importance of the floor area ratio is that It helps authorities foster planned and stable growth.

Floor Area Ratio vs Lot Coverage

Understanding floor area ratio and lot coverage can be challenging for individuals unfamiliar with these concepts. That said, one can fully understand their meaning and avoid confusion by knowing how they differ. So, let us look at some key differences between floor space ratio and lot coverage.

1. What is the meaning of floor area ratio 200%?

It means that the floor space ratio is 2, which means an organization or individual has permission to construct a covered area twice the size of the plot area.

2. Can the floor area ratio be greater than 1?

A floor space ratio is a decimal value; it can be greater or less than 1. A ratio of 1 means that one can utilize the entire property. Values below 1.0 suggest that some part of the plot remains empty. On the other hand, values exceeding 1 suggest that the same property has multiple levels.

3. Is the balcony included in the floor area ratio?

The calculation of the floor space ratio includes the area of the balcony. That said, it does not include unoccupied areas, such as porches, lifts, staircases, basements, and parking areas.

4. What does the floor area ratio depend on?

It depends on the policies set by local authorities of the particular region. The ratio keeps changing with the alterations in the rules and regulations. It also depends on the size of the plot. Some local municipal authorities offer a high ratio for large-sized plots.

This article has been a guide to what is Floor Area Ratio. Here, we explain it with its formula, examples, comparison with lot coverage, and importance. You may also find some useful articles here –