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# Floor Area Ratio (FAR)

## Definition

The Floor Area Ratio (FAR) is a term used in urban planning and real estate that measures the ratio between the total usable floor area of a building and the total area of the plot where the building stands. In other words, FAR is the ratio of built-out floor space to the total size of the land parcel. It’s an essential metric that helps determine the density and intensity of land use.

### Phonetic

Floor Area Ratio (FAR) phonetically is said as follows:Floor – /flɔːr/Area – /ˈɛə.rɪə/Ratio – /ˈreɪ.ʃi.oʊ/FAR – /ef.eɪ.ɑr/

## Key Takeaways

<ol><li>Floor Area Ratio (FAR) is the ratio of a building’s total allowable floor area to the size of the piece of land upon which it is built. It’s used in zoning codes to control the mass of buildings in relation to lot size, striving for an appropriate density. </li><li>The calculation of FAR involves dividing the gross floor area of all buildings on a lot by the lot area. Therefore, a higher FAR value typically indicates more available buildable area. This could mean taller buildings, or multiple smaller buildings spread across a lot. </li><li>FAR is a critical tool in urban planning and development. It helps maintain a balance between available land and overbuilding, and can influence the character and form of developments. It also assists in ensuring there’s adequate light, air, and open space in urban environments. </li></ol>

## Importance

The Floor Area Ratio (FAR) is an essential term in business and finance, particularly within real estate and urban planning, as it’s used to measure and regulate the density of buildings. It’s calculated by dividing a building’s total floor area by the plot area. The importance of FAR lies in its ability to set a limit and control the total amount of usable floor space in a building to ensure the efficient use of land and prevent overcrowding. FAR also guides the implementation of zoning regulations, maintains the balance between commercial and residential spaces, and aids in defining the overall character and intensity of development within specific areas. Therefore, it serves as a crucial tool in the sustainable planning and management of urban spaces.

## Explanation

The primary purpose of a Floor Area Ratio (FAR) is to maintain a balance between built-up space and open space, achieving a suitable urban density. It is essentially a tool used by urban planners and developers to regulate and control the bulk of a building or constructions within a particular area. By applying this metric, municipalities can effectively manage and control urban planning to reference sustainable living. Thus, managing urban densities while taking care of environmental factors such as light and air accessibility and to avoid overcrowding.FAR is an indispensable tool that is used in zoning ordinances, enabling planners to exert influence over the design and planning of buildings. It gives developers an estimation of the maximum amount of floor space they can utilize relative to the lot size. This way, officials can ensure that the built-up environment does not exceed set parameters and that the city or neighborhood aesthetic is preserved. Consequently, it’s a mechanism to contain and manage the rapid and ubiquitous urban growth seen in cities worldwide today, sustaining both the environmental and aesthetic integrity of urban areas.

## Examples

1. **New York City:** In New York City, zoning laws establish a maximum FAR for different areas to regulate the building sizes on individual lots. For example, in a residential area, a FAR of 1.0 could mean that a building could have a footprint equal to the entire lot area (built lot line to lot line) with one story, or cover 50% of the lot area with two stories. This prevents excessive building density and controls the scale of construction in certain areas.2. **Bangalore, India:** In Bangalore, the Bruhat Bengaluru Mahanagara Palike (BBMP), which is the administrative body responsible for civic amenities and infrastructure, has established specific FAR norms. For example, the maximum FAR in Bangalore is 1.75 in the core area, 2.25 in the outer zone (under certain conditions), and 3.25 in specific transit-oriented zones. This helps in maintaining proper space for the movement of vehicles, utilities and general infrastructure.3. **Business Parks or Commercial Complexes:** Developers of business parks or commercial complexes also use FAR to plan the construction of buildings. For example, a park with a FAR of 0.5 might only allow half of the land area to be built upon. This could result in two 1-story buildings covering quarter of the lot each, or a single 2-story building covering half the area. This factor directly contributes to the planning of the open spaces, parking areas, and other amenities available in these commercial complexes.

What is Floor Area Ratio (FAR)?

Floor Area Ratio (FAR) is a critical decisive tool used in urban planning to control the amount of construction in a certain area. It is the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built.

How is FAR calculated?

FAR is calculated by dividing the total or gross floor area of a building by the gross area of the plot or land that it’s built on.

What is the purpose of the Floor Area Ratio (FAR)?

The purpose of the FAR is to control building density and to prevent overcrowding. It represents the maximum amount a building can be developed upwards or spread out, helping maintain a balance between open space and developed land.

How does FAR affect real estate investments?

The FAR influences real estate investments by determining the maximum floor area allowed for a building. This, in turn, can affect the profitability of the investment. Generally, a higher FAR value might mean a more profitable investment but also more construction and operation costs.

Can the FAR be changed and who is in charge of setting it?

Yes, FAR can be changed; it is typically determined by local zoning laws and can be adjusted by local planning authorities. They can modify FAR in response to issues such as urban population growth and building density control.

Is a higher FAR ratio beneficial or not?

Whether a higher FAR is beneficial or not can depend on the context. For a developer, a higher FAR means more developable space and potentially higher profits. However, it might also lead to overcrowded areas with limited public and green spaces.

How does the FAR impact the design of a building?

FAR affects the design of a building as it limits the total square footage a building can occupy. Depending on the allowable FAR, architects and developers must adjust their designs to stay within the limit, potentially influencing the building’s height, number of stories, and overall design.

## Related Finance Terms

• Building Coverage Ratio (BCR)
• Gross Floor Area (GFA)
• Net Floor Area (NFA)
• Zoning Regulations
• Building Code Compliance

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