Clear explanations of terms commonly used in real estate sales, investment, taxation, and law.
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- Brokerage Fee Brokerage fees are capped by Article 46 of the Real Estate Brokerage Act and an MLIT public notice: for sales, 3% plus ¥60,000 (before tax) on the portion above ¥4 million; for leases, one month's rent. Since July 1, 2024, a special rule allows up to ¥330,000 (tax inclusive) from each of the seller and buyer for properties of ¥8 million or less. We explain the calculation and negotiation in practice. Learn more →
- Building Coverage Ratio The building coverage ratio is building area ÷ site area, and under Article 53 of the Building Standards Act the ceiling is set between 30% and 80% depending on the zoning district. Corner plots receive a 10-point bonus, as do fire-resistant buildings in fire prevention districts. We explain the calculation with examples and the points to watch for income properties. Learn more →
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- Cap Rate The cap rate (capitalization rate) is NOI divided by the property price, and under the income approach it is used as Price = NOI ÷ Cap rate. As of April 2026, the expected yield for studio apartments in Tokyo's Jonan district stood at a record low of 3.6%. We explain the definition and how to use it. Learn more →
- Capital Gains (Short-Term / Long-Term) Capital gains on real estate are calculated as sale price − (acquisition cost + selling expenses) − special deductions, and taxed separately from other income. If the holding period exceeds five years as of January 1 of the year of sale, the gain is long-term (15% income tax + 5% inhabitant tax + reconstruction surtax = 20.315%); five years or less is short-term (39.63%). We explain with a worked example and points to watch. Learn more →
- Cost Approach Valuation Cost approach valuation (sekisan hyōka) is a cost-method valuation calculated as land value + building replacement cost × remaining useful life ÷ statutory useful life, and it is a pillar of lenders' collateral assessments. We explain the calculation steps using rosenka and replacement unit costs, and how it is used alongside income-based valuation. Learn more →
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- DSCR DSCR (debt service coverage ratio) is NOI ÷ annual principal and interest payments. Below 1.0, rental income alone cannot service the loan. Lenders typically look for 1.2–1.3 or higher and also use it in stress tests for rising interest rates. We provide a worked example and benchmarks. Learn more →
- Defects (Contract Nonconformity Liability) Under the amended Civil Code effective April 1, 2020, 'defect warranty liability' was replaced by 'contract nonconformity liability,' and buyers can now choose among demanding cure, demanding a price reduction, rescission, and damages. The notice deadline is one year from discovering the nonconformity, or at least two years from delivery when the seller is a licensed real estate broker. We explain how this interacts with exclusion clauses in practice. Learn more →
- Depreciation (Real Estate) Depreciation is the system that allocates the acquisition cost of buildings and equipment as a necessary expense over the statutory useful life (22 years for wood, 47 years for reinforced concrete, and so on); land is excluded. Buildings may only use the straight-line method, and secondhand buildings can shorten the useful life using the simplified method. We explain the effects on after-tax cash flow and on the acquisition cost at sale. Learn more →
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- Fixed Asset Tax Assessed Value The fixed asset tax assessed value is the price determined by municipalities (the Tokyo Metropolitan Government for the 23 wards) under the Fixed Asset Valuation Standards, and it is used to calculate fixed asset tax, city planning tax, real estate acquisition tax, and registration and license tax. Residential land is pegged at about 70% of the official land price, with revaluation every three years (most recently fiscal 2024). We explain how to read and use it. Learn more →
- Fixed-Term Lease The fixed-term lease (fixed-term building lease) was introduced on March 1, 2000, and terminates on expiry of the contract period without renewal. A written contract and prior written explanation before signing are required; electronic execution has been possible since May 18, 2022. For terms of one year or more, notice must be given between one year and six months before expiry. We explain the differences from an ordinary lease and how to use it. Learn more →
- Floor Area Ratio The floor area ratio is gross floor area ÷ site area, and under Article 52 of the Building Standards Act the ceiling is designated between 50% and 1,300% depending on the zoning district. If the fronting road is narrower than 12 m, the ceiling is the lower of the designated ratio and road width × 0.4 (residential districts) or 0.6. We explain the calculation steps and the pitfalls for income properties. Learn more →
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- IRR IRR (internal rate of return) is the discount rate at which the present value of future cash flows equals the initial investment, giving the annualized return on the whole investment including the gain on sale. With a worked example, we explain why the exit price and holding period change the outcome even when the yield is the same. Learn more →
- Important Matters Explanation The important matters explanation is given under Article 35 of the Real Estate Brokerage Act, before a contract is concluded, by a licensed real estate transaction agent who presents their license card and explains in writing (the Article 35 document). Online explanations have been permitted for sales since March 2021, and electronic delivery of the document since May 18, 2022. We explain the required contents and tips for reviewing it. Learn more →
- Income Approach The income approach derives a property's price by discounting the future net income it generates to present value. It comes in two forms: direct capitalization, which divides one year's NOI by the cap rate, and the DCF method, which discounts multiple years of cash flows. We explain the formulas and how lenders use them. Learn more →
- Inheritance Tax Assessed Value The inheritance tax assessed value is the value of assets used to calculate inheritance and gift tax: land is valued by the rosenka method or the multiplier method, and buildings at the fixed asset tax assessed value × 1.0. For condominiums acquired on or after January 1, 2024, a unit-ownership adjustment factor raises the value to at least 60% of market price. We explain the gap to market value and the limits of its use. Learn more →
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- NOI NOI (Net Operating Income) is gross income less operating costs such as management fees, fixed asset tax, and repairs. It shows a property's intrinsic earning power before loan payments and taxes, and it is the most important metric in real estate investment, serving as the numerator for both the cap rate and DSCR. Learn more →
- Net Yield Net yield is calculated as (annual rent − annual operating costs) ÷ (property price + acquisition costs). It normally comes in 2–3 percentage points below gross yield, and it is the figure that property comparisons and lending decisions should rest on. We walk through a worked example and the breakdown of expenses. Learn more →
- Non-Rebuildable Land A non-rebuildable property is land on which no new building can be erected once the existing one is demolished, because it fails the road frontage requirement of Article 43 of the Building Standards Act (at least 2 m of frontage on a road at least 4 m wide). Rebuilding sometimes becomes possible through certification or permission under Article 43, paragraph 2. We explain how to identify it and the investment risks. Learn more →
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- Official Land Price (Koji Chika) The official land price (kōji chika) is the per-square-meter price of standard sites, judged as of January 1 each year by MLIT's Land Appraisal Committee under the Public Notice of Land Prices Act and published in March. For 2026 (Reiwa 8) the nationwide all-use average rose 2.8% year on year, the fifth consecutive annual increase. We explain its relationship to rosenka and the fixed asset tax assessed value, and how to use it. Learn more →
- Old vs. New Seismic Standards The new seismic standard applies to buildings that received building confirmation on or after June 1, 1981, and aims to prevent collapse even in an earthquake of seismic intensity upper 6 to 7. The old standard that preceded it was benchmarked to roughly intensity 5. Wooden construction was tightened further in June 2000. We explain how to tell them apart and the effects on financing and tax. Learn more →
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- REINS REINS is a property database exclusively for real estate companies, operated by the four designated real estate information networks (East Japan, Chubu, Kinki, and West Japan) under the Real Estate Brokerage Act. Listings must be registered within 7 days under an exclusive brokerage agreement and 5 days under an exclusive-right agreement. Since January 2025, registration of the transaction status has also been mandatory. We explain how it works and how sellers can check. Learn more →
- Restoration (Genjo Kaifuku) Restoration is an obligation the tenant bears on moving out, but wear from aging and ordinary use is the landlord's responsibility; the tenant pays only for damage caused by intent, negligence, or misuse. The approach in MLIT's guidelines was codified in Article 621 of the amended Civil Code in April 2020. We explain the allocation of costs and the validity of special clauses. Learn more →
- Rosenka (Roadside Land Value) Rosenka is the per-square-meter value of a standard residential plot fronting a given road, published by the National Tax Agency every July, and it is the basis for valuing land for inheritance and gift tax. It runs at roughly 80% of the official land price; the 2026 figures reflect prices as of January 1. We explain how to read it and how it differs from the multiplier method. Learn more →
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Detailed explanations of each term are published on Fudosan Insight, the real estate media site we operate.