Definition of "Allotment"

Julie Yo real estate agent
Julie Yo, Real Estate Agent RE/MAX Capital Realty

In order to define allotment, we have to take into consideration what it refers to. While generally, it refers to a certain amount of something that is allocated to a particular person, the most common use of the term can be seen in the corporate world regarding shares distributed across different entities. The term also has an application in the real estate world, but the idea is relatively similar. In both instances, a party makes an initial public offering (IPO), and interested parties express their desire to have amounts of something allocated to them.

If there’s a higher demand, the amount of something allocated might be smaller than the amount desired. In the opposite case, with lower demand, the amount of something allocated might be larger or cheaper than the original amount desired. Let’s take a closer look at what happens when this concept is applied in the real estate industry.

What is Allotment in Real Estate?

The residential allotment meaning describes a piece of land that is one part of a developmental land for a proposed development (i.e., residential) that will only be used for a single-family home, prohibiting further subdivision of the piece of land. This is a scenario where a real estate developer has 30 lots available within their residential development, and each lot is an allotment for a particular individual.

The allotment process is an equitable distribution of lots, and the individual who gets the lot allotted to them proceeds to make the purchase. The downside of this process can be seen when the supply is lower than the demand. If there are 30 lots available for allotment and 50 families interested in them, the distribution will leave 20 families without an allotted lot. In that scenario, the 20 families will be unhappy, disgruntled potential buyers that would have to look elsewhere for a developed lot.

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