What does the term "zoning" refer to in real estate?

Zoning in real estate refers to the classification of property for specific types of use, which is crucial for urban planning and building regulations. Local government authorities establish zoning laws to designate certain areas for residential, commercial, agricultural, industrial, or mixed-use developments. These regulations help in maintaining the character of a neighborhood, ensuring compatible land use, and protecting property values.

For instance, a residential zone will typically restrict the types of buildings that can be constructed to homes or family dwellings, while a commercial zone may allow for retail shops, offices, or restaurants. Understanding zoning is essential for real estate professionals and investors as it impacts what can be built and how properties can be utilized, influencing investment potential and development opportunities significantly.