FREEHOLD AND LEASEHOLD PROPERTY

1. Free Hold Property: A freehold property is one, where the owner/society/residents’ welfare association owns the building and the land that it stands on outright, in perpetuity. Freehold land is generally bought through an auction or lottery. The completed project, thus, will include the cost of the land incorporated in the final cost of the units. A freehold property, hence, is any real estate that is legally ‘free from hold’ of any entity other than the owner. The owner of such property has the right to use it for any purpose, in accordance with the regulations of where it is located. The sale of a freehold property requires significantly lesser paperwork, as it is not necessary to request authorization from the state. However, this also means that a freehold property is more expensive to purchase than leasehold property.

Rights of the owners of freehold properties : There are no restrictions on the right of an owner of freehold property to transfer it further and it can be inherited. There is no encumbrance to the absolute title of the property and it can be transferred, by registration of a sale deed. When you purchase a freehold property, you also own the land it was built on, along with the house itself. If the property is an apartment, the home owner becomes a shareholder in the property. You have the right to live in the house as long as you wish and you can also make changes to it. While most houses in India are sold as freehold properties, apartments are also sometimes sold on lease. However, this is gradually changing, as buyers feel more confident in purchasing a property that is freehold.

Advantages of buying a freehold property

  • Property owners do not have to pay annual ground rent.
  • You are in charge of maintaining the freehold property and do not have to depend on anyone else.
  • Complete ownership rights of the property, with no restrictions to transfer it further.
  • More stable, as compared to a leasehold property and more likely to increase in value in the long run.
  • 2. Lease Hold Property: However in case of leasehold property, ownership rights are divided between two parties viz. Lessor and Lessee. Hence we may say that it amounts to duel ownership. In case if the property is subleased, there will be three parties holding an interest in the same property, viz. Head Lessor, Lessee, and Sublessee. The value of their respective rights will depend on lease terms, conditions, and covenants. As the name suggests, here the owner of the land on which the property is built is leased for a certain amount of time to the developer.
  • Generally, the lease period varies from 30 to 99 years. If you are buying an apartment in a housing complex, it might be possible that the land on which it’s built is leased. The future of such properties after the lease period is over is a bit uncertain, and somehow depends upon the amount paid by the society to renew the contract. Also, it’s a task for the buyer to avail of a loan from banks to buy a leasehold property. You would be surprised to know that majority of the housing options in Delhi, Mumbai (especially Navi Mumbai), Noida Extension, and Gurgaon are leasehold properties.

Advantage of buying leasehold properties

The biggest advantage of buying a property in a project that was built on leasehold land is that it will be significantly cheaper than buying one that was built on freehold land or plot (where the developer is the sole and primary owner of the land). In metro cities, developers usually pay a far lesser price for leasing a plot in a good location in the city, as opposed to paying a huge amount and buying the land from the primary owner. This financial benefit trickles down to homebuyers, as well.

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