Freehold Vs Leasehold Property In India

The real estate market in India is vast and worthy; people invest in various types of properties in this market as the market has been witnessing growth in an upward trajectory. Among the different kinds of investments, two of the most common property ownership are freehold and leasehold ownership. Whether it’s for personal use or commercial purposes, you must know about the type of ownership you choose, as it influences the rights over the property and your long-term plans. In this blog, we will look into freehold ownership and leasehold ownership in terms of their characteristics, benefits, and differences.

First, let’s dig into the basics of Freehold Ownership vs. leasehold Ownership,

What is Freehold Ownership?

Freehold Ownership refers to the type of ownership where the buyer holds full power and complete rights over the land and the building built on it. This means that the owner is not bound to any restrictions, whether its modification or transfer of the property to another party. In this case, the only requirement is to have a sale agreement that acts as proof of ownership.

Freehold Property Example: Residential homes usually come under freehold ownership.

Characteristics:

1. Complete Ownership: After buying a freehold property, the land with the building entirely belongs to the owner. The owner doesn’t need permission from a third party to sell, transfer, or even modify the property.
2. No Time Restrictions: Freehold ownership doesn’t have any restrictions. The owner can hold the property for a lifetime or just pass it on to future generations.
3. Complete Control: The legal owner of the property/land has all rights to any changes, expansions, and modifications on the property. The owner can renovate, change, or even build some new construction without getting any external permission.
4. No Government Reclamation: With freehold ownership, the risk of the government taking your property for public development projects is much reduced, giving you much security to hold on to for the long haul.
5. Investment Potential: Freehold properties would generally increase their value over time, hence making them more stable investments in the long term.

What is Leasehold Ownership?

Leasehold property is a type of ownership where individuals purchase the right to occupy a property or land for a period of time, which is pre-determined; the timeline depends upon the agreement between the lessor and lessee. Here, the ownership of the land remains with the original owner/lessor, who can be an authority or a private landlord.

For example, leasehold properties are more in commercial real estate, even though some residential projects are also given for lease. Areas or properties controlled by government authorities may also fall under this category.

Characteristics:

1. Limited Ownership: The lessee doesn’t own the land on which the property is built. The rights to use the property or land last only for the lease period, after which the ownership goes back to the lessor unless the lease is renewed.
2. Subject To Reclamation: Leasehold properties, especially those owned by government authorities, can be reclaimed for development purposes. In such cases, the government may take back the land or property. However, in this case, compensation is usually offered.
3. Restricted Modifications: Any significant changes that need to be made on a leasehold property require permission from the lessor. The lessee may need approval for renovations or expansions, which limits the flexibility of making modifications.
4. Lessee Handles Maintenance: While day-to-day maintenance and repairs are typically the responsibility of the lessee, major structural repairs may fall on the lessor, depending on the lease agreement.
5. Lease Renewal: At the end of the lease term, the lessee needs to talk to the lessor about whether there is a requirement for a lease extension. Failing to renew the lease could mean losing the property, which could affect the future.

Freehold Vs Leasehold Properties

Freehold Properties: The Preferred Choice For Homebuyers:

Freehold properties are the preferred option for most individuals who would like to invest or stay, as these properties offer stability, long-term ownership, and the ability to make changes to the property as needed. There’s also the added benefit of easier financing, which makes it simpler for homebuyers to secure loans and invest in their dream homes.

Sterling Developers provides multiple types of properties in prime locations of Bengaluru. We usually provide freehold properties to ensure that our buyers enjoy complete ownership without restrictions. Our properties are suitable for those looking to either settle down in the city or invest in Bengaluru’s growing real estate market, which has a higher ROI.

Can leasehold property be converted into freehold property?

Leasehold property to freehold property conversion can be done under certain circumstances depending on the laws of the country. This would then make the lessee the owner of both the land and the structure. After the conversion, there will be no restrictions on the individuals which was previously imposed by a lease.
There are a lot of procedures involved in the conversion of leasehold property into freehold property, and conversion becomes completed when the final fee is paid and the property is re-registered as freehold.

Sterling Real Estate Developers offers prime freehold properties in Bengaluru, providing buyers with complete ownership and control over their investments. Whether you choose a freehold or leasehold property will depend on your personal preferences, financial situation, and long-term goals. By weighing the advantages and disadvantages of freehold vs leasehold properties, potential buyers can make choices that align with their lifestyle and financial objectives while benefiting from the expertise offered by reputable developers like Sterling Real Estate Developers.

FAQ’s

1. What is the difference between leasehold and freehold property in India?

Leasehold: You rent the property from the landlord for a specific period. Freehold: You own the property outright, with no time limit.

2. Is freehold better than leasehold?

Generally, freeholds are considered better because they offer more control and the potential for resale without lease restrictions. However, leaseholds can be more affordable in some cases.

3. Who is the actual owner of leasehold property?

The landlord is the actual owner of the leasehold property.

4. What happens after the leasehold expires?

Typically, the property reverts to the landlord. However, your lease agreement might have renewal or extension provisions.

5. Can I buy the freehold of my leasehold flat?

It’s possible, but it depends on the terms of your lease and the landlord’s willingness. You may need to negotiate a purchase agreement with the landlord.