Difference Between Leasehold and Freehold Property in India

Different ownership models are available for leasehold and freehold properties in India. The owner of a freehold property has total control and freedom over the land and the building. On the other hand leasehold properties are leased for a set amount of time with fewer maintenance obligations and restricted ownership rights.

What is Leasehold Property?

Tenants or lessees who agree to rent a property from a lessor for a set amount of time are said to be leasing the property. It's similar to renting a house for a certain period of time without actually owning the land. Eventually the original owner of the property will own the leasehold premise. In India the majority of the apartments and flats available for purchase are leasehold properties. As a tenant you are responsible for returning the property at the end of the lease and paying the landlord the ground rent service fees and maintenance costs.

The length of the lease could range from 30 to 999 years. The value of the property increases with the length of the lease term. It is also challenging to qualify for a home loan for leasehold properties with less than 30 years of lease.

What is Freehold Property?

To understand what freehold means you must know that the buyer has unrestricted rights to the property. There are no restrictions on the owners ability to sell, transfer or alter the property. They can give the property to whoever they choose with just a simple sale deed registration. Because of this, freehold properties are typically more expensive than leasehold ones.

Advantages of Leasehold Properties

Recognize how leasehold ownership affects your investments and property rights as well as the trade-offs between cost savings and restrictions.

●      Lower Cost- Leaseholds are less expensive than freeholds because you only purchase the building and not the land. Purchasing a leasehold saves money depending on the terms and duration of the agreement particularly if you wish to purchase a larger home in a posh neighborhood.

●      A Different Approach to Financing- For a smaller annual fee than a mortgage you can buy the entire property including land if the agreement permits it. You will need a specialist to search the agreement for this option though.

●      Become a Homeowner- Buying a house with a leasehold is a great way to avoid buying the land. You still have the ability to enhance the building's construction because you are the owner.

Disadvantages of Leasehold Properties

●      Rent is Continuously Reassessed- Although land rent was reasonable when the agreement was made it usually needs to be reevaluated in light of the property's current market value. If the real estate market booms the ground rent might become unaffordable.

●      An Increased Down Payment- The required down payment for a home loan is typically higher for leasehold properties than for freehold ones.

●      The Challenge of Obtaining Funding- Compared to freehold these properties are harder to get housing finance for.

●      There is No Advantage to the Rising Land Value- The rising land value does not benefit you because you do not own the land. The landowner benefits from the area's rising land prices; you only pay more in rent.

Advantages of Freehold Property

Examine the advantages and factors of being the sole owner of your home as well as the effects it may have on your financial situation and sense of autonomy.

●      Released from Hold- It's clear that such property is free from hold if you know what freehold land means. This indicates that you are free to use the property however you see fit as long as you follow the rules.

●      There is No Time Limit- You've probably heard that the property was bought by a buyer who had a 99-year lease. In contrast the definition of freehold implies that ownership of such properties is perpetual. A freehold property is yours to keep forever until you give it to someone else. Never will the lease expire.

●      Saving Money on Rent- With freehold real estate there is no ground rent to pay.

●      Access to Housing Finance is Made Easier- Kotak Mahindra Bank and other lending organizations readily approve home loans for freehold properties.

●      Use of Property at Discretion- You are the sole owner of the building and the land so you can make any structural alterations without getting anyone's consent or telling them. You are free to rebuild the house entirely as you see fit.

●      Paperwork is Easier- If you want to sell your freehold home the paperwork will be easier.

●      Transferring is Made Easier- If you wish to assign the property to someone the procedure will be considerably simpler. Your offspring will automatically receive the transfer.

Disadvantages of Freehold Properties

●      All Costs are the Sole Responsibility of the Individual- Since you own the entire property you are solely liable for paying for all associated costs such as repairs, remodeling and reconstruction. There isn't a landowner to split the blame if the property becomes a legal problem.

●      Pricey Purchase- A freehold property will be more expensive than a leasehold when you first enter the market to purchase one.

 Difference Between Leasehold and Freehold Property

In What Way can a Leasehold Pro