The terms free hold and lease hold property are very important in real estate. These are directly related to the title of the property. Both these terms are applicable to all types of properties, whether it is a plot, a building built on it, an authority flat, a group housing society flat or an independent floor. There is a sizeable number of lease hold properties along with freehold in major cities. Let’s know what is lease and free hold property… Which property should you buy…
Meaning of free hold property
Free hold property means that the ownership of the property ie ownership rights always remain with you. After you they get transferred to your legal heirs. That means your family will have the right to use, build and sell the property for generations. Most of the properties in India are free hold. For example, the builder bought land directly from a farmer and constructed a flat or house on it and sold it to the buyer. In such a situation, the ownership rights that were with the builder will be completely transferred to the buyer. The purchase and sale of freehold property is done through sale deed, conveyance deed or registry.
lease hold property meaning
Lease hold property refers to a property in which the ownership rights are given to the buyer for a fixed time period. In lease hold property, the owner is the state ie the government or any of its agencies. For example, in Noida, land is bought by the authority from farmers and then leased to builders or home buyers for a fixed period of time. This lease is for 30, 99 or 999 years.
The term of lease in residential property is usually 99 years. After this period, either the ownership of the property will go to the government or the lease will be extended. The lease can be extended up to 999 years. The deal of lease hold property is done through lease deed.
Pros and Cons of both types of property
Now let’s talk about the pros and cons of freehold and lease hold properties. In a freehold property, the entire ownership is transferred to the buyer. You can live in such a property, sell it easily, pick it up on rent. In lease hold property, the owner is mostly the government. You can use, rent or sell this property till the lease period. At the end of the lease, the property will go to the government. To transfer or sell the lease hold property, it is necessary to take NoC from the authority and pay transfer charges. Approval is also required for changes in the structure.
Loan is easily available on free hold
Loan can be easily availed by mortgaging free hold property, whereas in case of lease hold property, banks generally do not give loan if the lease is less than 30 years. As the lease expiry period approaches, banks will be reluctant to give loan or will charge more interest.
Tax is also less on free hold
In freehold property, you have to pay property tax to the government, which is used for the maintenance of common use things like roads, footpaths, parks. In lease hold property, ground rent or lease rent has to be paid, which is more than the property tax. Its rates are different in every city.
Free hold properties are costlier than lease hold properties, whether it is being sold by the government or a private builder. The government can also give land on lease to private builders. If the builder gets the land cheaply, then he builds a flat or an independent house on it and sells it cheaply. However, its disadvantage is that the charges can be very high while renewing the lease, because it is difficult to tell how much the lease renewal charge will be after 99 years from today.
Free hold property is more beneficial
Free hold property wins in terms of price appreciation as well. Freehold property appreciates well. In case of lease hold property, the property appreciation may be good initially, but as the time of lease comes nearer, the value of the property will start decreasing. In such a situation, while buying the property, first of all find out whether the property is lease hold or free hold. Try to buy only freehold property, even though it will be expensive, but you will create a property for the generations to come after you.
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