Real Estate Basics: What is a Freehold Property?

An estate includes a present or future right to ownership and/or possession of real property. Estates in land are divided into two main classifications: 

  1. freehold estates and 
  2. leasehold estates. 

Freehold estates are those involving ownership, while non-freehold estates are those involving tenants. 

If you have purchased a freehold property, you own the land it is built on and also the house. 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 a property has the right to use it for any purpose, in accordance with the regulations of where it is located.

In the case of apartments, the owner of the house becomes a shareholder in the property. You can live there for as long as you desire. You will have the right to make alterations in the house or redo some parts of the house. You might have to take permission from authorities if you bring about structural changes, (especially in case of old buildings). In India, most houses are sold as freehold property but apartments are mostly on a lease.However, this too is changing as many apartments are getting sold as 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.

How to convert a State owned leasehold property to a freehold property?

Under the Seventh Schedule to the Constitution of India, land is a 'State' subject, and so land laws differs from state to state.  Some states do not convert leasehold properties to freehold but provide more autonomy to the owners.

In other states, local development authorities such as the Delhi Development Authority (DDA), Greater Noida Industrial Development Authority (GNIDA), Noida Industrial Development Authority (NIDA), etc., periodically accept applications for conversion of leasehold property to freehold. They list out the documents required and the fees payable by the applicant. Among other documents, you have to produce the sale deed and an NOC, if the property is under sub-lease or mortgage. If the lease has taken place through General Power of Attorney (GPA), you also have to produce the GPA papers.

What kind of properties cannot be freehold?

Flats or apartments can never be freehold because they are dwellings constructed on the same land owned by the builder/developer, where each apartment owner is a shareholder.

Difference between Freehold and Leasehold properties

The main difference between freehold and leasehold properties pertains to land ownership and control. As an owner, you can mostly do what you wish with your home, provided you keep within the local planning rules. In the case of a leasehold property, the ownership is given by the government for tenure for certain years. It is possible that it can be further extend, which is in most of the cases, who wishes to extend the lease have to pay a price for the lease extension.

Lease duration is usually 30, 45, 60, 99 or 999 years.
Till you are owner, in some cases duration limited by town planning authorities.
Approvals Required

Lease transfers require State or its equivalent's approval.

Few limitations on the transfer of property.

Ownership Rights

You just have a lease from the freeholder or the
landlord to use the home/property for 'N' number of years.

You own the building and the land it stands on, in perpetuity.


Popular Posts