Leasehold Property Vs. Freehold Property in 2024

While purchasing a property, you may encounter terms like freehold and leasehold that may create confusion such as what do they mean? and how are they different from each other? Today, we will clarify all your doubts regarding these terms.

What is Leasehold Property?

Leasehold is the term used for apartments or flats leased by a tenant from a lessor for a predetermined period. It means you will have access to your home as an owner but will not own the land. The real owner will possess properties of the leasehold property's premises. Often, flats and apartments in India come under leasehold property, and they only pay ground rent, service, and maintenance charges to the lessor and return the property at lease expiry. At the same time, they are not allowed to make any structural changes to the property without permission, but don't get confused; it means you can change anything inside your flat or apartment, but you are not allowed to alter anything that can damage the structure or can alter the structure of the apartment.

For example, In cities like Noida, properties are Noida Authority and Subleased govern leasehold, and their whole ownership is to the person who wants to own a flat or apartment in Noida, but this lease is not the same as leasing other properties; it will be leased to you by the Noida authority for the period of 99 years or in some places it if varies from 30 to 999 years. So, you will be the sole owner, but you have to renew the property after your lease tenure expires because the authorities don't won't give you the land ownership.

What is Freehold Property?

Suppose you're unable to understand the significance of the term freehold. In that case, it is important to understand that this type of ownership grants the buyer all rights to the property without limitations. The owner is able to transfer, sell, or change the property without obligation. With just a simple sale deed, they can sell, transfer, or modify the property to any person they like. This is why freehold homes are generally more expensive than leasehold homes.

Advantages & Disadvantages of Leasehold & Freehold Properties

Leasehold and freehold properties each have advantages and disadvantages, so it's essential to understand the differences between them before making a decision.

Advantages & Disadvantages of Leasehold Property

Leasehold properties offer a cheaper initial purchase price since you're buying the building and not the land. This can be advantageous, especially in affluent areas where land prices are high. Additionally, leaseholds can provide an alternative finance option, allowing you to purchase the entire property, including the land, at a lower annual fee than a mortgage. Despite not owning the land, being a leasehold owner still allows you to improve the building, making it a viable option for becoming a homeowner.

However, there are downsides to leasehold ownership. The ground rent may increase over time, potentially becoming unaffordable if the real estate market booms. Additionally, obtaining financing for leasehold properties can be more challenging, and you won't benefit from any increase in land value since you don't own land.

Advantages & Disadvantages of Freehold Property

On the other hand, freehold properties offer complete ownership of both the land and the building, with no time limit to ownership. This means you won't won't pay any ground rent, and obtaining financing is typically easier. You also have complete control over the property, allowing you to make any modifications or renovations without needing permission. The paperwork for selling a freehold property is simpler, and transferring ownership is easier, especially to heirs.

However, freehold properties come with their drawbacks. As the sole owner, you're responsible for all expenses related to the property, including maintenance and repairs. Freehold properties are generally more expensive upfront compared to leasehold properties.

How To Choose Between Leasehold And Freehold?

When deciding between leasehold and freehold ownership, consider factors such as the extent of ownership, unpredictability of lease renewals, maintenance charges, and access to loans. Ultimately, the choice depends on your personal preferences and long-term goals.

How to Convert Leasehold Property Into Freehold Property ?

Converting a leasehold property into a freehold property involves following specific steps, such as applying for conversion from the relevant authority or preparing a sale agreement for private properties.

Both leasehold and freehold systems operate within a legal framework, with agreements defining rights and obligations and resources like the Leasehold Valuation Tribunal available to resolve disputes. Understanding these legal aspects is crucial when dealing with leasehold or freehold properties.

Conclusion 

While buying a property, you need to be aware of these terms and better assess their advantages and disadvantages, too, so that you will get your desired property without falling into any scam.

commercialnoida.com is a RERA-certified real estate company that deals in properties in Noida and has helped Thousands of residents find their dream; if you are confused about leasehold vs. freehold property, which one is perfect for purchasing for you, contact us at 7053707070