October 13, 2022

FREEHOLD PROPERTY IN INDIA :

Introduction :

Freehold property is any estate that is “free from hold” of any entity other than the owner. As a result, the owner of such an estate has perpetual free ownership and can utilise the land for any purpose, subject to local rules. A freehold property is more expensive than a leased property since it does not require state approval and hence involves less paperwork.

What is Freehold Property ?

A freehold property, as the name  suggests is one that is  “free from hold”. Here is what this means.

  • The owner of a freehold property has absolute ownership and clear title to both the building and the land on which it is built.
  • There is no encumbrance on the property’s title.
  • Freehold property ownership is permanent.
  • The owner of a freehold property can do whatever they wish with it (within the bounds of the applicable laws).

The owner can make modifications to the building (with the required municipal permissions).

The owner can sell a freehold property, without the requirement of any consent of the state or others.   

The owner of the freehold property can will it, or transfer it, or gift it, or donate it. 

A freehold property can be inherited by their heirs of the owner.

The owner can lease his freehold property.

Freehold, Leasehold & Commonhold Property :

1. Freehold

Freehold property, as the name suggests, is a property that is free from any kind of hold. Any individual or association who owns the building also owns the land it is built on. Thus, the owner has absolute ownership of the property, no questions asked.

One of the main benefits of freehold property is that it is easier to handle if you wish to sell or lease it out. The complications are fewer, and the owner controls every aspect of the building without being answerable to anyone else. Owning a freehold property means that you have the right to deal with the land as you wish, subject to laws and planning permissions.

2. Leasehold

Leasehold property is leased from the freehold owner and is the ownership of the property -but not the land- for a fixed term. A flat is usually leasehold property with the building remaining with the landlord.

A leasehold property is one that you own for a set number of years. This could be for a short time of 2-6 years for commercial property or for a longer duration of 99 or 125 years for residential property.

The lease is the agreement between you and the freehold owner that defines the rent to be paid for the property as well as your obligations.

It is common for a lease to state that the landlord’s consent is required before letting or selling the property, and you will be responsible for the landlord’s expenditures in obtaining the necessary consent.

It is sometimes possible for the length of a lease to be extended or for a part of the freehold to be purchased.

3. Commonhold

Commonhold property is a variant of freehold property. Commonhold is where a multi-occupancy building is divided into flats each with its own freehold. 

As an owner of a commonhold flat,  you would be responsible to manage and maintain the common and external parts of the building  (ie the stairs and hallways) jointly with the other flat owners.

Advantages of Freehold land:

Absolute control is shown by land with a freehold title. As a result, the landowner has complete control over the freehold grounds and is not required to pay any additional expenses such as land fees, processing fees, or any other type of tax that would apply to leased properties. As a result, the owner is aware of the actual amount he paid for the land. A freehold appears to have no time, visitor, or other restrictions. As a result, the owner is free to do anything he wants on his property without having to answer to anyone.

Disadvantages of Freehold land:

Freehold lands have only one disadvantage: they seem to be more expensive. Because a person controls both the ground and the estate, the expense of having complete control over it rises. As a result, those who are ready to live where they only have that land and thus pay a lesser price, may find it difficult to purchase such lands.

Difference Between Freehold and Leasehold Property :

Having understood what a freehold property and what a leasehold property is, let us now try to understand the difference between freehold and leasehold property. 

Residential  property in India is freehold, be it flats/apartments or villas, unlike in a few countries like Singapore, USA, etc, where residential property is leased for 30, 60, 99 or 999 years.

Commercial property in India is either freehold or leasehold. That is to say, people run their shops, business, companies, factories etc., either from space they own outrightly, or they lease it.

Freehold PropertyLeasehold Property
You own the property in perpetuity.Property is only leased to you for a stipulated period.
You can make modifications as you like.You need the owner’s permission and approval to make any modifications.
Costs more than leasehold property.Costs are relatively lesser than freehold property.
You are responsible for the maintenance.The landowner is responsible for the maintenance.
You can easily get a bank loan for a freehold property.Bank loans are generally difficult to get for a leasehold property.
Residential properties are generally freehold property.Commercial properties and company guesthouses are examples of leased properties.

Rights of Freehold property owners :

A freeholder’s right to transmit it further is unfettered, and it is frequently inherited. The absolute freehold title to the property is unencumbered and may be transferred by the registration of an acquisition document. When you purchase a freehold home, you receive both the house and the land on which it was built (freehold land). If the freehold property is an apartment, the apartment owner also becomes a shareholder. You have the right to live in the house for as long as you like and to make renovations to it as well.

While the majority of homes in India are sold freehold, apartments are occasionally leased.

What is freehold ownership? 

A clear sale document, a general power of attorney, and a no-objection certificate can all be used to convert a leasehold property to a freehold property (if the land is under mortgage or rent). In addition, you would have to pay a conversion fee to the appropriate authorities.

How to Convert Leasehold Property to Freehold :

It is possible to convert a leasehold property to freehold property if the landowner and the leaseholder so wish it. This can be accomplished by executing a sale deed, after which the ownership rights of the property will be transferred from the lessor to the lessee.

Documents needed for converting leasehold property to freehold :

The following documents need to be submitted while applying for the conversion of leasehold property to freehold property. 

  • Copy of lease deed or sub-lease deed
  • Copy of sale of agreement 
  • Copy of power of attorney
  • Possession proofs like property tax receipts
  • Demand/allotment letter given by the government 
  • No objection certificate, if needed
  • General Power of Attorney (GPA)

Conclusion :

Freehold property is inheritable, and the property owner’s power to further transfer the property is unrestricted. There is no encumbrance on the absolute title of a free hold property. A freehold is not like a condominium in which the owner of each individual unit pays a maintenance fee. A legal guardian can inherit freehold property. Freehold land in India is a great asset that promotes business growth and taxes foreign nationals living in India. A freehold property can be transferred using a sale deed.

References :

https://economictimes.indiatimes.com/definition/freehold-property

https://timesproperty.com/news/post/what-is-freehold-property-blid2104

https://www.rocketlawyer.com/gb/en/quick-guides/freehold-and-leasehold-property

https://www.nobroker.in/forum/what-is-freehold-land/

https://propertyadviser.in/news/real-estate/what-is-freehold-property-in-india-1054

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