When it comes to buying a property in India, the buyers stumble across two major property types – a) Freehold Property and b) Leasehold Property. The freehold properties are those which are ‘free from hold’ from other external entities. Only the owner has the right to use the given property as per his/her requirements. In other words, freehold property gives the property owner a free will to extend its usage for various purposes in accordance with the regulations set by the local administrative body. Costlier than the leasehold property that comes with a lease period of 99 years (counted ahead of the construction initiation process), freehold property can be sold easily and does not face any intervention from the state.
The key attributes of a freehold property are easier to comprehend. However, the same does not hold true for a leasehold property. The first question that may baffle your mind when it comes to leasehold properties is their lease period of 99 years. Why 99 years, you may ask? Well, in this article, we wish to outline the basic nuances of the lease period in India. Have a look:
- There are certain rights given to the real estate developers in a particular area that allows them to sell a property, be it a luxury flat in Thane or a villa in Goa, considering the lease period of 99 years. Whether it’s commercial or residential, a buyer can lease a property from the developer for 99 years. After the period gets over, the ownership of a particular property goes back to the landowner. The buyer is liable to pay basic rent to the landowner after purchasing a leasehold property. Also, the option for the renewal of the lease term is also available to the buyers.
- If, as a buyer, you have paid the conversion charges, the government allows the conversion of leasehold property to freehold property. The same can also be accomplished if you promise to buy another lease once the original lease gets expired.
- In case, you are looking forward to buying an older property, you may find it difficult to renew the occupancy contract. Moreover, such properties come with extra costs like property tax and may pose challenges when it comes to property title transference.
Let’s now discuss the relevance of the lease period of 99 years:
- Comprising of all the obligations pertaining to the lessor and the lessee such as the fixed rental limit, the lease agreement clearly states the lease period of 99 years besides various conditional clauses and rights of both lessor and lessee.
- The 99-years period is chosen to regulate the usage of the property alongside the land transfer. The chosen period tends to cover the entire lifetime of the lessee and thus, protect the proprietorship of the lessor.
- The lease period on leasehold properties can be extended by paying the requisite price.
- Whether you are buying a 2 BHK apartment in Goregaon in the western suburbs of Mumbai or a 2 BHK apartment in Goa, on leasehold, you must ascertain with the seller or developer about the transfer memorandum document issued by the local authorities.