Leasehold Vs. Freehold- Definition And Difference

Leasehold Vs. Freehold- Definition And Difference, In real estate, there are many terminologies that are confusing for most of the homebuyers. Two such terms are “freehold” and “leasehold”, so, in this article we are going to know these terms in details. Answering several questions such as- Are there any legalities associated with them which a home buyer should be aware of? What is the basic difference between the two? And, most importantly, is one better than the other?

Both the terms are related to land ownership and control, and that is what makes the main difference between freehold and leasehold properties.

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When you own a home, you have all the rights to do whatever you wish to do but also, you should keep in mind the local planning rules. The ownership of a leasehold property is given by the government for tenure of 99 years. It is possible to extend the leasehold to 999 years if the owner, which is the State in most of the cases, wishes to extend the lease and you have to pay a price for the lease extension.

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What Is A Freehold Property?

If you buy a freehold property for sale then you own the land it is built on and also the house.

But in the case of apartments, the owner of the house becomes a shareholder in the property and just owns a particular unit. You can live here for the desired time as long as you want to.

You also get the rights to make alterations in the house or renovate any specific part of the house. Although, you own it but sometimes 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. But now the scenario is changing as many apartments for sale are now being sold at freehold.

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What is a Leasehold Property?

A leasehold property, you have the right to reside there for a fixed period of time and the buyer is not the owner of the property or the land it is situated upon. In this type of property, one will have to pay ground rent to the owner or the leaseholder for using the property.

Once the lease period expires, the ownership of the property is given back to the landowner. If we look the majority of the leases are roughly given for a period of 99 years. For those opting for leasehold properties, it is important to know the tenure of the lease as it will influence the value of the property. It is possible to extend the leasehold to 999 years.

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What Kind Of Properties Cannot Be Freehold?

The flats for sale or apartments can never be freehold because they are spaces constructed on the same piece of land owned by the builder/developer, where each apartment owner is a shareholder.

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Can Leasehold Property Be Converted Into Freehold Property?

Yes, a leasehold property can be converted into a freehold property as some states like Delhi allow you to do so. And if there is such an opportunity, you should definitely opt for it. Every state holds its own set of rules and has a different set of rules for such conversions.

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What Type Of Properties Are Preferred By Buyers?

Today a buyer is smart and usually prefers investing in freehold property due to the stability and chances of capital growth associated with it. Moreover, a freehold property title gives buyers complete ownership of the property and makes him a sole owner. Whereas a leasehold title in which the land belongs either to the State Authority or the developer, who has purchased the land to construct the project.

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