4 major differences between a leasehold and a free hold property

You may be surprised to know that nearly all housing options in Delhi, Mumbai (especially Navi Mumbai), Noida Extension and Gurgaon are leasehold properties. Read on to know more:

It is imperative to understand that when you buy a residential property (flat, apartment, bungalow), you do not necessarily become the exclusive owner of the property as well as the land on which it is constructed. Here’s where it gets tricky! Let us simplify it for you:

In the case of a freehold property, you are the whole and sole owner of both the property you have purchased and the land. No one else can make a claim to your property, and you can renovate, repair and modify your property at any point in time. According to your wishes, and depending upon rules and regulations within your country and state, you are 100% free to revamp your freehold property.

It is this complete independence that many find so attractive while purchasing a property. You are free to live at said property or land, for as long as you like and you can choose to sell or lease it upon your needs. The only disadvantage: You also have the sole responsibility of carrying out repairs that may be required from time to time.

Now, let’s look at freehold in comparison to leasehold properties. They are words often used together in connection with properties, and may be confusing for first-time home buyers. Like in the case of freehold properties, there are important legal terms that entitle you to certain rights and obligations, even leasehold properties have their own advantages and disadvantages. 

Here is a brief explanation to understand leasehold properties and highlight the differences.

When you buy a leasehold property, you are actually buying the rights to live and use the property and not the property itself. It’s like booking a table at your favourite restaurant for a meal outside. You can sit at the table, order and consume food, enjoy your meal and company for the duration of an evening. However, you do not own the table at the restaurant. You are simply paying for the utilization of the table for a said duration of time.

Likewise, in the case of leasehold properties, your lease is for a set period of time and you do not actually own the property. Most of the flats are leasehold, which implies that you need to pay the ground rent, which is always very low, to the freeholder.

This rent covers the cost of the repairs and maintenance of the property.

In a leasehold property, there are additional annual costs to be borne out, so it is prudent to be prepared with a set budget for these annual costs. Most leases are for 99 years, however, you can get an extension if you wish to do so.

Since most of the flats for residential purposes in India are leasehold, it implies that all those living in a society or apartment complex with flats must bear the cost of repairs and renovation of the common property that they are using. The future of such properties, after their lease period is over, can be a bit uncertain, and somehow depends upon the amount paid by the society to renew the contract.

Let’s take a quick look at the 4 key differences between leasehold and freehold properties.
 

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