How To Convert A Leasehold Property Into A Freehold One
When one talks about ownership titles, a property is classified into two broad categories: leasehold and freehold. Based on the ownership title, the rights and liabilities of buyers vary.
Difference between Leasehold Property and Freehold Property
A freehold property is a property where the buyer is the absolute owner and has all the rights over it. Owing to a clear ownership status, freehold properties fetch a higher price and it's easier to obtain loans against them.
On the other hand, government authorities allot land at certain places on lease. While the lease period in most cases is 99 years, it may be as long as 999 and as short as 30 years. After the completion of the lease period, the lease holder has to apply for an extension and pay the requisite fee. In a leasehold property, the lessor enjoys absolute ownership of the property, while the lessee has restricted rights. A leasehold property can be sold to any third party only after obtaining a no-objection certificate (NOC) from the authorities concerned.
In some states, lease gets renewed on annual basis on the payment of rent, whereas in some states you have to renew it after a 99-year period by paying a fee. Such properties get transferred to lessors after the lease period is over, if a renewal of the lease is not done.
As getting leasehold properties financed from banks is not easy, especially if the lease is for a short duration, freehold property is always a better option from a buyer's point of view. However, developers prefer to construct flats on leasehold lands, as the cost of such parcels is much less as compared to a freehold land.
How to convert a leasehold property to a freehold property?
Under the Seventh Schedule to the Constitution of India, land is a 'State' subject, and so land laws differs from state to state. Some states do not convert leasehold properties to freehold but provide more autonomy to the owners.
In other states, local development authorities such as the Delhi Development Authority (DDA), Greater Noida Industrial Development Authority (GNIDA), Noida Industrial Development Authority (NIDA), etc., periodically accept applications for conversion of leasehold property to freehold. They list out the documents required and the fees payable by the applicant. Among other documents, you have to produce the sale deed and an NOC, if the property is under sub-lease or mortgage. If the lease has taken place through General Power of Attorney (GPA), you also have to produce the GPA papers.