Converting Leasehold Property In Delhi Into Freehold Will Now Cost More
Do you own a property anywhere in Delhi's Connaught Place, Hailey Road, Mandir Marg, Parliament Street, Khan Market, Prithviraj Road, Golf Links, Defence Colony, Sundar Nagar, Vasant Vihar and Nizamuddin? If you need to convert your lease-hold property into a freehold one in these premium areas — most of which are part of the Lutyen's Bungalow Zone — you will have to shell out more starting April 1, 2017. This is the first time since 2000 that property conversion rates will be revised.
Records show Delhi's Land and Development Office has leased out about 65,000 properties in the national capital, of which 30,000 have been converted to freehold.
What does freehold mean?
Authorities allot government-owned land to private parties on a lease-based agreement for a certain period which may extend up to 99 years. In a leasehold property, the owner is liable to pay a ground rent. Leasehold properties come comparatively cheaper, considering they occupy prime spaces, the LBZ in this case. Also, the responsibility of maintaining the property lies with the developer or the state administration, whosoever is in charge. That said, property owners would rather pay property taxes than ground rent. A lease tenure might last 99 years, but the fear of losing ownership is hovering. Most people in India prefer to fully own so that they can pass it on to their children as a tangible asset.
Industry insiders say it may be better to go for a freehold property because it gives you total ownership without any conditions. More so, it is easier to procure funds on your freehold property. However, most homeowners have budget constraints, and, thus leasehold properties are usually the first pick.
Also, if the property is to be constructed on a leasehold land, you cannot take a home loan for a tenure that surpasses the lease balance period. But of course, such cases are rare as land leases are for over a long stretch of time.
Who can apply for conversion of land?
According to the Land and Development Office, the following can apply:
- A person whose name appears on the records of the Land and Development Office as lessee. If there are multiple lessees, all of them will have to sign the application. However, the lessee(s) can also give a Power of Attorney (which should be registered in the office of Sub-registrar) to sign the application on his behalf.
- If there was already a transaction regarding the properties and the original lessee has given a General Power of Attorney to another person for execution of sale deed, the GPA holder himself can apply for conversion. However, in such cases, it should also be specified in the application in whose name the conversion is to be granted. If there are a series of GPAs, attested copies of all such GPAs must be furnished to establish the link with the lessee on record and the applicant.
Who will pay?
Even those who had converted their leasehold properties to freehold between 2000 -2017 will have to pay the revised fee.
How much would you end up paying?
In Delhi, the revised rates of land will vary depending upon the location and the kind of property. Usually, such land conversions are allowed when the building on the plot has been constructed and the completion certificate has been obtained. All dues have to be cleared which includes charges for any kind of misuse, damages before conversion as also the ground rent.
It is expected that the L&DO's rates would now be on a par with that of the Delhi Development Authority's (DDA). As of now, the DDA charges five times more than that the L&DO.
How to convert a DDA leasehold property into freehold?
The homes that the DDA develops are allotted through a lottery system. These units are given on a leasehold purpose that can be later converted into a freehold property after paying a conversion charge.
Here is the process of converting your leasehold property into freehold.
Types of properties that can be converted:
- All built-up residential plots of more than 50 square meter (sqm) where the lease has been granted on behalf of the DDA.
- All fixed-term residential built-up properties where premium has not been charged.
- The low-income group (LIG), medium-income group (MIG), high-income group (HIG) and apartments constructed in Asian Games Village Complex allotted by the DDA.
- Flats constructed by group housing societies on a land leased by the DDA.
Documents required for conversion:
- Copy of the power of attorney and sale agreement, attested by notary/gazetted officer.
- Copy of lease deed/conveyance deed/demand letter attested by notary/gazette officer.
- Proof of physical possession by the person who is seeking conversion. House tax slips, possession letter, passport, identity card, attested by the notary/gazette officer.
- Copy of completion certificate attested by the notary/gazette officer.
- Four passport size photographs, specimen signatures attested by the notary/gazette officer.
- Copy of the No Objection Certificate from the mortgagee attested by the notary/gazette officer.
- Undertaking and affidavit attested by the notary/gazette officer.
- Indemnity bond in prescribed format attested by the notary/gazette officer.
Process of conversion:
The authority takes 45 working days to complete the process of conversion. During the process, the owner has to submit the conversion application along with the charges to the central office of the DDA. The application is then sent to the concerned branch within two working days and the branch office or the concerned draftary incharge sends demand of files from record room and receives within three working days. The preliminary examinations of the documents and the issuance of deficiency letter is completed and dispatched with five working days. The applicant has to reply with the documents within seven working days. The documents are thoroughly checked, processed and sent for principal approval within seven working days. Payment verification and an NOC from the account department has to be received in next seven working days. Once the file is received from the accounting department, assistant director, deputy director and director approves the application within six working days.
An owner should submit all the required documents along with the conversion application to ensure the process is completed before the time limit. The documents and payment related proofs i.e. copies of challans along with others must be submitted with the conversion application so that the documents and the applications could be processed and finalised in 45 working days.
Word of caution
The conversion application can be rejected in some circumstances. In case the building was unauthorised or built as an encroachment on government property, the conversion is allowed only after charges for damages are paid, and provided that the action according to the municipal bye-laws is meted out. Land under disputes, too, will not get an approval till the matter is sorted in a court of law.
Your application might also be rejected if the property is mortgaged and an NOC (no-objection certificate) for conversion is not enclosed with the application. Applications that are signed by an ineligible person will also be rejected.
With inputs from Surbhi Gupta