Real Estate Jargon- Freehold vs. Leasehold

Freehold vs Leasehold- These two Real Estate Jargons are confusing, but yet they are commonly used. In urban areas two types of properties exist- freehold and leasehold. In case of freehold property [plot or flat], the owners right is full and unconditional [within the parameters of law of the land]. In case of a standalone property, the owner owns the property and also the land on which it stands. In case of multi-level property, the land ownership is usually divided in proportion to the floor area of each owner.

Real Estate Jargon- Freehold vs. Leasehold

The ownership of the freehold property is transferred to the buyer through registration of the sale deed. In case of a leasehold property, on the other hand, the land-owning agency gives the land on lease to the lessee for a stipulated period of time. The land ownership rights remain with the lessor. The lessee pays a premium and needs permission of the lessor before he sells the property.

Since property deals involve large sums of money, buyers need to be cautious and exercise all kinds of precautions. The ownership status of the property is one of the first issues you must address. Confirm that the land has a clear and marketable tittle. From legal stand point experts say that buying a freehold property is always preferable to a leasehold property.

Advantages of Freehold Properties-

  • You enjoy the complete ownership rights of the property.

  • If you own a freehold property you are in charge of maintaining the property, you are not dependent on anyone.

  • Owners on freehold property do not have to pay yearly ground rent.

Advantages of Leasehold Property-

  • Relatively cheaper prices than the freehold properties, as land cost to the developer is invariably less.

  • The responsibility to maintain lies with the developer, or whoever is in charge.

  • Leasehold properties are safer as they have clear titles, and developers’ credentials are intricately verified.

  • Leasehold properties can be converted to freehold properties in some states, like Delhi, every state has different set of rules.

It is advisable to buy freehold property if your pocket permits. Both have their share of pros and cons, the bottom line is to study all the documents, while procuring a property, before you sign the dotted line.

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