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If you are a homebuyer or an investor looking for properties like apartments or villas in Chennai or any other city, then this blog is for you. It is essential to know the ins and outs of freehold and leasehold properties before making a purchase.
Freehold Properties in India
You are the only owner of the building and the land it is situated on when you possess a freehold property. This ownership has no temporal restrictions and is perpetual. Purchasing a freehold property gives you jurisdiction over the land and property, allowing you to sell or transfer ownership as you see fit. There are no ground rents, renewal fees, or lease periods like with leasehold property. When deciding between leasehold and freehold, one important consideration is the security and control that freehold property provides, which makes it quite appealing.
Advantages of Freehold Properties
Owning a freehold property encompasses a wide range of advantages. Some of the most significant advantages are
- Freehold properties come with complete ownership rights. It offers an unrestricted claim for the owners, allowing them to use the property for any purpose and deed in accordance with the regulations.
- With freehold properties, one can customize your space based on your preferences without anyone’s approval. It allows flexibility to the owner to make extensions, renovations, or even rebuild the entire property.
- There is no time limit for ownership on freehold properties. The property ownership is guaranteed to an individual until they transfer the property to someone else.
- The property value appreciation for freehold properties is much higher than leasehold properties. Thus, freehold properties will be a sound investment option in the long run.
- Freehold properties have various financial benefits. The owner need not pay any ground rent or maintenance and service charges.
- Property transfer and inheritance of properties are made easy with freehold properties. The restrictions for property transfer on freehold properties are minimal.
- Financing is easier with freehold properties as it is more secure and safe. In addition to this, the paperwork for freehold properties is also simple.
Disadvantages of Freehold Properties
- One of the major disadvantages of freehold properties is the higher purchase cost. This expense results from purchasing both the structure and the land below it, which can be a major barrier for first-time purchasers or those with tight budgets.
- Since you are the only owner, you are in charge of all upkeep and repairs for the property. It covers both regular upkeep and any unforeseen repairs that could occur. Careful budgeting is necessary since these expenses may mount up over time.
- Owners of freehold properties are responsible for paying insurance and property taxes, which can eventually become a hardship.
- As with any property ownership, there are hazards involved with freehold ownership. These may include harm from vandalism, burglaries, or natural calamities. However, by taking the required steps, such as obtaining appropriate insurance coverage and putting security measures in place, these dangers may be reduced.
Leasehold Properties in India
A property whose ownership is provided for a predetermined amount of time, called the lease term, is referred to as a leasehold property. Purchasing a leasehold property gives you the right to occupy it for a predetermined period of time. But you’re not the landowner. The person from whom you purchase the lease of a property will still own this land. Unless you renew the lease, the property returns to the owner at the conclusion of the lease period.
As a leaseholder, you could have to pay yearly maintenance costs, service fees, or ground rent in addition to obtaining approval from the owner for specific changes. Navigating lease agreements and making sure your obligations and rights are clear is highly essential for leasehold properties.
Advantages of Leasehold Properties
Leasehold properties in Chennai or any other cities have various advantages. People mostly prefer freehold properties, but the advantages of leasehold properties might make them choose otherwise. Some of those significant advantages are listed,
- Leasehold properties are highly affordable when compared to freehold properties. This is because the buyers own the building and not the land. Thus, it would be an ideal option for first-time homebuyers.
- The leasehold properties come with less maintenance as the landowner is responsible for any major repairs and maintenance of the building. People who prefer houses with low maintenance can prefer leasehold properties.
- One can avail oneself of the benefits of shared amenities with leasehold properties. These shared amenities might include gyms, gardens, swimming pools, parking, and more.
- It would be an ideal option for people who are looking for villas or apartments in Chennai or any other cities looking to stay for a shorter duration.
Disadvantages of Leasehold Properties
Some of the disadvantages of leasehold properties that you must take into consideration before purchasing leasehold properties are listed.
- The owners do not have complete control over leasehold properties. If the leaseholder needs to make any changes or alterations to their property, they must seek approval from the freeholder.
- The property value increase will not benefit the leaseholder as it will to the freeholder. Unfortunately, rising property value can only mean higher rent for leaseholders.
- The renewal of the lease agreement can be expensive. Especially when the freeholder demands higher rent when there is no significant rise in the property value.
- In exchange for the freeholder’s right to occupy the property, leaseholders must pay ground rent each year. Service fees for shared facilities and building upkeep could also apply. Over time, these expenses may accumulate and rise.
- It may be more difficult to get a mortgage for a leasehold home than for a freehold one. Some lenders could impose higher interest rates or limit the remaining lease period.
Key Differences Between Freehold Properties and Leasehold Properties
It is highly essential to understand the key differences between leasehold properties and freehold properties to make an informed decision while purchasing properties.
- Property Ownership
Freehold: It offers complete ownership irrespective of any time limit.
Leasehold: Ownership is limited, pertaining to the lease duration.
- Finances
Freehold: It will have high up-front expenses but stand out as a long-term investment.
Leasehold: This will have a lesser initial cost and renewal fee.
- Property Value
Freehold: The property value will appreciate over time.
Leasehold: There will be no significant benefits for leaseholders.
- Lease Terms
Freehold: With freehold properties, there are no lease terms or agreements.
Leasehold: The lease term is crucial, as a shorter lease will reduce the property value.
- Property Maintenance
Freehold: Maintenance of property is the sole responsibility of the owner.
Leasehold: Maintenance of property is shared by the owner and leaseholder.
- Property Inheritance
Freehold: The property rights and ownership can be passed down for generations.
Leasehold: The leasehold rights can be passed on but within the lease duration.
- Personalization
Freehold: Maximum customization is possible with no restrictions.
Leasehold: Modifications require permission from freeholders of the property.
Frequently Asked Questions
1. Which is better to buy: freehold properties or leasehold properties?
Generally, it is always best to opt for freehold properties, as it will offer long-term stability and will stand out as a better investment option. Compared to leasehold properties, freehold properties encompass a wide range of advantages, making it the first choice for home buyers.
2. Can I sell my leasehold property?
Yes, you can sell the leasehold property; however, it is essential to know that the lease will remain intact, and the buyer must adhere to the terms and conditions of the previously drafted lease.
3. How can I convert my leasehold property to freehold property?
Converting leasehold property into freehold property is easy after acquiring ownership of the said property. With all the necessary documents, this transfer will be smooth and seamless.
4. Which is cheaper, freehold properties or leasehold properties?
When compared to freehold properties, leasehold properties are cheaper. This is predominantly because of the limited ownership of the leaseholder and the duration of the lease.