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Freehold Property vs Leasehold Property - Explained in Hindi - YouTube
Channel: Asset Yogi
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Namaskar, my name is Mukul and welcome to AssetYogi
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where we unlock the knowledge of real estate and finance.
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Today we are going to talk about Freehold and Leasehold property.
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If you have earlier invested in any property,
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or thinking about investing.
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So you need to know about these two properties.
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If you have already invested in a property, still
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you should see in your papers if your property is Freehold or Leasehold.
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And if it is possible in your city,
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you can also see how to convert Leasehold property to Freehold property.
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In this video, I will talk about,
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what are the differences in both properties?
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In which it is easier to get a loan and in which it is not easy.
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What are the benefits and what are the drawbacks of both?
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And which property is better to invest in.
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We will talk about all these points,
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let's go straight to my computer screen.
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Do watch this video from the beginning to the end,
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because at the end I am also going to talk about in which cities and in what way
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Freehold and Leasehold property are sold,
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what type of property is available in which city?
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So keep watching this video till the end,
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let's go straight to the computer screen.
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So to understand Freehold and Leasehold property,
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first, we need to understand that
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who is the biggest owner of land in any city or state?
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Now there could be two types of ownerships,
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There could be two types of owners, one is private owners.
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So if I take an example, you must have seen what happens in Gurgaon,
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is that there are maximum private owners.
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Builder directly buys land from farmers,
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and what they do is they make flat
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or houses and sell directly to the buyer.
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So this case is very simple a Sale Deed gets executed.
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So the absolute owner, the builder sold it to the buyer,
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and we call this Freehold property.
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What happens, in this case, is that,
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the new buyer has complete rights,
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to use it in any way and for unlimited time,
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means the property gets passed on generation by generation.
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Now, on the other hand, there is a case where,
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the owner,
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could be the state or the government.
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The government of the state initially buys land from farmers.
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So they mainly become the largest owner,
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so if we want to see an example of this,
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so if we, take the example of Delhi or Mumbai.
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So the biggest landowner here is the state.
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So in the case of Delhi,
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the DDA (Delhi Development Authority) is the largest landowner.
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And in the case of Mumbai, this is MMRDA,
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is a very big land-owning agency, other is MHADA,
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then there is CIDCO, so these are three major land-owning agencies.
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So in this case where is the main landowner in the state or the government.
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So there, the property can be sold in two ways,
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One way is Freehold
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and the other one is Leasehold.
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Now let's see what is the difference between them.
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So suppose, this is a buyer who bought a property in freehold.
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Now, this buyer can also be of two types,
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one can be your buyer.
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And the other,
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could be a society, which we call group housing society.
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So in this, 100-200 people collectively make a society.
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So what happens here is in the individual case is that,
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the property is transferred through a conveyance deed.
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Through conveyance deed.
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Freehold property.
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Here we are talking about freehold property,
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freehold property is where you,
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you get complete rights of the property,
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it is of yours's forever for unlimited time.
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And the property will pass on to your successors.
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And another case is of society, in this case
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one is conveyance deed to the individual's name,
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and along with that,
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there is one membership which we call transfer of shares.
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So there is membership in this society.
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So these two documents become very important, to claim your ownership.
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So this was freehold that in what way,
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if suppose state is selling freehold property to any buyer,
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may it be individual or society.
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So in these cases what documents are required?
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In the case of an individual mainly conveyance deed is required,
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and in the case of society, conveyance deed and transfer of shares suffice.
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So this becomes the membership of the individual in society,
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so that they can claim their ownership.
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So second option is that, a lot of time state,
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sells leasehold property.
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Now, what is this leasehold property?
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In leasehold property the buyer,
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signs a lease deed.
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So in this case there is a lease deed.
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This lease deed could be from 30 years to 999 years,
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could be of any year in between.
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The standard in this is,
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30 years,
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99 years,
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or of 999 years,
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standard lease is there.
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So this could be different for different cities.
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So the time comes in this leasehold property.
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So you will have all the rights which were there but,
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they will be for a particular time period.
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So suppose it is of 30 years than after 30 years,
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that ownership will transfer again to the state.
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And it is only given to you for use up to 30 years.
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And along with that, it could also be for 99 years
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and the most used standard is for 99 years lease.
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Like in the case of Noida, Delhi, and Mumbai also has property on lease.
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So in this, a standard lease of 99 years is created.
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So this was how to sell freehold and leasehold property,
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in what way there is ownership, private ownership, state or gov. ownership.
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And in what way freehold property and leasehold property are sold.
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Now let's see what are the highlights of freehold and leasehold property,
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what are the benefits and drawbacks?
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So first of all the biggest difference is how is the ownership?
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In the case of freehold, absolute ownership gets transferred,
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along with the land.
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So ownership of land also,
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gets transferred to you, if you are an individual,
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it will be transferred to your name if you are
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a flat member of any society,
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so membership will get transferred to you
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and the land-owning agency will become the society as a whole.
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After that what happens in the case of a leasehold property?
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The state or the government,
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is the main owner of land always.
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You only get a right to use the property.
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Now that right to use is valid for 30 years,
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60 years, 99 years, or 999 years.
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These are generally the standard lease terms.
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So what kind of rights do you get in freehold?
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Like we talked about right now, you have all the rights.
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Right to use, transfer, you can buy it, sell it.
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You can use it in any way, can put it on rent.
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Can take a loan by mortgaging it.
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There is no type of restriction on a freehold property.
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But in leasehold property you get all these rights, you can use it
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mortgage it, rent it, and can also transfer it but
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for only a limited time.
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So this time limit comes here.
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And the main ownership will be with the state, as soon as the lease period overs
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the owners will get back to the state if the lease is not renewed.
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So another important point is if suppose you want to take a loan,
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from any bank, so
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it is very easy to get a loan on freehold property,
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mortgaging it becomes very easy.
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But in the case of leasehold,
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the bank generally doesn't pass if the lease is of less than 30 years.
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And suppose if your
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the lease period is about to over, suppose only 10 years are left,
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still, the bank won't give you a loan easily.
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So this becomes a very big problem, as the lease period starts to decline
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bank start to back off from giving you loan,
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it becomes hard to take a loan on the property.
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Then, comes the annual charge.
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In freehold you
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need to pay a property tax to the state or the municipal corporation,
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for the maintenance and development of your city and surroundings.
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But in the case of leasehold,
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you need not pay property tax, we need to pay ground tax.
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Or in many places, we call it to lease rent.
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This ground rent is more than property tax, you generally need to pay it regularly.
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Its rate varies from city to city, you get to find out the rate in your city.
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Then there is a cost difference, generally, freehold property are costlier,
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than leasehold.
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Even if it's being sold by the state.
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Now a lot of times what happens in leasehold property is that
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the landowning property,
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the state can also give property on lease to a private builder.
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Because private builder gets the land at a low cost,
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so finally they also sell flats at a low cost.
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So generally leasehold properties,
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are cheaper than freehold property,
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But there is a very big drawback in this that
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when you need to renew the lease
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suppose the lease is of 60 years or 99 years,
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so suppose you are not there
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and when your future generation will renew the lease,
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so what will be the charges you don't know right now, it's not in your control.
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So that in a lot of cases,
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renewal charges could be very high.
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So we can also see this example, like Connaught place
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is a very posh area in Delhi.
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So many old leases there which are declining now
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as 3rd or 4th generation has come
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now they are facing many problems, as renewal charges are very high.
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So keeping or maintaining the property has become very hard for them.
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So this a drawback of leasehold property that,
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that maybe you get it very cheap upfront,
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But the property can cost a lot for the upcoming generation.
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Then comes appreciation, generally freehold property,
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appreciate it a lot compared to leasehold.
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At the start appreciation of leasehold could be good, equal to freehold
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but as lease term begin to decline,
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value of property start to diminish.
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Then future we can say in the case of freehold
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there is a clarity that the property belongs to you.
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It will keep on passing to legal generations, to all your successors,
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it will pass on to them but,
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future is uncertain in case of leasehold, as we talk right now that,
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we don't know what will be lease renewal charges in the future.
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So these were all the major differences between
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leasehold and freehold properties.
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Now let's see in different cities,
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of India how properties are sold and bought, is it freehold or leasehold?
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So we will see this in three parameters,
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one is what kind of properties are there in a city.
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And when any state or private owner, sells for the first time
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when for the first time,
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when a house is newly made and is up for sale,
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how is that sold and after that
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how subsequent sale/transfer happens?
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So if we take the example of Noida, all property in Noida are leasehold.
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There
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the state is the main owner of the land.
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And the first sale when a house is sold for the first time,
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that is the lease deed in that case.
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And subsequent transfers,
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like the first owner made a lease deed,
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so in the case of subsequent owners, a transfer deed is issued.
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In the case of Gurgaon, there are freehold properties,
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there are two types of landowners in Gurgaon now as we talk earlier also,
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one is private land where,
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directly from buying from the farms,
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any builder makes a house and then sells it to you,
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the sale deed is there in that case.
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And suppose HUDA, which is government land owing agency there,
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if that sells to you
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although sells freehold property, in that case, there is a conveyance deed.
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Any subsequent transfers,
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after the first house owner, the subsequent sale is done on the sale deed.
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Now, let's talk about Delhi,
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in the case of Delhi, both freehold and leasehold properties are there,
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In the case of Delhi DDA is the main land-owning agency.
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In the case of freehold property, a conveyance deed is signed.
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In the case of leasehold, the lease deed is signed.
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When DDA sells a house for the first time,
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conveyance deed or lease deed is signed.
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When there is subsequent transfer,
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then sale deed is signed in case of freehold and case of leasehold,
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the house is sold from General Power of Attorney (GPA) and along with that,
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and if it is a group housing society, shares get transferred,
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And along with that,
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one copy of the agreement to sell is attached.
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So what happens in DDA, if suppose,
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you bought leasehold property from DDA,
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So you can also have it converted to freehold.
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So you need to pay some conversion charges.
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And in that case you,
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need to submit a copy of GPA, Agreement to sell ATS
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and also a copy of the share transfer certificate.
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Then it gets converted from leasehold to freehold.
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Now let's see an example of other cities as well.
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So there is no complexity in Bangalore, all properties are freehold.
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In case of the first sale also when the government sells a property,
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then also sale deed is issued.
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And there is also a sale deed in subsequent transfers.
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The same goes for Chennai, no complexity all property is freehold.
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The first sale and all other sales after that are done on the sale deed.
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Then let's see the case of Mumbai.
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Mumbai case is also similar to DDA or Delhi.
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Here also both types of property freehold and leasehold are present.
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Freehold property is sold at sale deed.
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And leasehold property is sold at lease deed first time.
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And the subsequent transfers,
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freehold property is sold at sale deed
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and a transfer deed is signed in case of leasehold property,
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Like we saw here in the case of Noida.
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Now, what is there in Mumbai, as we talked,
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main land-owning agencies are MMRDA
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or MHADA or
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CIDCO.
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So the case of Mumbai is also a bit different from what happens there is,
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private landowners,
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get land on leasehold and they further sell it at leasehold.
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So in that case your property can't be freehold where,
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land ownership is left with MMRDA, MHADA, or CIDCO.
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Now as we talked earlier, if you bought a property at lease
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maybe you get it cheap initially,
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But it could cost you more in long term because you don't know,
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how much lease renewal charge will be.
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And this could also happen to suppose,
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the ground rent that you need to pay, or annual lease rent,
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that may increase, so every year you may need to
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pay more charges, as you don't know what charges going to be after 20-30 years.
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So I think I have covered all the major points of
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freehold and leasehold property,
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I think you understood the main difference between freehold and leasehold.
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So if I want to recommend, I would always recommend freehold property,
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If you want to buy any property then
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it is always advisable to go with a freehold property.
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I hope you liked this video, then do like and share it.
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If you want to suggest future topics for videos, you can comment down below.
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To watch the latest finance and investment-related video,
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by subscribing to this channel
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do press the bell icon.
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Let's meet in the next video,
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till then keep learning, keep earning, and be happy as always.
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