With the scarcity of land, megalopolises contribute to scads of projects on leasehold plots. Experts from RNA Corp, a Mumbai-based realty company, presents a guide for the home buyers about things they need to be cautious of while investing in such properties.
Home buyers, generally, get muddled between the terms leasehold and freehold. However, these are significant details to consider before investing in any property. Being ignorant of these details ought to result in unfavorable situation for a buyer.
In most Indian states, authorities provide the rights to develop the land to developers so as to build projects, or they sell the residential plots through auctions as freehold. Delhi,Noida Extension, Gurgaon and Mumbai are the places, where the land is scare. For that reason, the housing options in these cities are mostly leasehold properties.
Primary ownership of leasehold land remains with the city development authority. However, the first owner of the property, on such plots, is the developer. The lease hold period of land can extend from 30 years up to 99 years, Real estate company says that due to the limited ownership period, buyers of a residential flat will own it for maximum 99 years.
Biggest challenge for a buyer comes at the end of the lease period, where the renewal of the occupancy contract is needed. Experts say that major concern is of the projects built on leasehold land of 30 or 35 years. Buyers usually face inconvenience in the projects with small leasing period as renewal of contract involves other costs. They state that Mumbai is one such city, where projects are built on land with lesser lease period.
Properties with smaller leasehold periods come with the problems of mortgage. Chances are that they might not even receive funds for construction, leading to delay or non-completion of the project. Redevelopment is another problem, since any type of repair and construction needs consent from the authorities. Moreover, transferring the property title and registration are an obstacle. Therefore, reselling of such properties is also difficult.
Real estate company says that not all the odds stand against the buyers of leasehold land properties. With all the risks of investing in these properties, buyers also get access to various benefits. Land acquired by developers under leasehold is cheaper as compared to freehold land. Hence, property prices of these projects are often less. Whereas, completed projects on freehold land are of higher costs as the final cost comprises of the cost of land.
Freehold lands are always a favorable option for home buyers. However, RNA Builders suggest that buyers of leasehold land properties must always opt the ones with longer period leasing period.