Leasehold vs. Freehold Properties

In a leasehold property, the government or some development authority acquires the land, normally from farmers, and then lets it to individuals or organizations for a fixed number of years, normally 99 years. Furthermore, you hold rights to the property only during the lease period, while ownership remains vested with the government. Additionally, when the lease ends, you may have to pay the renewal fee or return the property to the authority.

Unlike freehold properties, you own the land and buildings forever. Leasehold properties are different. Freehold property in Noida gives you absolute control. Moreover, you can sell or change the property as you please, limited only by local regulations.

Why Cities Like Noida and Greater Noida Go in For Leasehold Model

In Noida and Greater Noida, the leasehold vs. freehold method has proven practical. The government controls the planned growth of those areas. In this context, officials can enforce a leasehold system. It will oversee infrastructure and land use. This avoids the half-baked expansion seen in other Indian cities.

Thus, Greater Noida freehold areas find this model beneficial. It satisfies authorities by enabling good urban planning. They can prescribe how the land should be developed. Such models are suitable for the growth of these fast-growing cities. They must meet the changing needs and future plans of the government.

Recent Change: CIDCO Converts Navi Mumbai to Freehold

A major change occurred on October 2, 2024. CIDCO, the city, and the IDC said they would make Navi Mumbai's leasehold properties freehold properties. Moreover, it makes the property more secure and its inheritance clear. Future heirs will own it. Additionally, full ownership can increase freedom and confidence to invest more.

Will Noida and Greater Noida Follow?

There is much prospect for Noida freehold properties.The various Noida property associations have their aim to transform a leasehold property into a freehold property. Most Noida homeowners have lived there for 20 to 25 years. They want freehold rights and more security. As a result, the Noida Authority knows these demands may change leasehold properties to freehold.

 In places like Greater Noida, where development is recent, a conversion may take longer. However, if this change occurs, residents must provide some documents and pay a fee. It is often a proportion of the property’s existing market value.

Historical Background: How Long Does It Take?

Similar cases suggest how long it may take for the Noida freehold properties to materialize. Chandigarh began in the 1950s as a leasehold city. The authorities allowed freehold conversion in 1996. But mass conversion started in 2017. That's about 44 years after Chandigarh developed as a rental city.

Navi Mumbai was the planned city started on the leasehold model in the year 1972 only. After 52 years, it shifted to a freehold model. In addition, one can expect the same to take a similar time in Noida since developers built the city 48 years ago. However, if it's cost-effective, Noida will soon adopt the freehold vs leasehold model.

The cut on conversion charges has been from 7.5% to 15% of the collector rate, depending on the area of the property. Moreover, they may also charge a conversion fee for freehold property in Noida. It will be per sq ft, based on the market or collector rate for the area.

Advantages and Disadvantages of Leasehold Properties

Advantages:

1. Maintenance: Leasehold estates are generally well maintained. Roads and parks in Noida receive maintenance on a regular basis. This is not the case for freeholds, as maintenance cannot be uniform.

2. Controlled Development: The government's control of leasehold land will ensure proper planning. It will improve infrastructure and, in turn, raise property values.

Disadvantages

1. Ownership Limitations: Owners in leasehold estates have fewer rights compared to freeholders. Furthermore, when the term is about to get over, renewal and negotiation even prove difficult.

2. Conversion Costs: If freehold conversion is possible, the cost involved may be very high.

Conclusion

When choosing between leasehold and freehold properties, know their pros and cons. In Noida and Greater Noida, it has found that there is still a growing need for ownership security. However, a shift towards Noida freehold can be on the cards. Leasehold properties, especially in well-managed cities, have a certain advantage. Additionally, this will help you make the right investment decision on the best property to invest in.

1. Is Noida going to become a freehold in the future?

Yes, it will likely shift to freehold. Property associations have asked for it, as lease terms are halfway. If approved, owners must pay a conversion fee at market price. But Greater Noida may take longer.

2. What fees carry the typical tag when transforming a leasehold into a freehold?

In Chandigarh, conversion fees for leasehold to freehold properties are 7.5% to 15% of the collector rate. As in Navi Mumbai, authorities may also base the fees on the property's area or value.

3. What are the demerits of holding leasehold property? 

Restrictions on Ownership: The property owner considers tenants inferior. It becomes complicated when you want to renew the lease on its expiry date.

Conversion Charges: If you can convert it to a freehold, the charges may be high and make it too expensive.

4. How will I select between leasehold and freehold?

Leasehold: Better if you want infrastructure maintained and do not need full ownership.

Freehold: Best for full ownership or if you want to change the property at any time. It's also good for a long-term investment.

5. Are freehold properties going to increase their value as investment tools?

Since freehold tenure grants full ownership, its properties appreciate more. Freehold flats are more valuable now. Navi Mumbai has gone for freehold, and Noida may follow.