In the Indian real estate market, property ownership can be classified into two main categories: leasehold and freehold. These classifications determine the nature of ownership, the rights of the property holder, and the responsibilities associated with the property. One important aspect of property ownership in India is that landowners are not absolute owners of the land but are considered tenants of the state, reflecting India’s unique legal framework governing land and property ownership.
Freehold Property
In a freehold property, the buyer has complete ownership of both the land and the structure. Once purchased, the owner has the right to use, sell, transfer, or lease the property at their discretion, with fewer restrictions compared to leasehold properties.
Key Features of Freehold Property
- Absolute Ownership: The owner holds complete ownership of the land and any structures on it indefinitely, without any lease agreement or tenure limitations.
- Transferability: Freehold property can be freely transferred, sold, or bequeathed by the owner without needing approval from any external authority, except for adhering to legal formalities such as registration and stamp duty.
- Fewer Restrictions: Freehold properties generally do not carry the same usage or modification restrictions that leasehold properties do, allowing owners more flexibility in terms of construction, renovation, or sale.
- Market Value: Freehold properties usually have higher market value and liquidity than leasehold properties due to the security of complete ownership.
Example of Freehold Property in India
In cities like Ghaziabad, Bangalore, Patna, Pune, and Chennai, most residential properties are freehold. If you buy a plot of land or an apartment in these cities, you are likely purchasing a freehold property, giving you complete ownership rights over the land and building.
Leasehold Property
In a leasehold property, the ownership of the land is retained by the government or a legal entity, and the property owner (referred to as the lessee) holds the right to use the land for a specified period, as outlined in a lease agreement. The tenure of this lease can vary, but it is typically set for a duration ranging from 30 to 99 years.
Key Features of Leasehold Property
- Limited Ownership:The property owner does not own the land outright but holds the right to use the land for the lease term specified by the lessor (usually the government or a development authority).
- Lease Agreement: The terms and conditions of the lease, including the duration, rent or premium payable, and the rights and responsibilities of the lessee, are defined in the lease agreement.
- Renewal: Once the lease period expires, the lessee may have the option to renew the lease, subject to the approval of the lessor and payment of a renewal fee.
- Restrictions: Leasehold properties may come with restrictions on structural changes, transfer, or sale. For example, a lessee might need prior permission from the lessor to sell or modify the property.
- Ownership of Structure Only: In leasehold arrangements, the lessee typically owns only the building or structure erected on the land, while the land itself remains the property of the lessor.
Example of Leasehold Property in India
In cities like Noida and Greater Noida, most land is allocated by the development authorities and with 90-year leasehold property rights.
In Delhi, large portions of land and houses were originally owned by the Delhi Development Authority (DDA) and leased out to individuals or institutions. Later, the leasehold rights were allowed to be converted to freehold on payment of certain fees.
Land Ownership in India: Tenants of the State
One important legal aspect of land ownership in India is the concept that all land ultimately belongs to the state, and individual landowners are considered tenants of the state. This idea is rooted in India’s land tenure system, which stems from colonial and pre-colonial systems of governance.
Key Points on Land Ownership in India
- State Ownership: According to Indian law, the state (i.e., the government) is the ultimate owner of all land within its jurisdiction. When an individual purchases a freehold property, they are effectively purchasing the right to use, occupy, and transfer that land, but they do not possess absolute ownership of the land.
- Tenant Rights: Property owners in India are considered tenants of the state, and their right to hold the land is subject to certain legal and administrative conditions imposed by the state. For example, the state has the power to acquire land for public purposes under the Land Acquisition Act.
- Eminent Domain: The doctrine of eminent domain grants the government the right to take private land for public use, provided that fair compensation is paid to the landowner. This principle underscores the state’s ultimate authority over land ownership.
