In India, freehold and leasehold properties represent different ownership models. Freehold properties grant full ownership of the land and buildings, giving owners complete control and autonomy. On the other hand, leasehold properties involve renting the property for a specific duration, resulting in limited ownership rights and reduced maintenance obligations.
A leasehold property is essentially a property that a tenant or tenant wishes to rent from a landlord for a predetermined period of time. It means that you stay in a home for a certain period of time without owning the land underneath it. Ultimately, the leasehold returns to the original owner. In India, the majority of available flats and apartments are leasehold. Tenants are obliged to pay the ground rent, service costs and maintenance costs to the landlord and to return the property at the end of the rental period.
Understanding property ownership
“A freehold property gives the owner full ownership rights over both the building and the land on which it stands, as recorded in the local municipal records,” says Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance.
Here’s what this means:
Advantages:
> Full and perpetual ownership rights to both land and building, without any time limitations
> Freedom to adapt, renovate or redevelop the property according to your needs (subject to local regulations)
> No recurring lease payments or ground rent obligations
> Full control over property maintenance decisions and choice of service providers
> Ability to freely transfer ownership to heirs without the landlord’s consent
> Generally higher sales value compared to leasehold properties
> No risk of lease expiration or renewal negotiations.
Understanding leasehold ownership
A leasehold property involves ownership of the building for a set period of time, while the land is typically owned by another party (landlord) for 30 to 99 years, Hardia added. This arrangement is often seen in apartment complexes and commercial properties.
Main benefits
> Lower initial purchase costs compared to properties, making it more accessible.
> Shared maintenance responsibilities through association/management committees.
> Professional property management that handles daily operations and maintenance.
> Access to communal facilities and facilities maintained by management.
> Lower individual responsibility for structural repairs and maintenance.
> Structured framework for dispute resolution through society statutes.
> Often located in prime areas where private property can be scarce.
Choosing between freehold and leasehold properties
When choosing between real estate and leasehold, it is important to take the following factors into account:
Financial capacity
Evaluate your ability to make a larger upfront investment for a freehold property.
Assess your comfort level with recurring payments associated with a leasehold property.
Think about your long-term financial goals and investment horizon.
Consider maintenance and ownership costs.
Ownership purpose
Determine whether the property is intended for long-term family residence.
Consider whether it is purchased as an investment property.
Evaluate potential rental income opportunities.
Assess future resale prospects.
Location analysis
Investigate property ownership patterns in preferred areas.
Compare facilities and infrastructure development in the area.
Study future development plans for the site.
Evaluate the accessibility and social infrastructure of the property location.
What is more beneficial?
“Rental properties can be attractive to those with short-term investment goals because of the lower upfront costs. However, freehold properties offer much greater long-term stability and security. With freehold ownership, buyers have full control over both the land and the property, without the restrictions of a lease or ongoing payments such as ground rent. This autonomy makes it easier for the property to appreciate over time,” said Ashok Chhajer, CMD, Arihant Superstructures.
“Rental properties, on the other hand, have a fixed lease term and may incur additional costs for renewals or service charges, making ownership more difficult. While leasehold can meet short-term needs, freehold ownership offers greater security and fewer legal and financial obligations. For buyers looking for “If it is a long-term asset that can grow in value, owning is the more economical choice, offering both flexibility and peace of mind,” Chhajer said.
Which one should you choose?
“The choice between ownership and leasehold depends on your long-term goals. Freehold properties offer full ownership, allowing more control and freedom to make changes, making them ideal for personal use or long-term investments. The freehold properties are more investor friendly as they are free from encroachments and the rules and regulations of the state government are better. No renewal documents are required to enjoy the property and the owner can rent it out, sell it or pass it on for inheritance. Rental properties, on the other hand, often have lower upfront costs, making them an attractive option for companies looking to lease commercial spaces in prime locations,” said Ashish Bhutani, CEO of Bhutani Infra.
“Both options offer different benefits. Self-owned property gives you the flexibility to modify, expand or sell without restrictions, which is especially valuable for investors looking to grow the value of their assets over time However, leasehold ownership offers flexibility for businesses that may need to relocate or scale up operations without bearing the full cost of ownership. Evaluating factors such as purpose, costs and long-term requirements is critical in making the right decision. Ultimately it comes down to what’s best suits one’s requirements, be it the sustainability of ownership or the cost-efficiency of leasehold,” Bhutani added.