In a leasehold property tenure, one party purchases the right to occupy the property for a specific period (30 to 99 years). In a leasehold land, the authority (often a government agency) retains ownership of the property while leasing it to developers to construct residential buildings. Anyone who purchases a residential apartment only owns it for the lease.
Purchasing real estate carries significant risk. Investors frequently end up not renting or leasing the property while looking at it.
When searching for any form of property, one must choose. Both renting and leasing have several advantages. This article serves as a guide to assist you in choosing whether to lease or rent the property.
A lease is an agreement to utilise the property that belongs to the legal owner. In this case, the property might be a house, a car, a structure, or other objects. The lesser and the lessee are the parties to the agreement.
When a buyer purchases real estate on a lease, they take ownership of the property for a longer time, ranging from 33 to 99 years. In a leased property, the landowner retains control and rents it to developers to carry out the projects. Anyone who buys a residential apartment only owns it while the lease is in effect. The lease agreements are typically made with governmental bodies.
It becomes crucial to comprehend who owns the apartment complex on the rented property. The primary drawback for a house buyer is the uncertainty that develops once the land lease expires and the tenancy contract is renewed. This situation often occurs when a land lease is granted for a shorter period—usually between 30 and 33 years—which is typical, particularly in Mumbai. In addition to the contract renewal, purchasers will be responsible for other expenses like property taxes.
Lack of construction funding is a problem that projects on properties with shorter lease terms encounter. Therefore, a significant delay in completion or project non-completion is possible. Additionally, since all relevant agencies must approve any repairs or construction, redevelopment of such projects becomes challenging.
The loan term cannot be longer than the remaining lease term when applying for a home loan for a residence constructed on leasehold land. Therefore, lenders could not approve a house loan in situations where the length of the land lease is short or is about to expire because they are hesitant to take the risk of the lease not being renewed.
The primary benefit of purchasing a house in a development constructed on leasehold land is that it will be far less expensive than purchasing one constructed on freehold land or a plot (where the developer is the sole and primary owner of the land). Instead then shelling out a large sum of money to purchase the property from the original owner, developers in major cities typically pay a far lower price to lease a plot in a desirable area of the city. Homebuyers also get the financial rewards of this arrangement. In addition, these leasehold parcels are typically a component of more significant development and are used for residential constructions. This indicates that the neighboring areas often have adequate connections and infrastructure.
