Want to own a home that offers complete ownership, long-term security, and complete control? A freehold property is for you. It ensures that you have full rights over the land and structure without any lease restrictions. Unlike leasehold properties, freehold homes provide greater investment value, flexibility, and peace of mind. Still confused about whether it’s the right choice for you? So, dive into our detailed guide to explore its benefits, key considerations, and the essential steps for verifying a freehold property.
What is Freehold Property?
You can understand a freehold property meaning as a type of real estate ownership, whereas as an owner, you will have full and perpetual rights over the land and any structures on it, with no time limit on ownership. Being an owner, you have the complete freedom to use, modify, and transfer the property.
Advantages of Buying a Freehold House Property
By purchasing a freehold house property, you can get the following benefits:
Complete Ownership: You have full control over the land and the property, with greater security and permanence, with no time restrictions. You can enjoy the freedom to modify, sell, or transfer your property without requiring approval from a landlord or lessor.
No Lease Expiry: Since there is no lease term for freehold property, you don’t have to worry about the lease running out or recurring lease renewal costs, which can be an issue with leasehold properties.
No Ground Rent or Service Charges: You don’t have to pay ground rent to a landlord or deal with erratic service charges.
Increased Investment Value: Freehold properties are better investments because their value does not decrease over time.
Higher Resale Value: Freehold properties commonly have a higher resale value than leasehold options, making them a better investment.
Simpler Selling Process: The process involved in selling a freehold property is typically simpler and more attractive to buyers than selling a leasehold, particularly one with a short lease remaining. Thus, it attracts more potential buyers.
Key Considerations Before Buying a Freehold House in India
Before purchasing a freehold house property in India, you need to consider the following factors for safety and legality:
- Property Title and Ownership Documents: Check whether the property has a clear title deed with proper seller’s ownership and legal rights. Conduct a title search for at least 30 years to identify any encumbrances or disputes.
- Check for Encumbrances or Legal Disputes: Get an encumbrance certificate to make sure the potential property is free from mortgages, liens, or legal claims.
- Outstanding Dues: Verify that the previous owner has paid all property taxes and utility bills to avoid future liabilities.
- Location and Infrastructure: Choose a location with good connectivity, infrastructure, and prospects for future development. The neighbourhood should suit your lifestyle and provide basic amenities.
- Legal Clearances: Ensure the property complies with local municipal regulations, zoning laws, and environmental clearances.
How to Verify Freehold Property in India?
You always have to be careful about your freehold property. You need to verify the property thoroughly to avoid fraud and legal complications in the future.
Title Verification: Get the relevant title deed from the seller and verify ownership details through land records. Conduct a detailed title search for at least 30 years to ensure the property is free from any kind of issues.
Legal Expertise: You need to hire a property lawyer to review documents such as sale deeds, mutation records, and encumbrance certificates. Legal experts can easily identify disparities that might not be obvious during self-verification.
Municipal Authority Check: Check with your local authorities to make sure that the property adheres to zoning laws, building regulations, and tax compliance. A No Objection Certificate (NOC) may also be required in specific cases.
Online Verification: You can easily check or verify the ownership records using relevant state-specific government portals, such as MeeBhoomi AP and Bhoomi RTC Karnataka. In this way, you can reduce manual paperwork with transparency.
Freehold Property vs Leasehold Property: Which Is Better?
Don’t get confused between freehold and leasehold properties. You will have complete ownership of both the building and the land it stands on in freehold ownership, with no restrictions on the duration of ownership. On the other hand, in leasehold ownership, you only have ownership of the building for a fixed period, after which ownership reverts to the freeholder unless a lease extension is negotiated.
Unlike freehold properties, leasehold properties have lower upfront costs and shared maintenance responsibilities, making them an affordable option. However, leaseholders must pay ground rent and annual service charges, which can increase over time.
To understand the detailed difference between freehold and leasehold property, along with the pros and cons of both options, you can go through freehold vs leasehold property.
Popular Cities for Freehold House Properties in India
There is a high demand for freehold properties in India. Most people are eager to attain freehold ownership, especially in major urban areas such as Mumbai, Pune, Bangalore, and Hyderabad. Also, tier-two Indian metropolises such as Jaipur, Nagpur, Kochi and Indore are gaining traction among homebuyers due to relatively lower property prices, improved infrastructure, and attractive living conditions.
Legal and Tax Implications of Freehold Property
Before deciding to invest in freehold properties in India, you need to understand the following legal and tax factors.
Stamp Duty and Registration Charges
While purchasing a freehold property, you have to do the stamp duty. You can understand stamp duty as a tax on written and legal documents and property. You must pay a stamp duty fee to the respective state. This is required for a document to be lawful. The stamp duty is usually a proportion of the property’s worth or consideration.
It can generally range from 3% to 8% of the property value, based on the state where the property is located. Registration charges are generally:
- 1% of the property value for properties priced below INR 30 lakh
- A fixed fee of INR 30,000 for properties above this price
This free stamp duty and registration fee calculator can ease your real estate purchase.
Capital Gains Tax on Selling Freehold Property
When you are about to sell a freehold property, capital gains tax applies based on the holding period:
- Property held for less than 24 months is considered short-term capital gains and is taxed as per the individual’s income tax slab.
- If the property is held for more than 24 months, it is regarded as long-term capital gains are taxed at 20%, with indexation benefits.
GST Implications
The sale of freehold land is exempt from GST under Schedule III of the CGST Act since it is not considered goods or services. However, GST may apply to those services if the transaction includes developed plots with amenities.
Common Myths About Freehold Property
Many people have misread about freehold property ownership, which may mislead potential buyers. The following are some of the myths and actual facts:
Freehold Properties are Always Expensive:
You can consider this to be true, as the initial purchase price for freehold properties can be higher than leasehold options. However, when you consider the long-term financial benefits, the initial costs are worth giving, and it is a cost-efficient investment in the long run.
Freehold Properties are Free from Legal Issues:
Although you will have complete ownership rights, you must consider legal factors. This includes zoning rules, property boundaries, and any claims on the land. Doing proper research helps you avoid legal problems.
Freehold Properties Cannot be Inherited.
Many people straightly assume that freehold properties cannot be passed down to family members. It is completely a wrong assumption. Freehold properties are easily transferable to respective heirs. Therefore, it is a good choice for establishing a family legacy.
Suppose you’re seeking a permanent residence for your family or a stable investment. You need to understand the intricacies of freehold ownership, which is crucial. After carefully considering your budget and location (based on future development plans), maintenance obligations, property condition, and future resale possibilities, you can ensure you make a cautious and informed decision. You can get help from professionals taking legal and financial advice.
Hemali Patel