What Is Freehold Vs Leasehold Property?

When you buy a house, you automatically assume that you get complete ownership, permanently. But that’s not entirely true. In reality, it depends on whether a property is labelled as freehold or leasehold.

The difference between freehold and leasehold property continues to confuse buyers, especially in areas where land supply is controlled by development authorities. These are legal permits that come with different clauses and authority permissions.

Knowing the difference, though, is critical as the nature of the property can affect resale value, loan eligibility, and long-term planning. Let’s clear the confusion by listing what they exactly mean and entail.

Freehold Property

• Under freehold, the buyer has complete and permanent rights over the land without any renewal requirements.

• Such properties can be freely resold, transferred or modified, without any permission from the relevant authorities.

• Typically, any property with a freehold title attracts a better market value, since it offers unrestricted ownership.

• Even banks view freehold property as low-risk assets, which improves loan eligibility.

• Some authorities may allow a leasehold property to be converted to a freehold, through an application process with a fee. The eligibility criteria can vary, depending on local development rules.

Leasehold Property

• Land or property with a leasehold title, typically, belongs to the government, or the local authority, and are leased to buyers for fixed tenures. These tenures are generally for 30, 60, or 99 years. They do not offer full ownership.

• Renewal of these leases may require a fresh process, including payment of fees and compliance checks.

• Transfer or redevelopment of such properties often require prior permission from the authority, which may slow down the process.

• Leasehold properties may be more affordable, but banks often assess the remaining tenure before granting loans. If the tenure is nearing expiry, the loan eligibility comes down, and so does the property value.

Is Freehold Beneficial?

• Under freehold, buyers get uninterrupted and unquestionable ownership, with better liquidity.

• Leasehold properties come with restrictions as the ownership remains time-bound. Such properties have administrative oversight at all times.

• Leasehold market moves differently. Government policies and transfer conditions influence the pricings directly. In freehold, the values are driven naturally by demand and even neighbourhood rates.

• Interested buyers must go through residual lease years, renewal policies, conversion chances and even transfer charges before committing to a leasehold property. There are no such requirements under freehold.