Do You Know why Leases are for 99 Years? Here is why
Jun 21, 2018 Legal Guidance
We all know that leases are usually for 99 years, but we often wonder why 99 years and what happens or who acquires after the lease period ends? Before going further let’s understand real estate jargons termed as ‘freehold property’ and ‘leasehold property’. In freehold property, the development authorities of various cities sell the land as freehold to the developers for an unlimited period of time. Whereas in case of the leasehold properties, the developers acquire land development rights through a lease for a period of 30 to 99 years from the time of the construction.
The lease period starts from the date of land allotment and follows terms and conditions set by the government that includes nature of rights, lease period, conditional clauses, duties of lessor and lessee, dispute resolution clause etc. the developers can then start with the construction and sale the property projects. The buyers are supposed to own the properties till 99 years and after that landowner can claim the ownership. Moreover, the landowners receive a ground rent according to the 99 year lease agreement.
The property owners can try to extend the lease tenure after the term ends. Also, there is a provision by the government to convert the leasehold property to freehold on the payment of conversion charges. Property owners can also buy another lease when the original lease gets expires or get the period extended up to 999 years.
The leasehold properties are quite affordable than freehold and can be purchased as an investment option but not if in case the owner is thinking to pass it on from one generation to another one. But if the buyer is buying a property that has covered 30 years of its lease period then selling it off would be difficult as banks are quite reluctant to finance them. If the remaining period is less than 30 years then the buyers might face low rate of appreciation and dropping values of the property. However, if the buyer intends to buy a leasehold property then he or should verify that the seller has obtained a transfer memorandum from the local development authority.
The concept of 99 year term is present not only in India but in other countries too. Ninety nine years is considered to be approximate encompassing three generations.
The lease period starts from the date of land allotment and follows terms and conditions set by the government that includes nature of rights, lease period, conditional clauses, duties of lessor and lessee, dispute resolution clause etc. the developers can then start with the construction and sale the property projects. The buyers are supposed to own the properties till 99 years and after that landowner can claim the ownership. Moreover, the landowners receive a ground rent according to the 99 year lease agreement.
The property owners can try to extend the lease tenure after the term ends. Also, there is a provision by the government to convert the leasehold property to freehold on the payment of conversion charges. Property owners can also buy another lease when the original lease gets expires or get the period extended up to 999 years.
The leasehold properties are quite affordable than freehold and can be purchased as an investment option but not if in case the owner is thinking to pass it on from one generation to another one. But if the buyer is buying a property that has covered 30 years of its lease period then selling it off would be difficult as banks are quite reluctant to finance them. If the remaining period is less than 30 years then the buyers might face low rate of appreciation and dropping values of the property. However, if the buyer intends to buy a leasehold property then he or should verify that the seller has obtained a transfer memorandum from the local development authority.
The concept of 99 year term is present not only in India but in other countries too. Ninety nine years is considered to be approximate encompassing three generations.
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