The Concept Behind The Lease of 99 Years
Jun 03, 2019 Real Estate News
In real estate, ‘freehold property’ and ‘leasehold property’ are some of the common jargons that one comes across regularly. In the case of freehold properties, the development authorities sell off the land to the developer via auction. The property built on such land belongs to the owner for the indefinite amount of time. The same is not true in the case of leasehold properties. The developers acquired the property through a lease for 30 to 99 years, from the time the construction begins.
The property owner can seek the extension of the lease by the lease renewal at the end of the term. The leasehold property can also be converted to freehold property by paying the fee for the same. The property owners can also buy another lease when the original lease expires or even extend it to 999 years.
Not just in India, the concept of lease being of 99 years is a global concept. According to the traditional American common law, it is an arbitrary time to cover the life expectancy of any lessee or lessor and secure the property ownership of the lessor. Also, the period of 99 years is expected to include not one but three generations.
If the buyer is willing to buy the property, then they must make sure the seller has obtained the transfer memorandum from the local development authority. In case the leasehold period is less, then the developer can find it hard to procure the funds.
We discuss the concept of the lease being issued for 99 years
The landowner lets out the land for lease for 99 years which begins from the date the allotment was done. The developer will have to adhere to specific terms and conditions laid down by the government and the landowner for the lease. The developer is free to build the property and sell it to the buyers. The buyers will only have the ownership for 99 years after which the landowner can claim his ownership on the land again. The landowner also receives some ground rent which has been agreed upon.The property owner can seek the extension of the lease by the lease renewal at the end of the term. The leasehold property can also be converted to freehold property by paying the fee for the same. The property owners can also buy another lease when the original lease expires or even extend it to 999 years.
Not just in India, the concept of lease being of 99 years is a global concept. According to the traditional American common law, it is an arbitrary time to cover the life expectancy of any lessee or lessor and secure the property ownership of the lessor. Also, the period of 99 years is expected to include not one but three generations.
Purchasing a leasehold property
Leasehold properties are cheaper than freehold properties, and they are a good investment option if you are not willing to intend to pass the property from generation to generation. If you are buying a property that has already been leased for 30 years, then it can be difficult to finance it. The banks are not very willing to finance the said leased property. Not only is this, but the slow rate of price appreciation and the value of the property depreciating is also a red flag for the prospective buyer. The buyers may also face issues with the occupancy contract, title transfer and registration, additional expenses like property tax.If the buyer is willing to buy the property, then they must make sure the seller has obtained the transfer memorandum from the local development authority. In case the leasehold period is less, then the developer can find it hard to procure the funds.
