Real estate might appear to be a complex mixture of terms, procedures, and terminology that is challenging for beginners to understand. The difference between freehold and leasehold properties, which has to do with who owns the property, is a major difference that frequently causes misunderstanding. Understanding these words is essential whether you’re a first-time home buyer, an investor trying to diversify your holdings, looking for Packers and movers in Hyderabad or just curious about the workings of the real estate market. We will go into the principles of leasehold and freehold properties, their benefits and disadvantages, as well as some important, frequently disregarded features of each.
Considerable Differences between Leasehold and Freehold Properties
- Meaning
A leasehold property is one that the landlord rents to you for a set amount of time; in a leasehold property, you own the building but not the land on which it is situated. A freehold property is one where the purchaser or owner has total control over the ground and the structures built on it, giving them far more freedom to use and alter the property as they feel
- Ownership Rights
In a leasehold property, the leaseholder has the right to utilise the asset for the term of the agreement, but only to the extent permitted by the lease agreement. In a freehold property, the owner (freeholder) has total control over the building and more freedom to make changes and upgrades as they wish, without the need for outside approval.
- Duration of Ownership
With leasehold properties, you have the predetermined “right to occupy” the same piece of land, structure, or apartment. Depending on the landlord’s agreement, the “lease duration” could range from 30 to 60 years to 99 or even 999 years. Unless the initial lease period was renewed or extended, property ownership returns to the original landowner (freeholder) when the lease term is up. Freehold property ownership is permanent since it can be passed on to succeeding generations.
- Cost of purchasing
The initial expenses of buying a leasehold property might be fairly low, but the initial costs of buying a freehold home are much higher because you are buying both the building and the land it is built on. This does not include the cost of House shifting services in Hyderabad
- Additional expenses
When you buy a leasehold property, you must give the landowner ground rent each year so they can use the property during the lease term. However, as you are the only owner of the property when you buy a freehold property, you are not required to pay rent; instead, you must pay the government an annual property tax.
- Maintenance charges and responsibilities
Only regular maintenance and little repairs are your duty as the leaseholder of the property. However, as a freehold property owner (freeholder), you are liable for the routine maintenance, major repairs and restorations of the building.
- Right to Sell/Transfer the Property
A leasehold property may be sold or transferred to a new owner, but formal permission from the relevant authorities is required. A freehold property, however, can be sold, given away, or transferred as the owner wishes to third parties or another family member.
- Financing availability
Banks and other financial institutions are hesitant to finance or offer loans for the purchase of leasehold properties due to the significant risk involved, particularly for short-term leaseholds (leases with a tenure of less than 30 years). Since the ownership rights are absolute, freehold properties have more stability and are therefore a more secure financial choice for banks, allowing them to easily extend loans even at lower interest rates.
