A leasehold property is a property constructed on a leased land/plot. The lease is only for a specified period, typically 99 years. In some cases, it can be as short as 30 years and as long as 999 years. It is important to note that the buyer of a leasehold property does not hold any ownership right on the house or the land. It can be attained only when he converts a leasehold property to a freehold . If so not done, he remains a lessee until the lease terminates and pays the ground rent to the leaseholder. On the expiration of the contract, the lessee has to either vacate the place or apply for an extension in lieu of a fee.

On the contrary, a freehold property marks the absolute ownership of the property. The buyer owns not only the house but also the land. According to Vishal Chaturvedi, Vertical Real Estate Solutions, Pune, “The clear title status of freehold properties helps in earning a higher capital value. Also, it is easier to avail a loan against freehold properties when compared to leasehold properties.”

Overall, freehold properties have an edge over leasehold properties. Therefore, if you plan to convert your leasehold land into freehold, here is a detailed process.

Guide to convert a leasehold property to freehold

To convert a leasehold to a freehold property, the lessee has to acquire the ownership title of the property. The transfer can happen either via property purchase or receiving it as a gift. In the case of an investment, it is essential to possess documents such as a search report, sale agreement and sale deed. However, if the property is built on land leased by the government, it is mandatory to seek permission from the concerned departments and statutory bodies. Also, it is essential to avail clearances from-

• Environment department
• Fire department
• Urban land ceiling department

Search report

To initiate the process, hire a legal expert to avail a search report. A search report is a vital legal document in property transactions that serves as proof that the property is free from all sorts of encumbrances, litigations and mortgages. The report comprises all necessary transactions registered concerning a particular property. For instance, any transaction such as a sale, gift or mortgage that occurred in the past against the property in question will be listed in the search report along with the details of the parties involved and the date of registration.

Sale agreement

Next is the sale agreement. Both the parties, the seller and the buyer, have to sign and execute the sale agreement on a non-judicial paper. According to the law, the sale agreement contains the terms and conditions agreed upon by the parties.

Conveyance deed

The conveyance deed is prepared on a non-judicial stamp paper of an appropriate value. It is a document stating the transfer of the authority and ownership of the property to the buyer. Once drafted, the conveyance deed must be registered in the Registrar’s Office.

Mutation

Property mutation is the change in the ownership title of the property from the seller to the buyer. The land revenue department records the mutation details. It is also essential for municipal records for property tax payments. Once the mutation is complete, a Mutation Certificate is issued to the buyer.

A privately leased property does not require the permissions mentioned above unless the property is barred or restricted under the government policies, for instance, leasehold land falling under sensitive areas. Also, the procedure of conversion varies across States, like some regions have banned the sale and purchase of land close to mining and forest areas.

On the whole, conversion of the leasehold land to freehold could be beneficial, particularly when you plan to sell the property and earn higher returns. It is important that you acquire all the documents and approvals mentioned above for a smooth and hassle-free conversion process.