roperty Tips: Leasehold versus freehold property

Submitted by admin on November 3, 2009 – 10:26 amNo Comment

It is a universal truth that the owner of a property with general power of attorney (GPA)
will one day try and convert his property as a freehold property. But, it is equally true that
despite this fervent wish, an average owner of a property will think several times before
applying in the concerned office for a freehold status of his property. The reasons are not
too far to seek – red tape, bureaucratese and the tedium of submitting endless papers to
concerned government departments.

Even if your papers are complete, one will still have to ‘grease’ the palms of concerned
officials to get even legitimate work done, bemoan so many hapless owners. Honestly
speaking, you can consider yourself very lucky if you don’t face any hardship in order to
convert your property. If you want to see the plight of all those who wish to convert their
properties as freehold, then just visit the INA office of DDA. You would meet scores of
people who can narrate their sad stories.

As the government is considering bringing about legislation to create a regulator for

realty sector to streamline the affairs, it can do yeoman service if it creates a single-
window system for converting power of attorney properties into freehold.

If we talk about total properties in both Delhi and NCR, both residential and commercial,
more than 70% of them are sold on GPA. The titles of thousands of properties are not
clear. While government is keen to regulate the very chaotic realty sector, it would do
great service if it works on this area sooner rather than later. It goes without saying that a
single-window system in all the states, which will ensure and clear the conversion cases
within a stipulated time frame and minimum paperwork, will go a long way in improving
the state of realty sector.

“I strongly feel that the day government eases the process of converting the status of
properties, it will be a Diwali-like day for all those with properties on power of attorney,”
says Sunder Khatri, a Supreme Court advocate and expert on realty matters, adding:
“Freehold property means a property which is in the absolute ownership of a person –
right to possess, right to enjoy and right to dispose of the property. Whereas, leasehold
property means a property in which the owner of the property has, in consideration of
price either paid or promised, transferred a right to enjoy the property for certain time or
in perpetuity, in favour of another person.”
Those who are well-versed in the affairs of realty world say that during festival time
people start their search for residential or commercial property. They are keen to clinch
the deal during these auspicious times beginning with the Navaratra. The auspicious time
goes on till early New Year.

However, most people are not aware of the paperwork related to purchase of property.
They are not aware of the importance of a clear title.

The paperwork related to purchase of property is even more tedious than selecting the
property itself. If we talk about Delhi, it is even more complex as land and property are
classified under different heads when it comes to ‘type of property’ and also come under
the purview of different landowning agencies.

There are many landowning agencies like the Land and Development Office, the Delhi
government, Delhi Development Authority, Delhi State Industrial and Infrastructure
Development Corporation Ltd (DSIIDC), Waqf Board, and land governed by the Punjab
Act. All these agencies require different kind of paperwork for converting the property
and the worst part is that they have not made any effort to work for the benefit of the
common man.

As far as freehold property is concerned, Khatri says they are classified under the heads
of residential, commercial, industrial, agricultural and Lal Dora lands. Sunil Jindal, CEO
of SVP Builders, says while on papers it looks like a cakewalk to convert the leasehold
property to freehold, the fact is one has to really put the nose to the grind wheel to
complete this job. This issue has to be resolved on priority basis once and for all.

“Government has to take stringent action against even those builders who don’t sell their
flats, floors and plots to innocent customers on clear titles. Unless government acts fast,
some builders will continue to harass people,” Jindal concludes.

It has been observed that while the leading builders hand over flats to their customers’
with clear titles, some don’t do that. Their customers somehow think that physical
possession of the property is enough. However, they face unending hardships when they
apply for bank loan or when they consider selling their properties.

“I strongly feel that if government is really thinking to regulate the realty sector, it has to
ensure that a system is evolved whereby leasehold property owner change the status of
his/her property without a long haul,” says Devender Gupta, CMD of Century 21 India.
Gupta has a very wise suggestion for all those who wish to buy a property. According to
him, if you are buying a property, then you must verify the title of the property at the
office of the concerned sub-registrar. You just have to pay some fees. Such verification
serves as a safeguard against potential losses due to fraud, misrepresentation or defects in
the title.

The last word comes from PK Jain, executive vice-president of PNB Housing Finance
Bank Ltd. Jain says that he feels astonished when even educated people visit his office
and seek a loan to buy leasehold properties. Unfortunately, still large chunk of people are
not fully aware of the difference between leasehold and freehold properties.