Leasehold and Freehold in Real Estate: What’s the Difference?

When buying a property, we often consider factors such as location, amenities, builder, and more. Every aspect is important, but one of the most crucial things is understanding the ownership rights of the property. In our previous blog, we talked about the importance of an Occupancy Certificate. Today, we will have a brief discussion about Freehold and Leasehold properties and which one is better for your requirements. Let’s dive into it.

Freehold Property

A freehold property means complete ownership of both the building and the land on which it is constructed. Once you purchase it, the property belongs to you indefinitely. This gives you the right to use it, transfer it, rent it, or sell it without many restrictions. The key features of a freehold property include: 

• Ownership of the land and building.

• No time limit on the ownership.

• Easy to sell, transfer, or mortgage.

• Higher resale value. 

• Generally requires no approval from government authorities for the transfer of property.

Leasehold Property

A Leasehold property is a property where you are allowed to use the property for a fixed number of years. This year's tenure usually varies between 30-99 years, but the land belongs to the government or the developing authorities. At the end of the lease period, the ownership reverts to the authorities unless the lease is extended. There are some key features of Leasehold property, that is:

• Ownership is limited to the lease period.

• Requires approval from the authority for transfer or sale.

• Lower upfront cost compared to freehold.

• Difficult to get loans for properties with a short lease term.

• Property value may decrease as the lease tenure reduces.

Which is Better, Leasehold or Freehold?

It depends on the purpose of your investment, whether you should choose a leasehold property or a freehold property. 

• If you are looking for a long-term investment with good rental yield, appreciation with time, and total ownership, then Freehold is the way to go. 

• If you want affordability in a prime location, are okay with a tenure period, and are someone who looks forward to switching homes in the future, a Leasehold property is for you.

Important Tips for Leasehold Investment

If you are planning to buy a Leasehold property, make sure to check these pointers.

• The Leasehold tenure of the property you are planning to invest in. 

• Whether the tenure can be extended in the future. 

• If approval is required for resale or modification made to the property.

Conclusion

Understanding the different aspects of real estate investment is important before making an investment decision. Both Leasehold and Freehold properties hold their advantages. Leasehold is an affordable option, while Freehold is the much more flexible one and will provide better appreciation. The choice is yours to make according to your budget and investment requirements.