Selling a property can be straightforward or complex depending on the type of ownership. While freehold properties are simpler to transfer, leasehold properties often involve additional steps, approvals, and transfer charges. Understanding the distinctions between these two property types can help sellers and buyers navigate the process smoothly.
What is a Freehold Property?
A freehold property gives the owner full rights over the land and the building. This means the owner can:
- Sell, transfer, or lease the property at their discretion
- Renovate or make structural changes (subject to local regulations)
Since the ownership is permanent, freehold properties are generally preferred by buyers. Selling a freehold property is relatively straightforward:
- Draft and sign a sale agreement with the buyer.
- Fulfill all terms and conditions of the agreement.
- Execute a sale deed to finalize the transfer.
- Register the sale deed at the Sub-Registrar of Assurances within four months.
Once registered, the property legally belongs to the buyer.
What is a Leasehold Property?
A leasehold property is built on land owned by a governmental or private authority, which is leased to the owner for a fixed period—usually 30 to 99 years, and in some cases up to 999 years. Key points about leasehold properties:
- Ownership of the land is temporary and reverts to the lessor at the end of the lease.
- Buyers may face difficulties obtaining loans if the lease period is short.
- Leasehold properties are generally cheaper and involve fewer disputes over ownership, as the transfer is overseen by the lessor.
Examples of leasehold land include areas in Noida, Greater Noida, and Navi Mumbai, while cities like Delhi, Gurgaon, Ghaziabad, and Bangalore offer mostly freehold properties.
How to Sell a Leasehold Property
Selling a leasehold property involves additional steps compared to a freehold property. Here’s a step-by-step guide:
Step 1: Draft Sale Agreement and Apply for NOC
- A lawyer drafts the sale agreement or Agreement to Sell, outlining all terms of the transaction.
- Both buyer and seller review and register the agreement at the Sub-Registrar’s office. The buyer pays the applicable stamp duty and registration charges.
- Apply for a No Dues and No Objection Certificate (NOC) from the housing society (if applicable). Ensure all maintenance charges and other dues are cleared. The buyer typically bears the clearance charges.
Step 2: Apply for Memorandum of Transfer
- Submit an application to the government authority or landowner (lessor) requesting a transfer of ownership.
- Attach IDs of both parties and the NOC from the housing society.
- Pay the transfer charges, which usually depend on property size and local circle rates (for example, in Noida, transfer charges are around 2.5% of the current circle rate).
- Plotted properties may have varying charges based on road width, location, or green belt adjacency.
Step 3: Government Verification
- The authority schedules a verification date for both seller and buyer.
- Officials confirm the seller’s intention to transfer the property and check all submitted documents.
- Once verified, the Memorandum of Transfer is issued, typically within 1–2 weeks.
Step 4: Execute and Register Sub-Lease Deed
- Draft the sub-lease deed with signatures of all parties.
- Submit the deed for registration at the Sub-Registrar’s office.
- Buyer pays registration charges. After 1–2 weeks, the registered deed is issued to the buyer.
- Sellers should retain photocopies of all pages for reference.
Note: The procedure may vary depending on state regulations or if the property was purchased via a Power of Attorney (POA). In such cases, POA-related documents must also be provided.
Key Takeaways
- Freehold properties: Easier and faster to sell; no government approvals needed.
- Leasehold properties: Require NOC, Memorandum of Transfer, and approval from the landowner. Transfer charges are applicable.
- Always consult a property lawyer or a local broker to ensure compliance with state-specific rules and avoid delays.
Frequently Asked Questions
An NOC confirms that there are no pending dues or disputes with the housing society, local authority, or builder, allowing the property transfer to proceed smoothly.
A POA is a legal document allowing one person to act on behalf of another in property transactions. A registered POA is required for legal property transfers, while notarized POAs may not be sufficient.
Yes, leasehold properties can sometimes be converted to freehold, subject to approval from the government authority and payment of conversion charges, which vary by state and property type.
