Tuesday, January 17, 2012

How about freeing your property? - Indian Real Estate Forum - www.indianrealestateforum.com

How about freeing your property? - Indian Real Estate Forum - www.indianrealestateforum.com:

Once converted into freehold, the owner no longer needs permission from the land- owning authority to transfer the title's ownership

Leasehold property schemes in ndia are offered by land-ownng public authorities such as the Delhi Development Authority, Noida Authority and the Greater Noida Authority. Purchasing a leasehold LIG/MIG/HIG flat or plot directly from the land-owning authority is a popular investment option, because buyers are assured a clear property title unlike properties in the secondary market.

Occasionally, public authorities launch conversion schemes for residential leasehold properties. In such a scheme, owners of leasehold properties can opt for conversion of their leasehold property into a freehold property. Though the exact process for conversion of leasehold property into freehold is different for each authority, these schemes also share certain features. Usually, the process for conversion involves submission of an application for conversion along with the prescribed set of documents, payment of requisite conversion charges, processing fee and other outstanding dues on the property, if any. Applications which do not contain the entire set of prescribed documents are not entertained by the authorities. There is a one-time conversion charge that may be paid on a lump-sum basis or equated annual instalments spread over a few years. When the payment is made in instalments, the prescribed rate of interest may also be payable on the conversion charges.

Outstanding dues are usually in the nature of arrears of ground rent, misuse/damage charges for unauthorised construction (if any) and any other unpaid dues levied by the authority. In case there is an ongoing legal dispute relating to the title of the property, conversion is usually not allowed until the legal dispute is finally settled. If the property has been previously mortgaged once/more than once, submission of no-objection certificate from the mortgagee/all mortgagees may also be required.

Once the land-owning authority is satisfied with the application, it executes a fresh conveyance deed in favour of the transferee, by virtue of which the erstwhile leasehold property stands converted into freehold. There may be instances where the original lease deed may have been lost. In such a case, the applicant must first issue a notice containing details of the property in a prominent newspaper with circulation in the area where the property is located, and must also execute an affidavit before a first class magistrate, describing how and when the original lease deed was lost. A copy of this public notice and original affidavit is required to be then submitted to the authority before execution of the conveyance deed.
As freehold properties generally have a higher market value than leasehold properties located in an area, such conversion schemes are an effective mode for enhancing the value of one's leasehold property.

Once converted into freehold, the owner is no longer required to first seek prior permission of the landowning authority before transferring the property. Also, unlike a leasehold property where the actual owner of such property is the landowning authority and the individual is only a lessee, conversion to freehold vests absolute ownership of the property with the individual.

The author is senior partner, ZEUS Law Associates, a corporate commercial law firm. One of its areas of specialisation is real estate transaction and litigation work

-HT
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