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What Is Leasehold Property? Know Everything About Leasehold Property

By Tata Capital
19 December 2025
9 mins read
2370

Many people are in the business of buying properties. Some buy it for personal use. However, there can be chances that their desired property is already being owned by another person or that the cost of the property is too high. In such cases, renting is an option whereby they can use the property against payment of consideration in the form of rent. In India, rent agreements are usually made for 11 months after which they need to renew the same. What if someone wants to rent the property for a longer tenure?

They can go for leasehold on houses. Let us see how!

What is Leasehold Property?

A leasehold property is a type of real estate where the owner, known as the lessor, grants the right to use the property to another person, known as the lessee, for a specified period, typically decades. Unlike freehold properties, where the buyer owns the land and the property indefinitely, leasehold properties involve a temporary ownership arrangement.

Key Features of Leasehold Property

While we discussed the leasehold property meaning, let’s discuss some of its prominent features. Leasehold land is usually taken for a longer duration that may range between 25-30 years to as long as 99 years. It can be extended to as long as 999 years. This is akin to selling the land but not in the legal sense. This is because the upfront payment is not done to the holder of the property in the form of sale consideration. Further, the ownership of the property remains with the lessor.

There is a difference between freehold property and leasehold property. In the case of freehold property, the buyers are the complete owner of the property and they can exercise all the rights associated with the property. Further, the owner of the freehold property does not require any permission for alteration or changes in the property. Whereas, in the case of leasehold property, the buyer does not completely hold the property and the actual ownership rests with the freehold owner.

The following are the features of the leasehold property:

The lease is usually for a period of 25-30 years
It is usually the buyer that bears the ancillary costs such as property tax, renewal of contract, etc.
For the redevelopment of projects that are constructed on the leasehold land, the approval of all the parties is required. There should be a consensus among the freehold owner, lessor, and the buyer of the home.
The consent of the state departments is necessary for executing the lease deed and construction of the leasehold property.
Some states offer an option for conversion of the leasehold property to the freehold property. If there is an option available, one should exercise the same.

Top Advantages of Owning a Leasehold Property

We’ve explored what does leasehold mean, now let’s see its benefits. Purchasing a leasehold property is a common practice in India.

Following are some of the advantages of leasehold property that make it a preferred option in real estate:

Purchasing a property on a project built on leasehold land costs less as compared to that built on freehold land.
When it comes to metro cities, the cost of land is significantly high. Buying the land and then building a project significantly raises the cost of the project which makes it less affordable for buyers. Therefore, developers resort to leasehold properties in metro cities.

Disadvantages of Leasehold Property

Leasehold property does confer certain disadvantages that a buyer should be aware of:

One cannot sublet the leasehold property.
The lease rent must be paid to the owner of the property which can increase the leaseholder’s charges.
Buyers of leasehold properties often face restrictions with respect to the rules and regulations.
Buyers of a real estate property built on a leasehold property can hold their property only for the lease period.
The leaseholder may need the permission of the freeholder for any changes to the leasehold property.
Leaseholders are usually not allowed to keep pets in the leasehold property.

Also, read – Conveyance Deed: Facilitating Seamless Property Transfers

What Home Buyers of Leasehold Properties Can Do?

If there is a leasehold on houses, the buyers of the same should check the period of the lease before investing in the property. As the homeowners of the leasehold properties can only hold the property till the lease period, they need to determine when can they hold the property. Further, what are the plans after the lease expires? Will the lease be extended? Or the homebuyers will have to vacate the property?

Homebuyers of leasehold properties should ensure the following:

Get the property registered in their name.
Obtain the transfer memorandum. It is official permission that is granted by the development authority to the owner or seller of the property which allows them to transfer their property rights to the homebuyer.
Buy or invest in a project built on land with a long leasehold period.
The buyer should ensure that the home loan tenure is not longer than the lease tenure. This is primarily because in case the tenure of the lease is shorter than the home loan tenure, then the risk of the lease not being renewed falls upon the lender. In such a case, they may refuse to sanction the loan.

Is Leasehold Property Safe to Buy?

It is safe and legally valid to own a property built on leasehold land in India. It is safe and secure to invest in the same and the buyer of the leasehold property gets to hold the property till the lease expires.

Leasehold vs Freehold Property – Key Differences

Here is a look at the how leasehold and freehold properties differ:

Basis of Differentiation	Leasehold Property	Freehold Property
Property Ownership Types	You own the structure for a fixed term, while the land remains with the lessor. This is a core point in leasehold vs freehold.	You enjoy complete ownership of both land and building. This is a defining difference between leasehold and freehold.
Duration	The ownership is time-bound. Typically between 25 and 99 years. This is another vital point in the leasehold property vs freehold property discussion.	The ownership has no expiry.
Control and Modifications	Changes often need the lessor’s approval.	You have the freedom to alter or transfer the property as you see fit.
Cost	This has a lower upfront cost	This has a higher upfront cost.

Leasehold Property Rules and Legal Aspects in India

Now that you know the advantages and disadvantages of leasehold and freehold properties, let’s discuss the legal aspect of these properties in India. Understanding leasehold property rules is crucial for anyone investing in such properties. The legal aspects of leasehold property ensure clarity, protect rights, and prevent disputes. Key points to note include:

Lease Duration: Varies from 25, 30, 50, or 99 years, depending on the leasehold property laws in India.
Renewal and Extension: Leaseholders can apply for an extension before expiry.
Ground Rent: Annual or periodic rent must be paid to the freeholder.
Permissions: Government or municipal approvals may be required for transfer or modifications.
Lease Deed Registration: Mandatory for legal validity and secure transfer.

Complying with leasehold property laws India ensures smooth ownership and legal protection.

Also, read – Know About The Stamp Duty And Registration Charges In Maharashtra

Leasehold Property Transfer Process – Step-by-Step Guide

Transferring a leasehold property requires following a systematic legal process to ensure ownership is valid and enforceable. Here’s a step-by-step guide to the leasehold property transfer:

Obtain No Objection Certificate (NOC): Get a NOC from the freeholder and relevant authorities as the first step in how to transfer leasehold property.
Draft Transfer Deed: Prepare the legal documents specifying rights, liabilities, and consideration for the transfer.
Pay Stamp Duty and Fees: Complete the leasehold property registration process by paying applicable stamp duty and transfer charges.
Register the Transfer: Submit documents to the local registrar or municipal office to legalize the leasehold property sale procedure.
Handover Possession: Update records and hand over physical possession to the buyer.

Financing Leasehold Properties – Home Loans & Considerations

Obtaining a leasehold property home loan is possible, but it requires careful planning. Key points to consider when financing leasehold property include:

Ensure your home loan for leasehold property tenure does not exceed the remaining lease period.
Check leasehold property loan eligibility, as some lenders may have stricter criteria compared.
Tax benefits on principal repayment and interest under Sections 80C and 24(b) are available, just like for freehold properties.
Additional documentation or conditions may be required by lenders due to the leasehold nature of the property.
Early planning helps in securing a suitable loan and avoiding complications during approval.

Key Considerations Before Buying Leasehold Property

Before investing in a leasehold property, it’s important to be thorough. Here’s a quick leasehold property checklist to guide you:

Check the remaining lease tenure and understand renewal provisions to avoid future complications.
Review obligations such as ground rent, service charges, and municipal dues.
Understand ownership rights to ensure clarity on what you can and cannot do with the property.
Consult experts. A legal or real estate professional can review the lease deed and transfer terms.
Verify financing compatibility if planning a home loan, ensuring the lease term aligns with the loan tenure.
Evaluate resale potential and long-term investment prospects.

These buying leasehold property tips and things to check before buying leasehold will make your decision easier. Use this leasehold property buying guide to navigate your purchase confidently.

Conclusion

The land is limited. This is the primary reason why the price of land and plots is skyrocketing. Therefore, to make real estate projects more affordable for homebuyers, developers go with leasing the land for developing their projects. This primarily benefits the people in the metro cities where the population and demand are high and the land is limited leading to high prices.

However, whether the project is built on leasehold or freehold land, homebuyers always go for affordable home loans. Home loans are some of the most affordable loans in India. It not only facilitates the purchase of a house but also provides tax benefits. Home loan principal repayment can be claimed as a deduction under Section 80C of the Income Tax Act whereas the interest payment is deductible under Section 24(b).If potential buyers are looking to purchase a leasehold property, then it’s time they move ahead with their decision with the TATA Capital home loan facility.

Apply for a Home Loan

FAQs

What is leasehold property?

If you’re wondering what is leasehold property, it’s a type of property where the owner (lessor) grants the right to use the property to another person (lessee) for a specified period, typically decades.

What is the difference between leasehold and freehold property?

A leasehold property gives you ownership of the building for a fixed term (usually 25–99 years), while the land remains with the lessor. Freehold property provides complete ownership of both land and building indefinitely. Leasehold often requires approvals for modifications and has a lower upfront cost, whereas freehold offers complete control and a higher initial investment. As you can see there are both advantages and disadvantages of leasehold and freehold properties.

How long is a typical lease period in leasehold properties?

An advantage of leasehold property is that the typical lease period can be between 25 and 99 years.

What happens when the leasehold period expires?

When the leasehold period expires, ownership of the property typically reverts to the lessor unless the lease is renewed. Planning ahead is crucial to avoid complications at the lease’s end.

Can leasehold property be sold or transferred?

Yes, a leasehold property can be sold or transferred, but the process requires adherence to the terms of the lease deed. The transfer usually needs the lessor’s consent, and buyers must be aware of the remaining lease tenure, obligations, and any applicable fees before completing the transaction.

Is it safe to buy a leasehold property in India?

Yes, buying a leasehold property in India can be safe if you conduct due diligence. Ensure you check the remaining lease tenure, understand all obligations like ground rent and service charges, and review the lease deed carefully. Consulting legal and real estate experts is highly recommended.

How does lease renewal or extension work?

Lease renewal or extension allows a leasehold property owner to extend the original lease term, usually by paying a premium to the freeholder. The process involves reviewing the lease deed, negotiating terms, and registering the extension. Longer leases typically improve resale value and financing options.

Are home loans available for leasehold properties?

Yes, home loans are available for leasehold properties, subject to the lender’s terms. Banks typically consider the remaining lease tenure and ensure it aligns with the loan tenure. It’s advisable to check eligibility with your lender before applying to avoid complications.

What are the responsibilities of a leasehold property owner?

A leasehold property owner is responsible for paying ground rent, service charges, and municipal dues as specified in the lease agreement. They must also maintain the property, comply with lease terms, and respect the rights of the freeholder while ensuring timely renewals and adherence to all legal obligations.

What are the advantages and disadvantages of leasehold property?

The primary advantage of leasehold property is affordability, as leasehold properties generally cost less than freehold properties, especially in metro cities. However, buyers should note restrictions such as limited lease tenure, mandatory lease rent, subletting limitations, and the need for the freeholder’s permission for modifications.

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