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Mar 2018

Why is a lease for 99 years?

Why is a lease for 99 years?

The properties are apparently of two kinds- freehold property and the leasehold property. While former refers to the properties that are free from the hold of other entry except for owner for the indefinite period, latter are properties generally leased for the period, commonly for 99 years from construction time. But, why this unusual figure, 99? Or what actually happens or who actually owns property at end of the lease period? Or maybe the applicable renewal conditions?

Here is why leases are for 99 years only-

The authority of development of a specific area gives the land development rights to the developers as well as sells properties for the lease of 99 years. This basically means that anyone who would buy a commercial or residential property will own it for a time period of 99 years after which ownership is provided back to the owner of the land. The home buyers of leasehold properties are required to pay the ground rent to landowners for specifically this. Lease of such properties can renew after term completion.

What happens upon the expiry of the said lease?

Generally, the government allows the conversion of the leasehold property to the freehold upon the payment of the conversion charges or it guarantees correct to buy another lease upon the expiry of the original lease.

Buying an older house

The investor eyeing the old property may actually find it pretty difficult to furthermore sell the property as it would not actually be easy for prospective home buyers to finance it. Such properties might not see an integral appreciation as well. The prime challenge faced by the home buyer is the renewal of the contract of occupancy once the lease is actually over. Along with the renewal, the old properties also need additional price such as the property tax. Furthermore, a buyer could actually face the challenges of transferring property title as well as the registration papers. On the other hand, if descendants of the leasehold property do possess the property for 99 years, they will certainly require paying for the lease renewal.

From the point of view of the developer, the projects that are planned for smaller leasehold periods may not get the funds for the construction which could lead to any delay and non-completion.

Why 99 years?

99 years lease agreement basically includes the obligations and rights of both the lessor as well as the lessee pertaining to the occupation of property in the exchange for the amount set as the rental. The terms and conditions that are mentioned in the agreement such as lease period, nature of rights, duties of the lessor and the lessee, termination clause, conditional clauses, dispute resolution clause, etc. are pretty crucial factors for the sustenance of the lease and dispute in the respect of lease.

The objective of having the time span is to actually control the use and land transfer. This span of time was seen as a safe interval choice in previous days provided that it will cover up the lifespan of the lessee. Also, it was regarded as the period enough to safeguard the lessor ownership.

Some facts about the leasehold property

• It is possible to actually extend the lease period to 999 years by paying the price
• New Okhla Industrial Development Authority proffers land to develop apartment projects only on the leasehold
• The developers do prefer to build an apartment on leasehold lands since the cost of parcels is much lower when in comparison to the freehold lands
• On the purchase of property on leasehold, the buyer must confirm whether the seller has actually obtained a transfer memorandum from the local development authority
• The prime advantage of investing in the leasehold property is the rate which is lesser than the properties that are built on freehold land


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