Conversion of a leasehold property to freehold

Whenever you look for investing in Delhi, Noida, Greater Noida, quite of often you would have heard of the terms freehold and leasehold. Also, there could have been times when you would have had confusions related to both. Let’s understand the both terms in detail.

The properties in urban areas are divided into two categories – freehold and leasehold.

A freehold property is one where the owner’s right over the property is full and unconditional. The title of the property is conveyed to the purchaser by conveyance or Sale Deed. Moreover, the purchaser can further sell and transfer the ownership of that property

In case of a standalone property, the owner owns the property as well as the land on which it stands. In case of a multi-level property, land ownership is usually divided in proportion to the floor area of each owner.
The ownership of a freehold property is transferred to another buyer through registration of sale deed.

In the case of a leasehold property, the land-owning agency gives the land on lease to a lessee for a stipulated period. The land ownership rights remain with the lessor. The lessee pays a lease premium and an annual lease rent as fixed by the lessor. Further, the lessee requires the lessor’s prior permission if he wants to sell the property.

To understand in details, let’s take example of Noida Authority, Greater Noida Authority or the Yamuna Expressway Industrial Development Authority. They offer land on lease for 90 years. A lease rent for the period is paid to the authority, once this period is over the lease rent is paid again. The leasehold properties are transferrable, though permission from the leasing agency is required by payment of stamp duty and transfer charges.

Buying and selling a leasehold property is still seen as a difficult task to be completed as it involves transfer at the authority level too. To curb such an issue, the Union government modified the procedure of conversion of leasehold land to freehold within Delhi. Post verification of all valid ownership documents and conversion charges, the property can be converted from leasehold to freehold.

Understanding the above facts, it is always better to get the property converted to freehold, if you have the necessary documentation and opportunity to do so.

Original publication at Content.magicbricks.com by AtulayNehra

Tips for NRIs before buying property in India

With over 20.20 million of NRIs (Non-resident Indian) and PIOs (Person Of Indian Origin) across the globe, the overseas investment into Indian real estate has never been an issue. Majority of these people have invested in the homeland in consideration to their individual future plans.

Factors for consideration for NRIs while buying property in India

1. Which property can a NRI or PIO buy?
2. How to pay for these properties?
3. Repatriation of the capital gains?
4. Availability of home loan
5. Can a NRI sell or transfer a property?

Which property can a NRI or PIO buy?

An NRI or Person of Indian Origin (PIO) can own both residential as well as commercial properties in India and there is no restriction on the number of properties you can buy. However, you cannot purchase any agricultural land, farm house and plantation property. You can have ownership of such property only if they have been gifted or inherited.

How to pay for these properties

The money for purchase of property can be made either by way of funds remitted to India from abroad through regular banking channels or through the balance in the  Non Resident External (NRE), Non Resident Ordinary  (NRO) or Foreign Currency Non Resident  (FCNR) Account.

Repatriation of the capital gains

NRI and PIO have been allowed to repatriate original investment in equivalent foreign exchange in residential/ commercial properties. However, the gains from such transactions have to be re-invested in the real estate market in India.

Availability of home loan

Loan to an NRI is available the same way they would be to an eligible resident, for reference below mentioned criterion is must for availing home loan

• Minimum age of 18 years.
• Valid Indian passport (for NRIs) / valid foreign passport (for People of Indian Origin – PIOs).
• Steady source of income.
• Employed abroad for at least 2 years.
• Valid job contract or work permit.

Can NRIs sell or transfer property

An NRI can sell property in India to a person resident in India or to an NRI. A PIO can sell property in India to a person resident in India or to an NRI or a PIO but after having a prior approval from the Reserve Bank of India.

Original publication at Content.magicbricks.com by AtulayNehra

Are assured returns schemes in real estate genuine?

From the offers of 100 per cent guaranteed returns to assured returns on investment of up to 14 per cent – anyone would be interested to know more. That’s it and the trap is set.

When you will ask for more information on these real estate offers and you are trapped in the dilemma of earning secured returns on your savings or investing in a fixed deposit  or seeking an assured 12.5 per cent + return on real estate project.

So, what exactly are these offers?

Let us first understand the reason behind such offers. When the commercial real estate developers avail a construction loan from any financial institution this loan is generally offered to them at a relatively high percentage, from 18 per cent to 25 per cent or above in most of the cases. Moreover, only 60 per cent to 70 per cent of the construction amount is funded. In comparison to having funds from the financial institutions, the developers find it easy to raise money from retail investors on a low percentage of 11 per cent to 13 per cent.

How does this work?

The investors are first lured with such juicy offers of over 12 per cent assured returns through radio, television, print campaigns or through realty brokers (please note any transparent and honest broker will never suggest assured return project).

You are made to pay a down payment of up to 95 per cent of the value of the property , the day the amount gets credited to the developers’ account , your annual returns are paid to you through post-dated cheques given to you for a monthly or quarterly credit from the developer.

If you are thinking that it is a great idea, hold on to your thoughts. Have you ever thought where these developers pay these assured returns from? That’s very easy to understand, although you should compare with other neighboring commercial projects as well – but the various payment plans in the same project itself explains the difference of an assured or a non-assured return difference.

For example, you would find that the developer is offering you 12 per cent assured returns at Rs 6,250 per sq ft for 2 years, while in the same project a non-assured return unit is available for Rs 5,000 per sq ft. So, the developer has taken an upfront Rs 1,250 per sq ft extra for the same property. Ideally, this extra money which is paid by you is given back to you over the next two years.

You may now ask, is this regulated and how sure should I be sure about my post-dated cheque getting credited?

The golden rule of investing is to question any deal that looks too good to be true. In most probabilities, it will actually be too good to be true. This may be rude but true. These assured return schemes are non–secure schemes and come at a very high risk. Even the developer having the best credibility in the market will not think twice to not to pay your returns during a financial crunch situation, which most of the developers are in today.

What should you do then?

We suggest that unless you have huge stash of money with you and can afford to look for legal help, stay away from such offers of assured return projects. Even if you still wish to put your money in such lucrative schemes, do calculate the net profit that you will get after all the expenses and taxes on the assured returns or look for a residential project offering assured return with buy-back guarantee. In that case, get the agreement vetted by a legal expert before entering into it. Your investments should be at a lower risk.

Original publication at Content.magicbricks.com by AtulayNehra.