Tenure & Ownership
What is Leasehold Property?
You own a term, not a thing. And the shorter the term gets, the less anyone will pay for it — and the fewer banks will lend against it.
The short answer
Leasehold means you own the RIGHT TO USE the property for a fixed term. You do not own the land. It belongs to the lessor — usually the government, a development authority, or the collector.
Common terms: 99 years. Sometimes 30. Sometimes 999.
The single question nobody asks: HOW MANY YEARS ARE LEFT?
What leasehold means
A superior owner — the lessor — grants you a lease for a term. You may occupy, use, sell and mortgage the property for that term, subject to the conditions of the lease.
At the end of the term, the property reverts to the lessor — unless the lease is renewed, which it usually can be, at a price.
Common lessors in India: DDA (Delhi), MHADA and the Collector (Mumbai), Noida and Greater Noida Authorities, state housing boards, Chandigarh Administration.
The years remaining — this is the whole game
The lease was granted in 1946. It is now 2026. It has 19 years to run.
What happens as it shortens:
• The value falls. Not gently — it accelerates. A buyer in 2035 will be looking at 10 years.
• Banks stop lending. Most require the lease to extend well beyond the loan term, often by a substantial margin. A short lease means your buyer cannot get a mortgage — which means your buyer pool collapses to cash purchasers.
• Renewal costs money. Sometimes a great deal, and the amount is at the lessor's discretion.
• Redevelopment becomes fraught. Nobody rebuilds on a lease that is running out.
The value of a leasehold property is not linear in the years remaining. It falls off a cliff.
“How many years are left on the lease?”
Then get it in writing, and verify it from the lease deed — not from the seller's recollection.
Rough guide:
• 80+ years left: in practice, close to freehold. Not a concern.
• 60–80 years: fine, but factor it into the price and into your exit.
• 40–60 years: think carefully. Your buyer in 15 years is looking at 25–45.
• Under 40 years: this is a real problem, and it will get worse every year you hold it. Get advice, and price it accordingly.
• Under 30 years: most banks will not lend. You are buying a cash-only asset.
Banks stop lending — and that is what kills the value
This is the mechanism that turns a shortening lease into a falling price, and it is worth understanding properly.
A bank will generally want the lease to run well beyond the end of the loan — because if you default in year 18, they must be able to sell the flat, and they can only sell it to someone who can themselves get a loan.
Which means:
- A 20-year loan on a lease with 25 years left is unlikely to be approved.
- Which means your buyer, in ten years, will face the same refusal.
- Which means your pool of buyers shrinks to people paying cash — a small pool, and one that prices accordingly.
The lease shortens by one year, every year, and there is nothing you can do about it.
Permission and fees — read the lease deed
A lease is a contract, and it has conditions. Read them.
- Transfer permission. Many leases require the lessor's consent to sell — and charge a transfer fee. Find out what it is before you agree a price.
- Ground rent. Usually nominal. But check it is paid up — arrears follow the property.
- Use restrictions. Residential only? No commercial activity?
- Alteration consent. You may need permission to build or modify.
- Breach clauses. A lease can, in principle, be forfeited for breach. Rare, but read the clause.
- Renewal terms. Is renewal a right, or a discretion? At what price? This is the most important clause in the document, and almost nobody reads it.
Converting leasehold to freehold
Many lessors — DDA notably — allow conversion to freehold on payment of a conversion charge.
It usually pays for itself, and then some:
• The value rises — freehold commands a real premium
• Banks lend freely again, which restores your buyer pool
• No more transfer permissions, no more ground rent
• The wasting-asset problem disappears entirely
If you own leasehold and conversion is available — look into it seriously. And if you are BUYING leasehold, ask whether conversion is possible, what it costs, and whether the seller has already applied.
A leasehold flat that can be converted is a very different proposition from one that cannot.
Freehold vs leasehold
| Freehold | Leasehold | |
|---|---|---|
| What you own | The property AND the land. Outright. In perpetuity. | The RIGHT to use it, for a fixed term. The land belongs to the lessor. |
| Duration | Forever | A term — commonly 99 years. Sometimes 30. Sometimes 999. |
| The lessor | — | Usually the government, a development authority, or the collector — DDA, MHADA, a Housing Board |
| Ground rent | None | Payable, though often nominal |
| Transfer | Free. Sell to anyone. | May need the lessor's permission, and a transfer fee |
| Alterations | Subject only to building bye-laws | May need the lessor's consent |
| Bank loan | Straightforward | Depends on the remaining term. See below — this is the one that hurts. |
| Value | Higher | Falls as the lease shortens |
| At the end of the term | — | The property reverts to the lessor, unless renewed. Renewal is usually possible — at a price. |
The single most important number in a leasehold purchase is the YEARS REMAINING. A 99-year lease with 82 years left is, in practice, close to freehold. One with 19 years left is a wasting asset that most banks will not lend against — and almost nobody asks.
Frequently asked questions
What is leasehold property?
You own the right to use the property for a fixed term — commonly 99 years — but not the land, which belongs to the lessor (often a development authority, the collector, or a housing board). At the end of the term the property reverts to the lessor unless the lease is renewed, usually at a price.
How many years should be left on a lease?
80+ years is in practice close to freehold. 60-80 is fine but should be priced in. 40-60 needs careful thought, since your buyer in fifteen years will face 25-45. Under 40 is a real problem that worsens every year. Under 30, most banks will not lend — you are buying a cash-only asset.
Why does a short lease reduce property value?
Because banks stop lending. A lender wants the lease to run well beyond the loan, since if you default they must be able to sell — and they can only sell to someone who can themselves get a loan. So a short lease shrinks your buyer pool to cash purchasers, and that small pool prices accordingly. The value doesn't fall gently; it falls off a cliff.
Can leasehold be converted to freehold?
Often, yes — many lessors, DDA notably, allow it on payment of a conversion charge. It usually pays for itself: the value rises, banks lend freely again, transfer permissions and ground rent disappear, and the wasting-asset problem goes away entirely. If you are buying leasehold, ask whether conversion is possible and what it costs.
What should I check in a lease deed?
The years remaining. Whether transfer needs the lessor's permission, and what the transfer fee is. Whether ground rent is paid up (arrears follow the property). Any use or alteration restrictions. And above all the RENEWAL clause: is renewal a right or a discretion, and at what price? That is the most important clause in the document, and almost nobody reads it.