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Difference Between Freehold and Leasehold Properties

July 19, 2025

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If you're foraying into home ownership or real estate investment, you will come across two terms - freehold property and leasehold property. It is also one of the most common dilemmas that first-time homebuyers often face - choosing between freehold and leasehold properties.

In this blog, we have demystified these legal terms to help you make an informed decision. Let's dive in!

What is a Freehold Property?

Freehold property refers to full property ownership, meaning you are the owner of both the land and the property on it. For a freehold property, you have rights over the land and property indefinitely. You are not bound by any specific lease agreement or restrictions imposed by a landlord.

Advantages of Freehold Property Ownership:

You have complete control over your property.
You are not tied by any lease agreements or restrictions.
You can freely sell or transfer the property without any restrictions.

Example: Imagine purchasing a freehold apartment in a developing neighborhood. As the area grows, your property value increases, allowing you to sell it at a higher price in the future.

What is a Leasehold Property?

Leasehold property, on the other hand, refers to rights to use a property for a specific period of time through a lease agreement with the landowner (often called the lessor). The landowner grants you certain rights to occupy and use the property for an extended period of time, usually ranging between 30 years to 99 years. Once the lease agreement ends, the property ownership is transferred to the lessor.

Advantages of Leasehold Property

Lower initial cost: Leasehold properties are generally cheaper than freehold properties.
Maintenance responsibility: The maintenance and repair costs of the property are often taken care of by the landowner.
Flexibility: Lease agreements can offer flexibility in terms of lease duration and renewal options.

Key Differences between Freehold Vs Leasehold Properties

Aspect	Freehold Properties	Leasehold properties
Ownership	In freehold properties, you have complete ownership rights over the property and land.	In leasehold properties, you have limited ownership rights as the landowner retains ownership. Additionally, you cannot sublet the leasehold property.
Duration	Freehold properties offer an indefinite period of ownership.	Leasehold properties have a specific lease duration.
Restrictions	Freehold properties have fewer restrictions compared to leasehold properties.	Have certain limitations specified in the lease agreement.
Transferability	Freehold properties can be freely bought and sold without any restrictions.	In leasehold properties, transferability of ownership is defined as per terms specified in the lease agreement.
Maintenance and Repair	In freehold properties, you are responsible for all kinds of maintenance and repair costs that may arise.	In leasehold properties, costs such as property tax are generally borne by the lessor

Choosing Between Freehold vs Leasehold Properties

The choice between freehold and leasehold property depends on various factors such as your long-term plans, budget, and specific requirements. Here are some scenarios where each type of property may be suitable:

Scenario 1: Long-term Investment

If you plan to hold onto a property for a long time and value complete ownership rights, a freehold property would be ideal. This is especially true if you are purchasing a property as an investment for future returns.

Scenario 2: Short-term Usage

For short-term usage or if you are on a tight budget, leasehold properties can be more affordable. They offer flexibility in terms of lease duration and maintenance

Scenario 3: Business Requirements

If you are looking for commercial space for your business, leasing a property could provide you with more flexibility in terms of location and lease duration. It can also help you avoid the high upfront costs associated with purchasing a freehold property.

Are Lease Properties Tax-Free?

No, property tax is levied on leasehold properties. However, the property tax is taken care by the lessor, unless the agreement says the lessee has to pay the property tax. Kindly go through the fine print carefully to avoid any kind of hassles in the future.

Final Thoughts

Understanding the differences between freehold and leasehold properties is essential when making informed decisions as an aspiring home owner. Freehold properties offer complete ownership rights, while leasehold properties provide more flexibility and affordability in certain situations. Consider your long-term plans, budget, and requirements before making a choice.

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Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

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FAQs

1. What are the legal terms concerned with property ownership?

Legal terms associated with property ownership include freehold and leasehold. Freehold properties grant complete ownership rights, while leasehold properties involve leasing rights for a specific period of time.

2. How does property ownership affect home loan eligibility?

Property ownership, whether freehold or leasehold, can impact your home loan eligibility. Lenders may have different criteria for each type of property, so it's important to check the specific requirements.

3. Are leasehold properties cheaper than freehold properties?

Leasehold properties are cheaper than freehold properties due to the limited ownership rights and specific lease duration. However, if you're living in a leasehold property for more than 20 years, it can prove to be more expensive compared to a freehold property.

4. Can I convert a leasehold property into a freehold property?

In some cases, it is possible to convert a leasehold property into a freehold property by purchasing the freehold title from the landowner. However, the process and availability vary depending on local regulations.

5. What happens when a lease expires?

When a lease expires, the ownership rights of the property typically revert back to the landowner unless renewed or extended through a new agreement.

6. Do freehold properties have any restrictions?

Freehold properties don't have any restrictions compared to leasehold properties. However, certain zoning or development regulations may still apply.

7. Can I make modifications to a leasehold property?

Modifying a leasehold property is subject to the terms specified in the lease agreement. The landowner may have restrictions or conditions regarding modifications.

Difference Between Freehold and Leasehold Properties

What is a Freehold Property?

Advantages of Freehold Property Ownership: