The Chandigarh Housing Board’s (CHB) decision to auction freehold residential and commercial properties is an attempt to woo buyers who have not shown interest in leasehold properties for a long time. Although the CHB received a nod for the freehold commercial property auction from the UT Estate Office, the decision on the residential properties is still pending. Here is a closer look at the matter:
What are Leasehold and Freehold properties in Chandigarh?
Leasehold properties are those where one has the right to stay for a given period of time but does not enjoy an absolute right of ownership. A person occupying a leasehold property in Chandigarh has to pay ground rent as well as 18% GST per annum. In freehold properties, one person is the absolute owner and enjoys the right to resell and mortgage, take out loans, etc., for the property. There is no provision to pay ground rent in freehold properties. In leasehold properties, the owner (government) enjoys the right of ownership for at least 99 years. After 99 years, ownership of the leasehold asset reverts to the occupant (purchaser). There are residential, commercial and industrial properties, which are leased in Chandigarh by the UT Estate Office and CHB.
“A conversion policy was introduced for people to convert their leasehold properties to freehold in 1996. People have not shown much interest due to high conversion costs in recent years,” said a retired CHB officer.
What category do properties built by the Chandigarh Housing Board (CHB) belong to?
CHB, which began in 1976, deals with leasehold properties by reserving ownership with itself and the UT Estate office for up to 99 years. In the rehabilitation settlements, which were built to house the slum dwellers of the illegal settlements, the lease term is 33 years. CHB properties included residential and commercial properties. Sectors 41, 42, 43, 44, 45, 47, 63 and 51 are the centers of multi-storey properties built by CHB and then sold to individuals. Usually, residential properties are divided into several categories including LIG (low income group), MIG (middle income group) and HIG (high income group), apartments, etc. The beneficiaries of these properties will have to pay 2.5% land rent. ownership for the first 33 years, 3.7% for the next 33 years and 5% for the next 33 years. 18% GST will be paid throughout the period. The rent percentage was calculated based on the sale of the property.
Why did the CHB shift its positioning from leasehold to freehold?
Lack of public interest in buying CHB’s leasehold properties at open auctions forced the council to sell these freehold properties through auction. People have shown no interest in more than half a dozen advertised auctions for leasehold properties, resulting in auctions being postponed or cancelled. In order to attract more bidders, the CHB decided to auction its freehold properties giving absolute ownership to the buyer. The leasehold concept is also one of the reasons why buyers or investors prefer to buy properties in Chandigarh.
How does converting leasehold properties to freehold properties benefit the public?
“There will be no need to pay ground rent for 99 years. A buyer can avail the loan on the basis of his freehold property. The buyer will be hassle free from the process of converting their property to leasehold forever. To my knowledge, there is not a single leasehold property that has been converted to freehold after 99 years,” said Kamal Gupta, Chairman of the Chandigarh Property Consultant Association.
What is the current status?
“UT’s realtor has accepted our request to sell eight freehold commercial leasehold properties. Our application to allow us to auction freehold residential properties is pending with the UT Estate Office. We are sure it will be accepted shortly. UT Estate Office consent is required to sell freehold leasehold properties,” said Rajeev Singla, Chief Engineer, CHB.
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