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Chandigarh administrator allows sale of unsold leasehold sites on freehold basis
Move aimed at inviting more buyers for unsold properties of various Chandigarh admn agencies, bringing in crores of revenue
With UT administrator Banwarilal Purohit giving his nod, the administration can now auction its unsold leasehold properties – commercial, institutional and residential – on freehold basis.
The step is being seen as a move to unlock crores of revenue for the administration by eliciting more buyers and improve ease of doing business in the city.
Currently, most residential properties are auctioned on freehold basis, whereas commercial, industrial and nursing home sites are sold on leasehold basis.
Now, the administrator has allowed the e-auction of the residential, commercial, industrial and nursing home sites as per the provisions of the Capital of Punjab (Development and Regulation) Act, 1952, and the Chandigarh Estate Rules, 2007, as amended from time to time.
Under the said Act and Rules, the sites/buildings in Chandigarh can be sold by way of auction or allotment, either on freehold or leasehold basis.
Nearly all unsold and vacant commercial, industrial and institutional properties with different agencies in Chandigarh, including UT Estate Office, municipal corporation and Chandigarh Housing Board, are leasehold properties.
For over 50 years, the administration has failed to find buyers for these properties, losing crores in revenue.
Welcoming the decision, Chander Verma, president, Chandigarh Business Council, said, “Though long-awaited, it is a great decision by the administration. It will not help increase the administration’s revenue, but also help the citizens. Leasehold properties create a lot of issues in terms of payment of additional charges like annual lease money and transfer of ownership rights.”
Advocating a uniform policy for the entire city for both new and old properties, Pankaj Khanna, president, Industrial Association of Chandigarh, said, “The administration’s decision is clear vindication of the demand against the grossly inferior title of leasehold property. A uniform policy for the entire city, including the industrial area, should be formulated concurrently.”
The decision is also expected to give a major fillip to the city’s stagnant real estate market. Kamal Gupta, president, Property Consultants Association, Chandigarh, said, “UT’s decision will help residents and businesses alike due to positive impact on the property market. Now, the administration should also allow conversion of already bought leasehold commercial properties to freehold, and at affordable conversion rates.”
Leasehold versus freehold
Leasehold properties allow occupation for a limited period, mostly 99 years, and the ownership rights remain with the government agencies. On the other hand, a person having a freehold property is its real owner.
“In leasehold properties, the allottee is required to pay yearly ground rent at 2.5% of the consideration amount for 33 years, followed by 3.75% for the next 33 years and 5% for the subsequent 33 years. Since this is a substantial amount and ownership rights are inferior as compared to freehold, people prefer to go for the latter,” said a senior UT official.
The conversion charges for residential leasehold properties vary from 12% to 15% of the consideration amount, making them unviable for most owners.
Meanwhile, the administration is also planning to allow conversion of industrial and commercial plots, which have already been sold, from leasehold to freehold. The matter is with the Union government for approval.
