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Chandigarh admn to turn unsold leasehold properties into freehold
The move will help attract buyers during auctions of unsold and vacant properties, generate more revenue for Chandigarh administration
Soon hundreds of leasehold properties lying vacant with the Chandigarh administration will be converted into freehold, thus attracting buyers and unlocking revenue in crores.
The decision was taken after UT adviser Dharam Pal on Tuesday chaired a high-level meeting to review the administration’s rules and regulations on leasehold and freehold properties.
“There is no policy or estate office rules that bar the selling of plots by government agencies as freehold properties. It is an executive decision and we have decided to allow for selling of these unsold and vacant leasehold properties as freehold,” said the adviser.
The decision will be submitted before UT administrator Banwarilal Purohit on Thursday for the final approval. “After the approval, all future auctions will be held after conversion of properties into freehold,” said Pal.
Ownership rights in leasehold properties are with government agencies, such as estate office (EO), municipal corporation (MC) and Chandigarh Housing Board (CHB), while freehold status gives the owner complete rights to the property. The three agencies have repeatedly written to the administration for allowing the sale of vacant and unsold leasehold plots as freehold.
Last month, with the administration putting on hold the policy for allowing new nursing homes in residential areas, the issue of leasehold properties again came to the centre stage. The administration has failed to auction around 11 dedicated nursing home sites as all of these are on leasehold. The administrator had asked the officials to first exhaust these properties before allowing new nursing homes in residential areas.
The decision will not only help generate revenue for the administration, but is also likely to give a major fillip to the stagnating property market of the city. Encroachments on vacant public land will also be curtailed as these are sold off to private entities, said an official.
Most unsold properties leasehold
Nearly all unsold and vacant commercial and industrial plots and a sizable chunk of residential plots in the city under the jurisdiction of the EO, MC and CHB are leasehold properties.
For instance, as per an internal report of the MC, more than 200 properties have not found any taker as these all are on leasehold. These include 11 shops and 40 booths in the city’s commercial centre Sector 17. One hospital site in Manimajra has also been lying vacant for decades despite multiple auction attempts.
The UT estate office had conducted its last auction in November 2019, when all 10 freehold properties on offer were sold while there were no takers for 15 leasehold plots. “The department had generated revenue close to ₹44 crore from the auction of freehold properties, whose total reserve price was around ₹27 crore,” said an official.
In the latest CHB auction, 24 built-up residential and 108 built-up commercial units on leasehold were offered, but not a single fetch a bid.
Why no buyers for leasehold units
Leasehold properties allow occupation for a limited period, mostly 99 years, and ownership rights are with government agencies.
“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.
The administration is also planning to allow conversion of industrial and commercial plots (which have already been sold) from leasehold to freehold. It has written to the Union government, seeking it approval.
