Con­ver­sion ben­e­fits for Noida

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Land-own­ing pub­lic au­thor­i­ties which have given land on lease to al­lot­tees oc­ca­sion­ally launch con­ver­sion schemes. Un­der a con­ver­sion scheme, lessees/sub-lessees of lease­hold prop­er­ties have the op­tion of con­vert­ing their lease­hold prop­erty into a free­hold prop­erty. Re­cently, there is much spec­u­la­tion over the pro­posal of the state government of Ut­tar Pradesh to in­tro­duce a con­ver­sion scheme for land fall­ing un­der the ju­ris­dic­tion of devel­op­ment au­thor­i­ties of Noida, Greater Noida and Ya­muna Ex­press­way. At present, prop­er­ties fall­ing un­der the ju­ris­dic­tion of th­ese devel­op­ment au­thor­i­ties are al­lot­ted to own­ers on lease­hold ba­sis. The devel­op­ment au­thor­i­ties of Noida, Greater Noida and Ya­muna Ex­press­way have ex­pressed their reser­va­tions over the pro­posal of in­tro­duc­ing a con­ver­sion scheme.

Their main con­cern is that with con­ver­sion of land from lease­hold to free­hold in the ar­eas fall­ing un­der their ju­ris­dic­tion, there would be a short­fall in rev­enue ow­ing to drop in lease rent col­lec­tion. The rev­enue short­fall would in turn ham­per the pro­vi­sion of ba­sic in­fra­struc­ture and civic ameni­ties and im­pede rapid and over­all devel­op­ment of the re­gion.

Na­ture of own­er­ship

By virtue of be­ing the ab­so­lute owner of the prop­erty, a per­son has wide pow­ers to deal with the prop­erty at his/her dis­cre­tion and as he/she deems fit. The owner of a free­hold prop­erty has un­re­stricted rights to trans­fer the prop­erty ab­so­lutely (by sale, gift, be­queath un­der will). He or she also can also trans­fer cer­tain rights in the prop­erty (eg by lease or li­cense), sub­ject to ap­pli­ca­ble laws in force. Thus, the owner of a free­hold prop­erty holds ab­so­lute ti­tle and own­er­ship of such prop­erty with few/no re­stric­tions on us­age and trans­fer of the prop­erty.

On the other hand, there are cer­tain re­stric­tions on the own­er­ship, pos­ses­sion and en­joy­ment of lease­hold prop­er­ties im­posed by the lessor (ie, the land-own­ing pub­lic author­ity). Be­fore an owner of a lease­hold prop­erty can trans­fer or cre­ate any rights, in­ter­est or own­er­ship in his prop­erty, he/she is re­quired to ob­tain prior per­mis­sions from rel­e­vant land-own­ing author­ity.

Term of own­er­ship: Un­like free­hold prop­er­ties, the term of own­er­ship of lease­hold prop­er­ties granted un­der a per­pet­ual lease deed/sub lease deed is for a spec­i­fied pe­riod (for in­stance, 99 years). It is mis­tak­enly feared by many that in­vest­ment in a lease­hold prop­erty comes with the risk of own­er­ship of the prop­erty coming to an end on ex­piry of the term. On the con­trary, the term of per­pet­ual lease/sub-lease is pe­ri­od­i­cally re­newed for fur­ther terms by the land-own­ing pub­lic author­ity. Also, con­ver­sion schemes are usu­ally launched from time to time.

In­vest­ment pa­ram­e­ters: From the point of view of se­cu­rity of in­vest­ment, both lease­hold and free­hold im­mov­able prop­er­ties have their own set of dis­tinct ad­van­tages. Some per­sons pre­fer to in­vest in a lease­hold LIG/MIG/HIG flat or plot as they are as­sured of a clear prop­erty ti­tle of the land- own­ing pub­lic author­ity. In free­hold prop­er­ties that are usu­ally pur­chased by sec­ondary sale, there may be an el­e­ment of risk in the va­lid­ity of ti­tle of own­er­ship of the seller. How­ever, con­duct­ing a proper and com­pre­hen­sive due dili­gence of the chain of ti­tle of the prop­erty – whether it is free­hold or lease­hold – and scru­tiny of the prop­erty doc­u­ments by le­gal ex­perts can sig­nif­i­cantly min­imise this risk.

Value of prop­erty

As the owner of a free­hold prop­erty holds ab­so­lute ti­tle and own­er­ship of such prop­erty with few/no re­stric­tions on us­age, trans­fer and en­joy­ment (as com­pared to lease­hold prop­er­ties), free­hold prop­er­ties are a more lu­cra­tive in­vest­ment. Gen­er­ally, free­hold prop­er­ties have a higher mar­ket value than lease­hold prop­er­ties even if both are sit­u­ated in the same area. Con­ver­sion schemes are an ef­fec­tive mode for en­hanc­ing the value of lease­hold prop­erty. Floor-wise sale of prop­erty: For free­hold prop­er­ties, the owner may trans­fer in­di­vid­ual floors of the prop­erty by sale. In lease­hold prop­er­ties, the owner can­not sell in­di­vid­ual floors of the prop­erty but may trans­fer the same by short-term lease/li­cense. If the con­ver­sion scheme for land in Noida, Greater Noida and Ya­muna Ex­press­way is ap­proved, the same shall have pos­i­tive as well as neg­a­tive con­se­quences. On the pos­i­tive side, own­ers of free­hold prop­er­ties who re­quire funds or who wish to bet­ter utilise por­tions of their prop­erty, will be able to freely sell in­di­vid­ual floors. How­ever, this may lead to rapid in­flux of pop­u­la­tion in th­ese ar­eas and strain on the ex­ist­ing civic ameni­ties and in­fra­struc­ture.

There is much spec­u­la­tion on the pro­posal of Ut­tar Pradesh government to in­tro­duce a con­ver­sion scheme for land un­der the ju­ris­dic­tion of devel­op­ment au­thor­i­ties of Noida, Greater Noida and Ya­muna Ex­press­way

The devel­op­ment au­thor­i­ties of Noida, Greater Noida and Ya­muna Ex­press­way have ex­pressed their reser­va­tions over the pro­posal of in­tro­duc­ing a con­ver­sion scheme

Their main con­cern is that with con­ver­sion of land from lease­hold to free­hold in the ar­eas fall­ing un­der their ju­ris­dic­tion, there would be a short­fall in rev­enue ow­ing to drop in lease rent col­lec­tion. The rev­enue short­fall would in turn ham­per the pro­vi­sion of ba­sic in­fra­struc­ture and civic ameni­ties and im­pede rapid and over­all devel­op­ment of the re­gion

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