The A-Z of Freehold Commercial Properties

There are several types of real estate investments, and it always pays to know more about all the options before you decide which is the best-fit for you. Today, we are discussing freehold commercial properties.

In India, real estate is mainly classified into residential and commercial property. Understandably, when it is a question of investing your hard-earned money into real estate, particularly commercial properties, you would prefer to know all the ifs and buts before committing.

And, this is where ownership is important – it helps determine the asset’s value, utility, and future prospects. Traditionally, Indian investors prefer freehold properties due to their stability, autonomy, and investment potential. Let’s discover more about them.

Introducing Freehold Commercial Property

The name freehold implies property over which the owner has complete and perpetual rights – both over the land and the structure upon it. This is the same in both commercial and residential properties.

But sticking to commercial properties for now, there are many advantages to freehold ownership for businesses and investors alike. As the owner, you can use, modify, lease, or sell the property without external approvals, though you have to abide by the local regulations.

The advantages of freehold commercial properties include:

Complete ownership and unrestricted rights to the property and land – owners can use, modify or dispose of the asset at their discretion, only subject to local zoning and regulations.

Legal clarity due to unambiguous property registrations in the owner’s name (through a sale deed or conveyance deed), ensuring minimal, if any, legal disputes and complications. In addition, freehold commercial properties can be bequeathed easily to heirs, providing long-term financial & legal relief.

Why Would You Choose Freehold Commercial Properties?

So far so good – you have a fair idea now of what freehold commercial properties are and their characteristics. What are the further advantages which can persuade you to invest in them?

• Stable Investment Option – Traditionally, freehold commercial properties are pretty stable in the long run. As the same owner holds authority over both the land and structure, the property’s value usually tends to grow over time, especially in high-demand urban and business areas.

• Easier Loan Accessibility – Any lending institution or bank prefers clear, single-point ownership records and perpetual rights, especially when disbursing or approving loans. This inherently makes freehold properties a safer choice, attracting better financing options.

• Autonomy and Control – This is the greatest advantage of freehold ownership. There are minimal restrictions, allowing businesses to operate without hassles. Owners can lease portions of the property, repurpose it, or even undertake major renovations without requiring third-party permissions.

• Higher Resale Value – Because of the unambiguous legal status, freehold properties command a premium in the market, with buyers willing to pay more for the potential, no-hassle returns they can provide.

Niggles in Freehold Commercial Properties

While freehold commercial properties may seem to be the ideal option for investing, you should be aware of the possible drawbacks too.

You will be paying a premium for a freehold property – higher initial costs due to upfront payments are a given.

And while you are the absolute owner of the property, you must comply with local zoning laws and regulations for any modifications or even for continued use.

It goes without saying that you are also responsible for all maintenance and renovation costs – however, you may not be aware that this can cost you quite a bit in the case of commercial properties.

Should Businesses Invest in Freehold Commercial Properties?

It is not an easy question to answer because the costs are pretty steep. However, we reiterate the advantages of investing in freehold commercial property for your business purposes.

Your business will benefit from the long-term security that a freehold property offers. Especially for enterprises requiring significant infrastructure investments that cannot be moved at will, the peace of mind that comes from knowing their operations are not tied to lease expirations or unfavourable renewal terms is an irrefutable asset.

Because it is owned outright, the owners can lease parts of the property to other businesses, generating consistent rental income.

And of course, freehold commercial spaces can be customized to suit your business’s changing needs, enhancing operational efficiency.

Tips for Investing in Freehold Commercial Properties

And how do you go about finding the best property for you? Here are a few tips.

• Location is of prime importance. Choose properties in areas with robust economic activity, good connectivity, and high footfall for better returns.
• Verify the property’s legal status, ownership history, and zoning regulations before investing.
• Research local market dynamics to identify areas with high appreciation potential.
• Budget in additional margins for potential maintenance and renovation costs.
• Consult real estate experts and legal professionals to ensure compliance.

Frequently Asked Questions (FAQs)

Just to sum up what we are saying…

Are freehold commercial properties a good investment?

Yes, freehold commercial properties are an excellent investment for long-term stability, appreciation, and revenue generation. They also offer greater autonomy compared to leasehold properties.

Can leasehold commercial properties be converted to freehold?

Yes, leasehold properties can often be converted to freehold by applying to the relevant authority, paying the required conversion fee, and completing the necessary paperwork.

Do freehold commercial properties appreciate more than leasehold properties?

Generally, yes. Freehold properties appreciate more due to their perpetual ownership and greater market demand.

Are there any restrictions on modifying freehold commercial properties?

Modifications must comply with local zoning laws and building regulations but are otherwise unrestricted.

The Final Word

Freehold commercial properties can be the ideal choice for businesses and investors seeking long-term security, autonomy, and financial growth.

While they do require a higher initial investment, the potential for appreciation, operational flexibility, and revenue generation makes them an undeniably valuable asset.

By understanding the intricacies of freehold ownership and aligning your investment plans with your goals, you can take advantage of this lucrative segment of real estate in India.

Feel free to contact us – our team is always ready to help you.