Property Ownership: Types, Rules, and Expert Guidance

Ownership of property in India implies making a major investment that could give you long-term security and has the potential of appreciating over time. Enhancing one’s knowledge of the different forms of property holding, laws attached to ownership and means of financing property increases efficiency for a property owner.

This manual provides mandatory information about varieties of property holding, and laws governing the sector. It will also take a look at financing options such as loans against property and loans on plots in detail.

Property Ownership in India

In India, there are different forms of property ownership depending on the rights as well as reasons of borrowing for the involved parties.

Freehold Property

Freehold property implies that an individual owns the land or structure exclusively and can do whatever he wants with it, without anyone interfering, either by leasing or selling.

Alternatively, there is a directive that offers this exclusive kind of property, and it usually appreciates with time due to its security. Thus, this would be ideal for residential houses within well-known walled communities where everyone knows everyone else’s business.

Leasehold Property

This type of property involves granting permission to someone else to hold onto it over some time after which ownership reverts to the original owner or can be renewed. Common examples include properties on leased land provided by government authorities.

Joint Tenancy

Joint tenancy denotes equal property ownership between 2 or more persons whereby they have the right of survivorship that is each one of them inherits the asset of the other upon her/his demise; such an arrangement is popular among married couples or joint families.

Tenancy in Common

Unlike joint tenancy which requires an equal proportion held by all owners, tenants in common may hold their shares in unequal proportions with each dying person’s interest being left to his/her heirs rather than to co-owners — this offers more flexibility concerning inheritance management.

Rules Governing Property Ownership in India

The ownership of property in India is governed by multiple acts, ensuring legal transparency and security in property transactions. Some of the key regulations include:

• The Transfer of Property Act, 1882: This foundational law governs property transfer in India, including rights, duties, and liabilities of parties in real estate transactions.
• The Registration Act, 1908: All property transactions involving the transfer of ownership must be registered under this act, ensuring legal ownership is officially documented.
• The Real Estate (Regulation and Development) Act, 2016 (RERA): RERA provides protection to buyers in property transactions, promoting transparency and accountability within the real estate industry.

Financing Options: Loan Against Property & Loan on Plot

When one secures a Loan Against Property (LAP) or loan on a plot, it makes available enough money for large financial needs such as business start-ups, education financing, and personal use among others. This post will highlight some facts about these two forms of financing:

Loan Against Property (LAP)

A Loan Against Property is secured by providing one’s property as collateral to a bank or any other financial institution.

Key Benefits of LAP

• Since this type of loan is secured, it offers lower interest rates compared to unsecured ones like personal loans.
• The borrower has the freedom to expand his /her business to invest money obtained from such a credit facility.
• It results in higher loan amounts due to the security given by the house the customer owns.

Also Read: What is Loan Against Property? - Features, Eligibility, Documents, and more.

Eligibility and Documentation:

• The customer should: own either residential, commercial, or industrial buildings before qualifying for this type of loan.
• Property value, borrower’s credit score, and income stability are some factors that banks may consider when granting loans against property (LAP) facilities.
• Important documents that need to be provided include property papers as well as identity proof, income proof, tax returns for the last three years, and property valuation reports.

Loan on Plot

An advanced form is better than LAP because it targets the acquisition of land primarily. It becomes an appropriate choice if you want to invest in land with potential future construction or capital appreciation.

Unique Aspects of Loan on Plot:

• Many banks will give out loans on plots up to 70% of their market rate price.
• Tenure options are shorter for Plot Loans compared with housing loans whereby they last around (10-15) years’ period.
• But remember, unlike what happens when taking housing loans, when it comes to loans on plots, the money will be used only on land purchases and never on building a house or any other thing otherwise.

Eligibility Criteria and Considerations:

• Most lenders prefer properties within municipal or corporation limits, as land outside urban boundaries may face restrictions.
• You may also need additional approvals for agricultural land, depending on local regulations.

Also Read: Everything You Need to Know About Plot Loans

Expert Guidance on Property Financing in India

Property ownership and finance in India are complicated but with these professional tips you will be able to make informed decisions.

• Evaluating Your Repayment Capacity: Before applying for this kind of credit facility check if your earnings can pay for its Equated Monthly Installments (EMIs). One can also use an EMI calculator to determine their total monthly payments effortlessly.
• Consider Future Value of the Property: In India, property costs vary due to place, market fluctuations, and infrastructural developments. For instance, in places like tier-2 and tier-3 cities, the cost of land has been increasing steadily which is promising for investment.

Also Read : Loan Against Property for Personal Expenses – Is It Possible?

The Bottom Line

Being aware of various types of property ownership, laws relevant to them, and funding opportunities such as loans against property or loans on plots, would help people maximize their profits from owning real estate properties in India. Whether you are going for a new piece of land, loaning on your current one, or simply want to know your rights, it is paramount that you remain knowledgeable.

For the best results examine multiple financing options, evaluate different lenders, and seek professional advice. Ready to move forward? Just apply for a Loan Against Property or loan on a plot and set out on the journey to owning secure property as well as optimal financing.

FAQs

Q.1. What are the different types of property ownership?

A. Ensuring that property titles are clear and undisputed is crucial in real estate transactions and when securing home loans. Types of property ownership:

• Individual ownership/ sole ownership
• Joint ownership/ co-ownership
• Joint tenancy
• Tenancy in entirety
• Tenancy in common
• Coparcenary

Q.2. What are the terms used for the sole owner of a property?

A. When a property is acquired and registered in a single person's name, it’s called “single ownership” or “individual ownership”.

Q.3. What is the rule of ownership?

A. Ownership is the legal right to use, possess, and give away a thing. Ownership can be tangible such as personal property and land, or it can be intangible things such as intellectual property rights.

Q.4. What is the highest type of ownership in real estate?

A. Fee simple is the highest form of ownership in real estate. It means the land is owned outright, without any restrictions – except local zoning ordinances.

Q.5. What are the three levels of ownership?

A. The three levels of ownership are — entrepreneur, owner/operator, and businessperson.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com.