Continuing from where I left my
last post - Understanding the reality in RealT – Generic Real Estate Value Chain, let me take you
further by trying to elucidate the first component of the value chain –
Ownership.
So what is the meaning of Ownership?
Just going by the literal gist, ownership implies having a hold or right
on something. Just as any other commodity always has someone to claim for it, so
is the case with real estate properties. Of course here it comes with some complications due
to the nature of this business. In Real Estate, this function – Ownership holds
a much more significant stature due the to the following reasons:
- The first reason, time horizon, is important as some of these investments span across generations. In such a case, an unclear ownership can result in blunders in future.
- Involvement of ‘unreported money’: Owners prefer not to disclose their true identity and goes for complex ownership structures. This is due to the nature of this business because there is a requirement of humongous capital for property projects.
- Property taxes, though not very obvious, are also responsible for ownership problems. Reason is simple, to save taxes!
Rights of Ownership
So what does having an ownership
title on a property mean? It means that if you have that title, you have the
right to:
- Use the property
- Delegate the ownership title to anybody
- To enjoy the monetary/other benefits derived from the property
- To sell/lease the property
Types of Ownership
Ownership can be categorized in
2 ways – Holding Pattern (Structure)
& Tenure.
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By Structure
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Sole
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There is a single holder of the
property and he/she holds all the rights mentioned above.
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Co-tenancy
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Joint
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A form of co-tenancy where the title is
shared by 2 or more holders, in EQUAL proportion. In this type of ownership,
the interest of one partner is automatically transferred to other upon former’s
death. Generally common for spouses.
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Tenancy in common
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A co-tenancy wherein the proportions
NEED NOT BE EQUAL. Unlike the above case, here the ownership is not
automatically transferred to the other partial partners.
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By Tenure
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Freehold
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Complete rights to the owner forever.
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Leasehold
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Right to possess and use the property with compliance to the pre-specified
terms of use.
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Reversion
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Right to possess free interest in real estate after the expiration of
a Life estate,
Estate for years or Leasehold.
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Life Estate
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Complete rights ONLY till the owner’s death.
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Estate for years
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Complete rights ONLY for a specified term.
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Alarming state in India!
Although I couldn’t find very vivid stats
on this but what I found out was enough to raise few eyebrows. Nearly 90% of
properties in India don’t have a clear title! Let’s see what impact it has.
Impacts of Unclear Titles
- Scarcity of land – resulting in increased prices
- Inefficient legal practices
- Increase in the use of black money
- Increased insurance complications
- Frauds
Solutions
- Fast track courts
- Computerization of land records
- Audits on existing properties
- Stricter land rules
- Education to investors
Note: The above mentioned information is a just an indicator of what is 'Ownership' in RealT Sector and what relevance does it hold in creating a new Horizon! Hope this was useful :)
- - - - - Thanks for reading J - - - - -
