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Business News/ Opinion / Online-views/  Did You Know | If the land use or status of a property is changed, its price typically goes up
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Did You Know | If the land use or status of a property is changed, its price typically goes up

Did You Know | If the land use or status of a property is changed, its price typically goes up


One of the many factors that affect the price of property is change in land use or status of a property. Every property is supposed to be used in a particular manner. For example, agricultural land is used for farming and residential for living.

Types of land use conversions

Why do prices go up?

The first and foremost reason for the hike in rates is the mandatory conversion fee that is levied by the city authority at the time of conversion. The amount of fee depends on the size and value of the property. The fee is added to the final market price of the property.

Since residential land is more in demand and developers bring up apartment complexes on such plots, the rates notch up. From leasehold to freehold means the title becomes clearer and has a permanency, which pushes up prices.

The conversion scenario

In most tier I cities, development authorities allot apartment properties on leasehold basis. But now authorities have started permitting conversion to freehold. For example, Delhi Development Authority has allowed conversion of flats to freehold.

Most tier II cities are expanding and new areas are being developed in peripheral regions. A lot of realtors and investors put in their money in these areas to gain from appreciation in the future. They buy agricultural land and then sell it after converting the land usage to residential status. The agricultural land gradually becomes ready to be amalgamated with the rest of the city areas as a residential zone.

What you should check?

If you are getting a property in the suburbs at lower rates, check it’s status—whether it is an agricultural land or residential land. Always check with your broker why the property is available at a low rate. Ensure that the documents are genuine and the title is clear.

If you are getting a leasehold property, make sure you get it converted into freehold after having spent at least a year in it. If it is an apartment complex, you will require permission from the residents’ welfare association (RWA) before applying for the conversion. But before you go for it, make sure that the association has the completion certificate from the authority. It is a must that the RWA has the certificate before any conversion is made within the society.

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Updated: 15 May 2012, 09:20 PM IST
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