The Chandigarh administration has taken a significant step towards unlocking properties worth hundreds of crores by approving the conversion of leasehold industrial and commercial plots to freehold ownership. This move is expected to boost revenue and enhance the ease of doing business in the Union Territory.
Proposal Sent to MHA for Approval
Punjab Governor and UT Administrator Gulab Chand Kataria has cleared a detailed proposal, which has been formally sent to the Ministry of Home Affairs (MHA) for final approval. A senior MHA official confirmed receipt of the proposal, stating that it is currently under examination. This development follows the administrator's earlier indication that the issue was under consideration.
Second Attempt at Conversion
This is not the first attempt by the administration to allow such conversions. A previous proposal was rejected by the MHA. However, officials believe the current bid has better chances due to two key reasons. First, the Centre has been actively pushing the UT administration to optimise land use, placing conversion among top priorities under its deregulation agenda. Second, the administration has addressed a major historical objection raised by former UT administrator Shivraj Patil in January 2015.
Patil had opposed converting leasehold land to freehold, arguing that it would transfer valuable public property to private parties at below-market rates, risk a public scandal, and violate court directives mandating public auctions for government assets. It is learnt that the administration has now provided prudent financial justification for the move. Following MHA instructions, the administration had even put on hold projects such as Vikas Marg development and property auctions.
Unsold Properties Causing Losses
For years, the administration has permitted conversion of leasehold residential properties to freehold on payment of hefty fees. However, hundreds of leasehold commercial and industrial properties under the Chandigarh Housing Board (CHB), Municipal Corporation, and UT estate office remain unsold, resulting in revenue losses running into crores. Buyers have largely shunned these properties in favour of freehold options in neighbouring Punjab and Haryana due to the unattractive leasehold model, high charges, and restrictions on ownership and financing. The government is also struggling to recover unpaid lease amounts from hundreds of allotted leasehold properties.
Key Issues Plaguing Leasehold Properties
- Limited ownership rights: Nearly 70% of commercial and industrial plots in the city are on a leasehold basis, typically for 99 years, with government agencies retaining ultimate ownership. Buyers are reluctant to invest heavily without full ownership.
- High lease amount: Allottees must pay annual ground rent — 2.5% of the consideration amount for the first 33 years, 3.75% for the next 33 years, and 5% thereafter.
- Financing hurdles: Banks and financial institutions are hesitant to extend easy loans against leasehold properties.
- Legal tangles: Thousands of transactions were carried out through General Power of Attorney (GPA) agreements to bypass high government transfer fees, leading to numerous legal disputes.
Other Land Reforms Under Consideration
The administration is also considering other land reforms to further improve ease of doing business. These include an increase in floor area ratio (FAR) across property categories, flexible zoning with a permitted until prohibited principle, enhanced coverage area and relaxation of building and planning norms, and demand-driven planning with mixed-use provisions.
