Indian law divides property into immovable property (land, buildings and things attached to the earth) and movable property (everything else). Real estate is further grouped by use as residential, commercial, industrial or agricultural, and by title as freehold or leasehold. For housing loans, the Reserve Bank of India caps bank finance at 75% to 90% of the property value, depending on loan size.
Types of Property at a Glance
| Property Category | Examples | Primary Use |
|---|---|---|
| Residential property | Apartments, villas, independent houses, builder floors, row houses | Housing |
| Commercial property | Offices, shops, retail outlets | Business and trade |
| Industrial property | Factories, warehouses | Manufacturing and storage |
| Agricultural property | Farmland, plantations, farmhouses | Cultivation |
| Land and vacant plots | Residential plots, commercial sites | Future construction |
| Mixed-use property | Developments combining homes, offices and shops | Housing and business together |
| Freehold property | Houses, plots and flats held under a sale deed | Ownership without a time limit |
| Leasehold property | Development authority flats, land allotted on lease | Right to use for the lease period |
| Immovable property | Land, buildings, hereditary allowances, things attached to the earth | Legal class covering all real estate |
| Movable property | Standing timber, growing crops, grass and all other property that is not immovable | Legal class for everything else |
The first six rows classify real estate by use, the next two by the kind of title the holder has, and the last two are the legal classes into which statute places all property. The class a property falls into decides which documents must be registered, which tax rules apply and what kind of loan a bank can give against it.
Movable and Immovable Property Under Indian Law
Three central Acts define the two legal classes. Section 3 of the Transfer of Property Act 1882 defines immovable property only in the negative: it does not include standing timber, growing crops or grass. The same section explains "attached to the earth" as rooted in the earth, as with trees and shrubs, or embedded in the earth, as with walls and buildings.
The fuller definitions are in the General Clauses Act 1897 and the Registration Act 1908.
| Statute | Section | Term | Definition |
|---|---|---|---|
| Transfer of Property Act 1882 | 3 | Immovable property | Does not include standing timber, growing crops or grass |
| General Clauses Act 1897 | 3(26) | Immovable property | Land, benefits to arise out of land, things attached to the earth or permanently fastened to anything attached to the earth |
| General Clauses Act 1897 | 3(36) | Movable property | Property of every description except immovable property |
| Registration Act 1908 | 2(6) | Immovable property | Land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries, other benefits arising out of land, things attached to the earth; not standing timber, growing crops or grass |
| Registration Act 1908 | 2(9) | Movable property | Standing timber, growing crops and grass, fruit upon and juice in trees, and all other property except immovable property |
The distinction matters most at the time of transfer. Under Section 54 of the Transfer of Property Act, a sale of tangible immovable property worth ₹100 or more can be made only by a registered instrument. Section 17 of the Registration Act makes registration compulsory for instruments that create or transfer a right, title or interest worth ₹100 or more in immovable property, and for leases of immovable property from year to year or for any term exceeding one year. Stamp duty on these documents is set by each state.
Residential, Commercial, Industrial and Agricultural Property
By use, real estate falls into residential, commercial, industrial and agricultural property. Each has its own tax treatment and its own rules on who can buy and how the purchase can be financed.
Residential property covers apartments, villas, independent houses, builder floors and residential plots. An under-construction home attracts GST of 1% if it is an affordable residential apartment and 5% otherwise, in both cases without input tax credit. The 1% rate applies to apartments priced up to ₹45 lakh with a carpet area of up to 60 square metres in metropolitan cities and 90 square metres elsewhere. A home sold after its completion certificate is issued does not attract GST.
Home loan tax deductions are now governed by the Income-tax Act 2025, which took effect on 1 April 2026. Section 123, which replaced Section 80C of the 1961 Act, allows a deduction of up to ₹1.5 lakh a year that covers home loan principal repayment along with other eligible payments. Section 22, which replaced Section 24(b), allows a deduction of up to ₹2 lakh a year for interest on a loan taken to buy or build a self-occupied house. Both are available under the old tax regime.
Commercial property covers offices, shops and retail outlets, and industrial property covers factories and warehouses. The RBI loan-to-value ceilings described below are set for individual housing loans and do not extend to these two classes.
Agricultural property covers farmland, plantations and farmhouses. Under Rule 24 of the Foreign Exchange Management (Non-debt Instruments) Rules 2019, a non-resident Indian or an Overseas Citizen of India can buy immovable property in India other than agricultural land, a farmhouse or plantation property. The same exclusion applies to gifts. Inheritance is the exception: an NRI or OCI can acquire any immovable property, including agricultural land, by inheritance.
Freehold vs Leasehold Property
A freehold owner holds the property outright, with no time limit. A leaseholder holds a right to use the property, while ownership stays with the lessor. Section 105 of the Transfer of Property Act defines a lease of immovable property as a transfer of a right to enjoy the property, made for a certain time or in perpetuity, in return for a price or for rent paid periodically.
| Aspect / Feature | Freehold Property | Leasehold Property |
|---|---|---|
| Right held | Ownership | Right to enjoy the property |
| Duration | No time limit | Term fixed in the lease |
| Governing provision | Section 54, Transfer of Property Act (sale) | Section 105, Transfer of Property Act (lease) |
| Document | Sale deed | Lease deed |
| Registration | Compulsory at ₹100 or more | Compulsory for terms exceeding one year |
| Periodic payment to lessor | None | Rent as set in the lease |
| Conversion | Not applicable | Possible where the lessor runs a conversion scheme |
Some development authorities allow leasehold property to be converted to freehold. The Delhi Development Authority runs a conversion scheme under which flats it allotted on a leasehold basis are converted by executing a conveyance deed in favour of the allottee or purchaser on payment of conversion charges.
Which Property Types Banks Finance
Banks give housing loans to buy or build residential property, and the RBI limits how much of the property value a bank can lend. The ceiling, called the loan-to-value (LTV) ratio, depends on the size of the loan.
| Housing Loan Amount | Maximum LTV Ratio | Minimum Borrower Contribution |
|---|---|---|
| Up to ₹30 lakh | 90% | 10% |
| Above ₹30 lakh and up to ₹75 lakh | 80% | 20% |
| Above ₹75 lakh | 75% | 25% |
Stamp duty, registration and other documentation charges are left out of the property cost when the ratio is calculated, so the borrower pays these in addition to the margin. The RBI allows banks to add these charges to the cost only where the house costs ₹10 lakh or less.
Other RBI housing finance rules for banks affect which properties qualify:
- A bank can finance the purchase of a plot alone if the borrower declares an intention to build a house on it within a period that the bank itself sets.
- Where a borrower owns a plot and seeks a loan to build a house, the bank must obtain a copy of the plan sanctioned by the competent authority before sanctioning the loan.
For under-construction flats, Section 3 of the Real Estate (Regulation and Development) Act 2016 bars a promoter from advertising or selling any plot, apartment or building in a project that is not registered with the state Real Estate Regulatory Authority. Registration is not required where the land to be developed does not exceed 500 square metres or the number of apartments does not exceed eight, counting all phases.
What Are the Primary Types of Property in India?
Property in India is classified in three ways. By law, it is immovable or movable. The Transfer of Property Act 1882 excludes standing timber, growing crops and grass from immovable property, and the General Clauses Act 1897 defines movable property as everything that is not immovable.
By use, real estate is residential, commercial, industrial or agricultural, with vacant plots and mixed-use developments alongside these. By title, it is freehold, where the holder owns the property outright, or leasehold, where the holder has a right to use it for the term of a lease.
Key Takeaways
- Immovable property includes land, buildings and things attached to the earth; standing timber, growing crops and grass are treated as movable property.
- A sale of immovable property worth ₹100 or more, and a lease for more than one year, must be registered.
- The RBI caps bank housing loans at 90% of property value for loans up to ₹30 lakh, 80% for loans above ₹30 lakh and up to ₹75 lakh, and 75% above ₹75 lakh.
- NRIs and OCIs cannot buy agricultural land, farmhouses or plantation property, but can inherit them.
Frequently Asked Questions (FAQs)
What are the main types of residential properties available in India?
Residential properties in India include apartments, independent builder floors, villas, row houses and residential plots.
Can NRIs purchase agricultural land or farmhouses in India?
No. Under Rule 24 of the Foreign Exchange Management (Non-debt Instruments) Rules 2019, NRIs and OCIs can buy immovable property in India other than agricultural land, farmhouses and plantation property. They can acquire such property by inheritance.
What is the difference between freehold and leasehold property?
Freehold property gives the buyer ownership of the property with no time limit. Leasehold property gives a right to enjoy the property for the term of the lease, in return for a price or periodic rent, while ownership stays with the lessor.
What is the GST rate on under-construction residential properties in 2026?
Under-construction affordable residential apartments attract 1% GST and other residential apartments attract 5% GST, both without input tax credit. A property sold after its completion certificate is issued does not attract GST.
Can home buyers get a bank loan to purchase a vacant plot in India?
Yes. RBI rules let a bank finance the purchase of a plot if the borrower declares an intention to build a house on it within a period laid down by the bank.
What is the maximum LTV ratio allowed by RBI for home loans on residential properties?
The RBI caps the LTV ratio at 90% for home loans up to ₹30 lakh, 80% for loans above ₹30 lakh and up to ₹75 lakh, and 75% for loans above ₹75 lakh. The borrower pays the remaining 10% to 25% of the property value.
What is the legal definition of immovable property in Indian real estate?
Section 3(26) of the General Clauses Act 1897 defines immovable property to include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. Section 3 of the Transfer of Property Act 1882 adds that immovable property does not include standing timber, growing crops or grass, which Section 2(9) of the Registration Act 1908 treats as movable property.
