Leasehold building rights vs. purchasing land: advantages and disadvantages for developers and municipalities

Leasehold building rights vs. purchasing land: advantages and disadvantages for developers and municipalities

According to a report from www.schwaebische.de, the city of Ravensburg is planning to allocate more properties under leasehold in the future. This offers developers the advantage that they can avoid the high land costs and instead pay a permanent leasehold. However, there are also disadvantages, such as the fact that the property always remains the property of the previous owner and the inheritance interest has to be paid for life.

The trend towards leasehold building rights has an impact on the real estate market and the construction industry. Due to increased land prices, loan interest rates and building material costs, many young families are afraid to build or buy a house, which leads to a slump in the construction of new apartments and houses as well as increased bankruptcies in the construction industry.

The city of Ravensburg is planning to allocate more properties under leasehold in order to enable cheaper housing and counteract the housing shortage. However, this would mean she would lose millions of dollars in income from property sales. On the other hand, current rental income would ensure the city's continued income for decades. The inheritance interest is usually four to six percent of the property value and can be adjusted every three years.

It remains to be seen how the increased allocation of land under leasehold will affect the real estate market in Ravensburg and the construction industry. It is a solution to create affordable housing, but it could also result in financial losses for the city.