Erbbaurecht
Heritable Building Right (Leasehold). You own the building but lease the land for 60–99 years against ground rent (Erbbauzins). Prices are lower, but financing is harder and value declines as the term shortens.
Common with churches, municipalities and foundations as landowners. Watch: remaining term (banks want their loan repaid well within it), Erbbauzins indexation clauses, and the compensation rule at expiry (commonly two-thirds of building value).
Erbbaurecht sits in a separate land-registry folio and transfer tax applies to it too. For investors, it's a yield play with an expiry date: model it explicitly.
Frequently asked questions
What is Erbbaurecht?
A heritable building right: you own the building but lease the land, typically for 60 to 99 years, paying an annual ground rent to the landowner.
Is leasehold property cheaper in Germany?
The purchase price is lower because you are not buying the land. Against that, you pay ground rent, financing is harder to obtain, and the value declines as the remaining term shortens.
What happens when the Erbbaurecht term expires?
The building reverts to the landowner, who owes compensation, commonly a contractually agreed share of the building's value. The specific terms are set in the individual Erbbaurechtsvertrag and vary considerably.
Why do banks treat leasehold differently?
Because the security shrinks as the term runs down. Lenders typically want the fixed-rate period, and often the full repayment, to end well inside the remaining term, which restricts the structures available to a buyer.