What is a sale and leaseback arrangement?

A sale and leaseback arrangement is a transaction where a property owner sells their property to a buyer and simultaneously enters into a long-term lease agreement to continue occupying the same property as a tenant. It converts an owned asset into liquidity while retaining operational use.

How It Works

  • Owner sells the property at market value to an investor.
  • Owner signs a lease (typically 10–20 years) to continue using the property.
  • Owner receives capital from the sale while avoiding business disruption.
  • Investor gets a long-term, creditworthy tenant with an assured rental yield.

Common Use Cases in India

  • Corporates monetising owned office campuses (IT parks, BPO buildings).
  • Retail chains monetising store real estate to free capital for expansion.
  • Hospitals and educational institutions unlocking capital from owned buildings.

Sale and leaseback is a sophisticated corporate real estate strategy that has gained traction in India's commercial property market. It works best when the seller is creditworthy (ensuring the leaseback is attractive to investors) and when the sale price reflects genuine market value not a distress transaction that undervalues the asset.

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