The Changing Face of Indian Commercial Leasing: Is the 99-Year Lease Model Losing Its Relevance?

In India's commercial real estate sector, the 99-year lease model has long been seen as a symbol of stability. This arrangement historically offered security to tenants while ensuring steady returns for landowners. However, as the real estate landscape in India continues to evolve, there’s a growing recognition that this traditional leasing model may no longer align with the needs of modern businesses.

Today, companies are no longer looking for long-term commitments that tie them to a single location for nearly a century. In an age defined by flexible work environments, rapidly shifting market conditions, and unpredictable business needs, businesses are looking for dynamic leasing options that can evolve with their changing requirements. The question now arises: can the 99-year lease survive in this new reality?

The numbers suggest that real estate demand is strong but evolving. In 2024, India saw a record 89 million square feet of office space leased—a 19% increase from the previous year. However, this uptick wasn’t driven solely by traditional corporate tenants. A significant portion of the demand came from flexible workspace providers and companies in the BFSI and technology sectors. In fact, flexible workspace operators alone leased over 12 million square feet in 2024, highlighting a trend towards shorter, more adaptable lease agreements.

These figures reflect a broader shift in tenant priorities. Gone are the days when companies would lock into decades-long contracts. In today’s fast-paced world, businesses want more than just physical space—they need the flexibility to scale up or down depending on their growth trajectory and market conditions. They are seeking leases that allow them to expand or downsize quickly, avoiding the long-term financial burden of traditional leasing models.

This move towards flexibility is further supported by rising commercial rents across major Indian cities. For example, in Bengaluru, office rents surged by 26% over the past six years, with the average rental rate climbing from ₹74 per square foot per month in 2019 to ₹93 in 2024. As rents rise and vacancy rates tighten, businesses are looking for ways to secure space without getting locked into long-term commitments that may no longer suit their evolving needs.

The Indian government is also adapting to these changes in the real estate market. In recent years, several states have started rethinking the traditional 99-year lease model. In 2023, the Himachal Pradesh government reduced the lease period for government-owned land from 99 years to 40 years. This move, along with similar changes in cities like Bengaluru, suggests that even policymakers are rethinking the long-term lease model.

In sectors like data centers, industrial parks, and large-scale infrastructure projects, long-term leases may still be appropriate. However, for the majority of businesses—especially those in BFSI, technology, and co-working spaces—flexible lease agreements are becoming the preferred choice. Businesses need arrangements that allow them to adjust their real estate footprint as their operations change, and traditional leases simply aren’t built to accommodate that level of flexibility.

For companies navigating these shifts, finding the right real estate partner is more critical than ever. Today’s businesses need a partner who can provide not just space, but strategic advice on how to adapt to a rapidly changing real estate landscape. They need insight into emerging trends, flexible leasing models, and tailored solutions that meet both immediate and long-term needs.

This is where CIRIL stands out. With a deep understanding of the commercial real estate market in India and an extensive network of properties across key cities, CIRIL helps businesses navigate the complexities of leasing in 2025 and beyond. Whether it’s structuring flexible leases, advising on optimal space solutions, or keeping clients updated on market trends, CIRIL empowers businesses to make informed, strategic decisions in a dynamic real estate environment.