Lease Over Buy: Why India's Startups Aren't Rushing to Own Their Offices
India boasts one of the world's most dynamic startup ecosystems, with the number of government-recognized ventures soaring past 159,000 as we navigate 2025. These companies are attracting significant investment and driving innovation. Yet, when it comes to securing a physical workspace, a clear pattern emerges: the vast majority choose to lease rather than buy. Despite impressive funding rounds, the rationale hinges on crucial factors like operational flexibility, prudent capital allocation, and the prevailing real estate market dynamics.
The Compelling Economics of Leasing
For startups, particularly those in early or high-growth phases, capital is the lifeblood. Deploying funds towards product innovation, talent acquisition, and market expansion typically yields higher returns than tying up substantial sums in illiquid assets like real estate. The cost of purchasing commercial property in prime business hubs such as Bangalore, Mumbai, and Delhi NCR is prohibitively high, ranging from ₹12,000 to ₹35,000 per square foot. This translates to a staggering ₹12 crore to ₹35 crore outlay for a modest 10,000 sq. ft. office – a significant financial commitment.
In contrast, leasing offers startups the ability to preserve precious capital and maintain the liquidity essential for navigating the rapid pace of business growth and unforeseen challenges.
Leasing is Surging in India's Startup Hubs
India’s commercial leasing market has been expanding rapidly. In the first quarter of 2025, India's top seven cities experienced strong office leasing activity totaling 15.9 million square feet, a 15% year-on-year increase. This surge was primarily driven by high demand for Grade A office spaces, with Bangalore and Delhi-NCR leading the activity. Notably, the demand for flexible workspaces continues its upward trajectory, maintaining strong momentum in Q1 2025, reaching 2.2 million square feet and reflecting a 22% year-on-year increase.
Looking ahead, forecasts for the full year 2025 project gross office space absorption across India's top six cities to reach 65-70 million square feet. Bangalore, fueled by Global Capability Centers (GCCs), technology firms, and flex space operators, is expected to contribute significantly, potentially close to a third of this demand. These figures highlight why leasing continues to be the go-to strategy for startups: it offers financial flexibility, minimal upfront investment, and the freedom to adapt quickly in a fast-paced, competitive environment.
Startups experience rapid growth and fluctuating team sizes. A 50-member team today could expand to 500 within a few years, requiring more office space. This makes leasing a far more practical option than ownership, as many startups anticipate changes in space needs within a few years. Owning an office space also ties up capital in a low-liquidity asset. Real estate transactions take time, and startups need agility in operations. With high market uncertainty, pivots, mergers, and acquisitions are common, making leased office spaces more adaptable to evolving business needs.
Leasing comes with tax benefits and lower operational costs. Lease expenses are fully tax-deductible, reducing a startup’s financial burden. Additionally, maintenance, property taxes, and infrastructure costs are typically the responsibility of landlords, making leasing an even more cost-effective option.
