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Cash'in on realty boom

There are instances where a firm possess a prime property and yet looking for capital infusion. Even though the business would be very much benefitted by infusion of capital, the firm does not have any choice of utilising the property's leverage.

In such circumstances, firms can use "Sale and Lease back". The method is very simple, the firm sells off its prime properties like office complexes at important areas and leases back the property from the buyer usually on a long lease.

This can be used for any type of assets but is best used for assets that are at risk of depreciation of values. This is very profitable for old firms with good asset value, as it gives a strong one-time cash flow.

Some of the advantages of this Sale and Lease back are:
  • It frees up the capital
  • Tax benefits on the lease expenses
  • Seller continues to use the property
  • Ability to sell at peak realty rates
The companies have begun to take advantage of high real estate prices to cash in on thier assets at the same time continue using it without disruption. I am not aware of such deals in India, but it may not be long when we start to see such deals in India.

More details

:) Falkor
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