Buy-Lease-Operate (BLO) is slowly gaining traction in the ever-changing environment of real estate investing, disrupting traditional notions of property ownership and administration. BLO has developed as a viable option for purchasers seeking financial stability and long-term rewards.
The BLO trend in India began in the late 2010s and gained strength in major cities. It has often accelerated during economic boom periods, when real estate activity peaks. The BLO made a huge impact by providing a flexible, cost-effective property management strategy that attracted both investors and tenants. This strategy enabled property owners to maximise revenues, while decreasing operational costs, and increasing commercial and residential leasing activity. As a result, it altered the real estate environment, creating more investment opportunities and increasing property management efficiency.
BLO has risen as a strategic approach to real estate investing, providing investors with an alternative to property ownership and administration. This strategy is simply a collection of processes that allows investors to capitalise on their property for long-term financial benefits.
Acquisition phase
Initially, investors purchase properties like homes, villas, or flats, which are often found in gated communities or residential complexes. These properties provide the foundation of an investment portfolio, with their ability to produce rental income being a critical factor.
Leasing strategy
Following the acquisition, investors lease the properties to builders or developers, who are responsible for their administration and upkeep. These builders, in turn, hire contractors to maintain the property and manage their day-to-day tasks.
Target demographics
Properties leased under the BLO model cater to a diverse range of demographics, including commuters, residential workers, college students, and individuals seeking assisted living. This wide range of tenants is a constant flow of rental income and increases the financial stability of the investment.
Currency structure
One of the main attractions of the BLO model is its robust currency structure. Investors typically secure home loans covering 60% to 40% of the property’s value and top up the rest with personal funds. Rental income from renting properties to builders allows investors to pay off their mortgages efficiently.
Financial benefits
The BLO model offers investors the potential for accelerated loan repayment and a substantial return on investment. With annual returns averaging between 5% and 6%, investors can expect to pay off their mortgages in a relatively short time, usually around 10 years. This financial stability and lucrative return on investment make the BLO model an attractive proposition for savvy investors looking to optimise their real estate portfolios.
How BLO impacts real estate
Increased investment activity: The BLO model stimulates investment activity by providing an attractive offer to both professional investors and newcomers looking for profitable real estate opportunities.
Expansion of the rental market: By facilitating the leasing of properties for multiple purposes, the BLO model contributes to the growth and diversification of the rental market, catering to the evolving needs of tenants in various demographics.
Stimulated economic growth: The infusion of investment capital into real estate, fuelled by the BLO model, supports economic growth by creating employment opportunities, increasing construction activities, and strengthening allied sectors along with hospitality and property management.
Transformation of ownership patterns: As more investors embrace the BLO model, traditional patterns of property ownership are transforming with an increasing emphasis on lease-based agreements and income-generating assets.
The writer is CEO and Executive Director, Shubhashish Homes.
