When Cousins Properties joined a venture to buy a 2.3-acre site in Uptown Dallas, where Morgan Stanley plans a regional hub, the purchase was reported as including "fee and leasehold interests", according to The Dallas Morning News on 30 October 2026. Those two terms describe two different things an investor can own, and the gap between them is what a ground lease is about. A ground lease separates the land from the building on it, so one party owns the land while another leases it for decades and controls the building for that time.
For an Indian investor reviewing a private U.S. property, the distinction changes the deal. A building on leased land can collect the same rent as one on owned land, but what the investor ends up owning, how long that ownership lasts and how a lender values it all differ. Before judging the income, an investor should know who owns the ground and on what terms. The U.S. real estate market guide for Indian investors explains the property types where this question comes up.
What a Ground Lease Is in Real Estate
Under a ground lease, a landowner leases a plot to a tenant for a long period, and the tenant builds on it or takes over a building already there. The tenant pays rent for the land, known as ground rent, and is generally responsible for the maintenance and repair of the building, according to Realized, a U.S. property marketplace. Realized describes terms of 30, 50 or even 99 years. The Dallas Morning News reported that a parcel next to the Uptown site was leased in 2020 for 99 years, and that lease passed to the new venture.
The tenant's interest is called a leasehold. The landowner's interest is called the fee, short for fee simple, which is full ownership of the land with no end date. The Uptown purchase combined both kinds of interest, which shows that a single development site can be assembled from owned and leased parcels.
Who Gets Paid First on Leased Land
Money on a ground-leased property moves in a fixed order. The building owner collects rent from the occupants and pays ground rent out of it before anything reaches investors. A GlobeSt analysis of ground lease risk published in December 2025 noted that ground rent ranks ahead of the mortgage, which means a missed ground rent payment can put the lender's claim on the building at risk.
That order shapes what equity investors receive. When ground rent is fixed and modest, the building owner keeps most of the income. When ground rent rises sharply at a reset date, less is left for the lender and for investors, even if the building is full of paying tenants.
How Ground Rent Is Set and Reset
Ground leases are negotiated one at a time. GlobeSt reported that no standard form exists, and that a careful review covers how fair market value is defined, whether rent resets follow a formula or an appraisal, who chooses the appraisers and how disputes are settled. Each of these choices decides how much ground rent can change and who controls that change.
The Manhattan office tower at 1407 Broadway shows why. According to GlobeSt, the 1.1 million square foot building pays ground rent of about US$414,000 a year under a lease that runs to December 2030, with one extension option to 2048. The article set out a scenario in which ground rent after 2048 could reach US$5 million to US$10 million a year if it were reset to track land value. That range is the article's scenario, not a known outcome, but it shows how much a reset clause can matter.
Why the Remaining Leasehold Term Decides Value
A leasehold shrinks every year. When the lease ends, the building and improvements often pass to the landowner, although Realized notes that the outcome depends on the contract, and some leases require the tenant to remove what it built. GlobeSt reported that in the last 10 to 15 years of a lease, appraisers may give the leasehold little value beyond its expiry unless an extension option can clearly be used.
Lenders read the same clock. Realized notes that lenders may require the lease to run longer than the loan, so a building with a short remaining term can be harder to refinance than a similar building on owned land, even with the same occupants. The remaining ground lease term works alongside the weighted average lease term of the occupants, which measures how long the rent coming in is contracted.
Ground Lease Risks and Limits for Investors
A ground lease adds its own risks to the usual risks of private property. The main ones are set out below.
- A ground rent reset can raise the largest fixed cost sharply, leaving less income and making it possible that distributions are not paid.
- As the expiry date nears, the leasehold can lose value, and falling property values can lead to a loss of capital.
- Lenders may shorten loans or decline to lend when the remaining term is short, which adds to leverage and refinancing risk.
- Because ground rent ranks ahead of the mortgage, a missed payment can end with the building owner losing the building.
- Private real estate is illiquid, and for an Indian investor the rupee value of any distribution also moves with the exchange rate.
None of this makes a ground lease good or bad in itself. GlobeSt quoted Lonnie Hendry of Trepp as saying that, "for the most part, they work themselves out fairly well." The risk sits in the terms, so the terms are what an investor needs to read.
What Indian Investors Should Check Before Investing
For an Indian resident, these checks belong before any money leaves India under the Liberalised Remittance Scheme, because private U.S. real estate is hard to exit once committed. The offering documents should say whether the property sits on owned land or leased land. If the land is leased, an investor should look for the remaining term including extension options, how and when ground rent changes, whether an extension needs the landowner's consent and what happens to the building at expiry.
Structure matters as well. Indian investors and other offshore investors typically invest through a U.S. corporation, known as a blocker, which holds the property interest, and they typically receive Form 1042-S. They own shares in that corporation rather than the land or the building, and the U.S. tax guide for Indian investors explains how that structure is taxed. Raveum reviews each deal and holds it in its own legal entity, and whether that entity's interest is fee or leasehold is one of the facts its documents should state.
The Ground Under the Building Shapes the Deal
The Uptown Dallas purchase shows how ordinary the split between land and building is. One site brought together owned and leased parcels, and the tower planned on it will rest on both. For investors further down the chain, the same split decides what they hold, how long it lasts and who is paid first.
A rent roll and an occupancy figure describe how a building is doing today. The ground lease describes how long the owner keeps that income and on what terms, which is why it deserves the same attention as the tenants. Read together with the property types in the U.S. real estate market guide, it gives a fuller view of a deal than the income figure alone. Eligible investors can review how investing in U.S. real estate from India works on Raveum, including the property, sponsor, ownership structure, fees, risks and offering documents for each opportunity.
Frequently Asked Questions
What is a ground lease in real estate?
A ground lease is a long-term lease of land only. The landowner keeps ownership of the plot, and the tenant builds on it or takes over an existing building, paying ground rent for the land. The tenant usually controls the building and pays for its upkeep until the lease ends, when the agreed end terms apply.
Who owns the building on a ground lease?
During the lease, the tenant usually owns or controls the building, while the landowner owns the land beneath it. What happens at the end depends on the contract. In many leases the building passes to the landowner when the term expires, and some leases require the tenant to remove what it built, so the end clause matters.
What happens when a ground lease ends?
When a ground lease ends, the building and other improvements often pass to the landowner, unless the tenant uses an extension option or negotiates a new lease. Some contracts require the tenant to demolish the building instead. Because the end date affects value and lending, investors should check the remaining term well before it becomes short.
How long does a ground lease usually last?
Ground leases are long. Terms of 30, 50 or 99 years are common, and many include extension options that can push the end date further out. The length that matters to you is the remaining term, including options that can clearly be used, because that is how long the building owner keeps the income from the property.
Can you get a loan on a property with a ground lease?
Yes, lenders do lend on buildings that sit on leased land, but they look closely at the ground lease. Lenders may require the lease to run well past the end of the loan, and they check how ground rent can change. A short remaining term or an open-ended rent reset can make a loan smaller or harder to obtain.
Is a ground lease property riskier for investors?
It carries different risks, not automatically more. The added risks are ground rent resets, a shrinking term that can reduce value, and lenders becoming cautious as expiry nears. Private real estate also involves illiquidity and possible loss of capital. Whether a ground lease suits you depends on its terms and your own circumstances, so read the lease first.
This article is for general education only and is not investment, tax or legal advice. Rules change and depend on individual circumstances. Investing in private real estate involves risk, including loss of capital, illiquidity, falling property values, distributions not being paid and currency movements. Participation is limited to non-U.S. persons under SEC Regulation S and verified U.S. accredited investors under Regulation D Rule 506(c), and offerings on Raveum are not open to the general public.
