Mumbai: To cater to the rising demand for commercial real estate, realty firm Sunteck Realty Ltd, having so far focused on building luxury homes, is chalking out plans to ramp up its commercial property business.
Aiming for a REIT (real estate investment trust) listing in the future, the Mumbai-based firm is looking at investing around Rs1,500 crore in the next three to four years on building a rental portfolio of about 2.6 million sq. ft of office and retail space in the Goregoan area, Kamal Khetan, chairman, Sunteck Realty, said in an interview.
Khetan said the investment would be funded through a mix of debt and internal accruals. Last month, the company raised Rs650 crore via a qualified institutional placement (QIP) and promoter capital infusion. A portion of the funds would also be deployed towards construction of new commercial buildings, he added.
At present, Sunteck Realty manages around 200,000 sq. ft of office space, generating a rental income of about Rs20 crore per annum. The company expects that the upcoming commercial developement has the potential to push the rental income to Rs500 crore annually.
“We want to build a huge rental portfolio which is currently missing. The top global funds are aggressively for quality commercial assets. There is a huge demand for commercial office buildings and we may decide to REIT from that portfolio," Khetan said.
The new commercial complex, which would comprise around five towers, is part of an ongoing mixed-used development called Sunteck City that is currently being built over 23 acre land area. Located within the 15O-acre Oshiware District Centre (ODC), the company had acquired the land in phases between 2010-2012 with a total investment of around ₹ 450 crore. The company expects to start construction of the commercial buildings in the next six months and plans to deliver the entire complex by 2021-2022.
“We are looking to investing another ₹ 1500 crore. We would need this over a period of 3-4 years. We have enough cash flow and if required we can even raise fund through LRD (lease rental discounting loans)," he said.
The company’s strategy to focus on ramping its commercial lease business comes at a time when many other premium developers including Lodha Developers Pvt Ltd, Rustomjee Group and Kanakia Spaces Realty Ltd are rushing to capitalise on the growing demand for prime office space.
In a report released on Thursday, brokerage firm Axis Capital said that Leasing traction of Sunteck’s commercial property would be aided by further improvement to infrastructure in the ODC area, which is expected to be ready by the time the asset is ready.
Mint reported on September 13, that more than $2 billion worth foreign investment deals in commercial real estate have been closed so far in 2017, mainly to acquire stakes in projects and companies. While Rs3,200 crore (approx $493 million) is being raised by domestic funds to buy office projects, around $1.4 billion of foreign investment is expected to come in to build and acquire office assets.