Bengaluru: Century Real Estate Holdings Pvt. Ltd, a Bengaluru-based developer and one of the largest landholders in south India, is building a commercial office portfolio and plans to bring in an equity investor partner to raise around Rs1,000 crore, a top company executive said.
The realty firm, which currently has a mix of residential and plotted development projects, plans to now develop around 7-8 million sq. ft of office projects in Bengaluru, to build an annuity base and find locations for projects where leasing risk is low.
The new focus area somewhat realigns Century’s business strategy, adapting it to changes that some developers are incorporating given the tough market conditions.
“Foreign investors have acquired many of the ready commercial office assets and are now looking at early stage, greenfield projects. We want to build a Rs2,000 crore office platform, where an investor brings in the initial Rs1,000 crore and we bring in the land required and development expertise. We are in talks with a few investors," said Ravindra Pai, managing director, Century Real Estate.
The plan to pursue office projects comes on the heels of the firm deciding to do residential projects selectively going forward, once it has completed the 14 projects it is currently constructing. It also has projects that it is developing through joint development agreements with other large developers.
Century has substantial land in north Bengaluru, along the Hebbal-Yelahanka corridor, and is building a million sq. ft of office space there.
“We think we will now focus on the commercial portfolio and also build projects that will fall under the affordable housing scheme and can avail the incentives. Plotted development will continue to be another area of focus," Pai said.
Century has around Rs800 crore of debt and till some time back, was planning to divest or sell some of the land parcels to pare leverage levels.
But Pai says it’s “a difficult market to sell land".
Given the slowdown in India’s residential sector over the last four years or so, some developers are planning to venture into commercial real estate including office and industrial projects and investors are raising funds to deploy in office developments.
Office rental projections for the next one year continue to point to solid growth across all prime markets, according to accreditation body Royal Institute of Chartered Surveyors’ (RICS) India Commercial Property Monitor in November. Bengaluru exhibits stronger rental growth projections when compared with Mumbai and the National Capital Region (NCR), the report said.
Though the projections for commercial office sector are positive even in the current real estate slowdown, and investments have remained steady, analysts signalled caution citing it’s not an easy business to sustain.
“The decision for any developer to venture into office space development can’t be reactive. Leasing is a big aspect and is intense and involves high involvement. Commercial real estate projects are capital-intensive, so leasing has to be done efficiently," said Somy Thomas, managing director (valuations and advisory) at property advisory Cushman and Wakefield India.