Bangalore: Tata Sons Ltd has asked two group companies to sort out differences to avoid competing with each other for real estate projects.

Both are 100% subsidiaries of the group. Tata Realty and Infrastructure Ltd was set up to function as a fund and develop infrastructure projects, while Tata Housing Development Co. Ltd was to develop and sell primarily residential projects.

Conflict in interest? Tata Housing’s Aquila Heights residential project in Jalahalli, North Bangalore. Hemant Mishra/Mint

Both Tata Realty and Tata Housing have planned residential projects in cities such as New Delhi and Pune.

Tata Realty has now been asked to either develop its ongoing and future residential projects as joint ventures with Tata Housing or not pursue housing projects at all.

Tata Sons had laid out a clear demarcation of businesses for Tata Housing and Tata Realty from the beginning. But what followed was different.

As infrastructure projects take a while to develop, “Tata Realty also started planning housing projects, which was a cause of concern for Tata Housing," said one of the persons close to the development, who didn’t want to be named.

Senior Tata Sons officials then stepped in to mediate between the two subsidiaries in end-March, when they reiterated that Tata Realty would continue with a business-to-business platform, while Tata Housing would remain a business-to-customer model, said the two other people close to the matter, who also spoke on condition of anonymity.

Sanjay Ubale, managing director and chief executive officer, Tata Realty, said the residential portions in the company’s larger projects will now be jointly developed with Tata Housing.

Tata Housing is already evaluating the development potential of three or four Tata Realty projects in Kochi and Pune, spread over 80-90 acres.

“We will get Tata Housing to participate with us to develop the housing portions, where they will do the design, marketing and development," said Ubale, who had a stint as secretary, special projects, government of Maharashtra, before he joined Tata Realty.

Ubale said his company is looking to invest about Rs2,000 crore in large projects. Tata Realty would focus on large mixed-development retail or commercial developments along with its current portfolio of special economic zones, logistics parks, airports and road and highway projects.

Tata Housing, established in 1984, lay dormant for several years before it sprang back into action in 2008, when it announced a premium residential project, Aquila Heights, in North Bangalore.

But it was the company’s launch last year of a low-cost housing project, Shubha Griha, in a distant Mumbai suburb that showed the way for other private developers to launch similar projects.

When asked if there was competition between the two subsidiaries, Brotin Banerjee, managing director and chief executive officer, Tata Housing, said there was some overlap and added that the companies shared the same chairman, R.K. Krishnakumar. Banerjee is also a director on the board of Tata Realty.

“Any conflicting interest like this wouldn’t augur well for either of them...considering the mandate was given out to both right from the beginning," said Amit Goenka, national director, capital transactions, Knight Frank India, a property advisory.

Devesh Chandra Srivastava contributed to this story.