Mumbai: K. Raheja Corp, a commercial property developer, is investing as much as Rs1,200 crore in building around 3 million sq. ft of office space in Chennai as part of its plan to ramp up its business in the southern part of the country, said a senior company official.
The Mumbai-based company, which recently sold a 15% stake to global private equity firm Blackstone Group Lp, is expanding its commercial real estate portfolio with a larger plan to go for a Real Estate Investment Trust (REIT) listing in the next one year.
“We acquired land in Chennai years ago but we have never built it. We believe that western and southern parts of India will continue to see demand. We want to bring in supply which we believe is adequate for these markets,” Vinod Rohira, managing director, (commercial real estate and REIT), K. Raheja Corp., said in an interview.
Rohira said this is the first time that the company is building information technology (IT) parks in Chennai.
The first project, which is currently being built over 6 acres of land at Porur, in Chennai, would have 1.1 million sq. ft and is likely to complete in the next two years. The second one is expected to start construction by the middle of next year and would span across 2 million sq. ft.
The investments would be funded by internal accruals. Last year, Blackstone had picked up 15% stake in K. Raheja Corp.’s commercial real estate portfolio of 20 million sq. ft for $250-$300 million.
As per a 27 December report by property consultant Cushman and Wakefield, Chennai registered the highest growth this year in net absorption of commercial real estate, a 38% jump from a year ago. However, supply dropped by 12% to 170,000 sq. ft this year as compared to 2016.
“Chennai saw the largest year-on-year increase in net leasing on account of high demand and availability of quality space, beating the overall trend in India,” said Cushman and Wakefield in the report. The city recorded a net leasing of 2.7 million sq. ft this year. As the Indian government stresses on ‘Make in India’ for companies to set up manufacturing base in India, Tamil Nadu has emerged as a hub for manufacturing activities in the country, the report said.
At present, K. Raheja Corp. operates and leases a total of around 20 million sq. ft of commercial spaces across Mumbai, Navi Mumbai, Hyderabad and Pune. The last one year has seen the company expanding rapidly in Navi Mumbai, where it is building 6 million sq. ft of commercial space.
It currently operates three information technology (IT) parks in Navi Mumbai under the Mindspace brand.
The expansion plans come at a time when the company is also gearing up to list its commercial real estate portfolio through a REIT.
Rohira said it would take “at least a year” to execute the plan. “We want to crystallise a lot of things internally. Once the structure is complete, we will go for it (REIT),” he said.