Japan's Sumitomo Realty and Development, the country's third-largest developer, plans to expand in India with an unusual strategy: focusing on Mumbai and managing apartments rather than selling them, executives told Reuters.
Japanese developers are extending their presence in India's $300 billion real estate market, attracted by rising rents and construction costs far lower than in Tokyo, New York or London.
Players such as Japan's Mitsui Fudosan, as well as U.S.-based Blackstone, have expanded across India by partnering with local developers or buying completed buildings, given slow land acquisition processes. Sumitomo, however, is concentrating on Mumbai and opting for ground-up construction.
"Just like Tokyo, Mumbai has assets and vitality that are worth focusing on," Niinomi Masato, general manager of Sumitomo's India business division, said in an interview
Sumitomo has previously called Mumbai its "second growth engine" after Tokyo, where it manages 240 buildings. Mumbai has fewer geographical risks such as earthquakes, which can threaten assets and cash flow, Masato added.
MAIN BET ON MUMBAI
Tomoki Iwata, managing director of Sumitomo's Indian unit Goisu Realty, said the company was reviewing other cities but so far had found no suitable sites in Delhi, Bengaluru or Chennai.
Sumitomo sees a stronger supply of prime locations in those cities compared with Mumbai, where a land crunch creates scope for long-term rental growth.
Sumitomo is developing five projects in India - all in Mumbai, including four in the Bandra Kurla Complex near the international airport, home to many global companies.
Iwata said those four projects would be completed within five years, with cash flows funding future expansion. He said Sumitomo had spent a quarter of its committed $6.5 billion India investment but declined to give details.
SERVICING, NOT SELLING
Luxury home sales have surged in India as wealth grows, and rents for premium apartments have also climbed. Average rents in south Mumbai this year were as high as 730,000 rupees ($8,096) per month, about 20% higher than three years ago, according to real estate company Cushman & Wakefield.
Local developers such as Oberoi Realty and Godrej Properties typically sell luxury homes for millions of dollars.
"We are not of the opinion that we should simply follow suit," Masato said, adding that Sumitomo would manage and rent apartments at one of its "super-high-rise" Mumbai projects rather than sell them.
