Japanese conglomerate Sumitomo Corporation is poised to buy the most expensive plot of land ever sold in India, according to local media.
The Tokyo-headquartered conglomerate, which has completed 300 real estate projects globally at a value of $30 billion, submitted the only bid to the Mumbai Metropolitan Regional Development Authority for an INR 2,238 crore ($323 million), three-acre (12,140 square metre) plot in one of Mumbai’s financial hubs.
The land parcel is located in the same area of Mumbai, the Bandra Kurla Complex, where Blackstone bought a grade A office building only last week.
Domestic Developers Balk at High Price
The Tokyo-headquartered company will be paying INR 746 crore per acre for the land, which will make it the country’s most expensive land acquisition ever on a cost per acre basis, beating the previous record set nine years ago by Lodha Group.
That deal in 2010 saw the Mumbai-based developer bid INR 653 crore per acre for a 6.2 acre plot in Mumbai’s Wadala district, at a total price of 4,050 crore ($584 million).
This latest land parcel initially received no interest from domestic buyers when it was put up for tender in April, according to a Mumbai Metropolitan Regional Development Authority official, who blamed the high reserve price and a liquidity crisis in the real estate sector.
Now Sumitomo has emerged as the only bidder willing to put up the reserve price for the plot near the Jio Garden concert venue in the Bandra Kurla Complex, which is built on marshland along the north bank of the Mithi river in the city centre.
The 370 hectare (3.7 million square metre) complex, one of three central business hubs in Mumbai, is home to the National Stock Exchange as well as a range of blue chip companies including Amazon, Citigroup, and Standard Chartered Bank.
The G Block plot that Sumitomo is acquiring is approved for construction of up to 65,000 square metres, with the Japanese conglomerate planning a commercial development on the site.
Average rents in the Bandra Kurla Complex stand at between INR 245 to INR 400, and are up 12 percent in the first three months of the year,compared to the previous quarter .
Sumitomo’s Expansion in India
Sumitomo’s acquisition comes just over a year after it entered India for the first time, setting up a joint venture with auto parts company Krishna Group to develop real estate projects in the country.
The joint venture is currently developing a $2 billion urban complex in Gurugram called Krisumi City, a 65 acre township that will eventually comprise 5,000 apartments, a high-end retail mall, education institutions, a hotel and offices, with the first phase due to be completed in 4 years. .
India saw 7.7 million square feet of new commercial supply added in the first three months of the year, a 17 percent decrease compared with the same period last year, according to Colliers.
Commercial projects under construction currently stand at 51.5 million square feet nationwide, with 5.7 million square feet of this in Mumbai.
Foreign Money Pours into India
Sumitomo is the latest of a string of international players making a claim on India real estate.
Only last week, US private equity firm Blackstone acquired a grade A office building in the same complex for INR 2,500 crore ($358 million), in one of India’s biggest office property deals this year.
Just over a month ago, a Warburg Pincus joint venture committed $400 million to build a retail platform in India, with an overall corpus including debt of $1 billion for the purpose of building shopping malls across tier 1, 2 and 3 cities.
The initial public offering in March of the Blackstone-Embassy REIT — Embassy Office Parks Real Estate Investment Trust (Embassy REIT) – was subscribed 2.5 times, with the share sale generating a demand of over INR 53 billion ($773 million).