Cos to unlock Rs 3k cr of city land

MUMBAI: Mumbai’s real estate market is set to witness large scale land deals worth over Rs 3,000 crore in the coming months, with corporates rushing in to cash in on huge property assets associated with their manufacturing facilities in the city and its suburbs.

The companies include Bayer Corpscience, Richardson and Cruddas (1972), Crest Animation, Grower and Weil, Kilburn Engineering, Nesco and Ceat. Most of these companies have already identified excess land adjacent to their manufacturing sites.

It is learnt that the Mumbai-based Apar Industries is exploring the possibilities of selling its Chembur property, after shifting its manufacturing facility. Developers such as Nirmal Lifestyle, K Raheja group, the Hiranandanis, Godrej Properties, Reliance Retail and Peninsula Land are said to be in talks with corporates to buy land in Mumbai suburbs.

With India reportedly having a little over 70mn sq ft of A-grade office space, which is less than Shanghai and Beijing put together, the demand for commercial space is likely to remain firm. Also, with the government easing norms for foreign investment in the retail sector, demand for land is expected to rise sharply.

According to London-based brokerage Knight Frank, an undersupplied market means the net yield on office property in India is 11%, which is among the highest in Asia. Also, with real estate fast emerging as an independent asset class, there has been a 20-40% price appreciation in the past 15 months. Office space in Mumbai, New Delhi and Bangalore has emerged as an attractive asset class for most investors.

The demand and the sharp appreciation in prices has brought companies to the negotiation table, but many are keeping their cards close to their chests. “We have taken a decision to shift our manufacturing activities in a phased manner from our Thane manufacturing facility. We have not yet decided what to do with the land,” a Bayer Corpscience spokesperson said.

Bayer Corpscience has around 50-60 acres of land in Thane. Market sources said that Reliance Retail and other developers have shown interest in the property. Similarly, Reliance Retail is learnt to be in negotiations with Nesco to buy out 65 acres in Goregaon to start their retail operations.

The BM Khaitan group, which owns tea estates across the country, is also planning to sell land in Mulund and move to a larger space near Thane, in a bid to expand its manufacturing activities. The company is in talks with developers for a deal.

Although the retail sector could take up much of the excess land, “technology services account for as much as 85% of India’s office space demand”, says an analyst with Cushman and Wakefield, a international property firm. The growth in India’s software and back-office businesses has led to a sharp rise in the demand for land.

Software and call centre companies in India have underscored the demand for commercial property in India, leading the Morgan Stanley Capital International’s India information technology index to quadruple in a little more than two-and-a-half years.

Last year, Unichem, a pharma company sold five acres of land in Jogeshwari to the K Raheja group. In some other recent deals, the Hyderabad-based IVRCL developed and sold a property in Mumbai to Glenmark Laboratories, while GP Goenka’s NRC sold its Kalyan property.