Lodha carving out a new entity for Commercial realty

Article from ET Realty

MUMBAI: Lodha Group, the country’s largest realty developer by sales, is now carving out a new vertical with strategic focus on commercial property developments. The group that has so far concentrated on residential development is looking to increase its presence in office space as well.

“We have been working on office projects, but in the next five years it will be a significant part of our growth strategy given the size and scale we are planning for. We are aiming at around $3 billion worth equity valuation for our commercial business itself by 2020,” Abhishek Lodha, Managing Director, Lodha Group, told ET.

So far, Lodha has developed total 5 million sq ft of offices across ten projects in Mumbai Metropolitan Region. Currently, the group has 3 million sq ft office space under construction and in planning stage at Palava City near Mumbai and its project New Cuffe Parade in Wadala. The company will start construction on the planned portion of this office space in the next 6 months.

The developer will be investing around Rs 500 crore each for the next two years on its commercial projects. Lodha clocked revenues of Rs 8,000 crore in 2014-15 (April-March) and currently derives revenues worth around Rs 600 crore from its commercial projects.

“The market is getting more organised and we can clearly see the rise in institutional investors like pension and sovereign funds’ interest in yield generating commercial assets. The demand for office spaces is increasing, while quality projects are running into shortage,” Lodha said while reasoning the group’s interest in office projects.

In the last few months, commercial realty market across the country has witnessed large transactions indicating a revival in space pick up. Robust deal momentum and data points are making green shoots in office space absorption visible.

After over three years of weakness, total purchases and leases of office space in the top eight property markets rose to 35 million square feet during 2015. This is the second-highest absorption figure in the country’s history after 2011. Net commercial real estate transactions by companies rose 17.1 per cent from a year ago, according to a recent JLL India report.

Recently, Lodha Group also formed a separate business vertical to develop super-luxury projects, starting with Mumbai and London. Following the launch of the luxury vertical, the company has now identified commercial real estate as the next area of strategic focus. In the next five years, Lodha is planning to start developing total 10 million sq ft in Mumbai Metropolitan Region and Pune. The new vertical will be overlooked by the company’s current team and no new structure is expected to be set up for the same.

From the year 2020, Lodha is looking at delivering 3 million sq ft commercial space every year. “Apart from our ongoing projects sites, we are scouting for land parcels in suburban areas of Mumbai for our proposed commercial projects with potential of 1 million sq ft each,” Lodha said.

At New Cuffe Parade and Palava, the group is currently developing 9 lakh sq ft and 2.1 million sq ft saleable office space, respectively. Office spaces at New Cuffe Parade and Palava are expected to be completely delivered by September 2017 and March 2020.

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