14 hours ago
Japanese developers bet big on Indian realty, lured by long-term growth promise
Bengaluru: Japanese investors and developers are placing large bets on India's real estate sector, prompted by a turnaround in the office, logistics and residential sectors, and convinced about the country's long-term economic growth prospects, analysts said.
Post-pandemic, Japanese companies such as Sumitomo Realty & Development and Sumitomo Corp. (both Sumitomo Group firms), Mitsubishi Estate Co. Ltd, Mitsui Fudosan Co. Ltd, Mitsui O.S.K Lines Ltd and its subsidiary Daibiru Corp. and Marubeni Corp. among others have poured in millions into real estate projects and land parcels, primarily in Mumbai and National Capital Region (NCR).
The deal momentum has gained further pace this year.
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In June, Goisu Realty, a group firm of developer Sumitomo Realty, which accounts for the highest share of India investments among Japanese firms, was allotted two land parcels in Mumbai's Bandra Kurla Complex, by Mumbai Metropolitan Region Development Authority (MMRDA), for a total of ₹3,138 crore. It paid 39-40% premium over the bid price for both the land patches.
Similarly, Sumitomo Corp. partnered with other companies this year for two projects—an office project in suburban Mumbai's Kalina, near BKC, and a luxury condominium project in Powai. Mitsubishi Estate is also an equity investor in the office project.
'India is expected to continue experiencing a demographic dividend, along with maintaining economic growth in the 6% range. In addition to its domestic demand-led economic structure, the country is increasingly recognized as a global business hub, particularly in the IT, financial and service sectors," Sumitomo Corp. said in a June statement, announcing its entry into the Mumbai office market.
'Based on the shared recognition that India remains a resilient growth market even amid today's increasingly uncertain global economy, we have decided to participate in this project," the firm added.
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Japanese real estate investors and developers entered India much after the American, Canadian, West Asians and Singaporeans did. The Japanese, however, are patient, equity investors betting on land and early-stage projects, and not shying away from taking development risks, experts said.
'Japanese capital is demonstrating rare conviction by backing early-stage development deals across India's core real estate segments—office, logistics and residential. This is not opportunistic investing, but a strategic bet on the country's long-term growth trajectory," said Nishant Kabra, head—land & capital markets (North and West) India, JLL, a property advisory.
'In the last five years, we've seen over $1.5 billion flow into development equity—a clear signal that Japan Inc. sees India not just as a market, but as a multi-decade growth partner," Kabra added.
Japanese investors entered India's realty sector via direct investments, or alliances with local partners or other international investors.
Last year, Daiburu, with a century-old experience in constructing office buildings in Japan, said it has made its first India real estate investment, pumping in $123 million in 'Atrium Place', a premium office project in Gurugram, being developed by Hines India and DLF Ltd.
'India is a key pillar of the MOL Group's (Mitsui O.S.K Lines) strategy to diversify its business portfolio by increasing non-shipping, stable revenue businesses that counter-balance the volatile shipping market," Daibiru said. Meanwhile, Japanese shipping giant MOL Group has been actively expanding its presence in India.
'The Japanese came to the party late, but they are very long-term investors. Unlike other international investors and funds, they are not married to returns. Japanese real estate investors have no pressure to sell or exit investments, don't operate in a fund structure and rarely manage third-party money, which makes them different from the others," said Shobhit Agarwal, managing director and chief executive officer at Anarock Capital.
As the real estate sector continues to perform on all fronts, Japanese investors are also eyeing multi-city investments, diversifying their portfolios and doing follow-on funding.
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Last year, Mitsubishi Estate partnered with Alta Capital-backed logistics platform Logicap Management to develop industrial and warehousing assets in Chennai, Pune and NCR, betting on a sector that is highly fragmented but with growth potential. This year, the joint venture was extended with an additional investment to develop more assets.
Earlier this year, Mitsubishi Estate also invested ₹560 crore in Birla Estates Pvt Ltd's residential project in Bengaluru, marking its maiden residential investment in India.
