L &T Realty Ltd, the real estate unit of India’s largest engineering company Larsen and Toubro, has secured approval to develop a special economic zone (SEZ) in north Bengaluru, though its focus will be on projects in west India, said a company official.
The Mumbai-based firm plans to develop around 3 million sq. ft of commercial office space in the SEZ, which is part of a large mixed-use development with total developable potential of 9 million sq. ft, and also has a residential township.
Earlier this week, L&T Realty, which has a portfolio of nearly 50 million sq. ft of ongoing and upcoming projects, said it will sell its 51% stake in a 92-acre township project in Siruseri, Chennai, to investment firm Pragnya Advisors Pvt. Ltd for Rs190 crore, as part of its strategy to exit most property markets outside western India.
“We may develop an IT SEZ because it is located in a prime location and is what we think is the new business corridor in Bangalore. It will be a built-to-suit kind of development and we are expecting to launch it this year,” said Shrikant Joshi, chief executive, L&T Realty.
L&T Realty has a large commercial office platform of about 26 million sq. ft in size.
According to a December 2016 report by property consultant Cushman and Wakefield, the outsourcing sector will need around 100 million sq. ft of office space in India and the Philippines through 2020.
In 2016, 27.2 million sq. ft of new office space was released in the Indian market but this was insufficient to cope with the strong demand, especially in markets such as Bengaluru, Hyderabad, and Pune. With 10-12% annual growth in the IT sector likely to persist until 2020, demand for office growth should remain strong for the next few years in the above-mentioned technology-driven cities, said Colliers Research’s India Property Outlook 2017 report.
In the last few years, L&T Realty has strategically streamlined its real estate development business by exiting and selling off certain projects and focusing on some others. In 2015, it exited its real estate business in north India when it sold its project, which included a mall, offices and a hotel, in Chandigarh to Carnival Group for Rs1,785 crore. Last year, it sold a million sq.ft of retail space in L&T Realty Ltd’s Seawoods project in Navi Mumbai for Rs1,450 crore because the firm didn’t want to operate shopping malls. Exiting the Chennai township project was also part of that strategy.
Joshi said the business model is clear—the firm does not want to focus on a large number of projects, it will take up new projects selectively and will not buy land but look for suitable partners to jointly develop projects.
“Real estate is a focused play and we want to focus on projects in Mumbai,” said Joshi.