Nitesh Estates to ramp up rental portfolio

Bengaluru-based real estate developer Nitesh Estates Ltd has hired Mahesh Laxmana as chief executive officer of commercial and rental business to boost its play in the segment, it said in a statement.

The company aims to enhance its rental portfolio to 5 million sq ft across locations such as central business districts and key micro markets of Bengaluru. It will pump in roughly Rs 1,500 crore to develop and acquire projects to strengthen its portfolio of rent-yielding assets.

“Nitesh Estates will diversify its portfolio mix with a well-balanced commercial and rental asset class. Our plan to build 5 million sq ft of grade A office space in Bengaluru will also set the pace to establish a footprint in a number of other cities within five years,” said Mahesh Laxman, CEO, commercial and rental business, Nitesh Estates.

Back in 2015, the developer set up a platform with marquee investor Goldman Sachs to acquire ready-made commercial assets across India. With a corpus of $250 million, the platform aims to invest in income-generating assets across cities such as Pune, Chennai, Hyderabad and Mumbai.

At the same time, it sealed its maiden deal under the platform by buying a 1 million sq ft mall in Pune, taking its total retail portfolio to 2.2 million sq ft.

Given a growing demand for commercial real estate and a spike in interest among global retailers, rent-generating assets have been on the radar of both developers and investors. Global investors such as Blackstone, GIC and Brookfield have taken exposure to the segment over the years and have ramped up their activities lately. Brookfield recently closed a $1 billion transaction with Hiranandani Group for commercial assets. Singapore’s sovereign wealth fund GIC also sealed a mega deal with DLF Ltd to buy a 40% stake of the promoter group in the rental arm of the developer.

Many developers have either forayed or ramped up their focus on the segment, due to the growing opportunity and the sluggish sales movement in the residential segment.

Office space is the only bright spot in the real estate market that has been going through a prolonged slowdown. According to consultancy firm JLL India, at the end of Q3 2016, India’s total grade A office stock stood at 472 million sq ft with an average vacancy rate of 15.3%. The average vacancy rate has been declining since 2013 amid a strong demand from domestic as well as international office occupiers, and this trend is forecast to continue in the medium to long term.

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