Leading Japanese real estate developers are now setting their sights on the Indian market. Reports indicate that due to the rapidly growing economy and comparatively lower construction costs, they are investing in India's real estate market. With office rents on the rise in India, it is expected that more Japanese companies will soon step into Indian real estate.
A prime example is Mitsui Fudosan, Japan's largest property developer, which entered India in 2020 by partnering with local developer RMZ Real Estate to build an office complex in Bengaluru. Reports suggest that Mitsui Fudosan is gearing up to invest more significantly in India.
The company may start a new project worth 30 to 35 billion yen (1,500 to 1,875 crores rupees) in collaboration with RMZ or another builder. It has been reported that the company's management team recently toured areas around Mumbai and New Delhi to explore new business opportunities.
Sumitomo Realty Focuses on Mumbai
Japan’s third-largest developer, Sumitomo Realty & Development, considers Mumbai its second growth engine after Tokyo and has committed to investing 6.5 billion dollars in five projects within the city, including two new sites added this year.
Why Are Japanese Developers Interested in India's Real Estate?
The primary appeal for Japanese developers to invest in India is the country's low labor costs. Additionally, with an average economic growth of 8% over the past three fiscal years, the rent for premium office spaces in India has escalated sharply. The Bandra-Kurla Complex in Mumbai led the Asia-Pacific region in commercial rent growth in the third quarter, recording a substantial 14.2% increase.
Data from real estate consultancy Turner & Townsend shows a significant global disparity in the cost of building major office buildings. While constructing a 20-story premium office building can cost over $8,000 per square meter in New York, approximately $5,300 in London, and up to $4,000 in Tokyo, in Mumbai, India, the same work is achieved at a mere $656 per square meter. This low cost makes India an attractive investment destination for Japanese developers.
Impact on India?
The increasing investment in India is infusing crucial capital, enhancing quality, and meeting international standards in the Indian real estate market. These investments will increase market liquidity and encourage other foreign investors to enter. Japanese companies are not only enhancing traditional office and residential projects but are also improving construction quality by bringing advanced technology and top-notch design to new sectors like logistics and data centers.
