Covid ensured that fly-by-night operators vanished: Tata Realty & Infra MD

Tata Realty & Infrastructure (TRIL), the real estate arm of Tata Sons, this week signed a joint venture with Canada’s largest pension fund manager, Canada Pension Plan Investment Board (CPP Investments), to develop and acquire commercial properties in the country. Sanjay Dutt, managing director of TRIL and Tata Housing Development Company, spoke to Raghavendra Kamath about the joint venture’s plans and his outlook for the real estate sector. Edited excerpts:

How much growth capital has been committed by CPP Investments in the joint venture with Tata Realty?

CPP Investments has committed growth capital of Rs 1,000 crore and so have we. This is for new land parcels.

How will this platform help in speeding up your REIT (real estate investment trusts) plans?

The Rs 2,000 crore is for new projects and there will be additional money to acquire existing ones. We have a current portfolio of 7.5 million square feet (existing) and 14 million square feet (under develo­pment) in various stages of design and development. The Rs 2,000 crore will give an additional 10 million square feet. If you add ready assets there will be 45 million square feet of portfolio in seven years. With a credible partner and additional money, we can explore opportunities together and fast-track our investments.

The joint venture is coming at a time when a new wave of the pandemic is spreading. How do you look at it?

There is clarity globally that employees need to work in a healthy environment in well-certified buildings. “Only work from home” has failed. Some functions need to come to the office. We feel mixed-use projects with retail, wellness, and office will do well and we will focus on that.

How will you handle the overlap where the same investor, CPP in this case, has invested in two commercial real estate developers?

India is a 40-million square feet office market annually in the top eight cities. There is enough room for all developers. The pandemic has ensured that fly-by-night operators vanish by themselves as commercial real estate is a capital-intensive business and not everyone has capital. These two factors give us comfort to grow the business.

What is your outlook on office rents and demand in coming quarters?

We believe rents are firming up because the demand has gone up. But not so with the supply. Tenants are terminating contracts at badly constructed offices and moving to new well-built buildings.

In the past you have built and sold malls. Will you stay away from that segment?

We may have sold malls in Amritsar and Nagpur but we have never said we will not build shopping centres. We are doing retail. We believe mixed-use centres are better from a real estate development point of view. But we will not build standalone malls.

With the view that the Reserve Bank of India may increase rates, how do you look at the demand for residential properties in coming months?

Job confidence, increase in overall hiring, and top packages for talent will ensure demand for the residential will go up. More and more people are ready to pay for better typology, amenities, and wellness-oriented development. There is some concern about inflation but the momentum in residential real estate will not go down. It will only go up.

Will you look at flexible workspaces?

We are doing flexible workspaces as part of our development through operators of services offices. We also do fully fitted-out offices.