In an interview with Moneycontrol, Sushil Kumar Sayal, MD and CEO, Bharti Realty, chalks out company’s progress in Aerocity.
As Aerocity, the 1.5 million-sq ft business hub located in the heart of New Delhi, gets ready to play host to major headquarters of financial institutions, Global Fortune 500 companies and top-in-line government institutions, Bharti Realty is hopeful of increasing its occupancies in its mixed-used development project Worldmark.
In an interview with Moneycontrol, Sushil Kumar Sayal, Managing Director and CEO, Bharti Realty Limited, chalks out company’s plans for commercial and residential projects. He believes that RERA might not prove to be a challenge for corporate developers while the Goods and Services Tax will make things a lot easier. Edited Excerpts:
Tell us something about your various retail projects coming up in CBD (central business district) area which is located right next to the airport?
We have got this flagship development Worldmark [a mixed-used development by Bharti Realty] in Aerocity area which is a 1.5 million sq ft development primarily for offices with high street retail. As you see, this Aerocity area is slowly taking the shape of a CBD because of its location, its proximity to the airport, proximity to the millennium city and the capital of the country. Most multi-national companies, wanting better security and accessibility, are moving to Worldmark.
Currently, out of 1.5 million sq ft area, we have around 900,000 sq ft area for offices and 500,000 sq ft for retail. Offices close to 85 percent have already been leased out where all the top Fortune 500 companies have moved in. Occupancy levels are going up. We have currently close to 6000-7000 people working out of Worldmark and we see the next six months seeing that number go up to 10,000. For retail, this is a new destination which is taking shape.
Is this area popular as an office destination because of its proximity to both Gurgaon as well as the Capital city?
This is the first smart commercial district where all the facilities right from security and other smart features are available as part of this development. Also, it is close to both Gurgaon (now Gurugram) as well as the Capital.
Can you tell us about the tenants that are moving here or about the ones you are in talks with?
We have a majority of Japanese companies who are headquartered in Connaught Place in all the premium buildings. A majority of them have already moved in to our buildings. We have the top financial institutions, globally the likes of IMF and IFC, which are making a move to this place. We have got Airbus. Its Indian headquarters are already here in this building and we have got GSTN, the implementing body for GST -- they are all headquartered here. National Skill Development Council, announced by Prime Minister Narendra Modi, is also being headquartered here.
This area will then house headquarters of all the major companies?
All major headquarters of major financial institutions, Global Fortune 500 companies and top-in-line government institutions are all ready to move into this place.
How many sq ft would companies be taking up here? What is the total area taken up so far?
Currently, we have leased out 7.5 lakh sq ft area for offices and 3.5 lakh sq ft area for retail out of a total 1.5 million sq ft development.
Tell us about your other commercial facilities in Gurgaon and Manesar?
All the top companies, which move in here, look at back-offices at reasonable rentals and we see that we should develop something in the NCR area where these people find similar kind of buildings and the same class of facilities but at lower rentals. So, we started a project in Gurgaon called Worldmark, in Sector 65 and by next year we will be delivering this project. Many Fortune 500 companies have started looking for big format office spaces there.
What would be the rentals like when compared to NCR?
Aerocity rentals will be at an average of USD 2.5-3 per sq ft (Rs 160-200 per sq ft). Against this, we see that we can get office and retail spaces at 50 percent of the rentals in Gurgaon region, with similar kind of facilities, similar kind of amenities and the same class of buildings.
Have any companies have shown interest?
A lot of companies are looking at big areas. We, in fact, are negotiating with a few people to meet their ‘built-to-suit’ requirements as well since the building is in the developing stage. And, I’m sure, by the time the building is complete, we will be close to 100 percent leased-out in that area as well.
And what about your plans in Manesar? How is that going to be different from Gurugram or Aerocity projects?
We started developing for in-house companies for the Bharti Group. In the process we developed an area in Manesar which is close to 7 lakh sq ft area. It is a single building and we are looking at people who are wanting to have space much lower than normal office spaces. If someone is looking at a space at Rs 30 per sq ft, I think that’s the address. So, we cater to all the categories in office space requirements. Right from Rs 30 per sq ft to Rs 80 per sq ft to Rs 200 per sq ft. So, Manesar in Sector 34 will majorly cover the rental category of Rs 30 to Rs 60 per sq ft.
And what kind of companies do you think will fit that bracket?
One is the back office variant; others are new start-ups and companies which are looking at innovating in some area or incubation centres can also take space over there. Also, educational institutions because each floor is spread across 50,000 sq ft area. Efficiency of area is much better there.
Tell us about your plans for a residential smart city?
Primarily, Bharti is into top-in-line marquee commercial developments. In Surajkund [near Faridabad], we signed the first residential project which is known as The Delhi Ridges, which is the first residential project and Bharti’s foray into the residential segment. Let me tell you, the Surajkund project is in one of the top locations in the NCR in terms of infrastructure development and environmental index. We are going to start soon as we are still in the process of getting approvals and in the next two-three months time we shall break ground there.
What is your take on GST for commercial properties?
GST is finally going to be implemented and there is a lot of discussion going on both in political and business corridors. The rates have also been announced and now our financial experts are seeing what kind of impact it will have on construction or in the leasing business and soon we’ll get to know. It is going to be more or less better with the uniform taxation policy of the government.
What about the challenges that you as a developer are facing in complying with the new RERA norms that have kicked in?
As a corporate developer, RERA is absolutely no challenge. We have been following this practice from the word go. I think RERA is a bigger challenge for the typical ‘fly-by- night’ operators or the developers which have come up in the last one decade. Corporates are complying with all the rules and regulations - not to build one inch more than what is permitted, get all the approvals, sanctions, utilise project money only for the project, open an escrow account. I think these have been practiced for the last two decades. We don’t see RERA as a challenge at all with developers like Bharti.
What about the scope of real estate asset management? Does Bharti Realty see itself entering that space?
In fact, I was the author of Real Estate Asset Management model in the country where in 2000 we signed (in my earlier company Central Park as the first project). We as a corporate developer are going to deliver projects on time. And if external infrastructure is not guaranteed, we don’t want to create ghost stocks.
What is your prime focus area?
Our focus is primarily the NCR area (but we have been approached from all over the country). We see a lot that is to be done here. We know the territory; we know the area and people know us and currently we are developing close to 10 million sq ft area, including residential and commercial.
In the real estate asset management sphere what would your fees work out to be and what kind of revenue generation targets are you looking at?
Our fees totally depend on the size and the duration of the project. In a typical residential project, it moves from 10-12 percent of the top line but it costs zero money to the land owner. If a brand comes in and you get a development expertise, your saleability becomes faster, you achieve better pricing, your delivery is assured. So, with all these factors, 10-12 percent of the top line is nothing for the land owners and in commercial areas, if someone wants to retain the asset, 12-15 months equivalent rental we charge as real estate management fee.
How many sq ft are you looking at for asset management?Project size should be close to a million sq ft area. Below that it does not make much sense to us to get into and, second, for real estate asset management, the credibility of the land owner is also very important. In this model, the finances, the land and approvals are the responsibility of the land owner.LIVE NOW... Video series on How to Double Your Monthly Income... where Rahul Shah, Ex-Swiss Investment Banker and one of India's leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.