Sumitomo Realty Acquires Property in Mumbai to Increase Investment in India

The Japanese developer Sumitomo Realty announced the purchase of a sizable plot of land for a mixed-use development in Mumbai's Worli neighborhood that maintains a fair value estimate of JPY 4,000 for Sumitomo Realty 8830, which is equivalent to 0.49 times the net asset value and 7% above the current share price. This is its third investment in the Indian city since 2019. This acquisition is significant because it is even larger than Sumitomo Realty’s first two projects in Mumbai, BKC1 announced in 2019 and BKC2 announced in 2022, in which the company is investing JPY 200 billion and which will add 260,000 square meters of gross floor area by March 2028.

A total of JPY 500 billion will be invested in the project, which is expected to add more than 1 million square meters and be completed probably in the middle of 2030.

The company projects that by March 2028, BKC1 and BKC2 will collectively account for about 3% of Sumitomo Realty's total operating profit, given that office rents in Mumbai are currently comparable to those in central Tokyo. As a result, India could contribute almost 10% of Sumitomo Realty's profits in ten years thanks to the new Worli project, which is significantly bigger than BKC1 and BKC2 combined. Compared with investment in offices in Tokyo, the development risks for Sumitomo Realty are larger in India, however, this is countered by the greater potential for future growth. Since the Worli site has been owned by the related conglomerate and family of the seller Bombay Dyeing for about 150 years, it may be possible to avoid some of the risks typically associated with land development in India. These risks appear to be lower in this case than they are in the acquisition of other plots of land in India, which can be subject to extended and complex lawsuits from parties claiming to have a title to the land. With five-star hotels nearby and the upcoming opening of the Worli and Siddhivinayak Metro Line 3 stations, the plot should also profit from a favorable location.