Oberoi Realty, India’s second largest builder by market value, plans to list commercial assets on a Real Estate Investment Trust (REIT) and expects to generate rental revenues of around Rs 10 billion.
In 2016-17, it generated a revenue of Rs3.20 billion from its leased commercial assets, accounting for about 27% of its overall revenue.
The Mumbai-based company, which currently operates one retail mall and two commercial office buildings in the city, had earlier announced plans to set up a separate mall unit with the aim to spin it off at a later stage.
It plans to build two more shopping malls totalling around 1.7 million sq. ft as part of its existing mixed-used developments at Worli and Borivali in Mumbai.
“With two shopping malls coming up, we should be doing a total of around Rs10 billion of rentals in the next three years,” Vikas Oberoi, Chairman and Managing Director, Oberoi Realty said in an interview to Economic Times.
“It doesn’t make sense to tie up with any private equity firms at the moment. Our borrowing cost is around 8%. Their (PE) expectations on returns are around 12%. We can’t accept their expectations or rate of returns. We will REIT it ourselves,” he said.