Sumitomo Realty Expands in Mumbai with Unique Serviced Apartment Strategy

Japan’s Sumitomo Realty and Development, the third-largest developer in Japan, is making a strategic move to enhance its presence in India’s real estate market, specifically focusing on Mumbai. Instead of adopting the conventional approach of selling properties, the company plans to manage serviced apartments, aiming to capitalize on the rising demand for rental housing in the city.

The shift comes as Japanese developers increasingly invest in India’s real estate sector, valued at approximately $300 billion. Factors such as escalating rents and significantly lower construction costs compared to major cities like Tokyo, New York, and London have drawn interest from international players. Companies like Mitsui Fudosan and Blackstone have established their foothold in India by collaborating with local firms or acquiring completed buildings due to challenges in land acquisition.

Focusing on Mumbai’s Potential

In an interview with Reuters, Niinomi Masato, general manager of Sumitomo’s India business division, highlighted Mumbai’s attributes, stating, “Just like Tokyo, Mumbai has assets and vitality that are worth focusing on.” Sumitomo views Mumbai as its “second growth engine” after Tokyo, where it currently manages 240 properties. The company perceives Mumbai as having fewer geographical risks compared to other regions, such as the threat of earthquakes which can adversely affect assets and revenue streams.

Tomoki Iwata, the managing director of Sumitomo’s Indian unit Goisu Realty, noted that while the company is evaluating potential projects in other cities like Delhi, Bengaluru, and Chennai, it has not yet identified suitable sites. He explained that Mumbai offers a unique advantage due to a land crunch that creates opportunities for long-term rental growth. Currently, Sumitomo is developing five projects in India, all located in Mumbai, with four situated in the Bandra Kurla Complex—a prime area near the international airport, attracting numerous global corporations.

Adopting a Serviced Approach

Sumitomo’s strategy diverges from the traditional market trend of luxury home sales, which have surged in India as wealth levels rise. The average rent for premium apartments in South Mumbai this year reached 730,000 rupees (approximately $8,096) per month, representing a 20 percent increase over the past three years, according to data from Cushman & Wakefield. In contrast, local developers such as Oberoi Realty and Godrej Properties primarily sell luxury homes priced in the millions.

Masato emphasized that Sumitomo is not inclined to simply follow the market trend, stating, “We are not of the opinion that we should simply follow suit.” Instead, the company plans to manage and rent out apartments in one of its “super-high-rise” projects in Mumbai, aligning with its vision for sustainable growth.

Sumitomo has committed approximately $6.5 billion to its investments in India, having already spent a quarter of this amount. The completion of the four Bandra Kurla projects is anticipated within five years, with cash flows generated from these developments expected to fund future expansions.

As Sumitomo Realty continues to carve out its niche in Mumbai’s competitive real estate landscape, its focus on serviced apartments could redefine rental housing in one of India’s most dynamic cities.