Sumitomo Realty Targets Mumbai with Unique Apartment Strategy

Japan’s third-largest property developer, Sumitomo Realty and Development, is making a significant investment in India, focusing on the vibrant city of Mumbai. The company plans to adopt a distinctive approach by managing serviced apartments instead of selling them outright, a strategy that sets it apart from many of its competitors in the rapidly growing Indian real estate market, valued at approximately $300 billion.

Japanese developers have increasingly turned their attention to India, drawn by rising rental prices and comparatively lower construction costs than those found in major cities such as Tokyo, New York, or London. Other prominent players, including Mitsui Fudosan and U.S.-based Blackstone, have leveraged partnerships with local firms or acquired completed buildings to navigate the challenges posed by slow land acquisition processes. In contrast, Sumitomo is opting for ground-up construction, with a clear focus on the potential of Mumbai.

Strategic Focus on Mumbai

In an interview, Niinomi Masato, general manager of Sumitomo’s India business division, emphasized the importance of Mumbai, stating, “Just like Tokyo, Mumbai has assets and vitality that are worth focusing on.” He further described Mumbai as the company’s “second growth engine” after Tokyo, where Sumitomo currently manages 240 buildings. Notably, Masato underscored the geographical advantages of Mumbai, pointing out that the city has fewer risks associated with natural disasters like earthquakes, which can adversely impact asset value and cash flow.

Tomoki Iwata, managing director of Sumitomo’s Indian unit, Goisu Realty, indicated that while the company is exploring opportunities in other major cities such as Delhi, Bengaluru, and Chennai, it has not yet identified suitable locations. Iwata noted that Mumbai’s land constraints present a unique opportunity for long-term rental growth, setting it apart from the more competitive markets in other cities.

Currently, Sumitomo is developing five projects in Mumbai, including four located in the Bandra Kurla Complex, which is adjacent to the international airport and is home to numerous global corporations. Iwata projected that these four projects would be completed within five years, with cash flows generated from these developments aiding future expansion. He also revealed that Sumitomo has already allocated a quarter of its committed $6.5 billion investment in India, although he refrained from disclosing further specifics.

Managing, Not Selling

As wealth in India continues to grow, the luxury housing market has experienced a surge, with average rents in South Mumbai reaching as high as 730,000 rupees (approximately $8,096) per month, marking a 20 percent increase over the past three years, according to real estate firm Cushman & Wakefield. While local developers like Oberoi Realty and Godrej Properties typically focus on selling luxury homes for millions of dollars, Sumitomo Realty is taking a different direction.

Masato articulated the company’s philosophy, stating, “We are not of the opinion that we should simply follow suit.” Instead, Sumitomo plans to manage and rent out apartments within one of its “super-high-rise” projects in Mumbai, reflecting a strategic pivot that prioritizes long-term rental income over immediate sales.

By focusing on serviced apartments in Mumbai, Sumitomo Realty and Development aims to carve out a unique niche in India’s competitive real estate landscape, demonstrating confidence in the city’s potential for sustained growth and profitability.