Singapore-listed and headquartered company CapitaLand Investment (CLI) is planning to double its portfolio in India. Its assets under management in India are currently valued at about $4 billion and this is likely to touch S$7-8 billion over the next three years, Sanjeev Dasgupta, CEO, CapitaLand Investment India and CapitaLand India Trust told Moneycontrol.

The company is also looking at expanding to the eastern region and planning to enter the renewable energy business. It plans to scale up its real estate portfolio to 50 million square feet in the next three years.

The India portfolio includes business parks, industrial and logistics parks, serviced apartment projects, co-working spaces and data centres.

The largest pie of the company’s investment currently is in the IT parks segment which is between 85-90 percent, followed by logistics. The company is hopeful that the data centre segment will be a bigger contributor to the overall business. “Maybe five years from now, we may end up with 75 percent IT parks, 15 percent data centres and about 10 percent logistics and infrastructure projects. The data centre story may take about four to five years,” Dasgupta said.

“The assets under management in India are spread across an area of almost 30 million sq ft. The company’s business parks currently comprise space of about 22.6 million sq ft. Almost 7.1 million sq ft is industrial and logistics space,” he said, adding that in the next three to four years this may increase to almost 50 million sq ft.

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Foray into Tier 2 towns

The company is currently focused on the top six cities of Mumbai, Delhi-NCR (Gurgaon), Bengaluru, Hyderabad, Pune and Chennai. The company does not intend to add more facilities in these cities but is considering expansion to Tier 1.5 and Tier 2 towns for logistics. “I think that’s the only place where there is opportunity to go into Tier 2 cities,” said Dasgupta.

Look East strategy

The company is currently developing a logistics facility in Kolkata. It also has a similar facility in Ahmedabad and may look at markets such as Lucknow, Jaipur and Guwahati. “The focus is currently on eastward expansion,” he said

”These will all be logistics hubs. Guwahati is like the gateway to the northeast. It’s an important distribution centre. So all products that are sold in the Northeast, their distribution centres are in Guwahati. There’s a severe shortage of good quality warehousing facilities there,” Dasgupta pointed out.

“We are looking for land in places like Jaipur, Lucknow, Guwahati and Bhubaneswar. Each of these cities is a gateway to the state or sometimes neighbouring states. That’s why they are important distribution centres. But having said that, I must admit that getting access to clean title land in some of these markets is more challenging than it is in the big cities,” he said.

“Interestingly, rents in Guwahati and Ranchi are higher than in Bengaluru and Chennai in the logistics space,” he added. Grade A warehousing rents in markets such as Bengaluru or Chennai are in the range of Rs 23 to 25 per sq ft. In Guwahati these may be more than Rs 25 per sq ft primarily because there’s hardly any supply available, he explained.

New role as CEO

Dasgupta is excited about the larger mandate that his new role as CEO provides. “I’m very fortunate that it’s happening at a time when India has truly become one of the few bright spots globally in what’s an uncertain and volatile environment. And our intent clearly is to allocate more capital to India to benefit from these developments,” he said, adding that in of the three business segments the company is present in to varying degrees—IT parks, logistics and industrial, and data centres—the IT parks space shows promise since “India is increasingly the outsourcing hub for IT services globally”.

Companies based in IT parks and the Hollywood connect

Indian companies are no longer doing low-end IT service work. “They are into high-end, cutting-edge work,” said Dasgupta, point out that some of CLI’s tenants in Bengaluru are behind special effects in Hollywood movies Top Gun: Maverick apart from TV shows and games.

“IT parks, the logistics and industrial sector and manufacturing are doing well in India. Several foreign companies are relocating their manufacturing businesses to India,” he said.

Also read: Investments in proptech firms dip only 3% in 2022 despite global headwinds: Report

Data centres business in India

The two key drivers for the growth of data centres in India is the fact that the country has the highest per-person data consumption globally with among the world’s cheapest data charges. The second part is cloud infrastructure, and “I think with AI adoption with generative AI, ChatGPT, and so on, the need for data is going to go up phenomenally”.

The company’s total investment in data centres in India is about S$ 1.4-1.5 billion. It plans to set up data centres in Noida and perhaps Kolkata.

Focus on renewable energy

The company is also evaluating opportunities in the renewable energy business. “We plan to get into renewable energy, primarily solar and even wind energy,” Dasgupta said.

“We are actually setting up our first solar power plant into Tuticorin. We are expecting it to go live in the next couple of months, in fact. The investment is about Rs 110 crore or something. This is going to be about 29 megawatts. The first phase with a capacity of 21 MW is expected to go live in the next couple of months, and the second phase probably by the end of the year.”

The reason why the company is looking at some of these new asset classes is because it thinks there are synergies with what it does. He said the company got into solar energy because IT parks require massive amounts of power. “This (solar energy) is the way to service our own captive demand,” he said.

Over time, the company may even start looking at real estate credit, he said, adding it is currently at a nascent stage. The company is planning to keep the fund size between S$100 million and $200 million and will be funding both residential and commercial projects.

Land acquisition model

Historically, the company has had three pools of capital in India. One is Capital and India Trust, which is a real estate investment trust (REIT) listed in Singapore. The others are private equity funds. The company has also been investing from its balance sheet. “Two and a half years back, we changed the company’s structure where we are into both capital and investment. The India business is now primarily a real estate fund manager,” Dasgupta said.

The company’s source of capital going forward will be the listed REIT and new private equity funds in addition to the ones that it already has. The company generally tends to buy income-producing assets or do forward purchases in the REIT listed in Singapore.

“We typically don’t buy land in the REIT. We only made an exception for data centres. For IT parks we don’t buy land in the REIT. The private equity funds are mainly for greenfield development projects. Private equity funds are being deployed for both logistics and for IT parks. There we are buying land, doing the construction, leasing out and eventually exiting,” he said.

REIT in India 

Asked if the company has any plans to list a REIT in India, Dasgupta said that if it does so, “we may have to take it private in Singapore and re-list in India. I mean, at this point of time, if you ask me, the cost of capital of Indian REITs is higher than it is for a REIT to be listed in Singapore. It’s harder to list in Singapore because the governance requirements are very high. One of the challenges for REITs in India has been that they have to fund their acquisitions primarily by raising new equity. So it becomes very diluted for the shareholders. At this point of time, we think that the business case is still quite robust to stay listed in Singapore,” he said.

Global headwinds and leasing commitments

Leasing commitments in the first half of the year have held up reasonably well. The two important things about office leasing that the company are currently witnessing is that one, tenants are now pushing their employees to come back to work, and two, vacancies in buildings with better amenities are low.

He also said that demand for co-working spaces is on the rise. “Co-working offices today also provide for cabins. The tenant profile of co-working spaces is turning corporate. The reason why corporates are choosing to take up co-working space as opposed to going into the main office is because they are not sure how many employees they will be able to bring back. They are also trying to save on capital expenditure,” he said.

Asked if the company was also exploring options in the co-working space, he said “We took a conscious decision that we will do co-working only for ourselves. We haven’t leased much space to co-working companies at all. We have a brand called Bridge+ in India, which is currently in Bengaluru. We are also in the process of creating a new Bridge+ in the same city,” he added.