Tata Realty: How Tata Sons' real estate arm is consolidating its position in the country's housing and construction market

When Tata Realty & Infrastructure Ltd (TRIL) was established in 2007, its primary focus was on commercial real estate. As a 100% subsidiary of Tata Sons, TRIL has undergone a remarkable evolution, emerging as the comprehensive real estate arm of the salt-to-software conglomerate, spanning both commercial and residential markets. Moreover, it has seized opportunities in the burgeoning infrastructure sector across the country. With the disruptive impact of the Covid-19 pandemic waning, the company is gearing up for rapid expansion, aiming to capture the top spots in five to six key Indian markets, drawing upon its expertise garnered from international ventures, and spearheading significant infrastructure projects.

According to Sanjay Dutt, Managing Director & Chief Executive Officer of TRIL, it was while the company was trying to shake off the effects of the pandemic-induced disruptions that the seeds of the future growth were being sowed. “We are now ready to launch 10 million sq. ft of projects between Delhi-NCR, Mumbai and Bengaluru markets. These are over and above our ongoing projects in Bhubaneswar, Pune, Bengaluru and other locations like Bahadurgarh and Sohna in NCR,” he says, adding that together, these projects are expected to fetch the company `16,000 crore.

TRIL’s growth narrative is seen by industry insiders as a testament to its potential as one of the select few professionally managed real estate companies in the nation capable of ascending to the big league. However, it’s only in recent times that TRIL truly began to flourish. Prior to the onset of the pandemic, TRIL had already showcased its prowess with a total income of `1,744 crore in FY19. Yet, despite this, internal competition among group entities, among other factors, had previously hindered its growth trajectory.

The internal competition was primarily with another Tata Sons subsidiary, Tata Housing Development Company (THDC). “In the past, with separate top managements of TRIL and THDC, instances of bidding for the same project by the two companies have been common. There are instances when both lost out,” explains a former executive who spoke on condition of anonymity. According to the former executive, once the two entities were brought under the same management, their strategies became more streamlined. The change in top management effectively came in 2018, when Dutt—who is a real estate industry veteran with experience of heading commercial real estate services firm Cushman & Wakefield’s India operations and diversified real estate group CapitaLand—joined the conglomerate to head both the entities as MD & CEO. Now, THDC is a subsidiary of TRIL.

Then the pandemic struck, and TRIL saw its top line decline in FY20 and FY21. In the next two years, however, it registered a strong comeback. With the pandemic’s impact gradually diminishing, FY22 saw a surge, with its top line soaring by 46% year-on-year (YoY) to Rs 1,818 crore from Rs 1,242 crore. And in FY23, the number skyrocketed by 140% YoY to `4,361 crore, demonstrating a robust resurgence.

Dutt says that although the pandemic did play its part, the complete overhaul that TRIL underwent was also why its finances were impacted. And once the process was completed, the numbers quickly jumped.

“We were redesigning our products and realigning our business [model] and teams. During the time, we also bought out several of our project partners. Multiple projects were under construction. For instance, since 2019 we have completed 21 projects,” he explains.

A closer look at the company’s bottom line makes the story of its transformation clearer. From grappling with a net loss of Rs 303 crore in FY21, the company orchestrated a remarkable turnaround, reporting a net profit of Rs 82 crore in FY22. However, the upturn didn’t halt there. In the subsequent fiscal, FY23, the figure surged to Rs 2,414 crore. Apart from turning its operations more efficient after the overhaul, the completion time for its projects has also reduced significantly as the company became “more agile and lean”, which helped it turn profitable. Also, the consolidation of TRIL and THDC under one unified management proved to be a strategic success, yielding tangible dividends and amplifying synergies across the board.

According to Akshaya Kumar, Founder & CEO of real estate advisory firm Park Lane Property Advisors, after TRIL was able to consolidate its operations, the company had much to gain. “Tata Realty is currently being run by a smart market-savvy leader and, with the market moving towards branded developers, the company has much to gain. Its performance in FY23 is already indicating a strong momentum,” he says.

Coming back to TRIL’s present, Dutt says new projects would be launched and executed over the next three years. And while it would undoubtedly boost the company’s fortunes in the near term, these projects may also alter the company’s exposure in India. While the Delhi-NCR and East markets are currently the largest in TRIL’s portfolio, Dutt expects the new projects to tilt the balance towards Mumbai. Out of 10 million sq. ft of new launches, 40% will be in Mumbai, which will be a mix of greenfield and redevelopment sites. These luxury projects in Mumbai are anticipated to yield additional revenue of approximately Rs 7,500-8,000 crore, consolidating the city’s position as not only the largest residential real estate market in the country but also TRIL’s foremost market. “In the next [financial] year, Mumbai is likely to be the largest,” confirms Dutt.

In addition to its increased presence in TRIL’s latest ventures, the consistent appreciation of property prices in Mumbai has propelled its ascent within TRIL’s existing portfolio, surpassing traditional strongholds such as the NCR market. To put this in context, just five years ago, the average rate stood at Rs 6,000-7,000 per sq. ft; today, residential projects under its Mumbai portfolio command an average exceeding Rs 12,000 per sq. ft. Roughly 70% of these new developments fall within the premium and luxury segments, while the remaining 30% cater to the aspirational, affordable and mid-range housing categories. As a result, the company management now estimates that the revenue of its residential business will double in FY25 from the current Rs 2,500 crore levels.

Dutt says that TRIL’s presence in Mumbai is limited, but the potential is huge. “Nearly Rs 8,000 crore out of the Rs 11,000 crore worth of residential projects in our pipeline will be coming from Mumbai,” he adds.

Dutt is now readying TRIL for the long haul. In the commercial space, which is the firm’s traditional stronghold, the company has built 10 million sq. ft of real estate, while another 10 million sq. ft is under various stages of development. The company recently acquired a 25-acre land parcel in Bengaluru’s upmarket Whitefield area from Graphite India, which will give it an additional 4.5 million sq. ft of commercial space. “Thus, roughly, 10 million sq. ft of new additions will be greenfield projects and takes the total area to 30 million sq. ft,” says Dutt.

Additionally, TRIL has a major presence in two of India’s neighbours—Sri Lanka and the Maldives. It is increasingly moving into the luxury segment in the Maldives, and its project in Sri Lanka’s Colombo—nearly 2.5 million sq. ft for mixed use—is expected to rake in an additional `2,000 crore. The plan is to develop and exit these international markets eventually. 

@arndutt