In a market that’s facing excess supply over demand, here’s a concept that works for the seller as well as the buyers — it is called the build-to-suit concept.
Real estate developers are wooing corporates to build office spaces as per the user’s specific requirement.
Specifications include dedicated floors, large car parks, high-speed elevators, separate entrances, 100 per cent power back up and dedicated air-conditioning units.
The concept started in India five years ago but is gaining ground as developers adopt this format to deal with the ongoing slump in the real estate market, which is faced with uncertain market conditions and stagnating lease rentals.
“Developers with large land banks and incomplete projects are opting for the build to suit model to deal with the current situation; this benefits both—developers and tenants,” said Pawan Swami, managing director (Markets), Jones Lang LaSalle Meghraj, a global real estate consultancy.
The concept works both ways. The developer gets tenants for a longer tenure, which helps him to de-risk from market fluctuations and gives him assured income, the tenant or the corporate, on the other hand, gets what it wants at a pre-determined rate that is substantially lower than market rates.
“Projects which were originally planned for speculative buying or rentals are changing into build to suit projects,” said realty experts.
“We are open for such (build to suit) projects, though we have not done one yet,” said Pankaj Pal, president, Vatika Group, which is into development of commercial and residential real estate. In NCR Delhi it has over 3 million sq ft spece either on lease or under development.
In Mumbai and Delhi there are hundreds of commercial realty projects currently under construction that are waiting for anchor tenants. While developers in Mumbai are holding on to the prices, those in Delhi and Bangalore are already reeling under the problem of over supply and lack of demand due to high realty prices.
Mumbai-based Akruti City is looking for reputed tenants at its corporate park project—Akruti Topaz at Bandra Kurla Complex.
“Slump or no slump there is always a demand for quality projects. Large corporates and IT companies prefer our projects as these are tailor-made for them,” said Hemant Shah, CMD, Akruti City, which began the build-to-suit concept in 2000.
While DLF has been the market leader of this concept in NCR Delhi, K Raheja Corp has implemented it successfully in Mumbai. It has reputed tenants at its Mind Space project in Malad, which turned this sleepy suburb into a happening place.