Mindspace Business Parks REIT (NSE: MINDSPACE) Q3 2025 Earnings Call dated Jan. 24, 2025
Corporate Participants:
Nitin Garewal — Finance and Investor Relations
Ramesh Nair — Chief Executive Officer
Preeti Chheda — Chief Financial Officer
Analysts:
Pritesh Sheth — Analyst
Abhinav Sinha — Analyst
Puneet Gulati — Analyst
Tanveer Sohal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Mindspace Business Park REIT Q3 FY ’25 Earnings Conference Call hosted by K Corporation Investor Managers Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assession during the conference call, please signal an operator by pressing the star then zero on your touchdown phone.
I now hand the conference over to Mr Nitin, Assistant General Manager, Finance and Investor Relations. Thank you, and over to you, sir.
Nitin Garewal — Finance and Investor Relations
Good evening, and thank you for joining quarter three FY ’25 earnings call for MineSpace Business Park. At this point, we would like to highlight that the management may make certain statements that may be forward-looking in nature. Please be advised that our actual results may differ materially from these statements. We do not guarantee these statements or results and are not obliged to update them at any point of time. I would now like to welcome our CEO, Ramesh Nayer; and CFO, Priety Chheda, who will walk you through the business update and the financial performance during the quarter. We will then open the floor to Q&A.
Over to you.
Ramesh Nair — Chief Executive Officer
Thanks, Nitin. Good evening, everyone, and thanks for joining us on this call today. I’m pleased to report another strong quarter for REIT. This has been driven by strong performance and positive trends in the Indian commercial real-estate sector. Let me start with an overview and outlook of the commercial real-estate sector in India. India’s commercial real-estate outlook looks very positive. In 2025, India’s demand for grade A office spaces is expected to stay strong. The last quarter of 2024 follow the steady trends seen throughout the year. Clients today are increasingly looking for grade a quality offices with institutional developers and we believe we are very well-positioned to take advantage of this.
On the market front, I’d like to share with you a few insights from the various year-end IPC reports which are read. The JLL report spoke about net absorption growing year-on-year from 42 million square feet to 50 million square feet-in last calendar year ’24. In 2024, India’s office market achieved an all-time high-net absorption. GTCs again played a key role driven by demand from AI, R&D and engineering. The tech sector rebounded, contributing 26% of the total demand. BFSI manufacturing engineering sectors also saw significant growth.
Mumbai, where we have a good chunk of our portfolio achieved an 18% growth in net absorption and moderate supply in many markets is helping rental values go up. The CBRE report stated that GCCs contributed 35% to 40% of leasing. GCC’s leasing grew over 20% compared to 2023 and reduction in vacancies has led to increase in trends. CDRE also, as part of the 2025 predictions spoke about continued demand leading to further growth, tech BFSI to drive leasing demand, demand to further increase in Pune, Mumbai, Bangalore and Hyderabad and MPA demarcation has led to further leasing of SEZ space.
The Kushman and Wakefield report again spoke about increased demand for Grade A offices and vacancy rate reduction to 16%, which is the lowest in the last three years. Kushman also gave their 2025 predictions where they believe that positive — their positive momentum would continue and GCC’s BFSI will keep driving the growth. I recently also came across a research report by lysis Forest on the Navi Mumbai residential market. That report spoke about how demand is surging driven by all the infrastructure upgrades which is happening in and around Navi Mumbai especially projects like the new airport.
This market in and around by 2030 is going to see close to 185,000 new residential units. This residential real-estate influx is expected to work-in our favor and drive office space demand. You may also recollect the KPMG study where I spoke about — which I spoke about a few quarters back, which rated Nabi Mumbai among the top three cities across eight different parameters. In summary, the quarter proved favorable for the industry and research teams at various IPCs hold an optimistic view of 2025. Now let’s come to the REIT’s performance.
On the key announcements of quarter three FY ’25. This quarter has been quite exciting for us. We closed a few large pre-leases. We are offering to buy the Hyderabad asset. We are recording double-digit distribution growth. Our ARPU building at Former zone Karadi in Pune spread across 1 million square feet has been fully pre-leased through a large MNC GCC even before completion. We are expected to get the OC in the next couple of months. We also received OC for our second data center in Mine Space four months ahead of schedule. The High Street retail in Minespace East is set to become operational next quarter with the OC now in-place. Some retailers and SMB brands have already started here.
On our operating performance, as mentioned earlier, we have achieved strong leasing this quarter with several new leases signed. We leased 1.7 million square feet during the quarter, including a pre-lease of 1 million square feet. We are on-track to achieve our highest gross leasing ever in the financial year since listing. Occupancy rates remained stable at 91.5%. I would also like to take this opportunity to point out that sometimes losing a tenant is not always bad news and can bring in many positives into the portfolio.
I’ll record a few examples in Madapur when a global IT major vacated they were paying us in the late 40s, this pace was taken-up by a global BPO major at 75 similarly when a global IT major gave us space at INR48 rupees, our co-working major took the same-space at INR80 rupees. In East, a global IT services firm vacated a space where they were paying rentals in the early 40s again, which was promptly leased to another global IT services firm at 64. In Commerce Lone, when a GCC of a global bank gave us space where they were paying INR72 rupees, a global energy GCC. Took the fitted out space, the global Bank also left some of the fit-outs out to managed to get a rental of 110. This is a very clear opportunity for us when some tenants lead to align our rentals with market values. Sometimes we also get an opportunity to upgrade the tenant mix, replace underperforming tenants and get more high-value stable tenants. We also get to improve efficiency and get an opportunity to reconfigure and upgrade some of our older spaces.
I’m also very happy to report that we achieved 100% occupancy rate in Commer zone, Chennai. With this, we have no space left to lease in Chennai. Our market position remains strong with six out-of-the nine parks maintaining occupancy rates more than 96%. We achieved a re-leasing spread of 26.4%, which increased our in-place rent to INR71.4 per square-foot per month. Also, the government’s — government streamlining of the SEC demarcation process has accelerated the conversion of spaces in our into MTA.
Coming to the financial performance of the quarter, revenue grew by 7.6%, NOI by 8.3% year-on-year respectively. Our NOI came in at INR5.2 billion. Distribution, like I mentioned earlier, saw an increase to 10.9% on a year-on-year basis came in at INR3.15 billion. Our strong balance sheet, low debt levels provides us with the financial flexibility to pursue growth opportunities. On the portfolio growth side, thank you once again for attending our Analyst Meet held in Altimus in November last year. At the meet, we shared our plans to focus on more than just organic growth.
We are looking to expand through acquisitions as well. The proposed purchase of the asset in Hyderabad is a step-in that direction. We’re also evaluating another potential third-party acquisition opportunity in Hyderabad. I also want to take this opportunity to give a development update on what’s happening. Happy to report that our projects are progressing well. The three projects which we are expected to be completed this financial year all are on-track. The 315,000 square feet BA data center in, Sairoli West has just been delivered ahead of schedule.
The million square feet ARPU building in Gera Commerce zone, Pune is being delivered in the next couple of months again on-schedule and the 67,000 square feet high-street retail complex, which is — which we have branded as Minespace Fusion has also been completed and tenants have started fit-outs. This space is going a long way in energizing not just our business park in Iroly East, but also the micro-market as a whole. At Mine Space Hairoli East, we shall be commencing work on two buildings in the coming financial year.
One of them will be a mixed-use asset building with a 280 keys Hyatt regency. This will be one of the few five-star hotels in Nabi, Mumbai and will elevate the positioning of our park. In financial year ’26, we will upgrade four more buildings in Idroli East in a phased pan. At Mindspace West, we have handed over the second data center building at PDG to PDG. At — as mentioned earlier, we now have two operational data centers and three more are slaughtered for future development. Upon completion, the business park will have five data center buildings. The total footprint of data centers will stand at around 1.7 million square feet. With this, we become India’s only REIT, having a strong data center footprint in the portfolio. In Space Madapur, construction of the two buildings under redevelopment is underway. We are on-track for delivery in FY ’27.
The experience center is scheduled to be ready by Q3 FY ’26. This will be one of our finest offerings, setting a benchmark in luxury club experiences. Also, activation work is underway at Building 18. This again is planned to be a mixed-use development to create a thriving ecosystem. Six buildings in-mine space Madharpur has already been upgraded and four more are underway. At Commerce I like to — as like I mentioned earlier, the entire building has been pre-leased to a large GCC client ready for occupancy starting Q1 FY ’26. We have also recently added around 37,000 square feet of recreational space in this for enhanced tenant experience., we have again started with the upgrade of our first building in this park. External common areas are also being revamped with new features.
Coming to asset management, I wanted to throw some light on clients, the kind of work we are doing for clients. In our asset management team, we prioritize client safety, health and wellness in REIT. We recently-completed a lifecycle assessment study for all our critical equipments. We have strengthened our five safety measures and are compliance with all regulations. To ensure again client convenience, we have enhanced focus on design from enhancing workspace design with efficient space planning, upgraded lobbies and facades to elevate tenant experiences and productivity and also focusing more on how we could improve our terraces, our landscapes and the glass quality focused on functionality and sustainability. On the amenities and tenant-centric initiatives, we recently hosted many of our clients at an event in Bombay, we Call-IT the tabletalk. This is a platform where we listen, learn and work together with our clients to shape our future approach.
We also launched our quarterly newsletter Mindscape for the employees of our client hosted nine events in the last quarter. We also ensured last mile connectivity through EV buggies operational in Hyderabad and Commerce zone. In the recent third-party survey of tenant employees, we identified the top-five most essential requested amenities from our clients based on feedback from clients and these are pharmacies, medical centers, gyms, convenience stores and crashes. I’m happy to report that we have either operationalized or signed MOUs to the operators for all five of these amenities across all our larger parks. To enhance tenant satisfaction, we have also introduced our fertilization initiatives and our business path. These initiatives are designed to infuse the sophistication and service standards of premium hotels into the workplace, elevating the tenant experience.
We are also reinforcing our commitment to customer-centricity with initiatives focused on strengthening tenant relationships and improving their overall experience. All these efforts are aimed at positioning us as a trusted partner in our clients’ overall success. Coming to ESG, furthering our focus on ESG and in alignment with our vision statement, which is to set benchmarks in-office real-estate building sustainable ecosystems that prioritize well-being, making us the first choice for stakeholders, we have taken solid steps in ensuring ESG compliance. On the environment side, we achieved a score of 99 out of 100 in the assessment. We earned a prestigious five-star rating with 91 out of 100 in the standing investment benchmark. We achieved an impressive score of 70 in the Dow Jones Sustainability Index, which is DJSI, placing us amongst the top 10% of the real-estate equity REIT category globally. 99.9% of our buildings have now achieved platinum ratings. As of Q3, 32% of our energy comes from renewable sources.
Our net zero is being validated by SBTI initiatives. Our overall efforts include net zero targets, green certification, solar installations and biodiversity projects. Regular meat focusing on ESG targets, development plans and collaborations with top vendors is also in-place. On the social side, we received 10 awards for outstanding safety practices. This is 10 out of 10 parks. All have this sort of corner now. So well done with our — by our asset management department. We are creating designated feeding areas and shelters for our furry friends within our business parks.
We prioritize safety of a women’s staff and clients in safety training programs are being implemented. We are always looking out for opportunities to increase diversity in outsource staff and client engagement has been expanded. On the governance side, happy to announce that we have launched the Investors portal. This portal allows investors to review their untrained distributions and tax data using specific log-in credentials. In conclusion, the industry trends appear to be positive. We believe we can sustain this progress. Our focus on client centricity, innovation, tenant satisfaction and sustainability positions us well for the future.
Thank you for all — thank you all for your time. I’ll now hand it over to Priety for further financial updates of the quarter.
Preeti Chheda — Chief Financial Officer
Thank you, Ramesh. Good evening, everyone. I’m happy to share with you all the financial results for the quarter ended December ’24. We delivered a strong NOI growth of 8.3% year-on-year for Q3 FY ’25. Our NOI for the quarter was INR5.2 billion. Also the revenue from operations for Q3 FY ’25 grew 7.5% year-on-year to INR6.4 billion. As we had guided, we have delivered a healthy distribution growth of 7.8% for nine months FY ’25 and more particularly for Q3 FY ’25, our distribution grew by a healthy 10.9% year-on-year. This quarter for the highest distributions listing of INR3.15 billion. In aggregate, for YTD December ’24, we distributed INR9.2 billion. Our loan-to-value continues to remain low at 22.6%. This comfortable level of debt gives us enough headroom for acquisitions and development within the portfolio. Our cost of debt slightly increased by around 14 bps to 8.07%. This was mainly because of refinancing of a bond, which we had raised three years back at a lower interest-rate. While the interest rates still remain at high levels, we have been optimizing our debt mix to reduce our borrowing cost.
As Ramesh mentioned, during the quarter, we received the notice for Commer zone rivals Hyderabad ROFO assets. We have evaluated the potential acquisition opportunity and made an offer to the shareholders of the post the approval of our Board. Asset divestment process is underway. We hope to understand the interest from potential buyers over the next few weeks. With improving occupancy at our path, completion of buildings under development, rental growth amongst others, we expect the performance of REIT to remain healthy.
With this, I hand over the call to the operator to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. All participants are requested to use while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles participants who wish to ask a question towards the management may press star and one at this time.
First question is from the line of Pritesh from Axis Capital. Please go-ahead.
Pritesh Sheth
Yeah, thanks for taking my question. Good evening, everyone. First is on the increase in expiries that we have seen this quarter and for the next year across assets, any specific trend you look at and you want to highlight on that or this is just a regular course? And based on that, what’s the outlook on occupancy now probably by this year end and next year that would be helpful. That’s my first question.
Ramesh Nair
Pritesh this year we have close to 2.7 million square feet coming up for expiry. Out of this 2.7 million square feet, we managed to retain 0.8 million square feet, 800,000 square feet of clients. The balance 1.9 million square feet of clients exited. In this 1.9 million square feet of clients who have existed, we have already released 1.2 million square feet to newer tenants. When I was looking at this data over the last four years, I said this year is 2.7. In the last four years, the average expiry has been around 2.8 million square feet, which is in-line with the last four years average is what we are seeing this year also. But some good news on that is that the next two years, when we check the data, the expiry is 1.5 million for next financial year FY ’26 and for FY ’27, 1.3 million square feet.
So overall expiries, we are able to fill it up and there is enough pipeline in the market given the good robust demand in the market. And like I mentioned earlier in my earlier part of the speech, sometimes tenants vacating gives us that opportunity to bump-up our rentals also. On the overall outlook of leasing, our gross leasing, like I mentioned in the first-nine months has been 4.9 million square feet. The last four years, again, average has been 4 million square feet of gross leasing and we are already ahead of the number in the first-nine months. There could be a chance we could end-up doing a gross leasing by of 7.2 million square feet this year. We’re seeing some strong demand for our B1 building in Hyderabad and some very good potential enquiries and hopefully we should be able to come back with some good news on that soon. So we would — we would be at around 92.5% to 92.89% towards the end of this financial year from a occupancy point-of-view.
Pritesh Sheth
Okay, got it. That’s committed occupancy that we believe.
Ramesh Nair
Yes, by March 31st of this year, we are expecting between that range 92.5% to 92.89%.
Pritesh Sheth
And from there on, you would further increase based on the gross easing trend and the expiries that are ahead of us.
Ramesh Nair
Yes. So if you look at the overall vacancies today, most of it is in Navi, Mumbai or Hyderabad as a vacancy of around 350,000 square feet of a park where we have 13 million square feet, that’s hardly anything. So that we are confident that 350 will become around 150 in the next couple of quarters. Navi, Mumbai, again, I was just checking with my leasing team. In the last two, three months, the inquiries have actually doubled. We need to convert some of these inquiries, but we have clearly seen a doubling of inquiries. So again, we remember looking positive. We had one large tenant vacate in, which led to that 150 odd 1,000 square feet of vacancy, but again, that 150 would become 100 in the next third — that 150 would become 50,000 square feet of vacancy in the next 60 odd days. So that also would come down.
Pritesh Sheth
Okay, okay, that’s pretty much helpful. And just on SEZ, if you can highlight like how much is under process, you know what’s the completion timelines and by when do you expect to — is it successfully East where our vacancy is a bit higher?
Ramesh Nair
So NPA, what we have done is close to 2.1 million square feet. Of this 2.1 million square feet, we have already leased 1 million square feet, which leaves us with vacant NPA of around 1.1 million square feet. Again, on the vacancy front, out-of-the 22 lakh square feet, which we have vacant, 2.2 million square feet vacant, 0.8 is and 1.4 is. The occupancy for ACCs is close to 93.2 and for non-Aces is 90.1. We are confident in by end of next financial year, we should be touching the 96%, 97% kind of a number in terms of occupancy, but a half of that size where we have 10 million square feet also will have some vacancy or the other coming up. We studied the market very, very carefully or we wouldn’t have announced building 15, which is the 1.5 million square feet and building 17, which is 800,000 square feet building in that location. We are seeing increased traction, but in terms of vacancy, Mumbai still has close to 1.7 million square feet flying weekend.
Pritesh Sheth
Got it. That’s helpful. That’s it from my side for now and all the best.
Ramesh Nair
Thank you, Prakesh.
Operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Abhinav Sinha from Jefferies India. Please go-ahead.
Abhinav Sinha
Hi, and congrats to management on the strong upload that we are seeing now across both parameters. Sir, my first question is on rentals. You have hinted at slightly higher rentals going ahead, I think we are now around 5-odd percent Y-o-Y increase. So when do we hit those double-digit sort of growth numbers here?
Ramesh Nair
I don’t see double-digits happening in very, very — in my 25-year career, I’ve seen very less times even during peak of maybe 2007 when rentals are going up. That time also like 7%, 8% kind of a number. 10% rental increases on a year-on-year, it’s quite difficult. I think 5% to 6% is more realistic, which is also in-line with typical escalations which we signed 4.5% to 5% is the kind of escalations we get from our clients. So expecting 10%, I think it’s a little — being very positive. I mean, that’s a little tough to achieve. We’ve seen very few markets which have like Hyderabad, once in a while, we are seeing that kind of behavior.
But what also typically happens,, is when a market becomes overheated, like today, Madharpur is very overheated, there’s absolutely no space available, no land to develop. We see cost-conscious tenants kind of migrating to non-expensive markets. So that’s how today you look at it. You saw outering road going to, 110, 120. And then people started looking at, which was at 55 back then and which become 70. So if a market overheats, typically it kind of start getting demand starts flowing to other markets.
Abhinav Sinha
Thanks. I think that’s a very frank answer. But let me slip it in. So when do you see Navi Mumbai overheating? Is it like two years away with those 80 plus rentals?
Ramesh Nair
I think all the MOUs partners they signed over the last two days. Hopefully, some of it will come towards Navi Mumbai also, but I don’t foresee Navi Mumbai being overheating like that. To be honest, I don’t see that happening.
Abhinav Sinha
Right. Sir, my second question is on the — the uptick that we are seeing in gross leasing this year. So there has clearly been a contribution from the return to office which is playing out, particularly in IT. Do you think this is done now or we have another sort of four quarters sort of tailwind here?
Ramesh Nair
Not exactly. I mean a great question. And I was sitting at the teams yesterday to check what’s the attendance level of our portfolio companies. And it’s kind of chose in the early 70s in the last quarter and it’s kind of come to that 75% 76% mark. Now we don’t see a big jump happening. Typically, may on a lighter note, many CRE heads tell me as soon as they start seeing that some of these big companies are letting go of employees in the US, that’s an attendance immediately picks up the next day because everybody wants to come and show-me their bosses and show attendance, but we’re not seeing some big bumps happening because most companies have learned how to work-from-home, their hybrid model has started working, they all have policies, which is not there two years back. So we’re not going to see some big jumps on that happening.
But every company we know are pushing out-of-the 200 odd office occupiers we have in our portfolio. In the last 17 months, I meet with the company, I would have met with more than 90% of them. And in the 90% of the companies I have met, I would say maybe 10% of the companies are still big supporters of work-from-home. The balance 90% of them are pushing their employees to come back to work, but they will always — always have a flexibility. So many people can come to office and some people will have the flexibility to work-from-home.
Abhinav Sinha
Great. And finally, I think one last question from my side. So on the Rofo assets, what are the timelines and mix between debt and equity that we should look-forward to here? Thank you.
Ramesh Nair
So on the timelines, like Preeti said, ROFO notice was received during this quarter and we have done our DD and evaluation and presented it presented the opportunity to the Board. The Board has cleared the acquisition. We made the offer to the seller. And once they accept the — once the seller accepts the offer, we will — we will go back to the Board and then go to the unit holders. Priety, you want to talk about the ratio of debt?
Preeti Chheda
Yeah. So this is going to be through preferential issuance. And so basically, we will be taking over the SCV’s debt. And then of course, once we take-over, we will look at refinancing. So maybe let the announcement happen after the Board approves post the aspectral you will get the further details soon.
Abhinav Sinha
Thanks and all the best to the team.
Preeti Chheda
Thank you.
Operator
Thanks a lot participants who wish to ask a question may press star N1 at this time ladies and gentlemen, if you wish to ask a question, you may press star N1 we have a follow-up question. It’s from the line of Pritesh Sheth from Axis Capital. Please go-ahead.
Pritesh Sheth
Just two more questions. First on the third-party acquisition that you’re looking at, the same strategy you highlighted during the Analyst Day. I just wanted to get some details or some thoughts behind it, or would it be like a larger acquisitions, I mean, larger asset that you would be looking at like about 1 million square feet, etc? And in general, what’s the value for us in — for REIT in those acquisitions? Is it like lower vacancy and hence it would be like a stress buyout from us, which will eventually give us value and will these acquisitions be a dividend NAV accretive right from day-one or probably we’ll have to communicate to the investors that look maybe couple of quarters, you’ll have to see-through this and eventually these sort of acquisitions will create a lot of value for investors going ahead.
Ramesh Nair
Pritesh, on the third-party acquisition, we obviously will look at good long-term buys. It’s still pretty quite premature, we are still evaluating. Three, four things we typically look at from a checklist perspective is, one, it should have a — the seller should be ideal and institutional owner. Is there going to be any redevelopment kind of potential in the long-run, like I said, is there any extra benefit the location will get from added infrastructure which the government is providing? And are some of these markets have spillover benefits from reduced vacancy in some of the other micro markets in the in the city. So these are some of the things we would look at before or looking at a third-party acquisition.
Pritesh Sheth
Got it. And just one last on the pre-leasing that we did for Karadi R2 building. Can you share some terms in terms of you know RD period in-line with what we have been doing and rentals, are we asking for a little more in what we are generating for existing tenants? So some details on that.
Ramesh Nair
Definitely, Pritesh. So we’ve got a good rental. Obviously, we have signed an NDA with them, but it’s a good rental and also it was the last building in our campus. So with that, we reach 100% occupancy. It is still 100% because this building did not receive the OC. So we don’t calculate it in our vacant space. So rentals are in-line with the best possible in the market. Not a worry. In-spite of it being one large GCC.
Pritesh Sheth
Okay. Okay, got it. That’s helpful. Thank you.
Operator
The next question is from the line of Puneet from HSBC. Please go-ahead.
Puneet Gulati
Yeah, thank you so much for the opportunity. My first question is when you think about growth and you’re talking about acquiring third-party assets, would it necessarily be in the cities that you operate or would you be keen to enter into kind of cities where you’ve not been like Bangalore or? Any thoughts there?
Ramesh Nair
Obviously, in the cities we operate Chennai in the REIT is full now. We don’t have anything. So we could be looking at Chennai as an opportunity. Hyderabad, we are the largest developer, largest portfolio, most — the best located park. Pune, again, we are very clear number-one. Bombay again in, we are very clear, number-one. We have looked at opportunities in Delhi and in Bangalore before there were times when we were the H2 bidders. In some cases, we were at three bidders. So the focus will be on all six cities, Puneet. We won’t — we want to have a pan-India presence right somewhere in four cities, but we look at Delhi and Bangalore, definitely.
Puneet Gulati
And even from the parent side, is there an initiative to acquire land and do greenfield and then pass it on to you or that’s still early stages there?
Ramesh Nair
Oh, that’s a very serious strategy for the parent sponsor to find land and build and give it to us eventually. So that continues.
Puneet Gulati
No, no, I meant in new cities like Bangalore, Delhi, or not in India.
Ramesh Nair
Like yesterday our Bangalore, South India Head was looking for land opportunities in Bangalore. So that continues.
Puneet Gulati
Okay. And secondly, I noticed that Flex space operators are almost 10% of your total tenant portfolio. Do they get any sort of preferential rentals given that some of their tenants can also potentially move-in or are they dealt in the same way as normal tenant?
Ramesh Nair
So again in-line with the market, Puneet, Flex has today become 18% of the market and we would be, I think in the 8%, 8% odd — 8%, 9% odd from a portfolio point-of-view. And yeah, it’s around 10% now. Yeah. That’s the kind of number we would like to kind of maintain. And — but again, if you look at when we do flex deals, one you can do a flex deal from a speculative point-of-view, the Flex guy just takes to space and then hunts for clients. There’s a lot of time in this 10% where the client is already there and this is going to be a back-to-back deal. In those kind of deals, obviously we it there is lot more security from a flexible flex player point-of-view. We don’t offer any preferential kind of deals there. We give exactly the same market rates we have that. And our model again is plain-vanilla leasing to the flex players. It’s not that we invest in the fit-out and then give it to them. There are those kind of models also. We give market rentals based on where the market is currently.
Puneet Gulati
So no revenue-share kind of agreements.
Ramesh Nair
We haven’t done any deal like that. And like I said, most of our deals are backed by a tenant. It’s a back-to-back deal which most of our flex operators have.
Puneet Gulati
So actually, that’s also very interesting. I mean, I would wonder why would they not come straight to you and go via flex operator if they know where they want to be. You have to do a bit of capex, right, for them.
Ramesh Nair
We haven’t know that we have — we build — we are investing INR4,000 crores in capex, which means obviously we know-how to build buildings. Doing fit-outs also. We’ve done so many fitted-out deals. We also have a hospitality arm, which understands. So we also have our Camplex, which is our facility management arm. There are clients who come and tell us, can you do it for us and we have done those kind of deals also where we do the project management, we do the facility management for our clients. But we are fine giving it to the top co-working operators who are well-capitalized and where there is less financial risk for us.
Puneet Gulati
Understood. Okay. That’s very helpful. Thank you so much and all the best.
Ramesh Nair
Thanks, Puneet.
Operator
Thank you. A reminder to all participants that you may press star and 1 to ask a question. Participants wish to ask a question may press star and one at this time. The next question is from the line of Shah, an Individual Investor. Please go-ahead.
Tanveer Sohal
Yeah, hi. Actually, my question is more around — in general about REIT and. In the middle, there was some talk around you know in having them included in the front-line MDC have you all heard anything from SEBI or any other governing body regarding you know where we are with this particular you know intention because globally you know reachs and are a part of the frontline industry and are actually semi director has also been promoting it, but I don’t know if it’s gonna happen this year or next year or when you have any idea of what is stopping it or is there any roadblock for that?
Preeti Chheda
So that one representation which has gone from the REIT in which associations also to study and I believe they would be reviewing this but difficult to put a timeline to this.
Tanveer Sohal
Okay, so not on the timeline, but you know what the main concern is or what is blocking this action.
Preeti Chheda
So as we heard, I think there was some reservation from the mutual fund industry, they had some reservations. But I think SEBI would be doing consultation with all the stakeholders to understand. But at this point in time, difficult to say where it is and when do we see this resolving.
Tanveer Sohal
Okay. Okay. Thank you so much.
Ramesh Nair
I’ll just — there was one small error. The Flex space is — I just checked the numbers again. It’s 6.6%. So it’s not 10.3% which came in the slide. I just checked the numbers. It’s 6.6%.
Operator
Mister, does that answer your question?
Tanveer Sohal
Yes, yes, I am thank you so much.
Operator
As there are no further questions, we will conclude the call. On behalf of K Raheja Corporation Investment Managers Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.