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Japanese property developers have been increasing their focus on India as rising commercial rents, lower building costs and improving construction timelines make the market more attractive. Mitsui Fudosan, which entered India in 2020 with RMZ Real Estate, is now reviewing fresh investments worth 30-35 billion yen (around USD 190-225 million). Sumitomo Realty has committed USD 6.5 billion across five Mumbai projects and is exploring new sites near the upcoming Navi Mumbai airport. Several other Japanese developers are assessing opportunities in office, retail and hospitality assets as returns in India remain comparatively higher.
Japanese real estate companies have been increasing their activity in India as demand for premium commercial spaces rises and development costs remain significantly lower than several global markets. The pace of interest has grown over the past few months as developers review new sites and evaluate partnerships. Advertisement
Mitsui Fudosan, Japan's largest property developer, entered the Indian market in 2020 through a partnership with RMZ Real Estate to develop an office complex in Bengaluru. People familiar with the company's plans said the firm is considering additional investment of nearly 30-35 billion yen (about USD 190-225 million) in new projects. These may be taken up either with RMZ or with new local partners. Executives from the company visited Mumbai and locations around the National Capital Region recently to examine development opportunities. Both Mitsui Fudosan and RMZ chose not to comment on the investment plans.
RMZ Real Estate's CEO, Avnish Singh, mentioned that Japanese developers have become more active after establishing trust with Indian partners, and he indicated that this momentum is likely to continue.
Sumitomo Realty and Development, Japan's third-largest developer, has also strengthened its presence in India. The firm has committed USD 6.5 billion across five Mumbai projects, including two sites added this year. A person familiar with the company's strategy said it is now assessing land parcels near the soon-to-be-operational Navi Mumbai international airport. The company did not respond to requests for comment.
Japanese firms are not alone in their interest. Global investors such as Blackstone remain major participants in Indian commercial real estate. Blackstone is currently the country's largest commercial landlord, and almost half of its USD 50 billion India portfolio is in real estate assets. While many foreign investors prefer buying completed properties due to past challenges with project delays, Japanese developers have shown more willingness to undertake new construction. Singh noted that they are comfortable taking development-related risks.
Despite procedural hurdles in land acquisition and approvals, returns in India remain comparatively attractive. Deloitte India partner Seiji Ota, who advises Japanese investors, said returns in Japan average around 2-4%, while similar assets in India can generate about 6-7%. Ota and Singh added that several other Japanese developers are evaluating their first projects in India, focusing on office, retail and hotel developments.
A recent survey by Sumitomo Mitsui Trust Research Institute indicated that Japanese companies and funds have increased their overseas real estate investments by nearly one-fifth this year. While the U.S. and Australia continue to be preferred markets, interest in India grew sharply, with 41% of respondents showing intent to invest six percentage points higher than last year.
Lower construction and labour costs remain a key factor behind this demand. Data from Turner & Townsend shows that building a premium office tower of up to 20 floors costs around USD 8,000 per sq. m in New York, USD 5,300 in London and USD 4,000 in Tokyo. In comparison, similar construction in Mumbai costs about USD 656 per sq. m. Labour rates are also significantly lower, with skilled workers such as plumbers or electricians costing around USD 2 per hour.
Strong rental growth has further increased interest. Mumbai's Bandra Kurla Complex recorded the highest increase in commercial rents across the Asia Pacific region in the recent quarter, posting a rise of 14.2%, according to CBRE. Tokyo's central business districts followed with over 10% growth, while the National Capital Region and Seoul each recorded increases exceeding 9%.
Japanese developers' preference for designing projects from the ground up also allows them to bring in construction technologies not widely used in India. Sumitomo Realty's first development in Bandra Kurla Complex uses a steel structure that supports wide floor plates and pillar-less office spaces-a design feature not typically adopted by Indian developers. The company expects this to command a 30-40% higher rent than standard buildings in the area. JPMorgan is among the tenants expected to move into the development, according to contract details reviewed by industry sources.
Other Japanese players, such as Daibiru Corp, also expanded activity in India this year, starting with office investments in two cities. Its parent company Mitsui O.S.K. Lines' South Asia CEO, Anand Jayaraman, said the firm is now considering land for potential residential and data centre developments.
Source Reuters
5th Jun, 2025
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