After big ticket acquisitions in the overseas market, the $22-billion Tata group now wants to expand its presence in one of the fastest growing business spaces in India—real estate. The salt-to-telecom conglomerate plans to develop excess land owned by various group companies through the recently floated $1-billion real estate fund under the Tata Realty and Infrastructure. The group believes the exercise will help it “unlock intrinsic value” for the benefit of the shareholders of its various group firms.

Bombay House, the group’s headquarters, is learnt to be finalising a blueprint for the new business. The group has hired KPMG to outline the commercial development of land owned the group companies. In the first phase, the group would develop the excess land owned by group companies such as Tata Consultancy Services (TCS), Voltas and Rallis India, said sources close to the development.

Demand for large office complexes and retail malls has fuelled a demand for land, which has also attracted large foreign companies and funds to invest in the Indian real estate sector. The robust trend has also prompted several companies to separate their real estate assets from core activities, to realise gains from high land prices.

TCS, the Tata group’s software company, has around 250 acres of excess land spread across Pune and Hyderabad, while consumer goods company Voltas owns 25 acres in Hyderabad. Rallis India, too, owns 100 acres in the southern city. “As per the current plan, the group would form special purpose vehicles and hive off the excess land into the SPVs which will be developed later,” sources said.

Although other group companies such as Tata Motors and Tata Tea have excess land bank, details of the same couldn’t be obtained. The group wants to develop mixed-use project, commercial, residential and IT parks on the identified lands, sources said.

The Tata real estate fund, which is in the process of mobilising $1 billion from domestic and overseas investors, would utilise a major share of the funds for developing land. Tata Sons, the holding company of group will invest $100 million in the fund. Sources added that the group is also looking to enhance the size of the fund from the current $1-2 billion. Tata Realty & Infrastructure would also invest in infrastructure and real estate projects, housing complexes, special economic zones, construction of bridges, ports and airports.

It is not the first time the Tatas are dabbling in real estate. In 1984, the group formed THDC (formerly known as Tata Housing Development Corporation) that built several residential projects in Mumbai, Pune, Goa and Bangalore. Recently, the Tata group tied up with global private equity investor Xander for developing real estate properties for its retail ventures. Trent, the retail unit of the group, recently said the Xander group would invest in the development of an institutional retail real estate portfolio. Trent will also have anchor tenancy rights and manage the portfolio with Xander.
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