Ladies and gentlemen, good day, and welcome to Mindspace Business Parks REIT's Earnings Conference Call for financial results for the quarter ended December 31, 2023. 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 assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Garewal. Thank you, and over to you, sir.
Good afternoon, everyone, and thank you for joining this Q3 Financial Year 2024 Earnings Call of Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. Mindspace REIT does not guarantee these statements or results and is not obliged to update them at any point of time. I would now like to welcome our CEO, Ramesh Nair, and CFO, Preeti Chheda. They will first walk you through the business update and the financial performance during the quarter. We will then open the call to Q&A. I now hand over the call to Ramesh. Over to you.
Thanks, Nitin. Hello, everyone. Thanks for joining us for Mindspace REIT's Q3 FY 2024 earnings call. It's been five months since I joined the company. I've got an opportunity to meet some of you. Also look forward to catching up with most of you during the site visits which we are planning in for our Madhapur Business Park around the first week of March. Calendar year 2023 has been a good year for the India office market. We saw a 12% increase in office absorption compared to 2022. If you analyze the data for the last 3 years, India has witnessed over 105 million sq ft of net absorption.
Net absorption last year being close to 42 million sq ft, and this has been a 4-year high. On the contrary, if you look at a market like U.S., over the last 3 years, you've seen a negative net absorption of 200 million sq ft in the commercial real estate sector. India office market has behaved very differently compared to many, most of the markets globally, and especially a market like U.S. Several markets in several cities and markets like U.S. are dealing with over a decade of oversupply. Most of the stock in the Indian office market are newer new buildings, cleaner buildings.
I was just looking at the work from home data points. In U.S., work from office is still just around 50%. This number in India has 74%. So work from office in India is at 74%. This is based on the recent research which came out from JLL. In India, there are no costly refinancing challenges like what we see in most parts of the Western world. Also, we haven't seen much of volatility what we saw in some of the Western world countries, where we saw doubling of cap rates. Also, there are no big concerns around high real estate exposures with banks. There's no QE related troubles which we are seeing outside.
We are looking at the LTV ratios of REITs in some of the developed markets, including U.S., and we realize that LTV ratios are 40% to 50%, where in countries like India it's much, much lower. Why I raise these points is we can clearly see the difference in terms of absorption, in terms of leverage, in terms of physical office utilization, and age and quality of assets in India compared to rest of the world. What we're also seeing is how the office real estate market has evolved over the years. Previously it used to be standalone. Today, we have business parks. Previously, office buildings didn't have much of amenities. Today, there are so much of integrated amenities.
There are some parks of ours where we have more than 20+ different amenities. Today, tenants again constitute multiple tenant profiles, whether it's domestic companies, banks, global capability centers, tech companies. Even today, in spite of all the positives in the office market, a lot of players in the industry still face difficulties in terms of obtaining funds for land land acquisition, funds for construction. I truly believe that every year, there's close to INR 55,000 crore to INR 60,000 crore worth of commercial real estate assets which are developed in India, and this is going to be more and more concentrated amongst just a few large institutional players.
So this combined with scarcity of aggregated land in established markets, definitely rentals will go up over a period of time. We are in a clear sweet spot to make the most of these changing tenant needs to make the most out of growing demand for quality space, and to make most of what we're going to be seeing in terms of consolidations and expansions, which is quite evident over the last few three to four years. We've also seen that, in spite of we having so many commercial developers in the country, how many of them are actually pouring concrete actively for the future? That's again, something which one needs to kind of look at.
Demand for Grade A assets, led by global capability centers and domestic companies. We have observed that Indian global capability centers tend to fare much better during global slowdowns. The demand today from GCCs, GCCs who occupy around 200 million sq ft, is expected to go to around 280 million sq ft over the next 3 years. Again, IT majors are optimistic about demand outlook as interest grows for innovative and emerging products like generative AI. India continues to be the cost competitive, we continue to be cost competitive. We continue to be high on talent pool. Salary of, salary of software engineers still one-tenth of that of U.S.
It's also worth knowing that in most markets in India, rentals are still sub dollar, compared to maybe 10 x more or 12 x more in many developed markets across the world. What we're also seeing is post-COVID, we are seeing that tenants are investing far more in their work workspaces to bring employees back to office. This also increases stickiness to their products which they lease from people like us. Given all this, our outlook remains positive. We have seen a slowdown in churn from IT companies over the last couple of quarters. IT outsourcing, after lagging for a few quarters, has picked up. Just check the physical attendance of our portfolio.
That's crossed 65%. I remember the last call we had mentioned 60%. That's gone up to 65% now. Our embedded rental escalations will also drive growth. Hyderabad oversupply, which was a worry a while back, hasn't impacted us because we have realized that we are very well located. The micro market where we are located is doing extremely well compared to the other micro markets where there is a oversupply situation. The vacancy in the micro market where we are located is just around 15%, while the other micro market, the Financial District, the vacancy levels are 40% plus, so we've been beneficiaries of that.
Again, MMR, where we have a significant portfolio, is very India economy company focused, and this is helping our Mumbai portfolio. Current stability of interest rates and possible rate cuts over the next financial year will also help us. I was going through the international property consultants, their annual year-end reports, which came a couple of weeks back, and most of them seem to corroborate our view. Quoting some of JLL's, what JLL said about the last year and their outlook for this year. JLL mentioned that India, India truly shone as the office to the world, and global companies continue to repose their faith in India. The outlook remains bright for the real estate commercial real estate sector, backed by strong economic growth.
CBRE spoke about how high quality investment grade supplies by leading developers and institutional owners in prime locations across cities is expected to continue driving flight to quality absorption in the office sector. Very relevant for us again. Knight Frank spoke about how the rising confidence in the improving economic fundamentals of India has spurred occupiers to make longer term commitments in the office market. Now, coming to key highlights of last quarter. We're extremely thankful to the government for coming up with the long-anticipated SEZ reform. This is a really big boost for the commercial real estate industry. This will bring more tenants into SEZ spaces and also boost economic activity in these parks.
One thing to be noted for all of you is, 83% of our vacancy today lies in SEZs, and this reform enables us to unlock these 83% of our vacancy. On our recent performance, we leased 450,000 sq ft during the last quarter. We achieved a re-leasing spread of 17.1% on this area. Our committed occupancy is now 86.1%. We achieved an average rent of INR 78 for the leases which we did during this quarter. This is more than our in-place rent, which is at INR 68. This is also a year-on-year growth of 5.4%.
The other good news is, our Mindspace Pocharam asset in Hyderabad is now completely vacant. This gives us an opportunity to divest this. We received board approvals to initiate the divestment process of this yesterday. Excluding the Pocharam asset from Q3 and Q2, our occupancy increased by 40 basis points. Coming to financial performance of the quarter, our revenue from operations stood at INR 596 crore. If you exclude the one-off, it grew by 13.5% year-on-year. Similarly, our NOI for the quarter is at INR 473 crore. Excluding one-off income and expenses, the growth rate is 10.4% year-on-year. Our distributions for the quarter stood at INR 284 crore or INR 4.8 per unit.
On the development side, we're building 4.4 million sq ft of new Grade A quality assets. That's 3.3 million sq ft in Madhapur spread over two buildings, 1 million sq ft in Kharadi, Pune, which will be ready later this year, and 400,000 sq ft in Airoli. Our main focus is on promoting wellness. Main focus will continue to be giving hospitality-grade experiences in our parks, adding lots of new F&B outlets, and focusing remain to stay focused on providing environmentally friendly parks. We aim to set benchmarks aligned with global standards. These are crucial for driving our organic growth in the coming years.
On the acquisition front, we received the board nod for acquiring a floor on an area of 42,000 sq ft in Commerzone Yerwada, Pune, from one of the owners. This is in line with our strategy to consolidate our ownership in the park. This is the second such acquisition following the purchase of owner's area in Commerzone Porur in Q1 of this year. We remain committed to identifying growth opportunities both within and outside our portfolio. There are many new developments happening on the sponsor side, and these have the potential to significantly contribute to the future expansion of our REIT. We will focus on value accretive acquisitions at the right time.
With regards to improving our tenant experience, we've always stepped up our game on upgrading our parks. We're investing close to INR 250 crores on the upgrades to enhance the tenant experience. These align seamlessly with our core values of putting our clients first, embracing change and innovation, and also striving for efficiency and excellence. We're also creating a new team called the Tenant Relations Team, which will focus on client retention and to make sure our tenants stay with us in the long run, even after expiry of their lease terms. This team will continue to maintain regular communication with our clients, get feedback, and also add to client delight and retention.
We also aim to foster top-notch engagement in our parks by offering the finest F&B choices and amenities, and a lot of progress has been made on this over the last few months. We recently did a large transaction with SOCIAL, where they chose Mindspace for its first outlet in Hyderabad. On the ESG front, our focus is on reducing Scope 1 and 2 emissions and increasing renewable energy consumption. It's part of our mission to provide top-quality, sustainable, world-class spaces. We also announced our partnership with IIT for a research project centered around climate risk assessment. As a pilot project, it currently involves setting up on-site weather stations in Mindspace Airoli West in the Mumbai region.
We work very closely with tenants, partners, and communities to lead meaningful and impactful sustainability initiatives. All this is in line with our vision, which reads as follows: "To set benchmarks in office real estate, building sustainable ecosystems that prioritize well-being, making us the first choice for stakeholders." Now, I'll hand it over to Preeti for financial updates during the quarter.
Thank you, Ramesh. Good afternoon, everyone. I'm happy to present our financial performance for the Q3 of the financial year 2024. We closed the Q3 with revenue from operations of INR 6 billion and NOI of INR 4.8 billion. Excluding the one-offs, revenue and NOI grew at 13.5% and 10.4% YOY, respectively. Our YTD Q3 FY 2024 revenue and NOI also saw healthy growth of 15.2% and 12.8% year-on-year, excluding the one-offs. NOI margin from the core renting stood at 87%. We announced a distribution of approximately INR 2.85 billion, which is INR 4.8 per unit for the quarter. The distribution comprises approximately 89%, which is 4.29 per unit of dividend, which is not subject to tax in the hands of unit holders.
Approximately 10.4%, which is 0.5% of interest, and 0.01% of other income. Our cost of debt stood at 7.8% at the end of Q3 FY 2024. We have constantly been optimizing the mix of our fixed and variable cost debt to reduce the overall interest cost. During the quarter, we raised INR 1.5 billion through commercial paper at great level. The issuance carried an effective coupon of 7.72% APM. Our fixed cost debt is now at 47.2% of the total outstanding debt. Given that some of our fixed cost debt, which was locked in at sub-7% interest cost, shall be coming up for refinancing over the next few quarters, we expect the overall cost of debt to increase marginally.
Any softening in interest rates in the coming financial year could help optimize our interest cost. Our net debt as of December 31, 2023, was approximately INR 60 billion. In addition, we have undrawn committed lines of approximately INR 8 billion from financial institutions. Our LTV continues to remain low at 21%. We have used the strength of our balance sheet to go aggressive with the organic expansion of our portfolio through redevelopments, commencing construction of new buildings, and upgrading our existing parks to create value for our tenants. We have constantly been engaging with third-party unit owners within our existing parks to acquire their space into Mindspace REIT portfolio. This is helping us consolidate our holding in the park and also enabling growth. Like in the last quarter, we acquired approximately 240,000 sq ft at Commer zone Koramangala, Chennai.
In this quarter, as Ramesh mentioned, we have received approval for acquisition of 42,000 sq ft at Commerzone Yerwada, Pune. With our low LTV, we have the headroom for both organic and inorganic growth of the portfolio, and we continue to evaluate inorganic growth opportunities. As Ramesh mentioned, the new SEZ policy reform will be beneficial for the entire sector. In addition to the denotification of buildings applied earlier, we have now applied for demarcation of certain floors as non-processing areas. In the coming quarters, our focus shall be on demarcation of vacant SEZ spaces as non-processing areas and lease them out to potential tenants. This shall help improve the occupancies at our parks and also help NOI growth.
To monetize non-core assets, we have obtained approval of the board to initiate the process of divestment of Mindspace Pocharam, Hyderabad, which shall be running the process over the next few months. We are hopeful that this active portfolio management, leaving flexibility provided by the SEZ policy reform, organic and inorganic growth in the portfolio, shall all contribute to the growth of NOI and distributable cash flows of the portfolio. With this background, I hand over the call to the operator to open the floor for questions. Thank you.
Thank you very much. We will now begin the Q&A session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Praveen Choudhary from Morgan Stanley. Please go ahead.
Thank you very much. Thank you, Ramesh. Thank you, Preeti. Great presentation. One quick question I have is, all the REITs have struggled to show the dividend growth commensurate with the NOI growth, which you have shown even in this quarter. I wanted to understand when, which quarter or which year we will start seeing dividend growth, which might be similar to NOI growth? Thank you.
Yeah. Hi, Praveen. So you're right. Our distribution growth has not come through in line with the NOI growth. There have been multiple reasons for Mindspace REIT. One, primarily in the last financial year and also in this financial year, a major chunk of our NOI growth has been lost to the interest cost degree. In our case also, as we said, we have done away with any form of debt support. So that's also resulted in our NOI growth not actually translating to distribution. As I've already said, and which is what I've got demonstrated in most of this year, was we've not actually taken any debt support to meet our requirement.
We are also hopeful that with the SEZ policy reform which come through, we should be able to now, over the next few quarters, start leasing up the spaces which were otherwise lying vacant. This obviously is going to add up to NOI growth, and, we are hopeful that if there are no surprises, that should, sub- translate. I'm not saying there will be an exact correlation, but it should translate to a distribution growth also.
Thank you very much. That's all I have. Yes.
Thank you.
Thank you. A reminder to the participant, anyone who wishes to ask a question, may press star and one. Next question is from the line of Mohit Agarwal from IIFL. Please go ahead.
Yeah, thanks for the opportunity. I had two questions. So firstly, Preeti, did I hear correctly, you mentioned that you have applied for demarcation of certain floors to Non-Processing Area? If yes, could you quantify how meaningful or significant that number is?
Yeah. Hi. So, this is one of our buildings in Airoli. It's about 400,000 sq ft. So that's what we've applied for demarcation at the moment, and we're already working on demarcating few other areas also, which will happen over the next few weeks.
Okay, perfect. And continuing with Airoli, you know, Ramesh mentioned in his opening remarks that in Airoli they continue to see demand from Indian economy-focused companies. Just trying to understand, do you think the entire GCC boom will that benefit the Airoli park post the SEZ de-notification? And what are your plans in terms of filling up that space, you know, the de-notified portion of it, Deepa?
Definitely, Mohit. If we look at. Just to add to what Preeti mentioned, we're looking at multiple floors across different parts of our portfolio to submit-
Ladies and gentlemen, we have lost the line for the management. Please stay connected while we reconnect to them. Thank you. Ladies and gentlemen, thank you for patiently holding. We have the line for the management reconnected. Over to you, ma'am.
Yeah, thanks, Mohit. Sorry, the line got disconnected. So out of our 3.6 million sq ft, which is vacant currently, 3 million of this is SEZ, and 2.3 million of this is in Airoli East and West, which is again all of SEZ space. For non-SEZ space, the occupancy rates are today 95%. Hello?
Ladies and gentlemen, the line for the management has got disconnected. Please stay connected while we reconnect to them. Ladies and gentlemen, the line for the management is getting connected. Please stay connected while we reconnect them to the call. Thank you. Ladies and gentlemen, thank you for patiently holding. We have the line for the management reconnected.
Ladies and gentlemen, thank you for patiently holding. We have the line for the management reconnected.
Yeah, hi. Hi, Mohit. Sorry, the line got disconnected. We had some challenges dialing back in. So, out of our 3.6 million sq ft, which is currently vacant, 3 million is special economic zones. 2.3 million out of this 3 million is in Airoli East and West. If you actually look at our non-SEZ occupancy, that's over 95% now, and 86% of our overall vacancy, SEZ vacancy can be floor wise denotified out of the 3 million sq ft. So there is a great amount of opportunity to go ahead denotify these major into non-processing areas.
To answer the second part of your question, what we believe is the biggest focus area is going to be Navi Mumbai leasing. Navi Mumbai, we have realized, has multiple advantages, which has not been kind of highlighted over the years because of competition from cities like Hyderabad or Pune or Chennai. We were looking at some of the studies done by some of the big four consulting firms, where Navi Mumbai has been rated amongst the top three cities in terms of overall quality of living. Navi Mumbai has been rated amongst some of the cleanest in the top two in terms of traffic index, again in the top two.
In terms of most competitive commercial leasing rates, again, in the top two, along with Chennai. Top three in terms of safest cities to live in, and most importantly, in terms of preferred talent hub for the BFSI, media, telecommunication and technology. Again, in the top top two, along with Mumbai. So, that's, those are the benefits. We want to make sure these kind of points are well heard in the market. We are making sure that all the teams are well geared up for our leasing to support the leasing teams. We have met all our IPC friends. We've announced bigger incentives for them.
We are targeting our clients who are in competing nearby parks. We are also proactively focused on winning BFSI, telecom, media and tech clients in and around Navi Mumbai and also in other cities, with special focus on GTC. Like Preeti said, we are proactively working towards our floor wise denotification strategy, where we are filing in those applications, and that number will go up over the next few weeks. So we're taking weekly progress updates on that. Our asset management teams, our architecture teams, our engineering teams, all the teams are supporting us for sprucing up our parks, especially the ones, the floors and the buildings which are vacant today.
So it's a team effort and multiple amounts of initiatives happening to make sure we lease this 2.3 million sq ft of vacant space in Navi Mumbai.
Understood. This is well understood. Just last question on Hyderabad. So, in your initial remarks, you mentioned that despite oversupply, you've not seen any issue with demand, given your location. But do you see any pressure in taking rental escalations or Mark-to-Market, considering that some of your price-sensitive tenants, you know, have more options? So any comments on that?
Yeah, most today people come to our park in Hyderabad because we are best located. But the bigger benefit than just the location is the metro connectivity. There's the metro, and which is the most used metro in Hyderabad, which ends at our park. This is possibly the biggest advantage we have. Like I mentioned, there's a financial district vacancy levels are in the mid-40s. Our vacancy levels are in the mid-teens. So that's definitely a driving force. One thing you need to note here, Mohit, is look at the most expensive space in Bangalore. We have seen rentals cross the INR 130 mark in parks like Golf Link.
You look at Chennai, some of the best located parks, rentals have crossed INR 100, INR 105. We believe Hyderabad market would eventually reach those levels with a few years of good demand supply equilibrium. So definitely there is an opportunity. And what we will also do is, I spoke a little bit about our two new buildings which are coming up. Building 1, which is 1.3 million sq ft, and Building 8, which is 1.6 million sq ft. In both these projects coming, we will offer price ranges starting right from the mid-70s INR going up to the late 80s INR. So we'll have different price points.
For the cost-conscious, we would have older buildings, while the newer tenants would pay higher for the newer buildings.
Perfect. Those were my questions. Thank you, and all the best.
Thanks, Mohit.
Thank you. Next question is from the line of Satjinder Singh Bedi from EON Infotech Limited. Please go ahead.
Yeah, thanks for the opportunity. First on the NDCF, Preeti, thanks. I think this time the NDCF is even more clear. Okay, so I think that helps, okay? We can sign the CapEx against the debt drawdown. So, Ramesh, on the SEZ, like it was mentioned that 400,000 we applied for, okay. So, any hurdles that you see still in terms of any government rules coming out or whatever, okay, and the timeframe that you see this happening? So, for example, 12 months out from now, based on the availability that we have of about 3 million sq ft, what is your estimate of the kind of area that we would have converted in 12 months from now?
So, Satjinder, in terms of, again, I would like to thank the government for proactively doing this. Lot of queries which we raised over the past one month have been addressed by the government. Today, we have a format which has been given by the government, it's an application format. That is a great start. Today, we know that non-processing area tenants cannot use the SEZ facilities. We know in terms of common area maintenance, we have to build the full building. Even SEZ tenants will be charged GST. Today, we know that NPA tenants cannot be given that area cannot be given for other uses like F&B.
It can only be used for IT. We also today know that common infrastructure, including roads and common parking, duty benefits don't have to be repaid back for that, for park infra, which is again. I think there are a few queries which will get sorted in the next few weeks. So that is definitely on the positive side. If you look at the different market cycles, we believe today, the Hyderabad Madhapur area, that's a 3.5 to 4.5 million sq ft market potential out of our Hyderabad 22 market size of around 7 to 8 million sq ft. Navi Mumbai is anywhere between 1 to 1.5 million sq ft market potential.
So if you take all this into account, we believe the SEZ vacancy which we have currently will get leased over a 2 to 2.5 year period. That's being realistic. If the gods are kind, I'm sure we will lease it faster.
Okay. Okay, and, and how much do we plan to apply, let's say, based on our assessment currently, the next 12 months for denotification? Because there are costs also involved, and, and the associated question was: what is the estimated per sq ft of cost payback that we have to do for the benefits availed earlier?
So, the way we would go about this, we will do this in phased manner. Obviously, you know, filing applications and all also is a process. So we'll keep doing in phased manner, and we'll keep releasing the SEZ spaces that are currently vacant, to our leasing teams for leasing. So, it will all depend on how the leasing goes, but I would say that this is not going to become a hurdle for our leasing teams to lease those spaces. We'll ensure that if we have a tenant available, these are, applied for, and we get the areas demarcated as NPA.
Satjinder, I'll just add to that what Preeti said. Like I mentioned, 86% of the total space, SEZ space is eligible for floor-wise , which is out of the 3 million sq ft. So that's a big positive for us.
Right. And the next question was regarding the physical occupancy in the parks. So can you give us a flavor of in your parks, okay, business parks, what is the kind of physical occupancy that you're currently seeing now?
So I did a check with our asset management team yesterday. It's gone up to 65%, was 60% during the last earnings call. Now, that's gone up to 65%. This is a positive sign that it's gone up. A lot of our clients today are asking employees to come back to work at least three days a week, with many, many clients insisting on five days a week. So definitely looking on the positive side, and like I said, there was a JLL study which spoke about work from office in India being 74% compared to the Western world, where it's still just 50%.
If you look at some of our BFSI clients, and if you look at cities like Mumbai or cities like Chennai, which is very BFSI oriented, we are seeing 95%+, 98%+ occupancies in many, many financial BFSI companies.
Okay. Okay, fine. Okay, and so is it fair to assume that we expect no material space give ups by clients on this count now, and is that part of the cycle virtually over? Is that a fair assessment?
I think we are reaching the bottom. Churn is part and parcel of our life. When you have a portfolio of 32 million sq ft, there would be tenants coming in, there would be tenants going out. We are hoping that at least 70% of the terms which are expiring, we are able to retain those clients. We have a strong pipeline of leasing inquiries. I've been pleasantly surprised over the last 3 to 4 months of the amount of leasing inquiries which has increased suddenly since around the October, November time frame.
And I hear this from other cities also, but the two main cities for us, being Mumbai and Hyderabad, we have definitely seen the amount of leasing inquiries go up, and many of these discussions hopefully will convert into actual transactions.
Okay. Thanks a lot. I'll come back in the queue for, for any further questions. Thank you very much.
Thank you.
Thank you. Next question is from the line of Parvez Qazi from Nomura Group. Please proceed.
Sir, hi, good afternoon, and thanks for taking my question. So I wanted to check about your leasing pipeline. I mean, in your assessment, how would, let's say, the RFPs in your relevant markets be today, compared to, let's say, what they were two or three quarters back?
Parvez, I was doing analysis of the IPC research, and last year we spoke about calendar year the overall net absorption being 42 million sq ft and gross absorption being 61 million sq ft. The estimate today by various IPC for this year, they have predicted that 42 million sq ft will go up to 46 million sq ft. So we are seeing a good amount of office absorption increases in all the four markets where we have spaces, Mumbai, Pune, Hyderabad, and Chennai. The only area of concern there is also that in some markets, supply is kind of going up.
Because of that, rentals may not climb up too much, but the demand is quite strong and almost all the IPCs I studied, the reports of all 5 IPCs, and they all spoke about how 2024 calendar year is gonna be better than calendar year 2023.
Sure. My second question is, I mean, obviously we have heard a lot about the improvement in demand from TCCs, but apart from that, which are the other sectors where you are seeing some traction in terms of inquiries and interest?
So a lot of demand we are seeing is coming from the domestic sector. Given that we have a significant amount of portfolio in Mumbai and the domestic corporations who want to save on costs from Mumbai are bound to look at areas like Navi Mumbai, where they get a much lower cost option. What we've also seen is our overall share of pie domestic previously, which used to be 15% when we listed the company, today is gone to 27%. So our dependence on just IT services has gone down, and there's a lot of domestic demand which is picking up. So that's a good sign again.
Sure. Thanks, and all the best for future.
Thank you.
Thank you. Next question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Yeah, hi, just two questions, from my side. Can you give us a sense on what was the area that came up for contractual leasing this quarter, and what was the percentage that you gained? And the second is on the presentation from Mindspace Pocharam, which you put up for sale now or decided to sell, You put, zero occupancy, essentially, no committed occupancy. That's because you've put it up for sale, or that's because the tenants just vacated out?
No, we are putting it up for sale. So, I would see that as a big, big opportunity. If you remember a while back, when Accenture vacated, some of our space in, Hyderabad, that was 3.5 lakh sq ft. That is a big opportunity for us because, when they vacated, we decided to demolish that building and, build a 1.3 million sq ft, new super grade A plus, building. It's probably gonna be the best, building in, Hyderabad. I think, Pocharam, obviously, we, we are gonna build anything there, but, it's been a hang, on, our, occupancy rates, for a while.
It's gonna give us a great opportunity to kind of monetize this, to sell it, and we got the board approval, like I said, to sell this space. We're gonna be very soon appointing our international property consultancy firm to run a thorough, transparent divestment process and to sell it. In terms of expiries, coming to your first question, Murtuza. We have close to 3 million sq ft of expiry, which is gonna happen this financial year. 1.8 million in SEZ, and 1.1 million sq ft in non-SEZ. 90% of the non-SEZ space has already been re-leased. That's definitely on the positive side.
Here, again, we need to remember the exits which are happening in Pocharam. If we exclude Pocharam, and Preeti also spoke of, spoke about this, our occupancy would have actually improved by 40 basis points. And if we are able to exit from Pocharam, that improves our occupancy by around 2%. So that's again on the positive side. Pocharam has always been a non-core asset, and we'll hopefully sell it in the next one to two quarters.
Sure. Thank you.
Thank you. Next question is from the line of Abhinav Sinha from Jefferies India. Please go ahead.
Hi. Just one question. I think, and I'm not sure if I missed this. So on expiry front, we saw a jump on the exits. So can you give us some color on what happened here, and by when can we fill up this 1 million sq ft, which is now expiring in Q4? Thank you.
So, the main exit was Genpact, who exited Pocharam, 210,000 sq ft. L&T exited a little bit, 100,000 sq ft in Airoli East. We saw Wipro exiting Yerwada, 60,000 sq ft. And, like I said, if we exclude Pocharam, the numbers look quite promising. And, so some of the space which is being exited, I'm very sure that in the next couple of quarters, we will end up leasing it. And, there is some expiries happening this quarter also. There will be an addition of 500,000 sq ft in Q3, financial year 2024.
The closing expiry, we hope to have the same modulus, the same occupancy numbers at the end of this quarter.
So it would be 85% to 86% number that we have should be there at the end of Q4 as well, right? Irrespective of the exits. Is that what you're saying?
Around 86% number.
Okay. Okay, and broadly, by when are we now expecting the, you know, pre-COVID 88-90% numbers to be hit? I mean, with the expiry rules also there. Yeah.
Over the next one year, Abhinav, I think we'll get back to those 90, the early 90s, and then kind of increase it further in the financial year 2026.
Okay. Thank you. That's all.
Thanks, Abhinav.
Thank you. Next question is from the line of Kunal Tayal from Bank of America. Please go ahead.
Sure. Thank you. My first question is on the SEZ part. You know, given that the de-notification process is now available, is it fair to expect that the upcoming expiries of SEZ assets should have better re-leasing available?
Definitely, Kunal. So, this quarter, we have a tenant exiting. That tenant is paying early 40, and that space, our tenant hasn't exited, but as soon as the tenant exits, we're looking at filling up that space at late 50s. So there are those kind of spaces coming up, and I would look at the positive side of some of these exits for us.
Got it. Thank you. And then just a quick follow-up. You were earlier talking about physical occupancy going up to 65%. Just curious if that includes IT services companies as well. Some of the larger ones have been in the news, you know, talking about return to office. I just wonder if, you know, you've seen that as a practice across all meaningful IT services tenants in your portfolio.
Yes, it includes all types of tenants, including IT services.
Got it. Thank you so much.
Yeah.
Thank you. Next question is from the line of Kush Kantalia from Nippon India Mutual Fund. Please go ahead. Mr. Kush, your line is unmuted. Please proceed with your question. As there is no response from the current participant. Anyone who wishes to ask a question may press star and one. As there are no further questions, on behalf of Mindspace Business Parks REIT, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.
Thank you.
Thank you.