Ladies and gentlemen, good day and welcome to the Q2 FY 2026 earnings conference call of Mindspace Business Parks REIT. 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 touch-on phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Govardhan Gedela, Head Corporate Finance. Thank you, and over to you, sir.
Good evening, everyone, and thank you for joining the earnings call for Q2 FY 2026 of Mindspace Business Parks REIT. 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 and MD, Mr. Ramesh Nair, and CFO, Ms. Preeti Chheda, who will take you through the business update and the financial performance during this quarter. We'll then open the call to a round of Q&A, and I'll now hand over the call to Ramesh.
Thanks, Govardhan. Good evening, everyone, and thank you for joining us on this call today. I'm pleased to report another strong quarter for Mindspace REIT. I'm delighted to share that in August this year, Mindspace REIT has completed five successful years of listing. This also marks the completion of two years of my tenure at Mindspace REIT. Over the last two years, we have delivered a strong and consistent performance. Unit price has risen from INR 315 in September 2023 to INR 455 at the end of September 2025, and annualized total returns of nearly 26% till 30th September 2025 in the last two years. Net operating income has gone up to INR 491 crore, from INR 491 crore to INR 634 crore, again highlighting steady growth. GAV again has increased from INR 28,700 crore to INR 41,000 crore. Distributions again have gone up from INR 284 crore to INR 355 crore as of this quarter.
Over the last two years, we have delivered sustainable growth, operational efficiency, and strong unitholder returns. We have definitely benefited from the favorable trends in Indian commercial real estate. Our performance shows our ability to capitalize on this positive trend and grow. We are sitting on significant firepower to capture India's office growth story. We know acquisitions and development are our twin growth engines. Our balance sheet strength gives us the flexibility and optionality. We want our business to be predictable, and we understand that steady execution keeps all of you happy. Let me start with an overview and outlook of the industry. A major milestone for the sector has been SEBI's reclassification of REITs as equity instruments. This further enhances flows from equity mutual funds and potential domestic index inclusions. This reform aligns India with global practices, deepening liquidity and broadening investor participation.
Mindspace REIT welcomes this game-changing measure by SEBI. This reaffirms the government and SEBI's commitment to a vibrant Indian REIT ecosystem. India's office market remains resilient amidst global macro uncertainty. Flight to quality is real, and we are trying to be that quality. I would now like to share some highlights from the various IPC reports which have come in the last one month. JLL reported that India's office market hit a record 40 million sq ft of net absorption the first nine months of 2025. This marks a 28.4% year-on-year growth. The third quarter alone was the strongest of the year, with 15.76 million sq ft of net absorption, up nearly 40%. Vacancy levels again have dropped. By 40 basis points to 15.7%, marking the lowest level in 17 quarters.
The CBRE report stated that the gross leasing surged to nearly 60 million sq ft in the first nine months of 2023, marking the highest level on record for that period. Hyderabad and Pune recorded the highest leasing-to-supply ratios, showing balanced growth with minimal vacancy risk. Also, CBRE stated that Navi Mumbai remains attractive due to the availability of Grade A stock and the relative cost advantages compared to other areas in Mumbai. A recent Cushman & Wakefield report stated that Navi Mumbai has strengthened its role in MMR. There are 23.7 million sq ft of Grade A stock, which constitutes around 20% of MMR's total stock of 120 million sq ft. 87% of this is occupied. Average quoted rentals are INR 70, which is 57% lower than prior MMR submarkets. Atal Setu and the Navi Mumbai International Airport are all helping in this.
Infrastructure upgrades, cost-effective supply, and deep talent are drawing occupiers towards Navi Mumbai. The report also stated that Navi Mumbai's integrated and scalable urban framework is perfectly positioned to absorb the next wave of real estate growth. Now let's look at Mindspace REIT's performance. The key announcements for Q2 FY 2026 include. We delivered a very strong gross leasing of 0.8 million sq ft this quarter. Our portfolio's committed occupancy increased to 94.6% on a like-to-like basis. Including the recent acquisition of Q-CITY, which we acquired around three months back, which is now rebranded as The Square 110 Financial District, our committed occupancy stands at 93.8%. This is the highest since listing. Our NOI in Q2 grew by 25.9% year-on-year to INR 634 crore. This is again the highest growth since listing. We delivered a strong distribution growth for the quarter at 16.3% year-on-year.
DPU growth again was 13.2% year-on-year to INR 5.83 per unit. Five out of 11 assets have a committed occupancy of 100%. Two more parks have 98% plus occupancy. Since the demarcation guidelines came out in December 2023, I'm very happy to report that we have demarcated 2.65 million sq ft. And out of this 2.65 million sq ft, we have leased nearly 2 million sq ft. Navi Mumbai's best occupancy has increased from 72% to 94%. This reaffirms our belief in Navi Mumbai's growth story and the strength of our collective vision. The overall occupancy in Navi Mumbai also went up from 76% to 87%. Leased rentals have grown with new deals happening at INR 70 in Navi Mumbai. Our focus now lies in reducing vacancy in Navi Mumbai East. Mindspace Fusion, our F&B hub, saw outlets like Starbucks, Pop Tate's, and Pizza Express open last quarter, along with Crossword Bookstore.
The 22 new F&B and retail outlets will help further increase our occupancy in Navi Mumbai East. As a public-facing retail destination, this will also bring new energy to the park. We are awaiting one final approval to begin development of the Hyatt Regency Hotel within Navi Mumbai East campus. With ongoing upgrades, Navi Mumbai East will become an even more attractive destination for marquee occupiers. Let's now look at the operating and growth highlights. Re-leasing spread again was very impressive, 28.1% for this quarter. We also delivered robust growth in rentals across our micro markets, especially Madhapur and Hyderabad. We signed the first deal at INR 100 per sq ft in this market. This showcases our mark-to-market potential in Madhapur. Our global healthcare giant vacated the space at INR 40. And we leased that to a flex player at INR 99. An IT services client renewed their lease.
Management, you may please go ahead.
Yeah, but can you dial in?
Sure. Ladies and gentlemen, thank you for patiently holding. We have the management line back. Over to you, sir. Please go ahead.
Sorry, the line got cut. A global healthcare giant vacated the space at INR 40, and we leased the same place to a flex player at INR 99. An IT services client renewed their lease at INR 95 after the term ended at INR 72. In Navi Mumbai West, a global fintech company vacated the space at INR 61, and we leased it to a green logistics company at INR 72. We are actively working on an under-construction pipeline of around 3.7 million sq ft. We clocked a healthy NOI income growth of 25.8%, as mentioned before, to INR 634 crore. We have also seen a 25% year-on-year growth in H1 to INR 1,250 crore. Our loan-to-value still remains low at 24.2%, and this demonstrates good balance sheet strength. Our GAV of our portfolio today stands at INR 41,000 crore. We declared distribution of INR 355 crore for Q2 FY 2026. We have cumulatively distributed since listing INR 5,952 crore.
In terms of portfolio growth, as you are aware, strengthening our portfolio through strategic acquisitions remains a priority. Over the last nine months, we have grown our completed portfolio size by over 4.2 million sq ft. This is through a judicious mix of organic and inorganic growth strategies. Organically, we successfully constructed and leased 1.3 million sq ft, mainly the R2 building in Pune and th`e DC building in Mumbai. Our inorganic growth strategy included acquisition of a sponsored OFO of 1.8 million sq ft, a large external third-party acquisition of 0.8 million sq ft, and consolidation within our parks of around 300,000 sq ft. Going forward, we would like to be more focused on acquisitions, which augur well with our portfolio to stimulate growth. Our platform is built to scale, and we continue to focus on acquiring high-quality assets in core markets. On each of our projects.
At Mindspace Airoli East, we launched Mindspace Fusion, like I mentioned earlier, and it's already buzzing. We're elevating the retail and F&B choices across all our parks. Barbeque Nation, Game Ranch, and Flurys are also opening this month. Upgrades are beginning in buildings B1, B9, B10, B11, and B12 in Airoli East. We're refreshing arrival lobbies, landscaping, and façades to current design benchmarks. The clubhouse again is at a design phase for planned enhancements. Podium and terrace-level sports and recreation are underway to boost tenant engagement. Continuous park upgrades and redevelopments keep our assets future-ready. At Mindspace Airoli East, buildings B2 and B3, along with the central food court, are slated for an upgrade. The project is currently in the design phase. We already have two data centers operational. The next three will go live in a phased rollout. Mindspace is the only REIT with a sizable data center portfolio.
Upon completion, the portfolio will house 1.7 million sq ft of data center space. Our early move into data centers positions us uniquely in the intersection of real estate and digital infrastructure. At Mindspace Madhapur, within our 10 million sq ft park, current vacancy stands only at 198,000 sq ft. Like I mentioned earlier, with Madhapur rents rising, for the first time, we touched INR 100. The Pearl Club, which we used to previously call the Experience Center, is on track for Q4 FY 2026 completion. Building redevelopments are underway. B1 is 100% pre-leased and ready for handover in Q1 FY 2027. B8 is slated for Q4 FY 2027. We are seeing very strong inquiry and expect to close many prospects soon. Phased enhancements continue with emphasis on infrastructure and ambience. In a hybrid world, tenants are gravitating towards best-in-class campuses, and we are truly leading the shift in Hyderabad.
At Gera Commerce Zone Kharadi, REVIVE, our multipurpose amenities center that was launched last quarter, is receiving great response. Uptake is strong, and our tenants use the spaces very regularly. Fit-outs are in full swing at the R2 building following its delivery to a GCC client, and rents commenced last month. At Commerce Zone Yerawada, upgrades are focused on creating a livelier, more immersive campus experience. B7 is undergoing a phased lobby refresh. Work is progressing as per schedule. Façade and lobby upgrades are being planned. Building B1 is set for enhancements, including a new food court lobby and façade upgrades. Plans are again underway for terrace amenities to revitalize the center and to revitalize the central recreation garden. On customer centricity, we always prioritize our clients, their feedback, and requirements. We advance our H23 program, which has 23 measures to bring a hotel-like experience in our park.
Lobbies are being reimagined with five-star hospitality vibes. We offer vibrant breakout zones, indoor games, music corners, and café seating. Amenities are being strengthened with more offerings at food courts, terrace activations, clubhouses, and covered walkways. These come together for a smoother, richer campus experience. Elevator upgrades are underway based on life cycle assessment findings. We conducted 16 B2C events across six parks, drawing thousands of employees. We continue to remain focused on our portfolio upgrades. The playbook is very simple: build, lease, and upgrade endlessly. The goal being to lift rentals while enhancing day-to-day experience for occupiers. We are channelizing CapEx into asset modernization to strengthen stickiness and renewals. Priorities are shaped by voices on the ground. We are doing a lot more surveys, audits, and continuous tenant opinions. All these initiatives will help us attract quality of tenants and also to keep quality tenants.
I'd like to highlight here that tenant quality also drives value of the parks, not just the location. Our investor narrative is very simple and consistent: quality occupiers, disciplined growth, and stable returns. On the ESG front, this quarter. In GRESB 2025, we retained our global sector leader status in the office-listed development benchmark for the third straight year. We obtained BSE five-star ratings for 11 assets across the portfolio. Renewable energy now contributes 50% of our energy requirements. Energy efficiency measures will help us meet our targets under sustainability-linked finance. In conclusion, let me address concerns that were highlighted over the last few quarters and how we have addressed them. Basically, concerns we have heard from all of you. Last quarter, global uncertainties from the West posed concerns, yet our performance reflects the business's strong resilience to global uncertainties. Navi Mumbai vacancy was a key concern.
Mindspace Airoli West now stands at 94% occupancy, and Mindspace Airoli East stands at 80%. Together, our Mumbai occupancy in Navi Mumbai stands at 87%. Leasing SEZ spaces was a challenge which we closely monitored. As mentioned earlier, 2 million sq ft out of our 2.6 million sq ft of NPA converted space is successfully leased. I also wanted to take this opportunity to highlight our new leadership team. Before I conclude, I wanted to share this. Venkat Neelakandan has joined us as Senior Vice President and Head Asset and Facilities Management. In this role, Venkat will be the head of Camplus, our FM business vertical, across our pan India office portfolio. Venkat was previously the Global CRE Head of Capgemini. Shrikant Reddy has joined us as Senior Vice President and Head Leasing South. In this capacity, Shrikant will lead the leasing for South India.
Shrikant was previously the Managing Director of Cushman & Wakefield. Both of them will be based out of Hyderabad, highlighting our focus on decentralized and strong regional leadership. In conclusion, India's commercial office market remains resilient, backed by strong fundamentals. Growth is being driven both organically through developments and upgrades and inorganically through carefully selected value-accurate acquisitions. Our financial discipline remains unwavering, with strong cash flows, low leverage, and prudent capital management underpinning consistent growth. Our philosophy is simple and proven: lease rapidly, build efficiently, manage spartanly, and create workspaces that people love and businesses thrive in. We thank each of you, our analysts, for your continued support and guidance that has helped us improve. At Mindspace REIT, we continue to build, love workspaces, and maximize value. Thank you all for your time. I'll now hand it over to Preeti for further financial updates of the quarter.
Thank you, Ramesh. Good afternoon, everyone. I'm pleased to present the financial results for the quarter ended September 30, 2025. Mindspace REIT continues to deliver healthy financial performance, aided by strong operating performance. Our NOI for Q2 FY 2026 grew 25.8% YOY to INR 6.3 billion. Revenue from operations for Q2 FY 2026 increased by 24.8% YOY to INR 7.8 billion. We recorded a healthy 16.3% YOY growth in distributions for Q2, totaling INR 3.5 billion. Our DPU grew 13.2% YOY to INR 5.83 per unit. The GAV of our portfolio grew about 12% to INR 410 billion as of September 2025. This strong growth was driven, amongst others, by rental increases across our micro markets, particularly Madhapur, Hyderabad, where the recent transactions have demonstrated a strong growth in rentals.
NAV of our portfolio also grew by 12% from INR 431.7 per unit at March 2025 to INR 483.7 per unit at September 2025. I would like to highlight here that we have consistently added value to our existing portfolio through park enhancements, redevelopment, creating new spaces like clubs in Hyderabad, High Street in Airoli East, diversification into data centers, adding newer buildings which were not in the search at the time of IPO, and so on. All of these collectively, of course, coupled with strong operating performance, have contributed to our NAV per unit growing almost 50% from INR 326 per unit at the time of IPO to INR 483.7 now. Our LTV, as Ramesh mentioned, continues to remain low at 24.2% as of September 2025.
Like I've mentioned in the last quarter earnings call, we are working to convert some of the continuing variable cost debt, which is at our SPVs, to fixed cost borrowing and also looking at longer tenure so that we can lock the lower coupons for the long term. With the rental growth at our parks, IROB occupancy steadily increasing, our under-construction portfolio progressing as per schedule, inorganic growth supported, of course, by a conducive interest rate environment, we believe we are well poised for a healthy NOI and DPU growth going forward. With this, I hand over the call to the operator to open the floor for questions. Thank you, everyone.
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 the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah, thanks for the opportunity. Just a couple of questions from my end. Firstly, if I look at slide number 11, Madhapur Tower 1A and 1B are already 100% pre-leased to a GCC. What's your thought process regarding Towers 7 and 8, given that we're near completion within the next four or five quarters? Are you in active discussions with potential tenants regarding pre-leasing of these towers? As a follow-up, what sort of tenant profile and rentals will you be targeting for these towers?
Karan, great question. In my 26 years in commercial real estate, I have never seen such a vibrant market as what I'm seeing in Hyderabad at this moment. One and a half years back, rentals were just around INR 75, INR 78. Today, everything is going between INR 95-INR 100. We have very confident P7 and B8, which is 1.7 million sq ft, which is expected to get ready by April 2027. Will get pre-leased very soon. For this 1.7 million sq ft, I was just checking with my leasing head, Shrikant, what's the amount of inquiries we have? We have close to 5.5 million sq ft of inquiries already for this 1.7 million sq ft. Very confident, and very soon we should be able to start giving good news. It's a big building, so we would at least have four or five tenants here.
The inquiry size is ranging from 100,000 sq ft right up to 800,000 sq ft. We are in discussions with many, many global large GCCs for this building. Construction is on track. I was there last week, so on track to finish construction by April 2027.
Sure, this is helpful, Ramesh. Just my second question is relating to the overall thought process. Regarding third-party and sponsor acquisitions. Given your net debt remains in the comfortable range of sub 25%, will the focus be first towards completion of under-construction and future pipeline of 3.7 and 3.0 million sq ft, respectively, before pursuing these opportunities? Are you open to evaluating the opportunities at the right time? As a follow-up, if you can also provide some current leasing status of some of the large sponsors. Perhaps at Altimus as well.
A good amount of assets we are looking at right now. Definitely, the focus is not just on development assets. That continues over the 7.71 million sq ft. We are a very execution-driven company. The key focus is on converting land to cash flows. That continues. As we talk right now, we are looking at multiple third-party assets, multiple ROPO assets, two, three very good ROPO assets. Altimus is something where the sponsor has seen a very good amount of leasing traction, nearing 80% plus number. Ascent, again, a building which is close to Altimus, again, is something which, again, these are sponsor assets. At the right time, we would make offers for these. Good leasing traction, given all the challenges today BKC is facing. Demand is moving outside of BKC markets around that. Good traction in markets like World.
Just as a follow-up, we are also seeing a lot of activities in the Bangalore market. With newly apprentices now having a presence in the Bangalore market, what's your thought process? Will you be actively evaluating opportunities here, or would you look to go deeper in some of your existing markets where you have a large presence overall?
We look closely at two assets in Bangalore. One, we were not the highest bidders. Somebody outbid us. The other one, there were huge traffic issues, so we gave it up. These are the two assets.
Sure. Lastly, on exit occupancy, given the portfolio occupancy and committed occupancy is already at 89% and 92%, respectively, what is the exit occupancy guidance for FY 2026? If you can provide some color for FY 2027 as well, that will be helpful.
We're looking at coming close to the 95% mark. That's what we had said at the beginning of the year. We're on track to come to the 95% mark at the end of this financial year.
For FY 2027, any internal targets that you'd like to share, or is it too early to comment on that?
Too early. The next call, we should be able to give some guidance on that.
Sure. This is helpful. Thank you and all the best.
Thanks, Karan.
Thank you. The next question is from the line of Mohit Agrawal from IIFL. Please go ahead.
Yeah, good afternoon, everyone. My first question is on your NAV increase. Last two times, the NAV increase has been in double digits. If you look at over a year, the NAV is up 23%, almost INR 90. Could you elaborate the reasons? More than that, is this some kind of a reset that you're seeing? If yes, then should we expect this to continue next six months? In March also, should we expect a double digit kind of? What is the color you can give on the NAV increase?
I'll give a couple of insights, and then Preeti can add to it. Like I mentioned, Hyderabad, the market has just gone crazy in terms of rentals, in terms of demand. You saw that record land prices where land is sold at INR 1.7 billion an acre. This is the same land which K. Raheja purchased at INR 3 lakh an acre. I'll just repeat it. INR 3 million an acre has today become INR 171 lakh billion an acre. Obviously, rentals have gone through the roof. People have underwritten these INR 170 crores , INR 140 crores land deals at 130-140 kind of rentals. That's the first part. Over the years, what all commercial developers and REITs have done is efficiencies back 10 years, 12 years back used to be 78%, 77%.
That's kind of dropped to a 70% mark in almost all parts of the country, except in places like BKC, where efficiency today is at 60%, even lower. Efficiency adjustments is something which, again, we have done. These are the two factors which have contributed to increased NAVs. Ironically, also, there's been increased rentals where you heard about me talking about Gigaplex occupancy going up. These are some of the valuation assumptions which the valuers told us about.
If I can just add, as Ramesh rightly mentioned, a big chunk of the growth between March 2025 and September 2025 has been attributable to Madhapur rentals. The valuer earlier had assumed INR 85 rent and has now reset it to INR 95, which is where the deals are happening. In fact, they are happening even higher than that. That has been one of the largest contributors to the valuation at this time. Generally, to answer your questions in terms of how you all should be looking at valuation going forward, as I had mentioned a while back, if you look at the way our NAV has grown, almost 50% since IPO, of course, operating performance has been one of the largest contributors. Alongside that, we have continuously added value to the portfolio. Like REIT developments have added to our NAVs.
The newer leasing areas which we've created, whether it be Pearl Club, High Street, or even newer buildings which we had not even advertised at the time of IPO, our data centers which have added value. Now, all of these have also contributed to our NAV. These are certain things which we will continue to do going forward. To, again, sum up, one, of course, your strong operating performance, our rental growth across our parks, including Airoli, needless to talk about Hyderabad, that's going to add operating performance as we complete our developments on the 7 million sq ft. That's going to add to the NAV. Of course, all the enhancements, redevelopments, newer buildings that we keep adding to our existing portfolio, all of them collectively should be able to contribute to a healthy NAV growth as well.
Sure. Understood, Preeti. This 85%-95% reset, now, I think in the next round, did you expect it to kind of moderate it to high single-digit, low double-digit number, or where do you see this?
It depends on where exactly Hyderabad winds move. If this rental growth continues for the next few quarters, years, I don't really know. Then, accordingly, I'm expecting that the valuer will keep resetting the rentals.
is absolutely no space available in this market. That is why you saw those massive land deals happening at INR 140 crore and INR 170 crore. That is the game. I mentioned it earlier also, our rentals have already touched INR 100. These are for some of our older buildings. Newer inquiries, we are confident we should be able to do more than INR 105 kind of numbers.
Sure. Understood. My second question is, Ramesh, in your opening remarks, you sounded optimistic on IROB East. In answer to the previous question, you had mentioned you reiterated 95%. Now, for that, obviously, the IROB East occupancy has to move up meaningfully from that 80% mark. Where do you see this number? Let's say an indicative specific target on IROB East by end of FY 2026?
Four, five things, Mohit. First is, there's not much space left for us in Gigaplex. I mentioned occupancy has already touched 94%, which means we only have excess space in IROBI East. Some of our neighbor parks, there were a couple of, three competing parks, we are also seeing good traction. There's not much space left. Everybody knows about these government initiatives in terms of Navi Mumbai. The airport is already a reality, opening anytime soon. Everybody knows about Atal Setu. There's multiple flyovers, tunnels, all that. Fusion, which is, we got the idea from DLF Cyber Hub. That's a mini version of Cyber Hub, which we have created in IROBI East, which again is something which is seeing a lot of traction. This is going to have 22 F&B outlets. You would have recently read about the Maharashtra GCC policy, which was announced by the government.
This GCC policy is a mix of many good GCC policies across the country. Very proactive efforts by the Fadnavis government. I think all these would lead to, and people can't afford the kind of rentals today. Let's say a JP Morgan in Millan or a Morgan Stanley in Commercial 3. Those kinds of global capital back offices, very few companies can afford. I think there is a clear opportunity, given that rentals in Navi Mumbai are only INR 70. I think it's a matter of time before you see a good amount of leasing happening. Almost all the top Indian banks like HDFC, Axis, IDFC, all of them, ICICI, all of them have big global back offices in Navi Mumbai.
Sure. Just a couple of small clarifications. Is Fusion now completely up and running? Secondly, on hotel, you mentioned you'll be waiting for just the last approval. What is the revised completion timeline for that?
Hotels, from the time we get the approvals, that'll be around three years to complete. We have 22 F&B outlets, of which we have leased 20. Five have opened up. Another five will open up this month. The balance fit-outs are happening. We lease two in the next 30 days. It is coming up well. You should try and visit more.
Perfect. Thanks a lot. All the best.
Thanks, Mohit.
Thank you. The next question is from the line of Yashas Gilganchi from BOB Capital Markets. Please go ahead.
Good afternoon, team. Thank you for taking my question. Despite record office absorption year to date, it seems like leasing momentum is slowing, at least for most of the streets. What do you think is causing this decline?
Leasing momentum for India, or leasing momentum for Mindspace REIT?
For India and also for Mindspace.
Not exactly, Yashas. This is a question I have a small WhatsApp group of 10 commercial leaders, including IPC leadership and commercial real estate developers. I ask this question at least once a week or once a fortnight to them. I have not heard any negative. There are two times I heard some amount of slow speed in decision-making. One was during April, during that Liberation Day tariffs time. Second was during that May time when the India-Pakistan war was happening. We are keeping a very, very close eye on this. No signs so far, but that is something we are tracking very much. Two things we track all the time on a fortnightly basis. One is tariff-related impact, and the other is AI-related impact. Till now, no negative news. Unless you have heard something, Yashas, it will be good to hear your views on that.
Understood. Nothing specific. Maybe take it offline and discuss it with you. Yashas, I understand.
Yashas, I'll just add one point. IT services definitely have slowed over the years in terms of portfolios. You'll see it. That's exactly the demand which is going to GCC. The other day I was sitting with JP Morgan. They have 65,000 employees in India. Accenture today has 380,000 employees in India. A lot of these guys are expanding. I was shocked to hear that a new company in Hyderabad, a new company, this is the first entry into India, is taking 800,000 sq ft in one shot. 800,000 sq ft in one shot. Previously, 20 years back, a company would take 200 seats. Today, people are willing to bet on 5,000-6,000 seats in their entry strategy into India. That's something we are tracking closely, Yashas.
Okay. Understood. The details are very helpful. What do you think is the stabilized occupancy level at The Square 110 Financial District? How long do you think before the assets can reach that level? Also, what's the upside you see in the rents?
Square is something which is 800,000 sq ft. The vacancy levels in Square today is around 250,000 sq ft-300,000 sq ft. We are quite confident in the next three to six months, we should be able to fill most of this space. What's helping us in this filling up is absolutely no space being available in the high street city Madhapur region, because of which the demand is slowly shifting towards financial districts. Companies want to be in Hyderabad, but if they do not get space in high street city, they would rather travel 20-25 minutes, go to the other side of town, and take space there. That's what we are seeing. In the next six months on, we should be able to close a lot of the space. Enquiries are being quite.
Okay. Understood. Is there.
Is he connected to us?
Yes. Hello.
Can I go ahead?
The conference is now being recorded.
Sorry, not sure if you heard my question.
Yeah. Yashas, in terms of Square vacancy, we're talking to multiple clients. There's a 50,000 sq ft client. There's a 80,000 sq ft client. There's a 30,000 sq ft client. We're also talking to a large 200,000 sq ft client. If some of this close, I think we should be comfortable.
Okay. Lastly, as we evaluate opportunities for acquiring assets, how do you describe the market as it stands today? Are there any challenges?
I think what we were seeing in terms of bidder spreads is slowly kind of narrowing as fund life of many companies kind of come to an end. There is obviously a little more pressure to sell. There is not too much of a difference between cap rates which are being quoted and which are getting closed. I think the number of buyers remains the same: five, six buyers who are there. Given that we have local teams in many of these cities that are understanding of these assets, we do a lot of due diligence before we place an offer. It is not just an Excel modeling which we do. Yesterday, we were looking at an asset in South India, and there were a team of 25 people who spent the full day in the asset evaluating the overall asset.
From our licensing team to asset management team to leasing teams to engineering, planning, scheduling, all those upgrade teams, all were at the site. This is an art which we are perfect at now, how to acquire third-party assets. That continues, Yashas.
Let's continue on.
Thank you very much.
Thank you. The next question is from the line of Pritesh Sheth from Axis Capital. Please go ahead.
Yeah. Thanks for the opportunity and good evening, good team. First, on just continuing on the Square 110. We saw negative NOI and negative NDC as well. At what occupancy do you think it breaks, it breaks even, and by what time frame do you think that it will start being accretive to NOI, DPU, etc.?
Pritesh , hi. This quarter, because it was an asset where a lot of work had to happen, of course, there is more work to do. We therefore spent a decent amount of money this quarter on some urgent repairs which were needed to be done. That is the reason why you have seen negative NOI and NDCF this quarter. Going forward, we have some upgrades which we want to do, which is just going to be more in capital theater. Those are not going to hit NOI or NDCF. Of course, some repair work will still continue, that will happen. I think going forward, we should, I mean, in all possibilities, start seeing positives for NOI and NDCF.
I just like to add here, Pritesh , that if you remember when we bought the asset, we had bought it at a cap rate of 9.9%. The reason for that was it was a mix of a core plus and value-add kind of an opportunity where we could upgrade. What Preeti just mentioned is the money which we are spending in immediate upgrades, they're also going to be immediate upgrades, we're going to be spending money.
Got it. Got it. Fair enough. That's helpful. Second, on Madhapur, now we have opened one more block for development. I guess it was there earlier as well, but we are reporting it in the presentation probably for the first time. Just on the FSI potential in that part, how much we can go till in terms of FSI utilization, how much we have already utilized, and taking the density into consideration, what would be the optimum FSI potential that we would be looking at? Any other redevelopment opportunities in the near term since we are close to delivering the two redevelopments that we have already taken up? Any other redevelopment opportunities that you think of starting in the near term?
This is our B18 plot in Hyderabad. In a 110-acre campus, this is probably the most prime plot, given that this is right in the entrance, main road facing. Here, the FSI potential is of leasable areas around 530,000 sq ft. We just got approval. Previously, there was a small legal issue which got sorted last year, post which we had approval. We had sent the files for approval. This 530,000 sq ft, we have started excavation work. This is going to be a mixed-use kind of development. This is of the full park, so 10 million which is ready, 1.5 million sq ft which is B1, 1.7 million sq ft which is B8, and another 530,000 sq ft to that. That is the total park as it stands today, Pritesh.
Any further potential to be unlocked?
There is decent FSI potential. We've been doing some analysis on that. Given the size of the park, it all depends when some large tenants vacate, when we could get redevelopment opportunities. One good thing is we have done two redevelopments there, so we understand that potential. There are still many occupiers, many buildings there, which was done in the old FSI of 2. As and when people serve notices, we could create a 6 and 7 kind of FSI there. Big opportunity. I do not want to put a number there, but the number is quite a decent number, which will keep us busy for the next few years. Similar redevelopment opportunities are available even in Airoli. Given that in all Indian cities, FSI, which used to be 2 around 12 years back, has gone to 5-6-7.
Two opportunities we are waiting for when tenants vacate to kickstart the plan. There are some places where we know the tenants could vacate and where we are getting ready with the plan, concept, designs, all that. We should be able to do some announcements over the next couple of quarters.
Sure. Got it. Just on Airoli, right? I mean, till now, we have had largely the back office clients or tenants. With airport now in proximity, do you think there is a potential to also attract front office clients leading to better rentals, or are we still far away from thinking about that opportunity?
Front office is going to be a little difficult right now, given that there's a lot of front office demand in places like BKC and Kalina and all these kind of locations. Front office is going to be a little difficult, but good, robust back office. Mid-market demand would come. And mid-market typically would go to areas like a Nandini kind of market. Some of that Kurla kind of market, those kind of demands could come to Nandini. But not front office, we haven't seen much of demand.
With sort of with this mid-market demand, these tenants do have a potential to pay higher rentals, or INR 75-INR 80 is what we should expect at the max?
Our focus, Pritesh , is always being occupancy over rent and high-quality tenants. Rentals in Navi Mumbai is something we marginally keep increasing every time we do a deal. That is how we would like to take it, given that there is decent vacancy available in that market. We are not going to suddenly jump to INR 80. Every time we do a deal, we will increase it by a couple of rupees.
Sure. That's it from my side. All the best. Thank you.
Thank you. The next question is from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Hi. Good evening. Congratulations for a great session, Anmol. A couple of questions from my side. When you refer to the additional 0.53 million sq ft FSI potential in Madhapur, are you referring to the building 18 that we have there?
That's right. Building 18. The one in the front block.
Sure. Secondly, I mean, I know this question was asked earlier, but now given that we have largely two assets only where we can lease out additional space, Financial District has already said that we expect most of the space to get leased out over the next six or so months, which would then leave only Airoli East with us. Over the next one, one and a half years, what is the kind of leasing that we can do in Airoli East? That's the first question. Second, what would be the occupancy in the ACC versus non-ACC space that we have? Thank you.
Yeah, ACC versus non-ACC, let me just find out what's the exact breakup. So like I mentioned, the total 1.8 million sq ft vacancy in this ACC is 1.3 million sq ft.
Our non-ACC occupancy today stands at 96.2%, and ACC occupancy stands today at 91.8%. Irony East. Tough to put a number. There have been years where we've leased 1 million sq ft. There have been years where we've leased 500,000 sq ft. Demand is decent, given that. The inquiries are definitely increasing, and there's not much of space available. There was Tata Realty had done a good project close by that got taken by one client, 600,000 sq ft. Now the next set of demands will start coming more towards our part. In terms of newer spaces, there would be many opportunities. We're looking at at least one, two, three, four, five, six, seven, eight different redevelopment opportunities across our portfolio over a period of time, Parvez.
Parvez, just to add to what Ramesh said, now, actually, there is no distinction between ACC, non-ACC spaces here, because you are today, within like 45 days, able to convert ACC spaces into NPAs. Honestly, there is nothing like ACC, non-ACC anymore.
Sure. That's it. Thanks and all the best.
Thank you.
Thanks.
Thank you. Participants who wish to ask a question may press star and one now. Anyone who wishes to ask a question, please press star and one. As there are no further questions from the participants, with that, we conclude today's conference call. On behalf of Mindspace Business Parks REIT, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you, everyone.
Thank you.