Ladies and gentlemen, good day, and welcome to Mindspace Business Parks REIT earnings call for Q3 FY 2026 financial results. Please note, 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. Please note that this conference is being recorded. With that, I hand over the call to Ms. Shweta Shah from Mindspace Business Parks REIT. Thank you, and over to you.
Good evening, everyone, and thank you for joining the earnings call for Q3 financial year 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. We advise 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, CFO, Ms. Preeti Chheda, and Mr. Govardhan Gedela, Head Corporate Finance, who will take you through the business update and the financial performance during the quarter. I will now hand over the call to Ramesh.
Thank you, Shweta. Good evening, everyone, and thanks for joining us all today. This quarter was another strong quarter for Mindspace REIT. The quarter was driven by strong demand for Grade A office assets and disciplined execution by us. We recorded gross leasing of 1.1 million sq ft. This momentum translated into good financial performance. NOI grew by 28.7% year-on-year to INR 671 crores. Distribution for the quarter increased by 19.8% year-on-year, delivering a DPU of INR 5.83 per unit. Similar strong show for the nine months period of FY 2026. NOI grew by 26% year-on-year to INR 1,922 crores, and distributions increased by 18.1% year-on-year, resulting in 12.5% DPU growth. Rental traction remains healthy across the portfolio.
We achieved a re-leasing spread of 27.4% on 1 million sq ft relet during the quarter. Rentals continued to trend upward, particularly in Madhapur. In Madhapur, we signed a transaction at INR 105 PSF, highlighting significant mark-to-market potential. During the quarter, we further strengthened and scaled up our funds through announced acquisitions. Prime CBD assets in Mumbai, like Ascent Worli, which is Goldman Sachs HQ in India, The Square in BKC Annexe, which is JP Morgan's HQ in India, and a small office asset in Pune. These three acquisitions added 800,000 sq ft of leasable area to our portfolio. Happy to share that we have concluded the acquisition earlier this month. These assets are irreplaceable, increasing our CBD portfolio and benefit from strong scarcity premiums.
Looking ahead, there's two clear drivers for our growth: well-chosen acquisitions and a development pipeline we can execute with discipline and focus. Our strong balance sheet keeps us agile. This gives us the ability to pursue when the right opportunity presents itself. Our approach is straightforward: consistent execution and delivery, reinforcing our performance and trust. I would now like to share highlights from the various IPC reports. Let's look at the JLL insights first. In 83 million sq ft of gross leasing in 2025, up 8% from 77 million sq ft. GCCs led demand by 31.4 million sq ft, up 13% year-on-year, accounting for 38% of total leasing. Q4 2025 leasing hit a record 27 million sq ft, driven by global firms and expanding GCCs. Net absorption again crossed 57 million sq ft, up 14% year-on-year.
Vacancy is the lowest in the last five years, with many micro markets witnessing single digit availability. Now let's look at the CBRE insights. GCCs are set to drive 35%-40% total absorption in 2026. Demand driven by steady investment, portfolio expansion, and ongoing digitization by global and domestic firms. While U.S. firms remain the main GCC drivers, EMEA and APAC occupiers are increasingly setting up shop in India. New supply rose 10% year-on-year to 59 million sq ft in 2025. Q4 completions increased 10% year-on-year to 16.6 million sq ft. The Cushman & Wakefield report states that 2026 completions projected at 60 million sq ft to meet rising demand. Growth driven mainly by fresh leasing alongside a steady rise in recommitment. Despite higher 2026 supply, vacancy expected to remain stable at 14%.
REITs and listed developers likely to expand further in 2026, which is expected to increase the share of premium Grade A-certified assets. The Colliers report stated that with demand exceeding supply in 2025, vacancy declined year-on-year, while average rentals rose up to 15% in many micro markets in many cities. Hyderabad was driven by BFSI, consulting, and healthcare, together accounting for more than of the conventional leasing in Hyderabad. Hyderabad market again saw rental increase of more than 15%.... In Mumbai, with limited new supply in 2025, vacancy fell to 8%, and rentals strengthened sharply year-on-year. Now we come to the operating and growth highlights. We recorded gross leasing of 1.1 million sq ft in Q3 FY 2026.
The committed occupancy for the quarter stood at 95.3%, excluding Pocharam and the acquisition we made in the second quarter of FY 2026. The acquired asset, The Square Financial District, is undergoing a planned stabilization phase as we evaluate and implement value enhancement ideas. Including the Financial District, asset, The Square, the portfolio committed occupancy for the quarter stood at 94.5%. We achieved a re-leasing spread of 27.4% for Q3 FY 2026 on one million sq ft of area relet. We saw robust growth in rentals across our micro markets, especially Madhapur and Hyderabad. We signed a deal in Madhapur, like I mentioned, at INR 105 PSF, offering huge mark-to-market potential. This follows last quarter deal signed at a rent of INR 100 PSF, reinforcing sustained rental momentum.
A global fintech giant renewed their office space for 10 years, giving us a mark-to-market of 50% in Hyderabad. Similarly, a global engineering GCC renewed their space for 10 years, giving a mark-to-market of 33%. In-place rent for portfolio today stands at 75 INR PSF, indicating clear headroom for mark-to-market opportunities. Happy to share that we have received occupancy certificate for the Pearl Club in Mindspace Madhapur. We also received full occupancy certificate for Mindspace Fusion and Mindspace Airoli East. Growth pipeline is well on track. We're actively working on under construction pipeline of 3.6 million sq ft, and approval for the balance, 3.5 million sq ft development pipeline, are at advanced stages.
We are very pleased to share that we've been ranked in top five REITs globally out of 377 REITs in 2025 in the S&P Corporate Sustainability Assessment, the DJSI. As you are aware, portfolio expansion remains a strategic priority, with a continued focus on value-accretive acquisitions. Over the past year, we have grown our completed portfolio size by over four million sq ft. This is through a mix of organic and inorganic growth strategies. Organically, we successfully constructed and leased 1.3 million sq ft. This is the R2 building in Pune and one data center. Our inorganic growth included acquisition of sponsored assets of nearly 2.6 million sq ft, the The Commerzone asset in Hyderabad, the asset, asset in Worli, the Square asset in BKC, and Raheja Woods in Pune.
A large external third-party acquisition, asset of 0.8 million sq ft, which is, the Q City acquisition, and a consolidation within our parks of 300,000 sq ft. Moving forward, we intend to focus more on acquisitions to strengthen our portfolio. With a scalable platform in place, we will continue to pursue high-quality assets in our core markets. A broad update on the development side. At Mindspace Airoli East, Fusion, our F&B hub, added many new outlets last quarter. Upon completion, we have 22 F&B and retail outlets which will be lined up. As a public-facing destination, Fusion will bring more footfall and buzz to the park. Also, upgrade work is underway across Buildings 1, 9, 10, 11, and 12 in Airoli East. We are creating premium hospitality arrival experiences with a sense of calm luxury. The lobbies will be both sophisticated and functional.
Clubhouse upgrades have commenced and progressing well. We are also building a new food court and sports arena. Regular upgrades and redevelopments keep our parks future-ready. At Mindspace Airoli West, committed occupancy has climbed from 72%, nearly two years back, to 96% since the demarcation announcement in December 2023. Across our 5.4 million sq ft business park in Airoli West, vacancy today stands at a low of close to 200,000 sq ft. This progress strengthens our confidence in Navi Mumbai's growth and our long-term plan for the micro market. Rentals have moved up as well, with recent deals in Airoli being signed at INR 71 PSF. We currently have two data centers up and running in Airoli West. Three more are in different stages of development. Mindspace is the only Indian REIT with a data center portfolio today.
Once completed, our portfolio will include about 1.7 million sq ft of data center space. Starting early in data centers has been advantageous, as demand for digital infrastructure continues to rise. At Mindspace Madhapur, 10 million sq ft business park, vacancy is as low as 180,000 sq ft. The Pearl Club, which is the experience center, remains on track for opening. We are also extending our skywalk from 1 km to 2 km to improve tenant experience. The skywalk is further expected to ease commute for nearly 100,000 people who use our Madhapur park. This will also provide direct link from the Raidurg metro station to key points within our campus. It also helps reduce road crossings and traffic congestion. In Commerzone Yerwada... Our upgrades are aimed at making the campus more vibrant and engaging for everyday users.
Refurbishment of the entrances have begun, improving the welcome experience. Building 1's food court is also progressing well. We're also undertaking lobby and facade upgrades. Plans are underway to add terrace amenities and a revitalized central recreational garden. Let's look at customer centricity. We put customers first. Their feedback shapes our priorities, and sustainability is built into everything we do. We've fast-tracked our EDGE 23 program, which is 23 focused actions to bring a more premium hospitality-led feel across our parks. We've added more spaces to relax and connect, more breakout zones, indoor games, music corners, and café-style seating. We are strengthening amenities across parks with better food options, activated terraces, improved clubhouses, and covered walkways. Elevator upgrades are also in progress, guided by life cycle assessments. We organized 16 tenant employee events last quarter, from festive celebrations and sports tournaments to stand-up comedy and curated third-party formats.
We are directing CapEx into modernizing assets to drive stronger renewals and long-term stickiness based on the surveys, audits, and regular tenant inputs. The aim is simple: improve everyday experience for our valued occupier clients. These upgrades help us win and retain tenants. We understand that value comes from the park experience, not just the address. Our approach is consistent: build, lease, upgrade, and repeat. In terms of ESG, Mindspace REIT earned strong global recognition from its sustainability work. We are ranked among the top five REITs worldwide out of 377 REITs in the 2025 DJSI Corporate Sustainability Assessment, with an overall score of 73 out of 100. Green building milestones included Building B4 in Kharadi, achieving an IGBC Platinum and LEED v4 Gold, and Madhapur Buildings 1 and 8, which received EDGE Pre-certification.
These achievements reflect our focus on building in ways that use energy, water, and materials more efficiently. In conclusion, over the next one to two years, Grade A supply constraints in many markets will support near-term pricing power for Mindspace REIT. On the demand side, AI-related job placement is not yet a material risk for Indian office markets. Lower interest rates should benefit us at Mindspace, given stable, long-duration cash flows. Mindspace has delivered excellent returns of 37% in calendar year 2025, significantly outperforming Nifty and Sensex. Indian REITs have now seen a full market cycle, and we have proven resilience across COVID, rate hikes, and GCC disruption. With relatively lower interest rates compared to a year ago, cost of debt is now below cap rates, supporting accretive acquisitions. Mindspace has low leverage, giving us headroom along with balance sheet strength.
We have also demonstrated our ability to close accretive acquisitions. We also have a strong sponsor-led acquisition engine and the proven capability to execute large accretive acquisitions efficiently. We are also benefiting from rental buoyancy in many of our micro markets, offering embedded mark-to-market. Our exposure to Hyderabad is helping us significantly today, given that Hyderabad has become India's most sought-after GCC destination. Stepping back, the message is consistent: pricing power, resilience through cycles, multiple levers for growth, and clear drivers for rental re-rating. We thank each one of you, our analysts and investors, for your continued support and guidance, which has been instrumental in our journey. At Mindspace REIT, we continue to build loved workspaces and maximizing value. Our investor proposition remains unchanged: high-quality occupiers, disciplined growth, sustainability-led action, and stable returns. Thank you all for your time.
I will now hand it over to Preeti for further financial updates of the quarter.
Thank you, Ramesh, and good evening, everyone. I'm pleased to present yet another quarter of strong financial performance. Revenue from operations for Q3 FY 2026 increased 27.2% YOY to INR 8.2 billion, while NOI for Q3 FY 2026 grew 28.7% YOY to INR 6.7 billion. Distributions for the quarter rose 19.8% YOY to approximately INR 3.8 billion. Our DPU grew 9.6% YOY to INR 5.83 per unit on a higher unit base following our recent concluded acquisition. I'm pleased to report that we have successfully completed the acquisition of sponsor assets in Mumbai and Pune, which are Ascent Worli, The Square BKC Annexe, and Raheja Woods in Pune. With this, the GAV of the portfolio now stands at INR 441 billion, basis September 2025 valuation.
Including these assets, we have now completed inorganic acquisitions of four million sq ft over the last 2.5 years, taking our total portfolio size to 39 million sq ft. We shall continue to actively explore external acquisition opportunities that align with our investment philosophy and growth strategy. As of December 31, 2025, our LTV remains low at 24.9%. On a pro forma basis, including the acquisitions we completed post-December, the LTV stands at a comfortable 25.4%. This provides us enough balance sheet headroom to pursue inorganic opportunities to scale up. Our cost of debt declined by 13 basis points during the quarter to 7.39% PAPM. This was driven by our active refinancing plan to replace relatively higher cost facilities.
During the year, we have raised INR 61.5 billion at 6.95% PAPM through fixed cost instruments, largely to refinance variable cost loans, which carried higher interest rates. In Q3, we raised INR 19 billion at an effective rate of 6.98% PAPM through debentures. As a result, the fixed cost portion of our debt increased from 46% in March 2025 to 76% now. This keeps our interest costs predictable, volatile to the changes in external macro environment. On the regulatory front, we welcome the recent reforms, including the classification of REIT investments by mutual funds as equity, effective January 1, 2026, and REIT eligibility for index inclusion from July 1, 2026. In addition, relaxation and investment norms for government pension funds are a positive development.
These measures will broaden the investor base and support long-term capital inflows into the REIT ecosystem. As we near the end of this financial year, we are happy to have delivered robust operating and financial for the nine months ended December 25, and we expect to end the year maintaining this momentum. Similar to this financial year, we expect the next financial year performance to be driven by rising occupancy at our parks, especially Airoli parks, rental uptick, delivery of projects that are currently under construction, and portfolio additions through inorganic acquisitions. I end here, and with this, I hand over the call to the operator to open the question, open the floor for questions. Thank you.
Thank you so much. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may click on the Raise Hand icon from the Participants tab on your screen. We will wait for a few minutes until the question queue assembles. We'll take our first question from Samarth Agrawal of Ambit Capital. Please go ahead with your question.
Hi, thanks for this. Just a couple of questions from my side. Firstly, for the expiries coming in in 2027 and 2028, 1.3 and two million sq ft, respectively, what kind of discussions are you having with respect to re-leasing? Firstly, how much of it would be re-leased to the same tenants? And secondly, and more importantly, what would be the re-leasing, re-leasing spreads that you accept, expect from the same?
So, Samarth, 77% of our expiries have been re-leased at a healthy spread of close to 28%. So, this year, our overall expiries are going to be close to 3.6 million sq ft. What we have seen over the last four years, Samarth, is, on an average, three million sq ft is what comes up for expiry. And when the portfolio is growing, like it's growing today, a 10% of the overall portfolio size is definitely something we can expect. Area coming up for expiry in FY 2027 and FY 2028 is only 1.3 million sq ft and two million sq ft, respectively. But we have seen some of these things... Companies don't tell us what their plans are one, two, three years ahead.
So, sometimes these numbers kind of go up. In a rising market like this, in my speech, I mentioned about how one client, we got a 50% mark-to-market in Hyderabad, and another client, we got a 33% mark-to-market in Hyderabad. So these kind of opportunities are there, and out of this 3.6 million sq ft, we expect to retain 2.3 million sq ft, and 1.3 will be exits. And out of this 1.3 million sq ft exits, we've already re-leased 300,000 sq ft.
In this 2.3 million sq ft, we've again already retained 1.7 million sq ft in the first nine months, and the balance 600,000 sq ft we hope to retain in the next three months, this quarter.
Understood. And secondly, in terms of re-leasing to newer clients, so just some thought on contrast between your current portfolio breakup, let's say, between different sectors and how the new re-leasing has happened. Are there any trends that you would like to point out in terms of any segment or any particular category where where the new leases are more prominent in versus your current portfolio breakup?
So this quarter, all the GCCs were only 27% of the leasing. Indian domestic and Indian MNCs were 52%, and non-GCC foreign MNCs were 21%. Overall portfolio is more or less stable today at 55% for GCCs, domestic Indians at 26%, and foreign MNCs at 18%. Two, three trends we have seen, Samarth, is some of these IT services clients who gave up space during COVID time, large Indian and multinational names; they are coming back. The main reason for that is they are insisting on office physical attendance for their employees. That's helping us. Previously, pre 2020, 2021, pre-COVID era...
Many large IT services, they would build their large campuses in different parts of India, outside the big metros, outside the six cities, outside in other cities like Bhubaneswar, Nagpur, and these kind of big campuses used to happen. Now, that strategy seems to have kind of gone down, and every time they have a new client, they're looking at, "Okay, why don't we go take a 100,000 sq ft or a 200,000 sq ft or a 70,000 sq ft kind of, transaction?" So that's something, a new trend which we're seeing. IT services coming back selectively into campuses where they're comfortable with. They've been in some of these campuses. These are some of our, large clients who gave up some space during when the vacancies went up.
We're managing to get them back because they are familiar with our campuses, and many of their employees who work from home stay close to our campuses. So that's an interesting trend we are noticing.
Got it. Just lastly, given the leasing momentum we have seen for this sector, any thoughts on how NOI growth and distribution would look like for FY 2027?
We typically don't give forward-looking comments. But Samarth, till now, there's not been any signs of any tariff impact on real estate. Even today, not many signs on AI impact. Actually, not many signs on AI impact. You heard me talk about JLL last year data of 14% increase in net absorption from 15 million sq ft to 57 million sq ft. This year, I was checking two, three of the data points when I met up with the IPC heads. They said whatever RFPs they have in hand, whatever inquiries they have in hand, this 57 million sq ft can only go upwards. So these are the clients who they're sitting on, showing properties, inspecting properties.
They all feel that they have a much larger view of clientele than us, because they look at the full 900 million sq ft of office offices in India. They feel it's going to be a better year than 2025 calendar. No signs as yet, but there could definitely be an impact of AI later on. Till now, we haven't seen. It's a question we keep getting asked every week. I wish I could give you the right answers for that. Till now, no impact.
Understood. Thank you so much. That's all from my side, and good luck for 2026.
Thanks, Samarth.
Thank you so much. We'll take our next question from Jatin Kalra of Bank of America. Please go ahead with your question. Please unmute your microphone.
Yeah. Thanks for taking my question. Hi, Ramesh. Ramesh, my question to you is: over the last 12 months, you've seen a very strong growth in market rents in Hyderabad, which has also helped your actual NAV. The way you've exited this year, how do you think the outlook for rental growth looks like for next year? Could it potentially normalize to some extent, but still probably stay ahead of the typical 4%-5% rental growth that you expect in this particular asset class? And second, as a follow-up to this one, you did mention that expiries for next year are only at 1.3 million sq ft.
So would you think that there is an opportunity to look at some proactive churn as well to just start taking benefit of this healthy MTM that you have gathered over the last few months? Thank you.
Thanks, Jatin. Hyderabad, I think, I've been going to Hyderabad since 2001, when Naidu used to be the chief minister. What I've been seeing over the last two years, I think, in Hyderabad is crazy. Crazy demand. I haven't seen this kind of demand coming in. I still remember when I joined the firm two and a half years back, rentals were at INR 70, and we were putting up super grade A buildings. We were investing very heavily, and I was actually sitting with our engineering team to see how we can value-engineer and reduce construction costs. This was two years back. Exactly opposite has happened. That INR 70 rental today has become INR 95.
B8, which is our new building, which is coming up, 1.7 million sq ft. The building is going to get ready only middle of next year, and the kind of inquiries I could say that we already are sitting on around 2-3x of inquiries for that 1.7 million sq ft. I won't be surprised if Building 7 , by the time we finish the leasing of this Building 7 ... We had underwritten that building at around INR 85 in our numbers when we INR 80-INR 85 when we decided to demolish, and you may remember that we had used the implosion technology to bring it down in nine seconds, and we started building.
That time we had put it at INR 80-INR 83 was the underwriting. I will be surprised if the last few deals in Building 17, by the time we lease the full building, doesn't touch INR 120. So, the market has gone bonkers. You would have seen how 46% of the new GCCs who have entered into India have all gone to Hyderabad. Proactive churn is something behind everything else. What works is our tenant relations. We value our tenants over rentals. So, unless a tenant shows their interest in vacating, obviously we try and retain the tenants. But when it comes up for renewals, we get that accepted.
Please also remember that many of these tenants were sitting on 10-year leases. When they vacate, we also get efficiency adjustment related support, because many of—10 years back, the market was at 78% efficiency, and today we are able to bring that to 70%. Almost all. Not almost, actually, all the deals we have signed in Hyderabad and Airoli East, all that have happened—new deals which we have signed, new deals, which is where the client has gone out and a new client has come, all have happened at 70% efficiency. So that is just more area, which is also helping us. So proactive churn, we don't do, unless a client comes and says he wants to leave.
Perfect. That's very helpful and elaborate. Thank you so much, Ramesh.
Yeah.
Thank you so much. Our next question is coming in from the line of Pritesh Sheth of Axis Capital. Please go ahead with your question. Pritesh, please go ahead and ask your question. It seems there is no response from the connection here. We'll go to our next participant. We have Puneet Gulati from HSBC. Please go ahead with your question, Puneet.
Yeah. Thank you so much. Ramesh, on your comment on efficiency improvements coming to 70% from 78%, will we see that an increase in leasable area in your presentations?
Yes, that's been something we've been doing over the last two years. And, many a times... See, existing clients, there's always a pushback when they are renewing-
Okay.
- to reduce that 78% to 70%.
Yeah.
Many times we get away with 74%, 75%. But new clients are perfectly okay with 70%, given that almost all the Grade A institutional developers in their Grade A parks have started quoting 70% as, efficiency.
So-
That's something which we have kind of benefited.
Okay. So, in future also, as you know, conclude such deals, your leasable area will just keep on growing just because of momentum to this newer efficiency zone?
That's right.
Okay. My second question is actually on Airoli East, right? I mean, you've got still 500,000 sq ft coming up for expiry, 1.2 million sq ft to lease. How do you think about this market now?
So let's rewind back a couple of years, Puneet. The overall combined Airoli in East and West the occupancy used to be around the 75% mark. Today, that 75% has become close to a 90% mark, so that's significant. And my leasing team was telling in the next few months, we may not even have any space left in Gigaplex Airoli West. Airoli East, I admit that we have some space. We believe there will be good trickle-down effect of no space being available in Airoli West into Airoli East. And Airoli West has already touched 96%, and Airoli East has already touched, again, 82%.
Given that, couple of our competing developers, their projects are also more or less, leased in that, Navi Mumbai market, we see good traction, Puneet, into our Airoli East, asset. And like I mentioned in my speech, we are proactively upgrading... Five buildings are getting upgraded: Building 1, 9, 10, 11, 12. We are also upgrading our clubhouse, adding more, amenities, across the park. So all that is, happening simultaneously.
Understood. Also next year, FY 2027, you've got The Square, Nagar Road's 0.4 million sq ft coming up for renewal. Is that one large client or is it multiple clients?
Yeah.
How should one think about re-leasing that part? Any color would be useful.
Which square is this? Pune Square or?
Yeah, Pune, The Square, Nagar Road. Yeah, Pune.
Okay. There's a couple of clients there, and we are in proactive talks with them to renew. I think the chances of them renewing is more than 90%. In today's market, actually, I used to feel bad when clients used to say they're going to vacate two years back. These days, if a client says they want to vacate, we are perfectly okay with it because we get a better deal outside. I mean, change my stand one year down the line, but today we are okay if clients are vacating, but proactive discussions happening there on retaining them.
Okay. And with your portfolio-
To answer that question-
Sorry, go ahead.
To answer your question, this is one client. This is one client.
This is one client. Okay. And, in your portfolio, you're already close to 95% leased out. How should one think about, you know, potential for a further increase in occupancy, and when do we see the gap between the actual and committed occupancy get bridged?
Actual and committed, always it takes some amount of time, given that clients take a little bit extra time to close documentation. Also, given that 55% of the clients are GCCs and another 20% are non-GCC multinationals. I think the focus would be now Airoli, the focus would be Financial District, where we have some space left. The recent Ascent, which we picked up in Worli, that still has around 70,000 sq ft left. So the focus would be to make sure... In parks like Yerwada Commerzone and in Madhapur, whatever you see that little bit of 80,000 sq ft vacant in Yerwada or Madhapur, 180,000 sq ft, these are all scattered around the park.
So it's not that we're going to get clients, tomorrow to fill them up. And these are also smaller units, may not be the best, type of, units for clients. Floor plates, may not be as efficient as, rest of the parks, rest of the buildings. So some of this will get eventually leased. So the focus is on every, every weekly basis, when we review our leasing teams, is to see how we can fill, all this up. But Airoli West, which was a problem two years back, today, no longer a challenge. I hope to say something similar for Airoli East, in the next few quarters.
Understood. That's very helpful. And lastly, Preeti, if you can talk about, you know, the cost of debt already at very fine rates of 7.39%, and you've got some maturity due in FY 2027. Should we expect further compression from here on, or you think you've already maxed out, given where G-Secs and repo rates are?
Yeah, Puneet, hi. I don't think you should look for any further reduction in interest rates, because as we talked, the last deal which we did, from there, the yields have almost gone up 25 basis points already.
If at all, we should be able to maintain these levels or see marginal increase, but I don't see them coming down. You can take at similar levels as we have achieved now.
Understood. That's very helpful. Thank you so much, and all the best.
Yeah. Thank you.
Thank you. We have our next question coming from Yashas Gilganchi of BOB Capital Markets. Please go ahead with your question.
Team, thank you for taking my questions. In-place rents at around INR 74.7 PSF were 4.6% higher year-on-year versus a 6% increase that Mindspace has achieved since 2021. What is holding back growth in in-place rents, and what can drive this in the future?
So because of the very nature of this business, Yashas, where you sign nine-year and ten-year contract, that's where the mark-to-market every time we... In the last few quarters, we've been talking of mark-to-market between 25%-30%, and it also shows what the opportunity we have. Even when these rentals come up for renewal, clients also know that property next door is paying much, maybe INR 20 more or INR 25 more. They're willing to kind of go up. So that's something which we will take advantage of every time agreement comes up for renewal.
Right. So despite-
I think also, just to add to what Ramesh said, of course, as Ramesh said, I mean, we've generally seen about three million sq ft of reletting coming, whether it's early exits or scheduled expiries. I think one big contributor to our rent enhancement has also been Hyderabad. And in Hyderabad, we don't have too much coming up for reletting immediately, but if you have... But I think where we'll really make good will be the new areas which are going to come up, the two redevelopment buildings. One will be delivered in the coming financial year and one next. So those are the ones which will give you a large upside in terms of your rental. Otherwise, it will all depend on the re-leasing, which is coming up in the next two years.
Yashas, like I mentioned, when we underwrote this to demolish Building 8, it was around the INR 82-INR 83 mark, and today we're quite confident that even the earlier deals will cross INR 110, so—and it'll touch INR 120 by the time we finish leasing in that park, so.
Okay, understood. Just trying to understand this a bit deeper. So, despite strong office leasing momentum, re-leasing spreads compressed to around 27.4%, versus 28.1% as of 2Q 2026, though it's up from around 26.4% as of 3Q 2025. Please tell us, what is pressurizing spreads?
Yashas, it's one of quarters here and there, in the 24%, 27%, it depends on clients. We have 178 clients in our portfolio. You shouldn't look at that kind of... As long as it's going up, it's fine. 74%, 24%, and 28% is not materially different. Different clients have their own strategy. Some of them are big, some of them are big names, some of them occupy a lot of... So it's not just exact numbers by which-
It also depends on which location is coming up for re-leasing. Locations where the spread is really large, if you have re-leasings coming there, then we tend to benefit more than locations where rentals are not seeing such a big spike.
Understood. Thank you very much.
Thank you so much. Our next question is coming in from the line of Parvez Qazi of Nuvama Group. Parvez, please unmute your microphone.
Hi, good afternoon. Congratulations for a great set of numbers. Couple of questions from my side. First, given the strong leasing momentum that you're witnessing, where would you expect your occupancy levels to be, let's say, one year down the line or, or maybe by FY 2027 end?
So this year we are hoping it'll touch 95%, and that upward momentum will continue next year. So, quite confident, Parvez, that this 95% number will go up. Whatever in Q-city, we have some innovative repositioning value addition ideas in mind, which we will start executing from this quarter onwards. So— And like you heard me say, there's a lot of upgrades happening in Airoli East. These are the only two places where we have some decent vacancy. And when we had bought Q-city in Hyderabad Financial District and renamed it the Square Financial District, we mentioned that at that time that we would look for some innovative value-added strategies there, and that's exactly what we are executing starting this quarter.
You'll hear some good news on that soon.
Parvez, please unmute your microphone if you have any more questions.
Yeah. Hi. Second question is on the SEZ part. What would be the vacancy in SEZ versus non-SEZ portion of our portfolio?
So as we said, we've we benefited hugely from the demarcation approval rules. So we have demarcated 2.8 million sq ft, of which we have already leased 2.2 million sq ft out of the 2.8 million sq ft. So non-SEZ occupancy today stands at 96.6%, and SEZ occupancy today stands at 92.7%.
Sure. Uh-
Just to add to what Ramesh said, actually, now SEZ and non-SEZ have become infrastructure, yeah, because we're able to get demarcation within 45-60 days. So it really doesn't matter now whether it's an SEZ area or it's a non-SEZ area.
Sure. Thanks, and all the best for you.
Thanks, Parvez.
Thank you so much. We have, Pritesh Sheth of Axis Capital with his question here.
Yeah. Am I audible now?
Yes, please.
Yeah. Perfect. Okay. Sorry for the technical issue earlier. Couple of questions. I think one is where I'm trying to build blocks for growth in FY 2027. So just on previous participant's question as well, in terms of you know, narrowing the gap between actual and committed, you know, I understand that gap will always—some bit of gap will always remain, but right now we are at 89% odd on actual occupancy while our committed is at 92%-93%. You know, will this 4% gap, we'll be able to bridge you know, sometime next year? Because I understand that some of the leases that we had in Airoli West were some kind of deferred leasing, which would take some time in terms of occupying.
So I'm just trying to understand whether we'll reach actual occupancy of 93% next year sometime?
Earlier than that. Actually, a lot of these are just getting completed in terms of documentation. And it's mainly because of the timing difference between LOI and lease date. It's just a matter of time. See, clients obviously take their time to close these kind of large deals. And I mentioned earlier that given that there's a lot of GCC demand, where there are multinational stakeholders outside the country, typically it takes time. But obviously our intent is to bring it down as much as possible because we want the rentals to start at the earliest. So the work is on that, Pritesh.
Pritesh, I think structurally there will be some gap between the two, because we also do experience churn. Typically between one client moving out, new client signing up, and rents commencing, there will be some structural gap between the two numbers.
Sure, sure. Got it. Got it. And so apart from the acquisition-led growth, we will have a 1.5 million sq ft completed in Q1 FY 2027, the first redevelopment block in Madhapur. And since it's fully leased, we will start generating rentals sometime in starting second half of next year, right? If that's right.
That's right. That's right.
Yeah.
So building is on track to get completed, and our projects team is doing a very good job. So we'll finish the building by... Which month are we targeting ? Finish.
I think by December.
Yeah, so we are on track, we are on track to finish the project.
Sure, and-
But obviously, it will be in phases, so you may not see too much of rent from this building coming in the next financial-
Next year.
Of course, rent will start.
Okay.
Yeah, but I would say if you really have to assume any meaningful rental from this building, then you should take it up by 2028.
Got it. Got it.
With these large clients, obviously, they take time to do their fit-outs. And this is a large global bank's biggest GCC outside of U.S.. So, they'll take time. Obviously, when they take time to do their fit-outs, they also negotiate longer rent-free periods. So that's part of part of the deal.
Sure. Completion you mentioned is December of 2026.
Yes.
Yeah, because
The rent, we are talking about the rent, Pritesh-
Ah, okay.
Not the completion.
Okay, okay. Fair enough. Fair enough. Got it. Got it. Fair enough. And, and-
The completion, our completion estimates will be somewhere around, between Q1, Q2.
Okay.
Q1 is what we expect, so around June, July. But we expect the rent to start by December, because it'll take about a few months to finish the fit-outs. So that's why I said you will not realize rent for the full-year, you'll realize for part.
Got it. Fair enough. And beyond these three developments, you know, there is obviously this one million sq ft data center assets which are coming up. I also heard you saying that, you know, we are progressing with another 5.5 million sq ft development, you know, in terms of getting approvals. You know, can you first elaborate the timelines of data center and then, you know, talk about this 5.5 million sq ft which you highlighted?
This is 5.5-
3.5. So 3.5, Pritesh, the challenge was last year when there was no approvals being given, and then the Supreme Court order came in September. And we are... our files are right on top in terms of getting MoEF approvals. So many of these projects, which is B-15 in Airoli, B-17 in Airoli, B-18 in Madhapur, all these are data centers, one million sq ft. All these are at that final stages of getting approval. So many of it the local bodies, like in Mumbai, the local body to give approvals is MIDC.
We already got the MIDC approval, so only the environmental, MoEF approvals are pending, and inspections have been happening, and we'll be very soon able to... If I was in September, I would have told you it's still uncertain, but right now, Pritesh, it's looking very certain that we'll start construction work at the earliest.
Sure. And completion timelines for a data center would be like FY 2029 and beyond, or earlier than that?
Typical data centers, given that these buildings are just seven levels, and given that these buildings don't have basements, and where we also create a next door block to keep your chillers and DGs and all that, typically it should take around 18-20 months. Data centers also don't have rent-free periods like large GCC clients, so rentals also kind of start early. Office building typically today takes around three years to build, while a data center takes only around 18-20 months to complete.
Got it. Fair enough. That, that's helpful. That's it from my side, and all the best. Thank you.
Thank you.
Thank you.
Thank you so much. Anyone who wishes to ask a question may click on the Raise Hand icon from the Participants tab on your screen. We have a follow-up question coming in from Parvez Qazi. Parvez, please go ahead.
Yeah. Hi, just one follow-up. I mean, if I heard it correctly, you said we are working on getting approvals for another 3.5 million sq ft data centers. Is the number correct?
I don't think I mentioned that. Maybe I said 3.5 million sq ft of development.
Development.
If you remember, we mentioned we have seven million sq ft of development. 3.5 is under construction, and the balance 3.5 is at final stages of getting approvals. That's what I meant. I didn't mean in that-
Sure. For sure.
Data centers, correct.
Sure, yeah. I mean, that, that's what I thought. Just wanted to clarify. Thank you.
Yeah.
Thank you so much. As there are no further questions, on behalf of Mindspace Business Parks REIT, this concludes today's conference call. Thank you all for joining us, and you can now click on the Leave icon to exit the meeting. Thank you all for your participation.