Engineering & construction giant Larsen & Toubro is setting up one of the largest residential projects in Mumbai -- measuring up to two million square feet over 20 acres of vacant land on its Powai campus in Mumbai.
The residential real estate prices in Powai and adjoining areas are around Rs 25,000 per sq ft.
This means the project would yield an estimated Rs 5,000 crore (Rs 50 billion) in sales.
Assuming the construction cost is Rs 2,500-3,000 per square foot, the company would have to spend only Rs 500-600 crore (Rs 5-6 billion).
The project comes at a time when L&T is planning to shift its switchgear unit at its adjoining Navi Mumbai campus.
While the move has led to unease among the employees, who fear the company would also use the land for its realty play, L&T Chairman A M Naik says people have misunderstood L&T's plans for realty development.
"There should not be any objection to the company developing real estate on its vacant land. In any case, we will protect employees' interest; no jobs will be lost," he said.
L&T has constructed two commercial towers -- one has been leased to JPMorgan and the other is occupied by L&T Infotech. But the new towers will be residential.
"Even employees working in Powai will find the residential project useful," Naik said.
"He added L&T would not enter into a joint venture with any company as it had sufficient experience in construction.
"L&T has a big opportunity as not much stock is coming up in the Powai area. New apartments are being sold at Rs 20,000-25,000 per sq ft," said Raja Seetharaman, managing director of Aperon Realty, a real estate consultant.
Seetharaman said L&T's residential projects would be in demand as the company has advantage in terms of quality, brand and project completion track record.
A commercial property project, which has direct relation with economic growth, would have been a different proposition," he said.
Last year, L&T created a subsidiary company, L&T Realty, which is executing a Rs 7,000-crore (Rs 70-billion) project in Bhoiwada in partnership with Omkar Realty and Developers.
This would be one of the largest slum redevelopment projects in the country. The company is also developing a commercial complex at Sea Woods in Navi Mumbai.
Meanwhile, Shiv Sena's labour wing, Bharatiya Kamgar Sena, a recognised union at L&T, has said the company has held verbal discussions with it on the proposed realty development.
"The company has indicated recovery of octroi, high power tariff and water charges, difficulty in transportation of jobs and equipment are some of the reasons for it to consider relocation of the switchgear unit to the Navi Mumbai campus.