Japan’s Sumitomo Realty’s Strategic Shift to Mumbai: What It Means for the Rental Market

Sumitomo Realty & Development—Japan’s third-largest property developer—is making an unusually focused bet on India: Mumbai only, and “rent/operate” over “sell and exit.” In a market where many developers monetize quickly by selling luxury apartments, Sumitomo is leaning into build-to-rent, leasing, and (potentially) serviced apartments as the core of its India strategy.

This isn’t a small experiment. The company has committed about $6.5 billion across five projects in Mumbai (with four near/within the Bandra Kurla Complex (BKC)), and expects these to come online over the next several years—creating a new stream of high-end rental supply and institutional-quality managed buildings.

The strategic shift in one line: “Own prime assets, don’t flip them”

In its home market (Tokyo), Sumitomo has a long history of holding and managing income-producing assets—reportedly managing hundreds of buildings there—and it wants to replicate that playbook in Mumbai.

A company presentation in late 2025 framed Mumbai as a prime-asset market “comparable to Tokyo,” including a stated plan of investing 1 trillion yen in Mumbai, and noted that Project 1 in BKC was targeting an investment yield exceeding 10% with ~50% of space pre-committed ahead of operations (scheduled for fall 2026).

Why Mumbai—and why now?

Sumitomo’s “Mumbai-first” approach is based on a few very specific beliefs:

1) Mumbai’s land crunch makes rents structurally resilient

Executives have pointed to the scarcity of prime land in Mumbai as a key reason they expect long-term rental growth, especially compared to other Indian metros where they see a larger pipeline of prime sites.

2) BKC is the “institutional demand” engine

BKC isn’t just a prestige address—it’s a dense cluster of multinational and Indian HQs, and it’s where demand for globally competitive Grade-A office and premium residences is strongest.

3) Returns + cost math favors long-hold strategies

A Reuters analysis highlighted why Japanese players are leaning into Indian development: expected returns in India (often cited around 6–7%) can exceed Japan (2–4%), while construction costs for premium offices can be dramatically lower in Mumbai than in global gateway cities.

4) “Risk-adjusted” attractiveness (including geographic risk)

Sumitomo executives also flagged Mumbai’s lower exposure to certain geographic risks (like earthquakes) versus Japan as supportive of long-duration asset holding (steady cash flows over time).

Why leasing/build-to-rent instead of selling apartments?

In India’s luxury segment, selling can be lucrative—and local developers commonly do it. But Sumitomo is intentionally not following that path for at least one major “super-high-rise” residential project, choosing to rent and manage units instead.

Here’s the logic behind that choice:

• Recurring income beats one-time profit when rent growth is strong and supply is constrained.
• Control over quality + operations (maintenance standards, tenant experience, amenities, leasing strategy) protects brand and pricing power.
• Institutional tenants and corporate demand often prefer professionally managed inventory—especially for expatriates, senior executives, and relocation housing.
• Serviced apartments (which Sumitomo has said it is exploring in Mumbai) can unlock a higher-yield hybrid between hospitality and residential leasing.

What new rental supply could hit the market?

Sumitomo’s pipeline is meaningful because it is (a) concentrated in Mumbai and (b) positioned at the top end of the market:

• Five projects total in India, all in Mumbai; four near/within BKC with expected completion within about five years for those BKC-area developments (per the company’s India leadership).
• An approach emphasizing ground-up construction rather than only acquiring completed assets, which is uncommon among foreign entrants due to India’s execution complexity.
• A push for globally competitive office product (large floor plates, high-grade design, infrastructure adjacency), aligning with the kind of tenants found in BKC.

Translation for the rental market: even if the absolute unit count isn’t public for every project, the type of supply is clear—premium, professionally managed, large-format assets that can reset expectations for what “rental housing” looks like at the high end.

Implications for Mumbai’s rental market

1) Premium rents get a new “benchmark setter”

Mumbai’s top rental market has already been rising—Reuters cited south Mumbai average rents up ~20% over three years, reaching as high as 730,000 rupees/month in some cases (per Cushman & Wakefield data referenced in the report).

Institutional, amenity-rich, well-managed rental towers tend to standardize premium pricing and make it “stickier,” because tenants compare buildings like-for-like (services, reliability, security, maintenance response times).

2) More “organized” rental inventory (and better tenant experience)

India’s rental market is still heavily fragmented (individual landlords, inconsistent maintenance, variable legal/lease practices). Developers who own + operate buildings can introduce:

• predictable lease terms,
• consistent service levels,
• centralized maintenance,
• stronger compliance and safety standards.

That doesn’t just appeal to tenants—it also appeals to corporate housing budgets and relocation programs.

3) Competitive pressure on luxury-for-sale developers

If a global developer proves that high-end rentals can produce strong yields, more capital may chase “hold-and-lease” models. That can:

• increase high-quality rental supply,
• reduce the dominance of the sell-only playbook for trophy projects,
• encourage hybrid projects (sell some, retain some).

4) BKC and nearby micro-markets could see “rental densification”

With multiple projects clustered around BKC, you can expect:

• deeper executive rental demand in nearby zones,
• spillover into adjacent neighborhoods,
• higher expectations for building specs and amenities.

Why this strengthens Mumbai’s “global city” appeal

Developers like Sumitomo are effectively betting on a simple story: Mumbai can keep absorbing global jobs and capital, and prime real estate will remain scarce enough to support long-term rent growth. Their view is reinforced by the continued buildout of transport infrastructure around the core city and BKC-adjacent areas.

Risks and watch-outs

No strategy is risk-free—especially in Indian development:

• Land acquisition and approvals are famously complex; even foreign investors often avoid development risk for this reason.
• Execution risk (timelines, contractors, cost inflation) can compress yields.
• Regulatory and tenancy friction can affect rental operations, especially in premium residential leasing.
• Market-cycle risk: if supply rises too quickly in certain luxury pockets, rent growth can pause.

That said, Sumitomo’s approach is explicitly structured so that cash flows from early completions can fund future expansion, suggesting a long-term operating posture rather than a quick-market-timing bet.

Bottom line

Sumitomo’s Mumbai-only, build-to-rent/leasing strategy signals something bigger than one company’s expansion: it’s a vote of confidence that Mumbai’s prime rental market is becoming institutional-grade—with enough depth, pricing power, and tenant demand to justify holding premium assets for decades.

If this model works, expect more developers (domestic and international) to treat high-end rentals not as an afterthought, but as a core product—reshaping supply, services, and the economics of living (and working) in Mumbai’s most in-demand districts.