Mindspace Business Parks REIT (MINDSPACE.BO) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mindspace Business Parks REIT Earnings Call for Q3 FY '26 Financial Results. [Operator Instructions] 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. 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; 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 our call 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 square feet. 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 9 months period of FY '26. 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 square feet re-let during the quarter. Rentals continue to trend upward, particularly in Madhapur. In Madhapur, we signed a transaction at INR 105 per square foot, highlighting significant mark-to-market potential. During the quarter, we further strengthened and scaled our [performance] through announced acquisitions. Prime CBD assets in Mumbai like Ascent at Worli, which is Goldman Sachs HQ in India, The Square and BKC Annex, which is JPMorgan's HQ in India and a small office asset in Pune. These three acquisitions added 800,000 square feet 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 is 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 IPC reports. Let's look at the JLL insights first. 83 million square feet of gross leasing in 2025, up 8% from 77 million square feet. GCC-led demand by 31.4 million square feet, up 13% year-on-year, accounting for 38% of total leasing. Q4 2025 leasing hit a record 27 million square feet, driven by global firms and expanding GCCs. Net absorption again crossed 57 million square feet, up 14% year-on-year. Vacancy is the lowest in the last 5 years with many micro markets witnessing single-digit availability. Now let's look at the CBRE insights. GCCs are set to drive 35% to 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 square feet in 2025. Q4 completions increased 10% year-on-year to 16.6 million square feet. The Cushman & Wakefield report states that 2026 completions projected at 60 million square feet to meet rising demand, growth driven mainly by fresh leasing alongside a steady rise in precommitment. Despite higher 2026 supply, vacancy is 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, certified grade A assets. The Colliers report stated that the demand exceeding supply in 2025, vacancy declined year-on-year while average rental rose up to 15% in many micro markets, in many cities. Hyderabad was driven by BFSI consulting and healthcare together accounting for more than [Technical Difficulty] 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 rental strengthened sharply year-on-year. Now we come to the operating and growth highlights. We recorded gross leasing of 1.1 million square feet in Q3 FY '26. The committed occupancy for the quarter stood at 95.3%, excluding Pocharam and the acquisition we made in the second quarter of FY '26. 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 '26 on 1 million square feet of area re-let. 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 per square foot, offering huge mark-to-market potential. This follows last quarter deal signed at a rent of INR 100 per square foot, 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 portfolio today stands at INR 75 per square foot, 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 square feet and approval for the balance 3.5 million square feet development pipeline are at advanced stages. We are very pleased to share that we've been ranked in top 5 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 4 million square feet. This is through a mix of organic and inorganic growth strategies. Organically, we successfully constructed and leased 1.3 million square feet. This is the R2 building in Pune and 1 data center. Our inorganic growth included acquisition of sponsor assets of nearly 2.6 million square feet, the Hetero Commerzone asset in Hyderabad, the Ascent asset in Worli, The Square asset in BKC and Raheja Woods in Pune. A large external third-party acquisition asset of 0.8 million square feet, which is the Q-City acquisition and a consolidation within our parks of 300,000 square feet. 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 bus 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 in the 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 2 years back to 96% since the demarcation announcement in December 2023. Across our 5.4 million square feet business park in Airoli West, vacancy today stands at a low of close to 200,000 square feet. This progress strengthens our confidence in Navi Mumbai, 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 per square foot. We currently have 2 data centers up and running in Airoli West, 3 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 square feet 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 square feet business park, vacancy is as low as 180,000 square feet. The Pearl Club, which is the experience center remains on track for opening. We are also extending our Skywalk from 1 kilometer to 2 kilometer to improve tenant experience. The Skywalk is further expected to lease commute for nearly 100,000 people who use our Madhapur park. This will also provide direct ring from the Raidurg metro station to key points within our campus. It also helps reduce road crossings and traffic conditions. 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 once 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 H23 program, which is 23 focused actions to bring a more premium hospitality-led scene across our parks. We have added more spaces to relax and connect, more breakout zones, indoor games, music corners and cafe 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 lifecycle assessments. We organized 16 tenant employee events last quarter from festive celebrations and sports tournaments to standard 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 turned strong global recognition for our sustainability work. We are ranked among the top 5 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 IGBC Platinum and LEED B4 Gold and Madhapur Buildings 1 and 8, which received EDGE Green Certification. These achievements reflect our focus on building in ways that use energy, water and materials more efficiently. In conclusion, over the next 1 to 2 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 NFT and SENSEX. Indian REITs have now seen a full market cycle, and we have proven resilience across COVID rate hikes and SEZ 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 out 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 '26 increased 27.2% Y-o-Y to INR 8.2 billion, while NOI for Q3 FY '26 grew 28.7% Y-o-Y to INR 6.7 billion. Distributions for the quarter rose 19.8% Y-o-Y to approximately INR 3.8 billion. Our DPU grew 9.6% Y-o-Y 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 sponsored assets in Mumbai and Pune, which are Ascent Worli, The Square BKC Annex and an IT Building in Pune. With this, the GAV of the portfolio now stands at INR 441 billion basis September '25 valuation. Including these assets, we have now completed inorganic acquisitions of 4 million square feet over the last 2.5 years, taking our total portfolio size to 39 million square feet. We shall continue to actively explore external acquisition opportunities that align with our investment philosophy and growth strategy. As of December 31, '25, 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 bps during the quarter to 7.39% p.a.p.m. 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% p.a.p.m., 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% p.a.p.m., 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 cost 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 Jan 1, 2026 and REIT eligibility for index inclusion from July 1, 2026. In addition, relaxation in 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 9 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 questions -- open the floor for questions. Thank you.

[Operator Instructions] We take our first question from Samarth Agrawal of Ambit Capital.

Just a couple of questions from my side. Firstly, for the expiries coming in, in '27 and '28, 1.3 million and 2 million square feet, respectively, what kind of discussions are you having with respect to re-leasing? Firstly, how much of it would be released to the same tenants? And secondly, and more importantly, what would be the re-leasing spreads that you expect from the same?

So Samarth 77% of our expiries have been released at a healthy spread of close to 28%. So this year, our overall expiries going to be close to 3.6 million square feet. What we have seen over the last 4 years, Samarth is on an average, 3 million square feet 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 '27 and '28 is only 1.3 million square feet and 2 million square feet, respectively. But we have seen some of these things -- companies don't tell us what their plans are 1, 2, 3 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 square feet, we expect to retain 2.3 million square feet and 1.3 million will be exits. And out of this 1.3 million square feet exits, they already released 300,000 feet. So in this 2.3 million square feet, we have again already retained 1.7 million square feet in the first 9 months and the balance 600,000 feet, we hope to retain in the next 3 months, this quarter.

Understood. And secondly, in terms of releasing 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 the new leases are more prominent 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 the IT services clients who gave up space during COVID time, large Indian and multinational names, they are coming back. And the main reason for that is they are insisting on office physical attendance for their employees. That's helping us. Previously, pre-2020, '21, pre-COVID era, many large IT services, they would build their large campuses in different parts of India, outside the big metros, outside the 6 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, okay, why don't we go take 100,000 square feet or 200,000 square feet or a 70,000 square feet kind of transaction. So that's something a new trend which we are 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 us some space during when the vacancies went up. We are managing to get them back because they are familiar with the campuses and many of their employees who are work from home, stay close to our campuses. So that's an interesting trend we are noticing.

Got it. And just lastly, given the leasing momentum we are seeing for this sector, any thoughts on how NOI growth and distribution would look like for FY '27?

So 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 -- not -- actually not many signs on AI impact. You heard me talk about JLL last year data of 14% increase in net absorption from 50 million square feet to 57 million square feet. This year, I was checking 2, 3 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 square feet can only go upwards. So these are the clients who they're sitting on showing properties, inspecting properties. So they all feel that they have a much larger view of clientele than us because they look at the full 900 million square feet of offices in India. So they feel it's going to be a better year than 2025 calendar. So 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.

We'll take our next question from Jatin Kalra of Bank of America.

Ramesh, my question to you is over the last 12 months, you've seen a very strong growth in market trends in Hyderabad, which has also helped your actuarial 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 square feet. 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?

Thanks, Jatin. Hyderabad, I think I've been going to Hyderabad since 2001 when Naidu used to be the Chief Minister. And what I've been seeing over the last 2 years, I think in Madhapur is crazy. Crazy demand. I haven't seen this kind of demand coming in. I still remember when I joined the firm 2.5 years back, rentals were at INR 70, and we were putting up super greedy buildings, we're investing very heavily and I was actually sitting with our engineering team to see how we can value engineer and reduce construction costs. This is 2 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 square feet. 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 to 3x of inquiries for that 1.7 million square feet. I won't be surprised if Building 7, by the time we finish the leasing of these we had underwritten that building at around INR 85 in our numbers when we -- INR 80 to INR 85, when we decided to demolish and you may remember that we had used the implosion technology to bring it down in 9 seconds and we started building. That time, we had put it at INR 80 to INR 83 was our underwriting. I will be surprised if the last few deals in building INR 70 by the time we reach the full building doesn't touch INR 120. So the market has gone bouncers. 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 tenants over rentals. So unless tenant shows their interest in [indiscernible], obviously, we try and retain the tenants. But when it comes up for renewals, we get that extra. Please also remember that many of these tenants who are sitting on 10-year leases, when they vacate, they also get efficiency adjustment related support because many -- 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 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 more area, which is also helping us. So proactive churn, we don't do unless a client comes and says he wants to leave.

Our next question is coming in from the line of Pritesh Sheth of Axis Capital. It seems there is no response from the connection here. We'll go to our next participant. We have Puneet Gulati from HSBC.

Ramesh, on your comment on efficiency improvements coming to 70% from 78%, will we see that it increased leasable area in your presentations?

Yes. That's been something we've been doing over the last 2 years. And many at times, see, existing clients, there's always a pushback when they are renewing to reduce that 78% to 70%, 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% less efficiency. So that's something which we have kind of benefited.

Okay. So -- and in future also, as you conclude such deals, your leasable area will just keep on growing just because of movement into this newer efficiency zone?

That's right.

Okay. My second question is actually on Airoli East, right? I mean you've got still 0.5 million square feet coming up for expiry, 1.2 million square feet to lease. How do you think about this market now?

So let's rewind back a couple of years, Puneet. 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 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 -- 5 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. And also next year, FY '27, you've got Square Nagar's 0.4 million square feet coming up for renewal. Is that one large client? Or is it multiple clients? How should one think about re-leasing that part? Any color would be useful.

Which Square is this? Pune Square?

Yes, Pune Square Nagar. Yes, Pune.

There's 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 too feel bad when clients used to say they're going to vacate 2 years back. These days, if the client says they want to vacate, they are perfectly okay with it because we get a better deal outside. I mean, change my [indiscernible] 1 year down the line, but today, we are okay if clients are -- clients leave, but proactive discussions happening there on retaining it. 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 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% 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 asset which we picked up in Worli, that still has around 70,000 square feet left. So the focus would be to make sure -- parks like Yerwada Commerzone and in Madhapur, whatever you see that little bit of 80,000 square feet vacant in Yerwada or Madhapur 180,000 square feet. 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. Flow 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 weekly basis when we review our leasing teams to see how we can fill all this up. But Airoli West, which is a problem 2 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 the cost of debt already at very fine rates of 7.39% and you've got some maturity due in FY '27. Should we expect further compression from here on? Or do you think you've already maxed out given where G6 and repo rates are?

Yes, Puneet. I don't think you should look for any further reduction in interest rates because as we talk, the last deal which we did from there, the yields have almost gone up 25 bps already. If at all, we should be able to maintain these levels or see marginal increase, but I don't see them coming down. So you can take at similar levels as we have achieved now.

We have our next question coming in from Yashas Gilganchi of BOB Capital Markets.

In-place rents at around INR 74.7 per square foot 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 the very nature of this business, Yashas, where you sign 9-year and 10-year contract, that's where the mark-to-market every time we [Technical Difficulty] in the last few quarters, we've been talking of mark-to-market between 25% to 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...

Yashas, I want to just to add to what Ramesh said, of course, as Ramesh said in the -- I mean, we've generally seen about 3 million square feet of re-letting 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 re-letting 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 few years.

Yashas, like I mentioned when we underwrote this to demolish building it was around INR 82, INR 83 mark and today, we're quite confident that even the earlier deals will cross INR 110, so -- and it will cross INR 120 by the time we finish leasing in that parts.

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 '26, though it's up from around 26.4% as of 3Q '25. Please tell us what is pressurizing spreads?

Yashas, it's one-off quarters here and then, '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, but it's...

And it also depends on which location is coming up for re-leasing. So locations where the spread is really large, if you have re-leasing coming there, then we tend to benefit more than locations where rentals are not seeing such a big spike.

Our next question is coming in from the line of Parvez Qazi of Nuvama Group.

Congratulations for great set of numbers. A couple of questions from my side. First, given the strong leasing momentum that we are witnessing, where would you expect your occupancy levels to be, let's say, 1 year down the line or maybe by FY '27 end?

So this year, we are hoping it will 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 it bought Q-City in Hyderabad Financial District and renamed it The Square Financial District, we mentioned 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. So you'll hear some good news on that soon.

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 have benefited hugely from the demarcation approval rules. So we have demarcated 2.8 million square feet, of which we have already leased 2.2 million square feet out of the 2.8 million square feet. So non-SEZ occupancy today stands at 96.6% and SEZ occupancy today stands at 92.7%.

To add to what Ramesh said, actually, now SEZ and non-SEZ have become [indiscernible] because they're able to get demarcation within 45 to 60 days. So it really doesn't matter now whether it's an SEZ area or it's a non-SEZ area.

We have Pritesh Sheth of Axis Capital with his question here.

Yes. Am I audible now?

Yes, please.

Yes. Perfect. Okay. Sorry for the technical issue earlier. A couple of questions. I think one is where I'm trying to build blocks for growth in FY '27. So just on previous participant's question as well in terms of narrowing the gap between actual and committed, 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%. This 4% gap will be able to bridge 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 deal. 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 [indiscernible] think structurally, there will be some gap between the two because we also do experience churn. So 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 1.5 million square feet completed in Q1 FY '27, the first redevelopment block in Madhapur. And since it's fully leased, we will start generating rental sometime in -- starting second half of next year, right, if that's right?

That's right. That's right. building is on track to get completed and our project team are doing a very good job. So we get -- we'll finish the building by [indiscernible]

I think that's December...

Yes. So we are on track. We are on track to finish the project.

Sure, and up...

Yes, it will be in phases. So you may not see too much of rent from this building coming in the next financial because rent will stop.

Next year, Okay.

Yes, but I would say if you really have to assume any meaningful rental from this building, then you should take April '28.

Got it. Got it.

Pritesh, large clients, obviously, they take time to do their fit-outs and this is a large global banks biggest GCC outside of U.S. So they will take time. Obviously, when they take time to do their fit-out, they also negotiate longer entree periods. So that's part of a deal.

Sure. Completion you mentioned is December of '26...

Yes.

We are talking about the rent, Pritesh.

Okay. Fair enough. Got it.

Completion estimates will be somewhere around between Q1 and Q2. Q1 is what we expect around June, July. But we expect the rent to start by December because it will 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 will realize for part.

Got it. Fair enough. And beyond these three developments, there's obviously this 1 million square feet data center assets which are coming up. I also heard you saying that we are progressing with another 5.5 million square feet development in terms of getting approvals. Can you first elaborate the time lines of data center and then talk about this 5.5 million square feet, which you highlighted?

So 3.5 million, 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 B15 in Airoli, B17 in Airoli, B18 in Madhapur, all these are data centers, million square feet. All this are at the final stages of getting approval. So many of it, the local bodies like in Mumbai, the local body to give approvals is MIDC. 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 that was in September, I would have told you it's still uncertain, but right now, Pritesh it's looking -- very certain that we will start construction work at the earliest.

Sure. And completion time lines for data center would be like FY '29 and beyond or earlier than that?

Typical data centers, given that these buildings are just 7 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 to 20 months. Data centers also don't have rent-free periods like large GCC clients. So rentals also kind of started. Office building typically today takes around 3 years to build, while a data center takes only around 18-20 months to complete.

[Operator Instructions] We have a follow-up question coming in from Parvez Qazi.

Just one follow-up. I mean if I heard it correctly, you said we are working on getting approvals for another 3.5 million square feet data centers. Is the number correct?

I don't think I had mentioned that. Maybe I said 3.5 million square feet of development. If you remember, we mentioned we have 7 million square feet of development, 3.5 million is under construction and the balance 3.5 million is at final stages of getting approvals. That's what I meant. I didn't mean in that [indiscernible] data centers currently.

Sure. I mean that's what I thought, just wanted to clarify.

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.