Swedish giant IKEA to buy land from Oberoi Realty for first city shop

IKEA, the world's largest furniture retailer which is planning to set up a chain of retail shops in India, is in advanced talks to acquire a land plot in Mumbai from Oberoi Realty, Mumbai-based real estate developer. The site, measuring around 6-7 acres, will cost around Rs 400 crore, two sources with direct knowledge of the development said.

The plot, located at the junction of Western Express Highway and Dattapada road in Mumbai's suburbs of Borivli, is part of the 25-acre land of Tata Steel sold to Oberoi Realty in 2014, in a Rs 1,155 crore e-auction deal.

This forms part of the Swedish firm's promised Rs 10,500 crore investment in India, where it seeks to open 25 stores by 2020.

"IKEA is currently in the process of due diligence for the deal and the talks are in an advanced stage, with the terms and conditions almost finalised," sources close to the deal told dna.

An e-mail query sent to IKEA spokesperson said, "We cannot say anything about any particular land parcel until a final deal is done."

The spokesperson, however, said the company is evaluating suitable sites in Bengaluru, Mumbai, Delhi-NCR and Hyderabad to open 25 stores. "We have recently sealed the purchase of our first land site in HITEC city, Hyderabad," the spokesperson said.

Oberoi Realty spokesperson denied any such development, adding, "We don't want to comment on rumours and speculation."

According to the insiders, this could be its first store in Mumbai. It has proposed to build around three lakh plus square feet space to ready-to-assemble furniture. The proposed deal would take 3 to 4 months for finalisation.

dna has learnt that Oberoi has already started its campaign about its pre-launch project in this area, offering variety in residential apartments. The project is expected to have high-rise buildings of about 60 storeys, tallest towers in suburbs.

"The deal suits the company's key priority which is the right location at right price. The said land is one of the most desired locations on the Western Express Highway, near Borivali station," a real estate expert told dna.

Early this year, Ikea signed an agreement with the Maharashtra government to set up stores in the state. Earlier in September, 2014, the retailer signed an agreement with the Karnataka government, promising to invest Rs 500 crore in the state.

Of late, the Swedish company bought its first piece of land in India in Hyderabad. The 13-acre land is very close to the information technology hub called HITEC City, which is connected to up coming metro project and public transport.

Soon after its first land deal, company's India CEO stated, "India is a very promising market for Ikea as it offers us the opportunity to source, retail, conduct CSR (corporate social responsibility) initiatives through Ikea Foundation and empower social entrepreneurs through next generation projects.

In 2013, the furniture giant wrote to Telangana State Industrial Infrastructure Corp (TSIIC) – the state government agency that allots land to industrial projects – expressed interest in buying a plot in Raidurg, not far from the HITEC City and Gachibowli, where a number of technology companies have offices.

After two years since it made its debut, the company won Indian government approval to invest in India from the Foreign Investment Promotion Board (FIPB), one of the largest single-brand investments made by a foreign retailer in India.