Oberoi Realty beats slowdown with launches

Sold 543 apartments within three days of launching its new project Sky City on October 30

Mumbai-based realty developer Oberoi Realty, which launched its new project Sky City in Borivali area on October 30, sold 543 apartments within three days of the launch. Oberoi released 900 apartments in the first phase and garnered around Rs 1,350 crore. Most of the apartments were three-bedroom ones with a price tag of Rs 2.4 crore apiece.

Analysts say this is a remarkable achievement given the sluggishness in the market. The unsold stock in the market is estimated at 206,000 units as of the first half of 2015, according to a recent report by KPMG.

The launch was also a big deal for the company, which bagged the land from Tata Steel in a heavily-bid auction for Rs 1,155 crore and raised Rs 750 crore to finance the land buy.  Earlier, the same developer had sold 300-odd apartments out of 563 apartments within four days of the launch in Mulund area, garnering Rs 850 crore.

“One of the things they have done is, that they have established a very good brand. They deliver within six months to one year of promised date when other developers delay much more,” says Amit Agarwal, senior analyst at SBI Cap Securities, about the success of Oberoi’s projects.

According to Agarwal, buyers’ expectation that prices will go up in Oberoi projects has also led to increased interest.



Analysts say prices in Mumbai have remained stagnant in the past two years, indicating a time correction of 20 per cent in property prices.  “Initial sales in Borivali also included investor interest that are otherwise out of the market,” he adds.

Oberoi’s chairman and managing director Vikas Oberoi, says. “We deliver quality; deliver on time and our locations are good. Of course, our brand has played a big role too.”

Good pricing

In both of the launches, the company has kept prices at par with the market or slightly less, say analysts.

For instance, Oberoi's launch price in Mulund was Rs 12,250 per square feet whereas the sale price for ready apartments in Mulund hover around Rs 14,000 per sq ft. In Borivali, it launched apartments at Rs 12,750 per square feet whereas the ready apartments cost at an average price of Rs 16,000 per sq ft, according to Magicbricks.com.

"They do not drop prices much. I think they launch 5 to 7 per cent below market prices. If you are a good brand and sell at slightly less than market price, you will do well," Agarwal adds.

But Oberoi says they sell at par with the market prices and offer no schemes to buyers.

"Buyers get discount in terms of good product and quality," he says.

Market is also expecting the company's impending launch in Worli area, where the company will launch Ritz Carlton Residences also, in December-January this year.

The company has got approval till 66 storeys for the 87 storey project called Three Sixty West, it has to get some approval from the civil aviation ministry for the rest.

"With the launch of higher floors at Eternia, Mulund and impending launch of the Worli project in Q4FY16, we expect to see sustained momentum in sales going ahead," said Adidev Chattopadhyay, an analyst with Elara Securities.

However, the company has faced headwinds in September quarter, with revenues going upe up only two per cent year-on-year to Rs 187 crore, missing estimates by 17 per cent due to lower sales from existing inventory.

But Oberoi is unfazed when he says: "You can not expect same amount of sales every quarter. This is minor blip and there is much to come," he says.

The company also has a envious record in terms of debt. It has a net debt of Rs 62 crore and net debt to equity of 0.2 times which not many companies can boast of, says Agarwal of SBI Cap Securities.

The company's stock has given returns of 18 per cent in the last one year.