‘Best time to buy land for developers’
Property developer Oberoi Realty posted the highest ever bookings in quarterly sales in the fourth quarter of FY21. The company is planning to pursue redeveloping residential buildings and buying land parcels to launch projects. Chairman and Managing Director
VIKAS OBEROI, in an interview with Raghavendra Kamath, explains the reasons behind its plans and the outlook for the residential and commercial segments. Edited excerpts:
What kind of bookings are you targeting in FY22?
As a matter of policy, we do not give forward-looking statements but we are confident of strong sales performance in FY22 as well. The customer’s preference to deal with select established players and limited supplies of quality developments owing to only select developers having the financial capability to launch such projects will ensure we are uniquely placed to capitalise on this competitive advantage.
Where and when are you planning new launches?
We are launching new projects in Goregaon, Borivali, Thane and Worli . The launches will be in third and fourth quarter.
Why are you bullish on the redevelopment business in Mumbai?
The economics of redevelopment vs buying fresh land for development are not very different, especially when you have put together all types of costs and associated project risks. Hence, we evaluate all opportunities on merit and do not apply a generalisation bias of preferring redevelopment over fresh development or the way round. There is a big dearth of developers having the financial and technical capability to execute some of these large redevelopment projects, which places us in a strategic position to leverage this as an opportunity.
In the recent concall, you said you were looking to buy land. Are you seeing any substantial drop in land prices?
We are always looking to buy land and have a set criterion for that. Like any other business we want to expand our horizons and enter new markets/micro markets. I believe this is one of the best times to buy land because sellers are seeing a significant value and brand erosion, limiting their options for asset monetisation.
Do you think developers will give discounts or schemes to get back buyers this year?
Most of the residential projects available for sale are at a discount to their replacement cost. It does not reflect the recent and massive increase in cement and steel prices. There is every likelihood of prices going up. At Oberoi Realty, we do offer financial schemes to address different customer segments but we have never considered discounting as a lever to generate sales because that is neither sustainable nor in the best interests of our existing customers. We believe in selling a quality home and not a lucrative pricing deal, which does not have a strong value proposition in terms of the
product.
You said Q1 would be a washout. Can you elaborate?
Yes. This is due to site sales offices not being operational. Despite all the technology and innovation, home buying remains an emotional and expensive investment, so customers do want to visit the site, look at the construction quality and progress, view the show apartment, and feel and visualise the experience of living an upgraded lifestyle before making a purchase decision. We expect visits to pick up once the lockdown like restrictions are relaxed.
What is your outlook for real estate in the remainder of FY22 for both residential and commercial?
India is significantly underbuilt and there is great potential for real estate to grow. Coupled with this, the inevitable consolidation in the sector and the customer’s comfort with a select few reputed developers that have financial stability will ensure that the market share for established players continues to grow. Hence we are very positive about the sales momentum of the previous financial year to continue in FY22 as well.