Oberoi Realty eyes Rs1,000 crore rev­enue from com­mer­cial as­sets in three years

HT Estates - - FRONT PAGE - Bidya Sa­pam bidya.s@livemint.com

MUM­BAI Oberoi Realty Ltd ex­pects to gen­er­ate rental rev­enue of around Rs1,000 crore in the next three years from its ex­ist­ing and up­com­ing com­mer­cial port­fo­lio, a top ex­ec­u­tive said.

The com­pany, In­dia’s sec­ond largest builder by mar­ket value, plans to list these as­sets on aReal Es­tate In­vest­ment Trust (REIT) as well.

The Mum­bai-based com­pany, which cur­rently op­er­ates one re­tail mall and two com­mer­cial of­fice build­ings in the city, had ear­lier an­nounced­planstoset up a sep­a­rate mall unit with an aim to spin it off at a later stage.

It plans to build two more shop­ping malls to­talling around 1.7 mil­lion sq. ft as part of its ex­ist­ing mixed-used de­vel­op­ments at Worli and Bori­vali in Mum­bai.

“With two shop­ping malls com­ing up, we should be do­ing a to­tal of around Rs1,000 crore of rentals in the next three years,” Vikas Oberoi, chair­man and man­ag­ing di­rec­tor, Oberoi Realty said in an in­ter­view.

In 2016-17, the com­pa­ny­gen­er­ated a rev­enue of Rs320 crore from its leased com­mer­cial as­sets, ac­count­ing for about 27% of its over­all rev­enue.

The rest of its busi­ness comes from res­i­den­tial projects.

Oberoi said the com­pany plans to even­tu­ally list part of its com­mer­cial port­fo­lio on REITs and does not in­tend to raise funds through any pri­vate eq­uity part­ner­ships at present.

“It doesn’t make sense to tie up with any pri­vate eq­uity firms at the mo­ment. Our bor­row­ing cost is around 8%. Their (PE) ex­pec­ta­tions on re­turns is around 12%. We can’t ac­cept their ex­pec­ta­tions or rate of re­turns. We will REIT it our­selves,” he said.

ABusi­nessS­tan­dard re­port in Au­gust 2017 said Oberoi Realty has shelved plans to form a joint ven­ture with pri­vate eq­uity in­vestors.

It was ear­lier in talks with Mor­gan Stan­ley and Sin­ga­pore’s sov­er­eign fund GIC Pte. Ltd to form a re­tail plat­form of Rs1,000 crore, it said.

Real es­tate ex­perts and an­a­lysts said Oberoi Realty’s plan to ram­pupitscom­mer­cial­port­fo­lio comes at a time when sev­eral other large firms are shift­ing their fo­cus on com­mer­cial real es­tate as de­mand for re­tail and of­fice spa­ces con­tin­ues to pick up.

“With the over­all real es­tate mar­ket down, par­tic­u­larly on the res­i­den­tial side, most de­vel- op­ers are shift­ing their fo­cus and look­ing at ramp­ing up their rental port­fo­lio apart from get­ting into the af­ford­able hous­ing or smaller ticket size homes,” said Ab­hi­manyu So­fat, vi­cepres­i­dent (re­search) at IIFL, a bro­ker­age firm.

De­vel­op­ers such as Mum­baibased Lodha Group and Sun­teck Ltd, Ben­galuru’s Cen­tury Real Es­tate Hold­ings Ltd and Salarpuria Sattva Group and Del­hibased Al­pha Corp. are fo­cussed on ex­pand­ing their com­mer­cial real es­tate port­fo­lio.

“With the pos­si­bil­ity of REIT com­ing, de­vel­op­ers are look­ing for op­por­tu­ni­ties to have a size­able rental port­fo­lio. So, we are likely to see most ma­jor builders fo­cus­ing on build­ing a rental port­fo­lio given the suc­cess of REITs in the in­ter­na­tional mar­kets,” So­fat said.

In a re­port dated 20 Novem­ber, 2017 re­leased by con­sult­ing firm PwC, the av­er­age ap­pre­ci­a­tion in rentals in the re­tail space has been in the range of 8-10% per an­num, higher than of­fice space, which grew at 5-7%.

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Mum­bai ranked 16th among the world’s costli­est cities for the year 2018

Vikas Oberoi, chair­man and man­ag­ing di­rec­tor, Oberoi Realty

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