Worli hotel spend of Rs 750 cr to come from residential sales

Written by Shubhra Tandon | Updated: May 9 2014, 09:47am hrs
The fiscal 2014-2015 seems to have begun on a positive note for Oberoi Realty. Oberoi has in its pocket one of the bigger land deals of recent times in Mumbai (Oberoi bought 25-acre land parcel in Borivali from Tata Steel for R1,155 crore). And now, it has tied up with one of the larger names in the hospitality industry Ritz-Carlton as its partner for a premium residential project in Worli. Vikas Oberoi, CMD, Oberoi Realty, speaks to FEs Shubhra Tandon on this partnership, its plans with the Tata Steel land and companys cash position.

Why did it take more than two years for Oberoi Realty to choose a hotel partner for this project

We had a NDA (non-disclosure agreement) signed with them (Ritz-Carlton) and it is not that we were scouting. It was only the documentation that took so long. Many things happened within that time. We were originally making hotels, offices and residential projects. But then we converted those offices into residential. But from day one we have been with them, they were giving us inputs on design, back office, etc.

Why did you decide to take the commercial/office space out of the project and what portion of commercial has got included in the development

Commercial is not doing well and we thought it would just be good idea to do residential development only. Earlier, we were planning to have 15% in hotel, 15% in offices and the remaining as residential component. But now that 15% is also part of the residential, which means 80%-85% is residential and the remaining is hotel.

Why did you choose a hotel component, especially when the hotel sector in India is not performing that well

We wanted these residences to be serviced by a hotel and we thought that if you anchor a hotel, the residential will more than pay for it. Our strategy was very clear that by doing it we could get a premium out of it. The hotel also ensures that the brand standard is maintained, all the services, all specifications are to their satisfaction. Yes, hotel business is cyclical but one cannot discount the fact that Mumbai is the financial capital of the country, also after all the discounting, India still remains the second fastest growing economy in the world after China.

How will you be funding the R750-crore investments in the hotel and construction finance of the residential part

It will be out of the sales of the residential component. All our projects are self-financed. If at all there is some more funding required, it will be miniscule like a stop gap or bridge finance, and no private equity participation.

What is the update on the Tata Steel land that you recently bagged

The payments are 100% done and we are on approvals now. Hopefully we should get all that approvals and probably be in a position to launch it in the first quarter of next year.

The cash position of the company has been coming down. Cash and equivalents were at R1,399 crore at the end of FY11 and it is down to R742.6 crore as of December 2013. Your comments.

We have invested in the Worli project, we have put in our money here and when the sale starts it will give us back our money. So, this capital deployed is either in buying land or in processing the product.

You had plans to foray in the Delhi NCR and Bangalore. What is the update on those plans

We already have an MoU in place in Delhi, but we would not like to talk about it at this stage.

Now that the political uncertainty is expected to be over in a week or so, how do you see that impacting real estate

It will only be positive because real estate is such a sentimentally-driven sector that once people feel that the political scenario is stable, the economic policies are in tune, this sector will pick up first.