FREE

MOSL: OBEROI REALTY (Buy)-Subvention schemes, new launches to drive sales velocity

Oberoi Realty: Subvention schemes, new launches to drive sales velocity; Plans to launch sub-brand ‘Aspire’ for affordable housing

(OBER IN, Mkt Cap USD2.7b, CMP INR472, TP INR627, 33% Upside, Buy)

 

We visited OBER’s key projects. We surmise that the response to subvention schemes is encouraging. Our key takeaways:

 Exquisite and Esquire (Goregaon) - pick-up after scheme launch

• Customers' response to the subvention scheme launched in April for Esquire and Exquisite projects (OC received) at Goregaon has been encouraging. The scheme allows customer to move in after paying 25% booking amount - the balance can be paid in equal installments over three years.
• In FY18, both projects combined had delivered sales of 71 units. With OC received and subvention scheme launched, the number of units sold is likely to be far better in FY19. This is critical, as demand in the higher-ticket (INR50m and higher) segment has been subdued across the industry.
• Scheme details: Customers can move in after upfront payment of 25% of the booking value, with the balance 75% payment equally spread over three years. OBER will immediately receive the balance 75% from the lender. On the loan amount, OBER will bear the entire interest cost in year 0, two-thirds of the interest cost in year-1, and one-third of the interest cost in year-2 (the balance interest cost burden in year-1 and year-2 will be borne by the customers).
• We believe OBER's subvention scheme will help increase volumes in the high-ticket-size category.