Mumbai Land Prices Expected to Continue Decline
Mumbai, known for having India’s most expensive land prices, may see a further 15 percent decline this year. This is primarily due to high borrowing costs, which are pushing indebted developers to sell their real estate holdings. Vikas Oberoi, Chairman of Oberoi Realty Ltd. (OBER), shared this insight in a recent interview in Mumbai.
Oberoi Realty’s Strategic Plans
Oberoi, who heads India’s second-largest developer by market value, stated, "We are waiting for the right opportunity to buy. I don’t want to waste my bullets." With no debt and approximately 13 billion rupees ($244 million) in cash, Oberoi Realty is poised to take advantage of falling prices to acquire land. The company reported a 5 percent increase in earnings to 1.43 billion rupees in the quarter ended March 31, attributing this growth to an increase in home prices, surpassing analyst estimates.
Analyst Concerns
Analysts have voiced concerns about Oberoi Realty not utilizing its cash reserves to buy land and maximize returns. Tejas Sheth, an analyst at Emkay Global Financial Services Ltd. in Mumbai, noted in an April 26 report, “The ‘missing clarity’ on new land acquisitions may be a drag on valuations with ‘idle cash’ offering lower returns.” However, Oberoi clarified his position, stating, "I am not watching the audience; I am watching my game, not playing for the gallery. I am very interested and very aggressive to acquire land, but aggression can’t be jumping off the cliff, it has to be backed with caution and preparation. After I jump, I want to land on my feet, not on my head."
Impact of New Building Rules
Mumbai’s amended building rules for home construction are expected to stimulate new projects and increase supply in the city’s expensive property market, where permissions to build had virtually halted. Oberoi commented on this, saying, "The rules have crystallized what one can get, the basic land potential is clear. Discrimination between two developers has now gone as everyone gets the same area. It’s levelled the playing field in a big way, which is fantastic."
Conclusion
The future of Mumbai’s real estate market appears to hinge on strategic moves by key players like Oberoi Realty, as well as regulatory changes that could reshape the landscape of India’s most expensive property market.