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Oberoi Realty Ltd
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Ladies and gentlemen, good evening and welcome to Oberoi Realty's earnings conference call for the Quarter 2 financial year 2019 that ended on September 30, 2018. We have Mr. Oberoi, the Chairman and Managing Director of the company; and Mr. Saumil Daru, the Director of Finance, of the company, with us for this call. Please note that this call will be for 60 minutes. [Operator Instructions]. This call is being recorded, and the transcript for the same may be put up on the website of the company. [Operator Instructions] Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those relating to general business statements, plans and strategy of the company, its future financial condition and growth prospects. These forward-looking statements are based on expectations and projections and may involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. I would now pass the conference over to Mr. Oberoi, the Chairman and Managing Director of the company. Thank you, and over to you, sir
Good morning, good afternoon, good evening to all of you as per the time zone from which you have logged in, and welcome to the conference call of Q2 financial year 2019 results and business updates. Thank you all for taking time to attend this conference call. Before I begin, I would like to share a few quick updates. You would be aware that we had commenced revenue recognition for our Sky City project in our first quarter. We are happy to inform you that we have now commenced profit recognition for our project Eternia at Mulund. You will also be happy to know that we have achieved 97% occupancy for our Commerz II building. The rent for this transaction shall commence from third and fourth quarter of this financial year itself. With this, I will now hand over the call to Saumil for details of numbers. I'll be happy to address any of your individual questions once we begin Q&A. Thank you.
Thank you, Mr. Oberoi. I guess, most of you must have gone through the presentation. And if not, the same is available right now on our website, along with the results which have been filed with the exchanges. In terms of consolidated financials, we achieved a consolidated revenue of INR 619 crores for this quarter as against INR 895 crores for the preceding quarter and INR 308 crores for the same quarter last year. The consolidated PBT was INR 307 crores for this quarter as against INR 454 crores for Q1 FY '19 and INR 155 crores for Q2 FY '18. Consolidated PAT was at INR 213 crores for this quarter as against INR 309 crores for the last quarter and INR 104 crores for the same quarter last year. Moving to the asset level performance and beginning with the investment properties. Oberoi Mall, which is a retail asset, contributed INR 37 crores to the operating revenue for this quarter as against INR 35 crores for the first quarter and INR 26 crores for the same quarter last year. The EBITDA margins in this vertical stand at about 95%. Commerz, which is our office space asset, contributed INR 10 crores to the operating revenue for this quarter as against INR 10 crores for Q1 FY '19 and INR 11 crores for the same quarter last year. The EBITDA margins in this vertical continue to be in excess of 97%. In Commerz II Phase 1, this contributed about INR 18 crores for this quarter as against INR 16 crores for Q1 and INR 12 crores for the same quarter last year. The Westin Mumbai Garden City contributed INR 32 crores to the operating revenue for this quarter as against INR 30 crores for the first quarter and INR 29 crores for the same quarter last year. The EBITDA margins in this vertical continue to be in excess of 33%. Moving now to the development properties, for Esquire, first. Of the total project of about 21.22 lakh square feet, we booked over 52,000 square feet in this quarter. Till date, we have booked about 15.16 lakh square feet, which is about 71% of the inventory. The total booking value for this quarter is INR 110 crores as against INR 267 crores in the first quarter and INR 103 crores for the same quarter last year. The cumulative booking value till date is about INR 2,389 crores. And the total revenue recognized for this project in this quarter is INR 110 crores, and the cumulative revenue recognition till date is INR 2,389 crores on account of 100% project completion. For Exquisite, out of the total project of 15.47 lakh square feet, we have booked about 17,000 square feet in this quarter. Till date, we have booked about 14.24 lakh square feet, which is about 92% of the inventory in this project. The total booking value for the second quarter is INR 39 crores as against INR 12 crores in Q1 FY '19 and INR 12 crores for Q2 FY '18. The cumulative booking value till date is about INR 2,346 crores. The total revenue recognized for this project in this quarter is INR 39 crores, and the cumulative revenue recognition till date is INR 2,346 crores on account of 100% project completion. Moving to Prisma. Of the total project of 2.68 lakh square feet, we have booked about 8,400 square feet in this quarter. Till date, total is 2.31 lakh square feet, which is about 86% of the inventory in this project. The total booking value for Q2 FY '19 is INR 17 crores as against INR 26 crores in Q1 FY '19 and INR 16 crores for Q2 FY '18, and the cumulative booking value till date is INR 407 crores. The total revenue recognized for this project in Q2 FY '19 is INR 17 crores, and the cumulative revenue recognition till date is INR 407 crores on account of 100% project completion. For Mulund, Eternia, in this quarter, we booked over 24,000 square feet; till date, about 5.64 lakh square feet. The total booking value for this quarter was INR 34 crores as against INR 42 crores in Q1 FY '19 and INR 32 crores for Q2 FY '18. The cumulative booking value till date is about INR 824 crores. The total revenue recognized for this project in Q2 FY '19 is INR 120 crores, and the cumulative revenue recognition till date is about INR 234 crores. For Mulund and Enigma, in Q2 FY '19, we booked about 7,000 -- over 7,600 square feet; till date, over 3.75 lakh square feet. The total booking value for this quarter is INR 10 crores as against INR 19 crores for the first quarter and INR 25 crores for the same quarter last year. The cumulative booking value till date is INR 552 crores, and the total revenue recognized for this project in this quarter is INR 18 crores, and the cumulative recognition till date is about INR 86 crores. For Sky City, we booked over -- nearly 77,500 square feet in this quarter. Till date, we have booked about 14.72 lakh square feet. The total booking value for this quarter was INR 130 crores as against INR 89 crores for Q1 FY '19 and INR 88 crores for Q2 FY '18. And till date, the booking value is about INR 2,356 crores. The total revenue recognized for this project in this quarter is INR 162 crores, and the cumulative recognition till date is about INR 742 crores. For Worli, Oasis, the total booking was over 51,500 square feet in this quarter. Till date, we have booked about 5.29 lakh square feet. The total booking value for Q2 FY '19 was INR 223 crores, and till date, the booking value is INR 2,149 crores. Coming back to some key financial parameters. Our EBITDA margins for this quarter was at about 49%. The PAT margin was 34% for this quarter. The EBITDA margins for mall and Commerz are much higher than the average, as mentioned before. And excluding them, the margins for our pure residential business is 45% for this quarter. With this, we would now be happy to open the floor for Q&A. Thank you.
[Operator Instructions] We'll take the first question from the line Niraj Mansingka from Goldman Sachs Asset Management.
Vikas and Saumil, question on the industry. I think others join the queue for the other specifics. Can you give a brief of what is -- what do you think is happening in the industry right now considering that there has been some NBFC crisis? And, number one, is there sales happening in the industry? Number two, any thoughts on how you see developers getting squeezed? Any experience of approvals by the NBFCs slowing down, et cetera? So some broad understanding.
So, Niraj, you have a very relevant and -- a very relevant question. I think we were seeing this coming for a very long time. In fact, it probably took a lot longer than we thought it would because we were not able to stack up how developers who don't have brand reputation, don't know how to build a project, don't have customers who buy from them, literally, going out and buying land parcels just because there were people willing to fund them. So I think this was waiting for it to happen. And I would honestly say this is great news for us because we will have less competition in buying land when it comes out to sell. And only genuine developers, who know that they can buy this piece of land, base a project and deliver it to the customer will probably raise their hand when it comes to buying property. So I think we are at a very interesting intersection, and this is only good news for companies like ours. And this clearly means that we will face less resistance/competition when it comes to buying land. And once that happens, we will not have fly-by-night developers trying to commit anything and try to attract buyers. So I think this is a very positive move as far as we are concerned.
But, Vikas, can you give more details and some color on how do you feel -- are your buyers facing issues of approvals by housing finance companies? And are constructions loan being refused? And is -- are the projects getting stalled? Or any color on that side?
So all of which what you are telling is true but none of that is applicable to us. None of our buyers are facing any problem because our buyers are prudent, and they are solid. So obviously, all the banks want to go for them. I mean, one-off buyer here and there who probably chose to go to an NBFC instead of a bank because his credentials were not approved by, probably would have fallen off. But I would say, 99.99% of our buyers are not facing that. We don't borrow for constructions. It really doesn't affect us whether these NBFCs give you money for construction or no. We've always gone and sold enough for us to build it. So none of these are really applicable to us but you are absolutely right that a lot of developers are going to face similar situations. And this could -- I mean, again, like, if there is a disadvantage to your competition, it is advantageous to you. So we are going to really benefit out of the current situation, however unfortunate it sounds for many people.
The next question is from the line of Puneet Gulati from HSBC.
Obviously, the momentum in your sales continues to be good, once again. Are you expecting this momentum, particularly, for Esquire and Sky to continue into the third quarter as well?
Puneet, this will be a little bit of forward thinking if I do. I mean, I hope and aspire to but I can't promise that, that will happen. I just want to jog you back into a statement I had made on these conference calls that at some point in time, commercial buildings will start doing well because not many people are building. Now I feel that the same will happen to residential apartments also. Very few developers will probably be able to take raw material, which is land, into a finished product, which is a ready apartment. And if the supply is going to reduce due to financial mismanagement of developers, due to lack of availability of funds from NBFCs or whatever, this is clearly going to be music to our ears because we'll end up delivering. And there will be shortage because these people who were earlier able to probably build at the back of whatever, are not going to be able to do that. So I clearly see, going forward, any developer who has good reputation, his market share will increase because the market size is not shrinking by any stretch of imagination. We are clearly seeing the market size increasing and supply reducing. So again, I feel that for developers who are prudent, who are having a good track record of delivery, will continue to do well.
Specifically, for these 2 projects because you launched the subvention scheme in the first quarter, and there was a good response. So just trying to understand it wasn't just onetime euphoria, that momentum continues into October as well.
So, Puneet, we originally -- when we started, we had set ourselves 100 apartments in this financial year for Esquire. We are at 76 in just 2 quarters. So I'm saying that probably we'll very easily beat that target. Collectively, we are -- by today, we don't have any apartment left in Exquisite to sell. Now we are left with only duplex and penthouses, which now don't compete with Esquire. And we've sold -- after the subvention scheme came into play, we sold about 76 apartments. So I think the going is good. I don't want to preempt any good or bad news for now. I feel that the momentum should continue, given the fact that we are now going to get into the festive season and so on and so forth. So I don't see any reason why there should be drop in demand.
Okay. Specifically, on Eternia and Three Sixty degree -- Three Sixty West, there has been a bit of price reduction. Is it more mix issue? Or is there any discount that you guys have offered now?
No, no. So Eternia and -- see, all of our apartments get sold, this is a base price and floor rise. Puneet, in a particular quarter, you see lower floors getting sold, then you see a price which is lower but the base price, obviously, continues to be the same. In Eternia, specifically, we opened up lower-floor apartments and that got sold. So obviously, the ticket price looks like as if there is reduction but really there is none. In Three Sixty, we had first sold all the higher floors. We've yet not yet opened the, what is that called, upper...
High zone.
High zone. We've not opened the high zone as yet. So in the low zone, all the higher floor apartments were sold. Now people are buying lower floors also because we've made some show apartment, and we've started showing people that the lower floors also have an equally commanding view and hence lower floors are also selling.
Okay. That's great. Sir, on the commercial real estate side, office space, there has been, obviously, an impressive increase in, what you call, the rentals and also 97% area, as you say, is now leased out. Who are these tenants? And what kind of rental rates are they paying now?
So these are pretty much local and international companies but the rentals are also similar to what we were getting in the earlier days. I mean, unfortunately, we haven't maximized it. We just -- we've had INR 10, here and there we got extra. But having said that, we thought we closed the deal more than we -- going for an increase or anything like that.
Yes. So your average for 3Q was INR 134 for Commerz II Phase 1. So will it be higher than this? Or pretty much in the same range?
It's about INR 140-ish.
Okay, INR 140-ish. And any specific reason why Commerz I rentals have come down from INR 143 to INR 136? How should one read that?
We are, basically, all falling in line with Commerz II. Obviously, Commerz II is a brand-new building. Existing tenants say that if you are leasing it out that -- in this building, you also -- you have to level it, nothing else.
So you're bringing down rentals for existing tenants? Is that how one should read?
Only for renewals.
Whenever there are renewals, then they have an option to leave us. We, obviously, want to retain them. And this was, again, before the entire one single push we got and got all our Commerz II leased out. Some of these deals are just before when the market kind of really started heating up and all.
Okay. And then how are these rental agreements typically? They are same 5% escalation annually? Or is there any change in how you structure it?
5% escalation -- rather, 15% every 3 years, including deposit and rental separately increasing.
Okay, okay. That's great. And Oberoi Mall, obviously, continues to outperform. Is there more room, in your view, to grow at the same kind of pace?
Yes. So the improvement that you saw came through 2 or 3 bulk deals that -- rather the big tenants we did. Now as we speak, some of my vanilla tenants were, let's say, at INR 220 on a leasable. They all have gone up to INR 400. So as and when they keep coming, we keep correcting the rents to present rent, and we see absolutely no resistance because they're doing so well. In fact, even at INR 400, we have a fight between 2, 3 people, 1 existing, 2 new people who want to enter and all that. So God has been really kind on the mall bit.
Okay, that's wonderful.
And this also helps us because at the back of this, we will be doing Borivali and Worli. So like, a happy tenant in Oberoi Mall helps us bring in equally happy tenant in Borivali.
And I presume most of these agreements are now as a percentage of their revenue? Or is it still broadly structured on per square feet basis?
So we prefer having a high fixed, which is like say, INR 400 or whatever, and we then go in for a percentage of revenue, whichever is higher. So we are assured of a high rent. We don't want to take his business risk but we want to be a partner in his upside. So we want to secure the minimum to be at a decent number that -- the ones that we talk of. And anything over and above that is welcome ...
So broadly these rentals should grow in line with their sales as well.
Correct.
Okay, okay. Sorry, lastly, if you can update on the third phase of Goregaon on Thane and on Maxima? When are they going to be launched?
So Goregaon third phase, work has commenced. We are hoping we'll either launch it in this quarter or next quarter, either of the 2. Maxima also is the same. We are -- already finished our basement. So we will launch Maxima also in this financial year. Thane, due to the nature of the deal, we want to conclude the whole thing and then speak about it. I think just one more quarter is what we need to kind of put everything on table for everybody to see what we've done. And if everything goes well, we would ideally like to launch it within the last quarter of this year or at best, the first quarter of next year.
Have you paid the entire sum? Or is that to be paid yet?
So like I said because of the confidentiality in the deal, we don't want to divulge much. But give us one more quarter. You will -- it's worth the patience you'll have shown.
The next question is from the line of Tanuj Mukhija from Bank of America Merrill Lynch.
I had just a few questions. Just a follow-up on the funding challenges for the industry. Are you seeing now the stressed or highly levered developers cutting prices aggressively to liquidate their inventory?
Tanuj, it really doesn't matter. What doesn't sell, doesn't sell. It doesn't matter whether you make it cheaper or more expensive. House is a onetime buy. People don't look at bargains or anything like that. It has to be a product, good product from a good brand. It has to be delivered. There are many things here in it. And I don't think our customers are going to fall for all this. They've burned their fingers in the past. I don't think they will ever go in for that.
Okay. Understood. So basically, Oberoi Realty will not face pricing pressure.
Not at all. I don't think so. We are rightly priced. Our prices take into fact that we have to build them and deliver them and not merely sell and then wait for some stroke of luck to happen that we can deliver. It's not like that, a very thought-through process. And if we can't build it at a price, we won't offer it and sell it, and that's what we've been doing.
Great. One more question on your cash flows. If I look at the collections for this quarter were about INR 560 crores, and the operating cash flow was about INR 45 crores for this quarter. So can you comment on the construction cost and the likely pace of it over the next few quarters?
Tanuj, Saumil here. So basically, as you would have noticed, the pace of work at both Borivali and Mulund has been impressive. So a large part of what you see is the construction spend that goes to places. If you would have seen the Worli number also, we would have spent close to about INR 120-odd crores or incurred INR 120-odd crores in this quarter. And then there is a last bit that there was a little bit of TDR and stuff, which was purchased for Mulund. So that is what kind of accounted for the cash flow.
Could you give us a number, please, for TDR purchased for Mulund for us to get what is the...
I think we can take that offline separately.
Sure, sure, understood. And just one last question. Can you update us on the time lines for the Borivali and Worli mall?
So work has commenced on both projects. We've already given indication by when we will be finishing. I think we are pretty much in line in doing that.
The next question is from the line of Chintan Modi from Motilal Oswal.
One, if you can make us understand like -- I mean, help share details on Exquisite 3 launch, what could be the configuration and what is the ticket size that you're looking at.
We've done well with regards to what we've built in Esquire. In fact, we don't have a single 4-bedroom to sell. So we are very tempted to start with 4-bedroom hall apartments, the luxury ones. Contrary to what the world thinks, actually, I must tell you, we don't have a single 4-bedroom to sell. And the resales are happening at 15% and 20% premium over the prices that we are actually selling. So we want to start with that. We want to start with 3 bedrooms. And the differentiator here is that this product will be ready, let's say, 3 years down the line, whereas the other ones are ready, and people have to pay and move in. So this is what we are looking at, 3-bedroom and 4-bedroom. Moreover, Goregaon has acquired this premium status, and we want to continue to maintain that, and the surrounding, everything is like complementing the development that we are looking to build. So it pretty much will be very similar to Exquisite and Esquire.
Sure. And would you please -- are you planning to continuing with the scheme for the new launch as well?
We haven't really thought of that. We haven't really thought of that, to be honest.
Okay, sure. Secondly is on the cash flow. I think if I broadly look at your 1H cash flow, it is somewhat around INR 1,000-odd crores. If I assume that the momentum continues for second half also, that will end with something like INR 2,000, INR 2,200 kind of crores. Against this, since we are coming up with multiple launches also, what could be the cash outflow? If you can just take us through that. And are you seeing any incremental increase in the tech levels?
So, firstly, we are not really looking at any increase in debt level. At best, if one has to build a shopping mall or office, now Commerz III that we intend to now start building because Commerz II is now fully leased out, we may need money for that. So very specific projects for development will require debt. But other than that, if you see, we've been able to manage all our development through our cash flows and sales, and we would ideally like to continue to do that, and we would not want our debt levels to go higher.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
First question is on Three Sixty West. When you think this will come up for recognition? I see now you are very close to having sold 25%. And the second question is, of the INR 2,150 crores booking value, you have been paid less than 50%. So just wondering what's keeping the balance inflows?
So firstly, we are very close to the number, you are absolutely correct. A few more flats and we should end up hitting the revenue recognition. Having said that, on the other front, more than 50% of the moneys are received, we are -- technically, with the way RERA expects us to count, I think there about 67% of work done. In some cases, a lot of these buyers have put their own, what are these called, milestones. They put their own milestones like this effect, when you finish glazing in the building, we pay you so much, when you do this because they are all advised by top lawyers, and they want to kind of ensure that some basic activities are done. So that's it. Nothing other than that. And they're equally happy that so much money is yet to be taken because we would love to take it but nevertheless, now if you really see the amount of work that is balanced with the money that we need to receive, we are probably even-steven, and we will be done with it. We don't need to -- we may not need to be pump in any more money. Even without a single flat sold, we will be able to complete the project out of the cash flows. We need to receive from them.
This is very good to hear, Vikas, really. So this is -- so we're looking at about 6 to 9 months for this -- these triggers or milestones for us to receive the balance INR 1,000-plus crores?
Absolutely. So in fact, I must say that internally we are gearing to finish the -- most part of everything by March of this year -- this financial year -- end of this financial year. I mean, few things will probably spill to June but you're absolutely right. In the next 9 months, we will have done all our work, and we would be -- in fact, we fancy our chances to get occupation certificate by maybe March and June of next year. So we will be done June of 2019. So we'll be done with everything, and all our moneys will be due.
Okay. And the second question is on the unsold inventory on OC projects, so to say. So 250 units pending in Esquire, if I'm not wrong, and now about 150 units in Worli. So it's a pretty massive number out there. So how are you thinking about liquidating all of this?
So -- we, obviously, phased our OC in a way where we get 2 years from the time we get our occupation certificate until the government starts charging us at deemed rental and all that bit. So we have until April or March of...
2020.
March of 2020 to sell. So we've got another 18 months. If we see how Esquire has done in the last 2 quarters, we've done 76 apartments. I mean, let's say, if we are able to close 100 by -- maybe more than 100 by March, we'll be left with probably 200-odd for the next 1 year. And if so many people move in, there is a different sort of buzz in the building and so we see -- we've seen that happen in Exquisite also. So even people moving in Exquisite are helping Esquire and so on and so forth. So if you see collectively, both of them put together, we've almost sold 86 apartments in 2 quarters. Now since there is nothing in Exquisite to sell, the focus will be on Esquire, and we should be close to all our sale by April of 2020 -- or March of 2020. I mean, that's our conservative realistic estimation. So I don't think we'll go very wrong from that. And these are apartments built, fully paid for, no debt on them. You receive money, it goes directly to your cash flow, profit, everything. So it's like really something we really want to see sell.
Okay. And about 150 unsold units or so in Worli, which probably is about INR 6,000 crores, INR 7,000 crores of unsold...
Yes, Sameer, I keep saying this that every quarter, I feel that I will surprise you all by telling you that I've sold 15 apartments but somehow that just doesn't happen. Maybe I'm very bullish about my product or very enthusiastic about it but I must also tell you that the footfalls have immensely increased. We are talking to a lot more people, like, there are probably 30 deals in the pipeline but it just takes too long, and these are not people who one can simply pin them down and say close it. Multiple deals are in play but we finally have to happen to happen. And they are within the ballpark on price, on everything. So there is a huge profit. These people believe more in Vastu. They have top lawyers. Similar -- same lawyers want to do complete title search for the same product for a new client. So it just takes too much time and so that's where we are. But very optimistic that we will be able to -- once it starts. And the good part is that we have now the best inventory left for ourselves. We've not even opened the high zone. So from 48 above, we've literally not sold anything. So that probably will -- when we start selling that, which we want to sell at a premium, we will get momentum also. And I think today, the 50 who's who of Mumbai have literally bought an apartment here. I think even that probably will start rubbing off and working on people.
Yes, sure. And one final, with your permission, and that is on the CapEx side for 2 malls and large Commerz II Phase 2. I think if you need to compete them in, say, roughly 3 years, it's a very high CapEx that we're talking about, maybe INR 2,000 crores, INR 2,500 crores. So -- and I remember you said that you would rather fund rather through construction finance. So it's a very -- a fair bit of gearing or leveraging up that we are able to see over the next 2 or 3 years. Would this be correct?
So I'll just tell you how we are planning this out. We want to, firstly, lock in all our deals. And in our shopping mall at least, we'll get 12 months' deposit and stuff like that from the incoming tenant, number one. Number two, unlike any other asset where you will build and wait for it to be leased, there is a risk element attached to it. And in a mall where you have preleased everything, the receivable of the rents will take care of the interest and the capital repayment -- principal repayment of the loan that we take. So I'm not worried about the quantity, I'm worried about how I will pay and where the cash flows are going to come from. If I have clarity of where the cash is coming from, really, no number is big. So it's more about being prudent where the money is coming from rather than the quantity of the money. And here again, if you see, we have not leveraged anything on our existing rental portfolio. Commerz III fully leased out is a little over INR 100 crores. Our -- sorry, Commerz II. Our Commerz I hotel, school and mall throw in another INR 250 crores. So we are looking at INR 350 crore rental income every year. Even if I discount that, I have enough money from my existing rental yield that can take care of 2 more assets, which will -- you know the deal that I did with the cinema operator. I'm telling you I'm getting identical offers for my Borivali mall that I'm getting in Goregaon. If I just use the same numbers, we are looking at another maybe INR 300 crores of rental yield out of Borivali and similar numbers in this thing...
Worli.
Worli. So if all this gets ready, you are looking at a decent size or INR 1,200-odd crores of rental portfolio happening from these 3 additional assets. So we are not really worried about gearing on that.
Plus, Sameer, again, if you look also at the way Borivali has been doing, if you look at just the existing level of sales, about INR 2,350 crores, Borivali is again going to be generating cash surplus to what is going into the construction. So again, you will also end up drawing them only as much as is required because Borivali is going to be spending cash. You have the rest of Esquire, again, as Vikas mentioned, that's complete free cash flow. So all of these will end up also contributing to the cash flow. So we'll see how it finally cranks up. But while there will be some cranking up, which will happen, it may not be the entire amount, which will come from construction party.
And Worli, also, will give in cash. One is our share of profit and also our contribution in the construction, the waterfall that comes out first. So even that cash will come back to us, which will, again, become free cash flow in our hand. So that way, we are still completely in control, which we like to be.
The next question is from the line of Abhishek Anand from JM Financial.
So I have my first query on the DCR, which had been released. So is this correct that there is some calculation change in FSI calculation and we will get some additional area?
Abhishek, all that has been factored in by our calculation. So we have actually always calculated it and presented it the way we've understood. I mean, if it is, it's marginal, nothing out of the whack, really.
Okay. So the gross area, net area...
Some of them that we have mentioned are pretty much the same.
Okay, okay. So nothing much changes on our saleable area potentially.
Nothing changes for anybody, really.
Okay, okay. And if we could get some more details on our Three Sixty West project, especially, on the debt side, how much is on the books? Is there any date that LLP is carrying?
There is no debt on the book.
There is no debt on the book?
No debt.
Okay. Because I was getting to hear that certain debt is linked to the Worli project.
No, there is really no debt at all.
Great, great, great. If you could help us out with the TDR and FSI purchase expected in the FY '19. Do we expect any purchase for Borivali in the current year?
So we are waiting for a few policy clarities on this bit. So we'll cross the bridge when we come to it. Of course, we will need TDR but like in what form, how and from where? All those clarities need to come into play.
And also, we were hearing Tower E being launched soon. Any tentative time line on Sky City Tower E?
So Sky City, we have A, B, C, D happening. We continue to sell A, B, C, D. If you see in this quarter, we've sold flats on a higher floor and that's why you see the price increase. But really, we haven't increased the prices, it's just the higher floors that are selling. We can, obviously -- we are already building Tower E. We can start sales today but if I sell Tower E today, then -- I'm already selling A, B, C, D with good momentum, so there's no point in diverting these customers to Tower E, and we have predominantly seen that the lower floors get taken first because they come cheaper, they come without floor rise, so they come cheaper. Literally, the 50th floor ends up being almost 50% more expensive than the base floor. So people like to live on the lower floors on because they like height or dislike height but they don't like the price that they've to pay for the higher floors and all. So we don't want to start E because we already are seeing -- this quarter itself you saw that we sold good number of apartments in this thing. So it's some sort of a mini strategy that we are playing it out that we are dealing E because we are seeing momentum. The minute A, B, C, D starts drying up, we will launch E so that we are able to give more offerings to a more variety or more better views to people and then probably sell E. But we are already building F, G and H also. So the work for F, G and H has started, the work for the mall has started, the work for the hotel has started in Borivali. So work-wise, everything is there. The minute we sell any of these, we will immediately be able to recognize or get cash or whatever for the project.
Okay. Because I think somebody mailed me something on Tower E, so I felt this is something that...
The good part is the markets are always ahead of our own thought process. And we don't mind that because they kind of almost guide you to do what they want us to do. And we take them very seriously, that if the brokers say we'll start Tower E, Tower E and all that, we kind of think through about it. And we do -- I mean, these rumors are not things that are baseless. They -- we do have discussions, and it's funny to know that even our discussions, which are close-ended discussions, do get out.
And finally, if we could -- Vikas, if you would have the capital deployment view. So if you expect the stress level to go up in the sector. Are you planning to hold off any big purchases for the time being and see how the market plays out? Or we are actively looking for deals in the current market as well?
So we are looking for deals, and every deal has to be looked at it -- in its merit. And see because one can never time the market. We can't time the market either way. You guys know it better than we do. But having said that, I feel if there is good land, if it's available at the right price, if it's a credible seller, then we are buyers for that even today. We don't -- we are not nervous about the market at all. In fact, these are the times when you get good land parcels at reasonable prices. I'm not saying cheap or expensive but you get it the right price. And if you do, then we are buyers.
Sure. Any ballpark number? What do you expect as per these level price to mix, 10% below the current price on The Street.
You know, not really. -- I would say that...
And especially, do you expect land to come off from current levels, land prices?
Well, there is no current level as such. All these buyers are flushed from NBFCs, which are luckily now not going to give moneys to these developers. So we stand a better chance in getting land parcels at the right price. So that's our criteria. We do a math. We know -- see real estate, if you see, apartment prices have not gone up in the past 4 years, 5 years. And so there should be no reason why land prices should go up. In fact, if at all land prices should correct because inflation has to hit something. If the ready product price doesn't change and the input cost has gone up, the only cost that can be corrected and is a variable is land. So land should technically become cheaper every year, and that's music to our ears because that's what we want, that's our raw material. If in an industry the raw material prices keep going down, producers should be happy.
The next question is from the line of Adhidev Chattopadhyay from ICICI Securities.
Just to give us some color on the Borivali and Worli malls. What would be the now total budgeted CapEx over a life? Do you have any figure for that?
Adhidev, Saumil here. So typically, we have seen that if we were to benchmark it to current pricing, this should be less than -- all inclusive, it should be at about INR 4,000 a square feet.
Okay. But this is including the multilevel car park also, along with the malls? This is the area that you have in the presentation? Or it is on the leasable area? Just I wanted to...
It is, obviously, on the leasable area but basically, we spread the entire cost of construction over the entire GLA.
Okay. So it is INR 4,000 on the leasable, okay, okay.
Because, again, in all fairness, most of the tenants sit outside and all are all done by the tenants themselves. So what we are left to finish is -- what we are left to do is only the services and -- the superstructures and services and only the common areas.
Okay. Fine. And sir, on the Worli mall now, is there a -- have we got all the approvals in place? Or is there some coastal regulations on approval still pending or anything else we need to do over there before we do the leasing?
We will be taking approvals in due course as we speak. There is no coastal approval that we need. We are already cleared of that. We fall under the present DCR. So for us, that's not a problem. But like I said that we, basically, will be taking approval under the new DCR. And as we speak, we are processing that.
Okay, okay. So there are no environmental clearance or any other hurdle which you...
No, no, no. No uncertainty or no hurdle on that account.
Okay. And the last one, this Commerz II now in Goregaon, obviously, the building is leased out. So are you going to be starting now construction immediately on the whatever balance FSI is there for the office building?
Oh yes, yes, yes. We want to immediately start. In fact, we have a design meet on Monday, next Monday, and we get cracking on it. We have something very interesting, very iconic coming here. This is the last of the commercial building that we'll be doing in Goregaon. So we want to really make an iconic building here.
The next question is from the line of Sandeep Kothari from Fidelity Investments.
Vikas, this is Chandrasekhar. Just a question, just I'm not sure whether it's been asked before but just wanted to check, do you worry about any second-order impact on pricing, in that some of the developers who were affected by this NBFC crisis come to sort of offload finished inventory maybe in the next few months and that sort of puts pressure on pricing for a while on your projects? I know, obviously, they've not moved for a while but do you worry that this can actually go down?
If they had ready apartments to sell, they would have not been in these crises. All of them are in the crisis because they have taken moneys and bought land parcels, which they don't know what to do about. They've not been able to build, they've not been able to sell, nothing. So you just see -- absolutely yes, there are brownfield projects. Some right across our projects, which are at level 1, level 2 and not moving. But by no stretch of imagination, we'll buy a brownfield project off a developer who is defaulting in repaying his own loan. So that clearly says it. And there are no ready apartments with developers who are in trouble. If they were, they would not be in trouble, trust me because everything sells in Mumbai. If it's a ready apartment, it sells, and it will sell at a cheaper price. But there aren't any developers who are in trouble and have ready apartments.
The next question is from the line of Nimit Gala from Edelweiss.
I have 2 questions, one related to Enigma. So do we have any target number of units to sell for the year because I understand we've been still -- the other projects have been doing well but we've been still struggling to sell units here?
Well, our first target is to sell as many apartments that we can immediately start recognizing revenue. And so that's really our first target, I must say, which we should achieve within this financial year, if everything goes well. Again, Enigma is a one-of-its-kind project, even in that micro market. If you see, we've really done a calculation that probably we are doing a little over 20% of all of Mulund's development as we speak today. And our 20% is very unique and different because we are -- our 20% is the highest quality product and very differently sized. Everyone has the -- rest of that 80% are competing for the 1, 1.5, 2, 2.5 and 3 -- 2.5 bedrooms, not even 3 bedrooms. We started 3 bedrooms. So literally, the overlap between competition has been very minuscule, and competition has decided to avoid us. We are very happy for that. And we feel, going forward, when -- and because our apartments are of a little larger size, they do end up selling only when they are nearing completion because it's a big check people write, number one. Number two, Mulund, unfortunately, is a cash market. We don't take cash. And that's also a deterrent. But this is something that we will have to live with it and we'll continue to. So it's slow but it's certainly not a worry for us. It is slow but it's not a worry as such.
Okay. Got it. And second question, if I understand it's correct, a good number of portion of your sales comes from NRIs, right? In that case, are we witnessing any increase in inquiries, given the recent appreciation?
Honestly, not many of our customers are -- I mean, we actually totally don't really differentiate but you've given us a good cue. We could step up our marketing for NRI clients, telling them that now that rupee is cheaper, they can get an apartment at a better price. But really, we haven't really thought as much. We don't focus on the NRI market. We look at actual users. But this is certainly something that one can think and push towards.
Yes, from what I understand, other players -- some portion that's come from under the Ind has been witnessing good inquiries, so this could be a good point for you.
No. So we will try and go in for some international exhibitions and see the response. We've never done that but there's no harm in trying in places like Hong Kong, Dubai, London and some cities in the U.S. where you have Indian domination.
Ladies and gentlemen, since we are running out of time, that was the last question. I would now like to hand the floor over to Mr. Chairman and Managing Director, Mr. Oberoi, for closing comments.
Thank you all for taking time to attend this conference call. We like taking feedback from you all, and this really helps us think how we go forward. We really get a lot of good advice from you people. Please continue to help us do that. We look forward to talking to you in these conference calls or even otherwise. Please continue to reach out to us. Thank you, again. Have a good weekend -- have a good day.
Thank you very much, sir. Ladies and gentlemen, with this, we conclude this conference call. Thank you for joining us, and you may now disconnect your line.