IGI Logo

Bhandup land acquisition - unfolding the market opportunity

We view the Bhandup land acquisition by Oberoi as attractive and strategically positive.

* Land acquisition details: As per media reports (ET), Oberoi has purchased a 4.2acre land parcel in Bhandup for Rs1.15bn. The total saleable area is expected to be ~1msf, with a GDV potential of ~Rs10-12bn, in our view. This qualifies the acquisition as attractive, with the land cost at 10-15% of the total sales potential.

* Marginally accretive but strategically positive: While we note that on a standalone basis the acquisition hardly moves the needle on the valuation front for Oberoi (~2% upside to our Dec‘22E Development business GAV), we view the deal as a strategic extension to the Mulund projects, where completion is at a late stage. A smaller land parcel will also allow the developer to test the waters in a new market with limited risk on the balance sheet. Additionally, we note that the Bhandup micro market lacks competition from Grade A developers, thus offering an opportunity to take the early mover advantage in terms of premium development.

8 The Bhandup residential market is relatively small but offers high growth potential. We note that annual absorption in the Bhandup micro market has averaged 0.7-0.8msf over 3, 5 & 10 years vs. ~2-2.5msf for Mulund west alone. However, strong connectivity similar to Mulund offers location advantage with proximity to key markets (including CBDs) - Powai, Andheri East, BKC, Lower Parel and Navi Mumbai.

* Retain our Hold rating and Dec’22 TP of Rs860. In our view, the performance of the upcoming Thane project launch will set the direction of the stock price hereon.

Bhandup micro market overview

* Key location advantages: 1) strong connectivity and proximity to key CBDs, similar to Mulund but relatively attractive on pricing by 15-20%; 2) relatively less fragmented market with top 5 developers accounting for ~40% of the overall absorption over last 3 years; and 3) low inventory overhang of 20 months vs. ~30 months (excluding hold projects) for Mulund west and 28 months for Mumbai.  Smaller unit size remains in flavor: We note that 1&2 BHK units dominate the Bhandup market, with 1BHK accounting for a lion’s share at 75%/77% over the last 5/3 years. 

* Dominated by local developers: Over the last 3-5 years, Shraddha Landmark, Marathon Realty and Srishti Group are the top 3 developers, accounting for ~30% of market absorption.

* Strong and improving connectivity. We note that Bhandup’s connectivity is largely similar to Mulund, Kanjulmarg and Powai. Upcoming connectivity boosters include Metro Line 4 (Thane to Wadala line) and Goregaon-Mulund link road, along with new proposed road development/widening plans.

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer