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Good evening, ladies and gentlemen, and welcome to the Oberoi Realty's Earnings Conference Call for the Quarter 3 Financial Year 2018 that ended on December 31, 2017. We have Mr. Oberoi, the Chairman and Managing Director of the company; and Mr. Saumil Daru, the Director Finance of the company, with us for the call. Please note that this call will be for 60 minutes. [Operator Instructions] This conference is being recorded, and the transcript for the same may be put 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 the 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 Q3 FY '18 results and updates. Thank you for taking your time to attend this call. A quick update. We have applied for the occupation certificate for our project Esquire and have -- I'm happy to announce that as of 29th January, yesterday, we've -- the day before yesterday, we've received the part occupation certificate for the same. What is noteworthy is that we have been able to give possession absolutely on time. Booking value for our project Borivali Sky City has grossed INR 2,000 crores. We are also happy to let you know that the construction progress at Borivali is going as per plan, and so is our Mulund project. With this, now I'll hand over the call to Saumil, who will take you through the details. And I'll be most happy to answer any of your questions individually. Thank you.
Thank you, Mr. Oberoi. I guess most of you must have received the presentation by email from the IR team. And if not, the same is available on our website along with the results filed with the exchanges. We'll keep things short and sweet to help us get adequate time for Q&A. In terms of consolidated financials, we achieved a consolidated revenue of over INR 360 crores for Q3 FY '18. This is as against over INR 308 crores for Q2 FY '18 and nearly INR 265 crores for Q3 FY '17. The consolidated PBT was nearly INR 184 crores for this quarter as against over INR 155 crores for Q2 FY '18 and over INR 125 crores for Q3 FY '17. The consolidated PAT was at about INR 120 crores for this quarter as against INR 104 crores for Q2 FY '18 and INR 84 crores for the Q3 FY '17. Moving to the asset level performances and beginning with the investment properties. Oberoi Mall, which is the retail asset, contributed about INR 27 crores to the operating revenue for this quarter as against INR 26 crores for the preceding quarter and INR 25 crores for the same quarter last year. The EBITDA margins in this vertical are at about 95%. Commerz, which is the office space asset, contributed about INR 11 crores to the operating revenue for this quarter as against a same number -- or similar numbers for Q2 FY '18 and Q3 FY '17. The EBITDA margins in this vertical continue to be in excess of 98%. For Commerz II Phase 1, this contributed INR 11 crores for this quarter as against INR 11 crores for the same quarter last year -- the preceding quarter and INR 7 crores for the same quarter last year. The Westin Mumbai Garden City contributed about INR 35 crores to the operating revenue for this quarter as against INR 29 crores for Q2 FY '18 and INR 34 crores for Q3 FY '17. The EBITDA margin in this vertical comes in at about 36%. Moving on to the development properties, beginning with Goregaon. Esquire, out of the total project of 21.22 lakh square feet, we booked over 24,400 square feet in this quarter. Till date, total booking is at about 12.9 lakh square feet, which is over 61% of the inventory. The total booking value for this quarter is INR 48 crores as against INR 103 crores in Q2 FY '18 and INR 53 crores for Q3 FY '17. Cumulative booking value till date is INR 1,919 crores. The total revenue recognized for this project in this quarter is INR 156 crores, and the cumulative revenue recognition till date is INR 1,694 crores. For Oberoi Exquisite, out of the total project of 15.47 lakh square feet, we have booked 17,550 square feet in this quarter; till date, totaling INR 13.98 lakh square feet, which is about 90% of the inventory in this project. The total booking value for this quarter was INR 41 crores as against INR 12 crores in the preceding quarter and INR 4 crores for the same quarter last year. Cumulative booking value till date is about INR 2,285 crores. The total revenue recognized for this project is about INR 41 crores, and the cumulative revenue recognition till date is at about INR 2,285 crores on account of the 100% project completion. Moving to Prisma. The total project is 2.68 lakh square feet. We have booked about 8,600 square feet in Q3 FY '18. Till date, we have booked about 2 lakh square feet, which is over 75% of the inventory in this project. Total booking value for this quarter is INR 15 crores as against INR 16 crores in the preceding quarter and about INR 4 crores for the same quarter last year. Cumulative booking value till date is about INR 348 crores. And the total revenue recognized for this project in this quarter is about INR 51 crores, and the cumulative revenue recognition till date is at about INR 257 crores. For Mulund. In Eternia, in Q3 FY '18, we booked 6,680 square feet. Till date, we have booked about 5.02 lakh square feet. The total booking value for this quarter is about INR 10 crores as against INR 32 crores in Q2 FY '18 and INR 9 crores for Q3 FY '17. Cumulative booking value till date is INR 737 crores. For Sky City, we have booked 47,000 square feet in this quarter; till date, about 12.82 lakh square feet. Total booking value for this quarter is INR 76 crores as against INR 88 crores in the preceding quarter and INR 58 crores for the same quarter last year. Till date, the booking value is about INR 2,052 crores. For Oasis in Worli, we booked over and nearly 47,500 square in this quarter. Till date, we have booked about 4.32 lakh square feet. Total booking value for Q3 FY '18 was INR 214 crores. And till date, the booking value is INR 1,716 crores. Coming back to some key financial parameters. Our EBITDA margins for this quarter was at 54.61%; and for Q3 FY '17, was at 52.41%. PAT margins were 33.35% for this quarter and 32.01% for Q3 FY '17. EBITDA margins for Mall and Commerz are much higher than average, which we just discussed. Excluding them, the margins for our pure residential business is 50% for this quarter. With this, we would now like to open the floor for any questions that you all may have. Thank you.
[Operator Instructions] The first question is from the line of Abhishek Bhandari from Macquarie.
Vikas, I have 2 questions. One, can you share some more update on the GSK land parcel in Thane? Have you signed a deal with them? And have you paid any money to them?
Abhishek, Saumil here. On the Thane land transaction, in view of our arrangements which we are having with Glaxo. We do not want to discuss anything about this transaction at this point of time. As and when there is an update, I think you can wait for us to come back to you.
Okay. The reason for asking is that the company has gone ahead and already filed to the exchanges saying that you already wound up...
Yes, but -- so the only thing is we would want to wait for everything to get concluded before we come back and tell you everything. So while everything -- while it is in the process, we would just want to concentrate on getting that process completed. That's all. Nothing else.
Okay. The second question is on your Worli project for the residential and the hotel. What is the progress on the hotel? And what is the spending spent on both these parts of the project, residential and the hotel parts?
So the combined -- so firstly, in terms of physical status, the building, if you look at it, so we have Tower A and Tower B. Tower A is the building with the hotel and the residential. Tower B is the fully residential building. As far as Tower A is concerned, which is the hotel building, all slabs have been cut, which is the slabs of the hotel as well as the resi. So we have basically topped out that building as far as construction is concerned. It will now be only interiors to go. As far as Tower B is concerned, we have about 4 to 5 or thereabout in terms of slabs to go.
The next question is from the line of Tanuj Mukhija from Bank of America Merrill Lynch.
My first question is regarding the demand that your Esquire project in Goregaon and your Mulund projects continues to remain, I think, pretty weak. Can you please comment on the inquiry levels at these 2 locations?
See, in fact, Esquire is not that bad. We believe that there is enough demand, and there is demand in the pipeline. We, ourselves, are a little concerned -- or about Mulund as such. I mean, Mulund has been a little slow for us. And we are trying to see whether it's like either there's an oversupply or what's the real reason per se. So we are focusing a little on Mulund to see how things pan out there, and that is a cause of concern for us also. Esquire, we are not really worried. We've seen uptick happen here.
A follow-up question on that. Sir, can you please comment on the launch pipeline for next phase at Goregaon and Borivali?
So Goregaon, we have 5 more residential towers to go. We have started work there. We've also received commencements there. We haven't started booking. And we don't feel that, at any point, this will cannibalize our existing supply because the state of construction is very different. People who want to book for the next 5 years or 4 years don't buy ready, so that customer segment is completely different. Borivali, we have started construction on 5 buildings but launched only 4. So the fifth one is ready for us to sell. But again, because we are doing well in the 4 towers, we continue to sell that again. Everyone has preferences of either a particular side or a lower floor, so by opening inventory there, I don't know whether we will end up increasing the sale. Here, in this case, at least, we are able to sell the entire inventory that's open, so we want to continue to focus on that. And we are seeing good numbers, so we don't see any reason why we should open another listing.
Understood. Understood, sir. Summarizing, most likely, Oberoi will launch a next phase at Goregaon perhaps early FY '19, and Borivali could be later?
Yes, you could say that. Actually, it could be both. I mean, we could launch both in first quarter or second quarter, either of the 2.
Okay, understood. And could you give us the time lines for your retail malls at Borivali and Worli? Would they be -- sir, would the Borivali mall be in sync with the completion of your housing project in Borivali?
In fact, it probably might be a little before that. We are trying to -- like the government is committed to finish the metro by 2019. So we ideally want to -- 2019, early 2020, we want to time it in a way where metro is ready and our mall is ready for both Borivali and...
Worli.
Both have started at both ends.
Okay, great. One last question from my end. I have several questions, but I'll just stick to one last. If I look at the sequential pricing per square foot at Esquire and Three Sixty West, it's declined over the course of the last 9 months. What is the reason for a decline in pricing per square feet?
Okay. So actually, we have neither increased our price. Actually, in fact, we have marginally increased our price in Esquire, and we have kept Worli pricing the same. Whenever there's a lower floor sold, you see per-square-foot realization come down. Whenever there's a higher floor selling, you see per-square-foot realization going higher because of the floor rise component. But otherwise, like I said, that we've marginally increased. We marginally increased the price of Esquire, so there is no reason other than what I told you to see that difference.
And on Esquire, Tanuj, if you will look at it, then the 9-month FY '18 average is about 20,473 versus 9-month FY '17, which is 20,275. So actually, there's a -- I mean, it has actually gone up by about 200 bucks.
2,000 -- about 200.
There is no fault per se. But again, as Vikas just pointed out, it's all got to do with the floor mix. I think this has been a question we have always addressed in the context of Exquisite, Esquire, virtually all the projects. It all depends on the floor mix in a particular quarter.
Quarter.
The next question is from the line of Puneet Gulati from HSBC.
So firstly, just want to understand here, why is the operating cash flow negative this time?
Those would typically go because of working capital adjustments rather than anything else. So if there are some advances which are made, then for that particular reason, you will see that, for us, everything is a working capital change. So if there are any FSI premiums or any of those related costs, which happen, so though it ends up being as a part of inventory, but in the quarter in which that gets incurred, it lines up converting into a negative operating cash.
Right. Because the collections are quite good this time, so...
Oh, yes.
Surprised here why it would go negative. Is there some speeding up of work from there?
Speeding up of work is going on. Also, there are some advances going on to contractors, and all of that various buildings are at various stages, so that's the only reason, nothing else.
Okay, okay. And also, the borrowings had gone up some INR 750-odd crores long term to INR 1,430 crores. So is that in preparation for this velocity?
Yes.
Okay. Secondly, if you can also update on -- in terms of revenue recognition, would you record the Worli thing as 1 or 2 separate, Tower A, Tower B?
We are presently proposing to record them as one.
Okay, that's great. And lastly, if you can give some color on what's happening on the leasing side for Commerz Phase 2 -- Phase 1, sorry.
So during the quarter, we had one more floor which got concluded. I think you will see that coming into the rental streams shortly. We are also on the verge of, so to say, quite a few transactions which are coming through. So maybe by March of this year, so maybe in a couple of months, you will likely see that, again, the occupancy will kind of crank up to anywhere like about 65% to 70%. That's what we are targeting.
Okay. And in terms of rentals, are they broadly in the same range?
Yes, yes, they're roughly in the same range.
And what kind of clients are these?
Also, again, this could be the multinationals or very leading companies. So again, people are wanting to use this as a corporate headquarter.
The next question is from the line of Chintan Modi from Motilal Oswal Securities Limited.
So 2 questions from my end. One is on the Three Sixty West collection, which has been quite low compared to the booking value that we have done in the quarter. So what are the reasons for the same? And how do you look at it going ahead? Second is, again, on Three Sixty West. Considering that would be our planning for a possession in March 2019, and we have 200 -- approximately close to 200 units, and I think we have sold 46 units till now, once the possession is given, a lot of operational costs will start coming in because you'll have to switch on the amenity, the security company and all of the expenditure that's built into it. So I wanted to understand how large the quantum of this expenditure could be and how do we bear it out once we had it.
So 2 things, Chintan. Firstly, on the collections bit, if you will see it, typically, what happens in transactions of this magnitude is that customers prefer to do a more detailed diligence compared to our turnaround in places like, say, the Goregaon or Borivali or Mulund, where, typically, people just walk in, and they collect the agreement, and then they sign off. Typically, it goes through a far more detailed diligence and the far more detailed discussion on the agreements. So that is where you see -- and subsequent to that, payments all get linked into time lines or to milestones. So I would say that maybe again from March quarter, with the way we are seeing things getting lined up, I think you will start seeing the cash flows which we are looking at starting to come through. So that would be the first one. The second one I don't think is a very -- it is, very frankly, I don't think at all a material number in the overall context of the size of that project and everything, so -- plus, if you will also note what happens as -- in Worli is that we are selling bare shell apartments. So even once we hand over the possession, by the time people will fit out and move in, it will take some time. So obviously, the usage of those facilities will also begin only once people come in. So -- but even having said all that, it's not such a material number to bear.
Okay. And so with regards to the first question, you mean that, I mean, agreements would be in place, right, for the 5 units that we have sold?
So basically, these are preliminary, or things which are in place, the allotments are in place. Agreements, typically, when under RERA, only once you collect 10% and more then comes the requirements of agreements and all that stuff. So that's where -- as I've mentioned to you, if there is a diligence process going on, then until and unless that is over, the agreements don't get done.
Right. And regarding the height restriction issue, I think you were looking for an approval in Three Sixty West. Any progress on those lines?
So what we've decided is that we will go ahead -- sorry, this is Vikas Oberoi. We are -- we have topped up as far as the A tower, which is our hotel and the resi on top is concerned. We've also topped up with the B tower at 66 floors. So we are not going ahead, which actually is good and bad, both good, as in we are in -- now in a position to give. We'll be finishing our building at probably the end of 2018. And so we treat on everything from that point of view. And since we have no FSI costs, so we don't have really any loss per se, and that's what we are doing. They're not waiting for height clearance anymore.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Saumil, if you can just tell us on the time lines for recognition for Borivali, Mulund and Worli Three Sixty West.
So in sequence, Borivali would be, in all probabilities, Q1 of FY '19, so this would be in April to June. As far as Mulund is concerned, Eternia should be -- in all probabilities, be H1; so in all probabilities, maybe Q2. And Enigma could be the third quarter. And as far as Worli is concerned, again, first quarter or second quarter. If you will note of -- as far as, basically, Worli is concerned, the percentage completion for construction, as we have already way past that threshold of 25%, so it's only a question of hitting the volumes and then beginning recognition. As far as the others are concerned, the sales are -- I mean, it will be more trying to reach the construction milestone rather than the sales milestone. Borivali, we are already about 50% in terms of sales.
Yes, that's right. But for Worli, in terms of sales, you have done 46 units.
Yes.
Where do you need to hit it for recognition, 60, 65?
It's more on the basis of area. So if you look at it, Worli may be about 24 lakh square feet. What we have sold so far is about 4 lakh, 30,000.
Yes.
So I need to sell 25% of 24 lakhs.
So 6 lakhs is 25%?
So 6 lakhs, yes, exactly.
Okay, got it. And because it's -- I understand what had gone, did you say there are 5 towers that you'd be launching more in Goregaon?
Correct.
Okay. And what would all -- what would they -- these towers total up to?
Sameer, we are actually doing internal Math, and we will actually be sharing this with people. So just wait for us to tell you what's the exact quantity because we are working out what sort of reservations we'll hand over and how much FSI we'll get from here and what sort of additional area we'll require to buy. So we're actually doing an internal Math and shortly come out with those numbers.
Okay. And -- but this is quite different from your earlier disclosures of what Exquisite 3 was going to be?
Exquisite 3 was always -- okay, so there are 2 things. The third phase, when we were talking about launching, we were talking about either 2 or 3 buildings. But there were always 11 towers in...
In Goregaon.
In Goregaon and 1 commercial building left to be built. So if I may tell you that there are 5 more residential buildings, 1 office building and 1 hospital for us to build. And we have some more area for an education complex, so we have another property that needs to be built.
So we may -- we would have and could have discussed the -- on launch, we would have said, maybe out of the 5, we would launch 2 or 3, but this was always the total potential for a long time.
Okay. And any thoughts on how cost -- input costs have moved for you over the last 6 months or the 9 months? Or the right time frame, both material and labor?
Honestly, we did our Mulund contract, we did our Borivali contract, which was probably 6 to 9 months apart. We've been able to get the same price. We have, like recently, negotiated. We had to finally shake hands. And we've been able to get contractors to agree for our 5 towers in Goregaon pretty much at the same price, so we don't see any increase in costs from that point of view. And I mean, like contractor availability has been reasonably good for us because I feel others are slowing down or, what, I don't know.
Okay. And your contracts, how do they capture the concentration for the contractor?
So the material costs, like steel and cement, are fixed at a price. And if there's any increase in that, we obviously pay for that. As far as labor is concerned, that's already absorbed. It's within the time. We don't have to pay any increase. Different contracts, different listing. But they are -- I mean, like historically, we've seen over the last 20 years, they are not very significant.
Okay, one final question, with your permission. And that is...
Please go ahead.
Yes. Vikas, so what's your outlook for Mumbai property market and more so for your locations? And do you think that you have a leeway to increase prices anytime soon?
So let me tell you about the Mumbai market, then I'll tell you the segments that I'm in -- or rather the suburbs that I'm in, and then I'll answer your last question. See, Mumbai has always been a supply-constrained market. Having said that, the latest -- rather not the latest, the order of the high court which was challenged in Supreme Court, that dumping ground issue, that has not helped increase supply per se. Whatever you are seeing are all old approvals that are continuing to be built. We have been on the lucky side, where we had permissions in all our projects, so we are not really -- not even a single project of us is stuck because of that order. So having said that, there is certainly a slowdown in the supply. In the last 2 years, after the order, now new IOD or CC has been issued, so we don't see much of a rush in BMC to get approvals because high court has restricted them. This, in turn, will certainly create a shortage going forward. This is our belief. Now when it comes to our suburbs, we are pretty much present in most of the prominent suburbs, be it Borivali, Goregaon, Mulund, now with this in Thane as well, JVLR, again, and Worli, let's say, if it was to be the city. Barring Mulund, I feel Mulund has a little bit of an oversupply. Barring Mulund, I don't see there being any issue in any of our other projects. Worli, again, there is supply, but they are not of the product that we are building or the quality or the price point that we are looking at. So again, we get the best pick of the people wanting to buy a house in that area; as indeed, the first one to come to us. And only if they don't fit into their budget or if they want to buy a smaller house will they go to someone else. And so there -- what was your third question?
On the price, increased or retained?
Okay. So on the price increase, see, even though I said that Mumbai is a supply-constrained market, we have no issues elsewhere. The normal sentiment is such that we are not able to push our price up. Everyone would love to, but the way things stack up, I don't see we having enough reason to go out to the world and say that we are going to increase our price. That's where we are. So prices may continue to be the same for some time to come. But like I said, that there will certainly be absolute supply crunch going forward in the next 2 years because you cannot catch up to the demand instantly. All these things take time for it to build and all that. So today, there's a standstill as far as new projects go, and this is why we are able to negotiate a better price with a lot of contractors.
The next question is from the line of Saurabh from JPMorgan.
Sir, my first question is on Worli. What's the total debt in the asset? And what's the cost just to complete this now?
Saurabh, Saumil here. The total debt on this asset right now is at about INR 125 crores, so nothing very meaningful left. And our total cost to completion for this should come in at about close to INR 3,000 crores, excluding the hotel.
Yes. So you already spent INR 2,300 crores on this, so total with respect to...
Yes, but that is including the hotel.
Okay. So just on the economics you will first recover, so what will be the hotel cost?
So the hotel cost should clock in at about anywhere about INR 800-odd crores or upwards. But yes, in terms of the cash flow, the first thing that comes out is the cost of construction.
Which is INR 2,200 crores?
Yes. And then comes out the allocable share of profits to the partners.
And that INR 350 crore deposit also, which...
Yes, correct.
So basically, INR 2,600 crores recovery will be before you start the...
In the distribution amongst the partners, yes.
And this INR 2,600 crores takes precedence before the profit distribution, right?
Yes, yes, yes.
Okay. And second is just on this -- I mean, so you got -- I mean, Exquisite has got OC now. So post-OC now to GST is not applicable, would you expect an acceleration in presales in Exquisite? And as a follow-up question, Worli, if I'm not wrong, you have said March '19 as a completion.
Yes.
Can we then think that March '19 onwards is when it like starts selling this, and currently, would still be INR 6 crores on that, approximately INR 5 crores to INR 6 crores on that project?
Okay. So as far as GST goes, as a company, what we've done is now we have come up with a MRP kind of price. So whatever you buy is inclusive of GST, irrespective of whether the building is pre-completion or post-completion. For the buyer, it does not make any difference. Like if you were to buy Esquire, we were charging, I'm just saying hypothetically, 16,500, you'll continue to pay 16,500 today. Our logic here is that if you were buying pre-OC, I was getting input credit. Post-OC, I don't get any input credit. So for me, whether I sell it before or after, it does not make any difference. And we are, in fact, telling all developers to move to this. So at least, I mean, we are not disincentivizing the customer or slash-incentivizing the customer to buy post-OC or pre-OC, whichever the case may be. So this is what we are, in fact, suggesting everyone should do. And we have been very successful in doing this. So we have one ticket price. Whether you buy 1 day before OC or whether you buy 1 day after OC, it doesn't make any sense -- I mean, any difference.
But in project like Worli, I mean, the input credit will not be right significant given the sale price?
Yes. But I mean, I said that -- so for us, it's that much more important to ensure that the customer comes in first. And that's why we have like we have one ticket price, irrespective whether you come before OC or after OC, you will pay the same price. Now the breakup can be agreement value and GST, or the breakup can be all agreement value, but what you write out of your book is the entire amount.
Okay. So effectively, the net realization should -- to us should improve, hopefully?
Correct, correct. But there is no margin impact on account of that, so our margins remain the same.
Neither loss nor gain.
Okay, fair point. And second is like if I just look at Exquisite, Esquire and, let's call it, this mall , like your near-completion projects, you've closed -- have closed about 20 -- I mean, depending on how you calculate it, almost about INR 2,200 crores of near-finished or almost-finished inventory lying on your book. And you obviously now have some debt, thanks to the Thane acquisition. So I mean, just at the cost of capital thing, is there anything you can do to accelerate these sales?
You know we are doing everything to accelerate the sales. Really, our sales are -- interested in doing that, given a scenario where we are not increasing price. But we cannot reduce price because, for the past 4 years, we've done sales. And unlike the stock market, the flat purchasers are very sensitive, that he bought it at X, and later on, somebody goes in and sells it cheaper, it's not taken well. So we don't want to start that trend. And I see like -- with the way things are now, like I said, that there is clearly a constraint in supply due to that high court order and RERA coming in and all that. I see that there will be -- I think going forward, there'll be some push to the sales as well, and these customers will get concentrated to fewer developers.
The next question is from the line of Abhishek Anand from JM Financial.
Sir, as you were mentioning the goods supply constraint, so how is the company looking at the business development side? We understand Thane, of course, is a work in progress, but are we looking at maybe some other geographies; or within Mumbai, how active we are? And also tying in with the increase in debt we have had over the last 2, 3 quarters, what is the comfortable position that we will be happy to leverage up to in order to go ahead with the business development part?
So we very actively continue to look at new land parcels. We have multiple options going there. There are a lot of these private equity guys who want to partner us. And so that's one route. And like I said, that we've never been shy of taking debt, but we have to be prudent about it. We are concerned about the cost at which we borrow. We also want to ensure that we had time with the repayment. Now somebody just said that we have INR 2,000 crores, INR 2,200 crores worth ready inventory. And let's say, at -- with whatever Phase 1 puts a little -- at least gets sold in the next year or 2 years or, at best, 3 years, so we are clearly looking at cash flows getting generated out of these projects which are complete without having to put in it a single rupee. So one can easily look at leveraging that. We also have our rental incomes one can discount that receivable and go and buy. So there's a lot of leg left in the company as far as buying new assets are concerned. We have really no stress on that. And we are very proactive. We prefer Mumbai market first. And like I said, that we are happy to go outside, but we want to do a JV, and we don't want to block a lot of our capital when we do business outside Mumbai.
And in terms of trend, Vikas, have you seen valuations improving, especially post-RERA, GST? Or it's pretty much the same as what we have seen over the last 2 years?
No. So certainly, I would say that the so-called worst effect of RERA and demonetization is gone. We obviously believe that it was a huge positive, which had a negative impact for a while. It was a surgery needed. And the entire post-surgery recovery for the economy is now done. With the budget tomorrow, I'm sure that things will only look up, and we'll continue to do -- I mean, as an economy, do very well. And within that economy, we'll also do well.
So then since you are mentioning budget, we have a fair bit of completed inventory, and Three Sixty West is also likely to be completed over the next 1.5 years. The deemed rental clause, how will it impact our company? Will it be a material impact? How should we look at it?
Not really. So we have timed our OC in such a way that it won't really have an effect on that. Like even in Esquire, we have obtained OC for apartments that are complete and rather sold. So the rest of it, we will obviously want to take it to the next financial year.
And time will tell.
And time will tell that we get, technically, 23 months to sell also.
The next question is from the line of Abhinav Sinha from CLSA.
Just going back a bit to the pricing question. So we will now have Esquire also completed next to Exquisite, but I think a pricing gap is still pretty much there, right? So any thoughts on closing that out?
We will be doing that. It's been on top of our mind. We'll actually be pushing Esquire to Exquisite pricing.
Okay. So that is, say, effective 1st April or something?
No. Like again, it's just a matter of time. We are now actually on the finishing stage. And obviously, like this is a newer project being completed 2 years later, the feel, finish, fit of this building will obviously be better. I mean, it has to be and all that. All buildings have their own charm. The charm with Exquisite has now -- I mean, from our own inventories, say, 90-plus percent sold and everyone living there. So people -- some people want to -- whoever has an apartment in that building want to continue to stay in that building and stuff like that. So they -- whatever little inventory we have, that will get sold, but we will shortly be bringing this price up. And it could be effective 1st April, it could be earlier, but certainly, that's on the cards, for sure.
Okay. Lately, I've noticed the mall was doing much better this quarter. So it's just a festive jump, or you now have like a reset to INR 170 as baselines here?
No. In fact, the real reset is yet to come. We've been able to renegotiate -- or rather not renegotiate, all the earlier terms that we had with, let's say, PVR and Lifestyle and all these big anchors are getting over...
In April.
In April. So coming April, you'll see a much bigger jump because we've been able to renegotiate at today's market price, which is much higher than what we had given them.
And today's -- for a plain or in nice words, is it like 200 or something like that?
Like for the plain vanilla, we go as high as INR 400 on a leasable area; INR 600 on carpet.
Okay, okay. So I think when should we really get to see a very good number.
[indiscernable]
Yes. Saumil, I just had a clarification on that Worli construction cost. So INR 3,000 crores, you said this includes the hotel? Or the total is...
Excludes.
INR 3,000 crores plus INR 800 crores?
Excludes the hotel.
So INR 3,000 crores plus INR 800 crores is the total?
Yes.
The next question is from the line of Kunal Lakhan from Axis Capital.
Quickly on Mulund, is the traction there slow because of our product being a little on the expensive side? Because typically, Mulund is like a 1.5 to 2 CR market, and our product is closer to about INR 3 crores. Also, if you can throw some light in terms of how is the competition doing over there.
So you're right that Mulund is at INR 2 crores. Most of the -- actually, everyone is targeting only that segment. And we are -- in fact, we have 2 products -- that we have 3 products. One of them is like the INR 2.40 crores and all that. Then we have something which is more closer to INR 3 crores, which is like a bulk of our supply. And then we have something which is INR 4 crores and INR 5 crores. And you will be surprised that the INR 2.40 crores is not selling as much as the INR 3 crores and the INR 4 crores that is selling. So in a way, it's always nicer to not be a part of the herd and do the same thing that others are doing. People know that we do a better job and we get a premium. And whoever wants a better quality product is willing to pay us and come to us.
But anything on the strategic front that we are thinking that could help us revive the momentum here?
We are really putting our thoughts together on how to do it. One of the challenges that we are not able to mitigate is that Mulund is a cash market, where 90% of the developers are selling in cash. We obviously don't and cannot do it, and that's genuinely an issue for us. And there are people who come and say, take cash, which we can't. And so that's the only challenge I feel in Mulund. In fact, even now, I don't see that there are no customers also. But luckily, now we see these NBFCs are willing to fund people who cannot show their capability to pay and are willing to fund these guys at a higher margin and all that and with a secured developer. So we are hopeful that people who don't have incoming check and all that can go to these NBFCs and still buy our house, which they very much want to but they don't have the check or whatever way we don't. So that has been a challenge. I mean, but that's a market challenge, which we genuinely don't have an answer for.
Okay. Secondly, on the Mumbai new DP front, any update on that side, like when is it expected?
So Mumbai's new DP is pretty much out, if I may say so, because all the rules that they were to bring in, whether it was the FSI on good weight or many other things, they've just gone about -- got that because there was a delay and there were mistakes and things like that. So the new DP, from what I know -- little that I know, is going to be pretty much similar to the old DP. There are a few clarifications. The government is internally committed to bring that out within the first 2 quarters of the calendar year. So before June, they want to come out with it. It could be even before March. But again, these are moving targets, and there are many things that are fluid. So one can guarantee they are lapping, but there's nothing much in the DP for it to happen now.
Right. Another question on the same line is we keep hearing about the CRZ norms being relaxed, the center being very keen to do that. Is there any truth to it? And what kind of time lines are we looking at if it's true?
Again, the -- like we, Mumbai developers, have now learned how to live within the CRZ regime, and there's nothing that is holding us as such. So even if it happens, it's a nonevent now.
Okay. But the talks are still on, right?
It's been on forever. But again, like I said, that one doesn't know what will come out with and what will finally happen. But like I said there, it doesn't make a difference. There's nothing that is holding any development; one-off building here and there, but that's about it.
And the next question is from the line of Atul Tiwari from Citigroup.
Sir, thanks, my question has been answered.
Mr. Tiwari, you have questions?
Yes, sir, my question has been answered.
Okay, thank you.
Next question is from the line of Parikshit Kandpal from HDFC Securities.
I have a question. On 8th of January, there was a notification from the UDD Maharashtra that increase of FSI -- proposal for increasing FSI for the island city to 1.83; and suburbs, 1.5. So in terms of our own salable area, are we maxed out already in terms of FSI? Or are there still scope if this thing is implemented in terms of further increasing the salable area?
I don't know. I think it was just in the form of clarification that the FSI for city and suburb is 2.5. And what they really did was they just gave a clarification that like there's some portion of FSI that even bring by the TDR. The rest of the portion you need to buy from the government. We have the same rule in the suburbs, it is 2.5; and the same rule in the city, which is 2.5. So there is really no change. Even I thought that it looked like there's additional FSI being made available in the city, but that's not true.
Okay. And just coming to the -- so you had raised your -- highlighted your concerns about oversupply in the Mulund market and working around the strategy to prop up sales. So -- but going a little ahead, and close proximity is Thane market, so what's your view about the Thane market and, call it, aligns with your probably near future launch there? So how do you look at it?
Well, Thane is a good market. I mean, we have a fantastic location, so I would say that probably this is, by far, the best location that any developer would have asked for. So we are banking on a good brand name, a good track record, location. And so money is not really worried. And we are -- we're like internally going to a global competition, going to come up with a great design, and then we are very sure that this will be very well received and appreciated by the buyers.
Is this coming from the point that there's a big format downshift going on, so the close proximity, so...
No, no, not really. This is a very different market. That's a developing location. This is an already developed location that we are on. So it's in Thane, of course, but this is much better. I mean, this is our belief. It is very superior.
Does it mean the kind of challenges we are facing in Mulund may not...
No, no, no, Mulund is a micro market. We can't compare Mulund to Thane. So Thane is like Mumbai. And Mulund is a part of Mumbai, whereas our suburb of Thane -- Thane is very big. Our suburb of Thane is probably 5, 7 kilometers away from the 2 projects that you are talking about. And this is like as good as it can get in terms of a location in Thane.
Okay. And any thoughts about the affordable side, I mean, comment as...
Again, all sorts of thoughts are running in our mind. Just allow us some time, and we'll come back to you with a definitive plan on what we are doing.
No, no, because you have always focused on like premium segment but after...
No, no, we are mindful of the tax benefits that the government is giving and the push that the government wants us to get into affordable housing. So we are looking at -- we are strongly consistent.
But this will be in the existing land parcel or like a little bit out of Thane?
It could be in Thane. It could be in these places, existing land parcels. And again, here in Mumbai, the restricted area is only 30 square meters, whereas if you go to Thane, it's only 60 square meters. So when you do a 60-square-meter home, it's a decent 2-bedroom hall and all that, and that's where we would want to ideally start with.
Probably that could be a product strategy...
Correct, correct, correct.
We can look at for the Thane parcel.
Correct.
The next question is from the line of [ Neeraj M ] from Goldman Sachs.
I just have a question on the commercial market. The leasing in the commercial, I know you have been talking about negotiations. It has been reasonably not picked up, though you have sold -- you have leased out one parcel this quarter. Can you give some color on how you see that happening and how the negotiations are happening and what type of -- is there a price issue? Or is there a -- the quality of tenants which are not coming enough. So can you give some color on the market?
We've always wanted to sell Goregaon as a head-office location not as a back-office location, and we've been trying to do that. We've been successful. And I again see, because we were able to bring in, let's say, Teva Pharma here, or we were able to bring Samsung here, and we've got O&M here as their headquarters, this actually helps us with our mall business. It helps us with our resi also. And like the other day, somebody was giving a presentation to another company. And when we wanted to say that you should look at Goregaon, they were saying, "No, no, we want to look at BKC, and we want to look at Worli." They were able to give names of companies like Samsung and this, that and the other. If these companies can have headquarters here, which are like multibillion-dollar MNCs, why can't you look at it? And that kind of caught a lot of eyes, and they said that, "Yes, yes, in a way, it's a good idea because we have our own staff living in the suburbs and the deeper suburbs, so why should we not move our office here instead of the MD driving only 5 kilometers, and the rest of the office going 20. It could be the other way around, where everyone else travels only 5, and the MD has to travel for 20 kilometers." And so in fact, we are very close to closing a very nice deal. Hopefully, it should happen in the next week or 10 days. If it happens, you'll see -- you will hear it in the papers also. So once that happens, you'll know that this is a place where people want to be and all that.
Okay. But anything on the color on the industry -- overall Mumbai market in terms of there is option and if this picked up?
So there is no new supply. BKC cannot get any new supply; Worli, also one-off building here and there. But like I said, that there is the no new construction in the last 2 years. We all are going to see the effect of this in the next 1 or 2 years, when this is ready, already under construction, inventory will be done, you will have that lull for the last -- the next 1, 1.5, 2 years. Even if somebody were to speed up and try and catch up, there is a huge lull.
Thank you. Ladies and gentlemen, due to time constraint, this was the last question. I now hand over the conference back to the management for their closing comments. Over to you, sir.
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Thank you very much, sir. Ladies and gentlemen, with this we conclude today's conference call. Thank you for joining us, and you may now disconnect your lines.