Oberoi Realty NCR launch bookings and rising rentals support robust FY28 growth outlook

Investment View and Valuation

ICICI Direct Research retained its BUY recommendation on Oberoi Realty and revised its sum-of-the-parts-based target price to Rs 2,200, factoring in a higher run-rate of NCR project sales. The broker expects robust pre-sales growth over the next two years, supported principally by the successful maiden NCR luxury-project launch and a sizeable FY27-FY28E launch pipeline.

Q1FY27 Performance

Oberoi Realty reported muted Q1FY27 pre-sales of Rs 1,050 crore, down 36 per cent year-on-year and 37 per cent quarter-on-quarter. ICICI Direct attributed the decline to a high base from Elysian, Goregaon tower launches in the comparison periods and lower Three Sixty West sales.

Residential revenue was Rs 879.6 crore, rental revenue was Rs 331 crore and hospitality revenue was Rs 47 crore in Q1FY27.

NCR Launch Success and Project Pipeline

Management stated that phase 1 of Three Sixty North, Gurugram, comprising six towers and 832 units, received bids equivalent to 3.7 times the launch inventory. The project recorded bookings of Rs 8,109 crore for 13.52 lakh square feet of carpet area, at an average realisation of about Rs 35,000 per square foot, or about Rs 60,000 per square foot on RERA carpet area.

Management plans to launch phase 2 in the latter half of FY28E after completing the show apartment. The FY27 launch pipeline includes:

• Aurelius at Peddar Road.
• One tower each at Jardin on Pokhran Road and Forestville at Kolshet.
• Adarsh Nagar in Worli.
• Alibaug.
• Ralliwolf, Mulund, in Q4FY27E.

Following the success of the NCR launch, management has also added NCR and Noida to its business-development focus.

Pre-sales and Rental Growth Outlook

ICICI Direct estimates Oberoi Realty's pre-sales to rise at more than 70 per cent CAGR over FY26-FY28E, assuming the full phase 2 launch of Three Sixty North in FY28E. The broker also expects rental income from retail and office assets to grow at about 17 per cent CAGR over FY26-FY29E.

Lease rentals increased about 19 per cent year-on-year to Rs 364 crore in Q1FY27. Occupancy across key assets remained strong, while Sky City Mall recorded an improvement from the previous quarter.

Management expects Sky City Mall to approach 100 per cent occupancy by Q4FY27E. It plans to open Marriott Hotel, Sky City, in H1FY28 and expects Ritz Carlton, Worli, to be ready by Q4FY27E.

Management Commentary and Margin Outlook

Management indicated that sales velocity at Three Sixty West was lower in Q1FY27 because of resale activity and sales by the landowner. With the landowner inventory exhausted, management expects sales to return to a normal run-rate.

Management stated that its residential-project portfolio has margins ranging from 43 per cent to 65 per cent, with Three Sixty West at the upper end. It also indicated that prior price increases should protect built-in margins from higher costs related to the West Asia conflict.

ICICI Direct Financial Estimates

Key Risks

• An adverse outcome from the Punjab and Haryana High Court restraining order on fresh allotments at the NCR project.
• Weaker MMR pre-sales.
• Delays in project launches or execution.
• Higher interest rates.
• Increased raw-material prices.