Morgan Stanley Research is Overweight on Indiabulls Real estate

Indiabulls Real Estate
Limited
Worli Mill Land to Worli BLEU
– Wasting No Time
Quick Comment: IBREL soft-launched (limited
regulatory approvals) premium residential project (Worli
Bleu) in Mumbai’s prime location – Worli. It is
noteworthy that the company has launched this project
within three months of winning the auction of two
adjoining NTC mill land parcels (~ 11 acres at Rs20 bn).
The launch also comes within a few days of euphoric
response to nearby Lower Parel project (Sky Suite) with
‘Deferred Payment Scheme’, wherein IBREL sold
1.5msf (Rs35 bn plus sales value) within two weeks.
Bleu at Worli: This project is expected to have five
75-storey towers with the first tower of 188 apartments
being soft-launched. The ticket size varies from about
3,900 to 6,550 sf by saleable area (including roughly
40% carpet area, plus terrace and private lobby area).
Pre-launch BSP is about Rs18,000 psf (down payment)
to Rs27,000psf (construction-linked payment plan),
additional charges would include Preferential Location
Charge (PLC, Rs2,000psf for some units), car park
(Rs2mn per slot), average floor rise (Rs1,200psf) and
club charges (Rs2.5mn). Possession would be in 5-6
years. Pricing appears to be a 20-30% premium to
Lower Parel projects, but in line with premium Worli
projects; without adjusting for the floor efficiency.
Interpreting the move: 1) Most important, the project
outline implies 4-4.5 msf expected saleable area
(assuming balance four towers to be same as the first).
This is the best possible outcome (FSI ~ 4) for IBREL for
Worli land, which could drive land cost down to
Rs5,000-6,000 psf and gives clear upside visibility to
NAV. 2) IBREL is showing urgency to move inventory
and liquidate its NAV. Overall math – we estimate that
IBREL has sold 2msf plus from a total pipeline of 8 msf
(between Lower Parel and Worli). 3) With this launch,
supply stock (25msf delivery over 6 years – MSe)
continues to rise in South Central Mumbai, which should
restrict (to 15-20% decline) prices. Remain OW.