Bollywood star launches luxury Asian property investment
Vivek Anand Oberoi, Bollywood actor and chair of Oberoi Family Office, has committed seed capital of $40 million, combining his own money with that raised from several other family offices in India, to a new $160 million resort development in India.
“We are now going to raise capital institutionally,” he said, referring to a range of real estate developers, banks and investment funds he is approaching within India and abroad as additional co-investment partners.
The wellness hotel and resort located in the state of Uttrakhand, on the banks of the Ganges, India’s holy river, will be managed by Anantara, a luxury hotel and resort business, with more than 550 hotels around the world.
Previously, Oberoi has concentrated his property allocation on residential property in India.
His first investment was in 2011, and the last development was sold in 2017.
In that period, he developed 22,000 homes across eight gated communities in two states in India, raising $300 million of finance across debt and equity from other family offices, developers and banks (Oberoi declined to reveal how much his office provided directly).
The average annualised returns from the projects were between 18% and 24%, Oberoi estimates.
The wellness resort poses new challenges compared with his earlier experience in residential property, related to the longer time horizon for investment in a sector where development has long lead times and running costs are high, he said.
“When I am going to raise capital institutionally, it needs to be patient capital. This is a seven-year investment programme for the resort,” he said, adding that with high operational expenses, capital expenditure would break-even between the fifth and sixth year of operations.
CELEBRITY APPEAL
Oberoi employs his celebrity -- a key advantage when it comes to investing -- both in this sector and elsewhere in the range of early-stage venture investments he pursues via his family office.
For co-investors, Oberoi’s celebrity provides two types of appeal, he notes. On the one hand, it offers significant marketing benefits.
“In the business-to-consumer market, [co-investors] know they are already dealing with a brand that has huge popular appeal,” he says. “When the media know I am involved with a project, they grab it.”
On the other hand, co-investors enjoy the association with Oberoi, both for the bragging rights this provides among friends and family, and for the associated business connections that it can create - especially given Oberoi's growing reputation as a successful investor.
“Those two benefits are not mutually exclusive, I don’t think. If you go into your community – business or otherwise – and say ‘guess who my partner is’ people take notice of you,” he said
Oberoi says his approach to property investment has been to focus on two extremes of the market when it comes to homeowners and hospitality customers. “I am only the top and bottom of the spectrum – the middle market is the first to collapse when there’s a slowdown,” he said.
“The rich can always afford luxurious homes, and post-COVID-19, the growth in luxury market was huge. At the bottom, the market is driven by necessity, the need for customers to move out of dilapidated rental buildings and the dream of owning a home themselves,” he added.
Entering the residential market in 2011, he chose an original development model, introducing an improved living product in a sector where developers had traditionally concentrated on price.
"This was a highly innovative approach as the segment was very underserved specific to low-income group housing," he said.
MASS HOUSING
“Everyone focussed on making homes as cheap as possible to buy but I shaved off a few square feet of space in homes and increased the price in return for great amenities - a creche or space for communal activities, or a swimming pool. We made this financially feasible with economies of scale and reducing costs by making better layouts.” he said.
“I would talk to taxi drivers who would tell me about dropping off rich families to sports or leisure clubs. They aspired for the same experiences and quality of life for their families. I realised that they didn’t mind working a few more hours to afford a better lifestyle with communal facilities like this [in their buildings]. The rickshaw drivers, the vegetable stall guys, I knew they were prepared to pay a bit more for this.
With such developments relatively rare, and because of his large public profile, there were plenty of critics.
“Bankers and people from the financial sector laughed at me: you’ll never get them to pay more for a gated community, they said – you’re an actor, go back to doing that. But we had trend-setting sales and bookings on every launch.” he said
Following 2017, the number of developers increased and prices fell to levels that were unsustainable, Oberoi added.
“It was too hard to make a profit as many developers were only speculating and undercutting the market with no real ability or intent to deliver. That’s why most of those companies have gone out of business.”
OFFICE DEVELOPMENT
Oberoi's family office is also developing a commercial project in Bangalore that will provide 1.1 million sq ft of AAA-grade office space. It is a $170 million project with some marquee partners already on board.
"The project has commenced this year and we hope to achieve completion by 2027," he said, declining to reveal how much of the finance had been raised or what portion was supplied by his office.
Oberoi said that, when he selects partners, he looks for specialist real estate developers or reputed contractors with prior experience in the segment he is focused on, who are prepared to put up some of their own money into the project. “I want a partner who has skin in the game,” he said.