Economic revival and receding Inflation will boost Housing demand
J C Sharma, VC & MD, Sobha Ltd
Interviewer : Sandeep Pattnaik
J C Sharma, VC & MD, Sobha Ltd

The demand for real estate properties will increase in future, given the slew of initiatives in the offing by the ruling NDA Govt, says Mr. J.C. Sharma, Vice Chairman & Managing Director, Sobha Limited. The industry will break away from the vicious cyclical routine and tread a sustained growth path, as the increased interest rates and economic slowdown that had previously dissuaded customers from buying homes is now showing a downward trend, Sharma revealed during a free-wheeling interview with Sandeep Pattnaik of Gharabaricom. According to him, during a span of 20 years, Sobha Developers have set industry benchmarks in quality construction that are appreciated by both customers and its peer groups. Excerpts.


1.        Sobha has completed 20 years of operations. Can you please share some of the achievements during the last two decades of your journey?


A.We are currently in our 20th year of operations. Our founder, Mr. PNC Menon incorporated Sobha in 1995 with a vision to transform the way people perceive quality and today, we can confidently say that we have set industry benchmarks in quality construction that are appreciated by our customers and our peers. He has revolutionised the Indian real estate sector with his futuristic thinking and establishing Sobha as the only backward integrated real estate player in the country.


Our unique model of backward integration with 4 stat-of-the-art manufacturing facilities, in-house architects, design studio and MEP execution capabilities ensures that we are able to consistently deliver international quality products to our customers as per our delivery schedules. In these 2 decades, we have completed 98 real estate projects and 258 contractual projects covering about 68 million square feet. Over 15,000 Sobha homes are currently possessed by quality aspiring customers and with another 49 ongoing projects, this number will only increase.


Some of the landmark structures in the commercial space have been executed by Sobha. We are the preferred development partners of the IT giant, Infosys. We have been executing iconic structures for the world renowned IT giant over the last 15 years. We have 28 ongoing contractual projects measuring 8.62 million square feet under various stages of construction for various prestigious corporate clients. Our scalable business coupled with superior execution capabilities has worked immensely to our advantage.


Our success can be attributed to the immense trust and confidence our customers and external stakeholders have placed on us. Our employees have exhibited ‘Passion at Work’ at every stage, helping us deliver our projects on time and ensuring customer delight.


2.        Sir, you are quite optimistic on Realty sector growth in future. Which factors do you think might drive the sentiment in this space?


A.Real estate is a cyclical industry. While the last few quarters have been tough on us, with the economy showing clear signs of recovery and interest rates coming down, we are positive about growth in the real estate sector. RBI has indicated further rate cuts going forward and inflation is under control. The last Union Budget initiated some realty sector friendly initiatives such as developing 100 new smart cities and ‘Housing for all by 2022’, and we hope that the coming union budget will augment the same. There is immense scope for urbanisation from growing employment opportunities and the working class population gravitating towards the cities. Most of the working population does not own a home and the time is right for investing in residential and commercial properties. These are signs that good times are not far away. We expect the economic growth momentum to pave way for greater developments in infrastructure and realty sectors.  


3. Sobha has initiated the launch of ‘Sobha Aspirational Homes’ in Bengaluru.  How it is unique among other host of projects you are running?


A.In the last few years, the interest rates and increasing land costs have made home buying an expensive affair. The economic slowdown has led to stagnation in the income levels in the last few years, especially in the services sector. Now with signs indicating economic revival and with inflation under control, there will be an increase in the demand for homes.


In order to cater to this demand for high quality, value-for-money homes, we have launched ‘Sobha Aspirational Homes’ in Bangalore. It is one of the largest developments we are undertaking in a single location. With a total developable area of 10.26 million square feet and super built-up area of 7.63 million square feet, the project will comprise of approximately 7,000 units set on a total land area of 81 acres. Of these, over 6,000 units will be 1 and 2 BHK units ranging between 650 and 1,200 square feet. Recent trends have shown the growing demand for studio apartments and this project will help us cater to this discerning segment. This is the first time we are offering 1 BHK units to our quality conscious and aspiring customers. We are also using pre-cast technology to develop this project and this is the first time we are adopting this technology.


4.        Though Sobha has clocked highest ever top-line this time, (as per the result declared), but the y-o-y growth was a mere three percent (3%). Do you think the growth an impressive one, given the current industry scenario?


A.Despite our lower than expected sales volumes, our financial performance was satisfactory. The real estate industry as a whole was reeling under pressure in the last few months. Inflation and increasing interest costs have had a large impact on the real estate sector. The demand remains challenged throughout India barring Bangalore and the project launches were delayed due to bureaucratic hurdles and the input costs have been increasing. Despite this, we have been able to maintain steady margins and we have clocked the highest ever top-line. We have the strength to withstand the test of time and in the backdrop of favourable economic conditions, we are hopeful that our operational and financial performance will improve in the coming quarters.


5. What is Sobha’s investment commitment for FY 2015-16?


A.In the coming few quarters, we plan to launch approximately 15 million square feet of new projects in our existing real estate geographies. We have about 2,600 acres of land bank and we wish to capitalise the same. We have been generating adequate cash flows and have sufficient in-house resources to fund our development and expansion plans.


6.        How do you see the NDA Govt. policy conducive towards the growth of the realty sector in the Country?


A.This Government is the most dynamic and forward looking administration. There has been unwavering focus on development initiatives that is evident in the policies and reforms initiated. Having realised the potential of the Indian real estate industry, the last union budget contained a slew of realty and development friendly initiatives such as relaxed FDI norms, a framework to initiate REITs, development of 100 smart cities and ‘Housing for all by 2022’.


Besides the law and policy initiatives already around until last budget, we urge the Government to consider the following requests of the developer fraternity:


1.     Industry status for the real estate sector to ensure better availability of funds

2.     Availability of funds at low costs to aid in the development of properties

3.     An environment for getting faster approval of plans. Project delays have always been a cause of concern for the developers.

4.     Exemption in income tax for payment on home loans and tax benefits for boosting affordable housing.


Besides, the ‘Make in India’ initiative has not only opened larger development avenues; it will also create better employment opportunities. These factors will help the industry break away from the vicious cyclical routine and tread a sustained growth path. The increased interest rates and economic slowdown that had previously dissuaded customers from buying homes is now showing a downward trend. This will now present greater investment opportunities and with better availability of funds for buyers and developers, the demand for real estate properties will increase. 


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