Customers Will Continue to Show Strong Positive Signals

In his two decades of association with the leading listed real estate company, SOBHA Limited, J C Sharma, has ably steered this company to become one of the most respected and trusted real estate brands. Under his dynamic leadership, last year SOBHA achieved the milestone of completing 112.30 Mn sf of real estate and it continues to go from strength to strength. The company has a USP of being an established player with backward integration model in place. And SOBHA’s expertise in manufacturing home products including interiors and furniture, has made it reap big dividends in the fast-emerging furnished homes segment.

In this exclusive interview with Torbit Realty, J C Sharma, Vice Chairman and Managing Director, SOBHA Limited, talks about company’s core philosophy, growth strategy, business plans and future prospects. Excerpts.  Vinod Behl 

Despite Covid setback, the real estate sector has shown great resilience and recovery last year. How did Sobha cope with these challenging times and what kind of performance the group expects in FY22?

Yes, residential real estate has been showing great resilience since last year’s lockdown. Stable factors such as working from home, low interest rates, increased affordability, and other financial rebates have helped the stable developers perform better. Home buyers and residential real estate players understand the new normal well and are better prepared to handle the emerging opportunities. We, at SOBHA, understood the need of the hour and requirements of our customers and worked around their needs accordingly. There was greater keenness among home buyers to own residential asset  during the pandemic. The third quarter of FY22 marked a significant increase of 51% in sales registration, which includes all major cities. This further received a booster shot with new launches going up by 58% on a year-on-year basis, as per Knight Frank.

We adopted technology and facilitated virtual site visits. In addition, we cut costs and managed our cash flows better. This helped us immensely. Considering our performance, we recorded our best quarter results when we declared our score for the quarter ending September 2021. Our sales volume increased by 51% as compared to the previous year. Adding to the momentum was an increase of 49% and 61% in sale value and the SOBHA share of sale value, respectively, compared to Q2’21. We are optimistic that customers will continue to show strong positive signals well into 2022, and established developers with a proven track record of timely delivery, will benefit the most.

Overleveraging has been the bane of real estate in the past. Learning from this, many companies are now focusing on maintaining good financial health with strategies like asset light and zero debt model. What is Sobha’s financial strategy and how sound is the group’s financial position?

At SOBHA, we focus on the value of sustainable growth with incredible great attention given to the quality of the product, transparency, and timely delivery. On the other hand, we made it certain to improve the efficiency of cash flow management and customer centricity and accordingly, we pivoted to strengthen the overall process. The entire process helped us to streamline our various business operations. Our consistent and constant attention to keeping the customer at the centre of the business has enabled significant transparency in transactions, timely delivery, and unmatched quality that people have come to associate SOBHA with. This has earned us great dividends during these testing times.

During pre-covid times, Sobha entered into the new business line of furniture and home furnishings. Post- covid, there is an increasing trend/demand for furnished homes. How do you see your business growing in this segment?

SOBHA is the only known established real estate player that has a backward integration model in place. Our expertise in manufacturing products including concrete products, metal & glazing solutions, interiors, and mattress dates back to the early 2000s. We, as a brand, rank high on the customer preference index for our residential products. Giving our customers a home that is truly international and interior solutions that further enhance their lifestyle, makes it a better deal. With the pandemic inducing demand for furnished homes, it does give us an entry into the world of furnished home segment. Much before the launch of this new business line, many of our homes across the country featured furniture that were manufactured at our facility. However, with changing market dynamics as more and more people are opting for furnished homes, it has opened a new window of opportunity. We are eager to explore this growing segment by streamlining our business operation to meet existing and future demand.

Sobha’s main focus has been on residential realty with relatively smaller exposure to commercial real estate. What are your current plans on the commercial real estate front, particularly with regard to newer asset classes of coworking and logistics and warehousing?

Our commercial portfolio at present comprises 1 SOBHA in Bangalore and SOBHA City Mall in Thrissur, both of which are landmark commercial developments that represent the brand’s interest to pursue more such ventures in the near future. We are at present focused on residential segment alone barring few exceptions in commercial segment. Of course, we do lot of great work under contractual business.

As part of your pan-India plans, what has been your experience in the NCR market and what are your plans to increase your footprint in this promising market? What are your overall business plans for FY 23?

Our two projects in the NCR belt i.e., SOBHA City, a premium apartments complex and SOBHA International City, an exclusive villa township have met with overwhelming response from prospective buyers. Looking into our Q2 result ending September 2021, Gurugram was among the three cities that showed good performance during the said quarter. We intend to bring more such world class residential structures to this part of the country as people here also appreciate premium offerings from a brand that has been delivering definitive products with timely deliveries. In the near future, SOBHA plans to expand its horizon by launching more residential projects across the country at different ticket sizes. With WFH becoming more of a reality and the IT sector gaining momentum coupled with low interest rates, affordability factor among others, the demand for premium homes will continue to grow.

Big branded listed companies have dominated the residential sales in 2021. Considering that compared to smaller real estate companies, they have easier access to cheaper funding and have much better execution capability, do you foresee their monopoly in the residential segment?

In Tier-1 cities, established realty players will continue to keep the momentum going well into 2022-23. The last two quarters have proven that these realtors registered their best sales figures yet. It hasn’t happened overnight, SOBHA for that matter has built this trust and belief among the customers over the past 25 years by delivering best in class products and services within the given deadline, which is reaping results in challenging times like these. It applies to certain other players out there who have been operating in the market for a long time now. We already have started to make inroads into Tier-2 markets and so have others. But here as well as in Tier-3 markets, there are lesser-known developers or small real estate companies so to speak, who also have substantial presence.

While big listed companies have easier access to funds and are first in line on customers list to buy a property, it will take a while for these players to replicate this success in aforementioned markets. Moreover, the market size is large enough to accommodate well intentioned players of all types.

Going forward, how do you see the prospects and challenges for real estate and what is your prescription to ensure speedy revival and growth of the sector?

While certain challenges continue to plague the sector, yet there are certain definitive driving factors. The real estate sector is the second highest employment generator in the country and contributes nearly 6-7% to the economy, and is predicted to reach 13% by 2025, provided all the announced reform measures are executed well. The sector continues to show grit and resilience against pandemic which no longer adversely affects its growth prospects as seen in the last two quarters. As customers embrace residential assets, particularly larger homes and leading developers deliver desired units on time, it’s all contributing to the growth story. Further, factors like work from home culture, low interest rates, easy liquidity are the growth boosters, Customers have come to realise the value of owning a house and investing in an asset that guarantees handsome returns in the long run. However, product innovation, tech-led interface between developers and buyers, and timely delivery will define the long-term success of the sector.