There has been no reduction in sales or price: Sobha MD

K Giriprakash / Anil Urs Bengaluru | Updated on September 07, 2020

One of the leading developers in the southern markets, Sobha Ltd has had a relatively lesser impact due to the pandemic. In an interview with BusinessLine, Sobha Ltd Vice-Chairman and MD, JC Sharma, shares his perspective about the real estate sector and what the future holds for the company. Excerpts:

The pandemic has been extremely hard on the real estate sector. What are the challenges for the sector?

The residential sector constitutes 80 per cent of the total activities. These settlements can be categorised as below ₹1 crore, which constitute 40 per cent of the total number while the rest is above ₹1 crore. But two-thirds of the value come from those above ₹1 crore. The remaining 20 per cent is commercial space or the rental or retail space. While the impact has been uniform, the residential space has proved to be more resilient than the commercial space, because in the residential space you produce and you sell, whereas in other models you hold on to the immovable assets and you work on the yield rather than on the sale. Factors such as uncertainty about the income, fear of job losses and the economy not doing well will surely have an impact, but organised players should have a greater advantage in the market. The site visits are less but conversions are still happening, and while the billing cycle has been impacted, the sales are still better than most. We are well equipped to handle this crisis.

In terms of volume of sales, how did Sobha perform in the previous year and in the recent quarter?

Last quarter we did about 6,50,000 square feet of new sales. In the last financial year, we did about 4 million sq.ft., which is the company’s highest-ever sales. So, it is 1 million sq.ft. versus 6.5 lakh sq.ft. In value terms, we posted ₹2,880 crore of revenues during the last year. This quarter, we did about ₹488 crore. While April and May were not good for us because of the complete lockdown, things started looking up in June. We achieved almost normal sales and normal enquiries in the month of June.

Has the price remained constant; did developers like you take a cut?

There has been no reduction in sales or price at all. It is the same as it was before the pandemic. While the perception of the market is that the prices should come down, the kind of cost associated with completing a project does not allow developers the freedom or flexibility to bring it down.

Has RERA been beneficial to you during these times. The Central government had announced a series of measures to help the real estate sector. How far has the sector benefitted?

The fact is that even though we collected full payment and hundreds of apartments were ready for handover, customers were reluctant to take delivery of the apartments. So, this is something beyond the control of the customers. Our overheads have rather gone up. One factor that will certainly benefit developers like us is that the moratorium on loan repayment. It has helped our cash flow. However, it will help those who have suffered temporary mismatch, but for the others who are not that fortunate, it will be quite difficult because once the moratorium is lifted, how will they be able to pay?

Has there been any issue with the procurement of raw material? How much has it had an impact on the end-price?

As and when the actual construction starts and economy starts reviving, then it will start hurting. Now, you are working from home so you don’t have to pay for petrol, but when work starts then the fares of Ola, Uber, bus, flights will go up. So, right now, the impact is relatively not much, but it will be there and it will hike up the cost. But I doubt there will be an indiscriminate increase in prices.

Published on September 07, 2020

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