Sobha LLC, the international arm of listed realty firm Sobha Group, has two projects going in Dubai — Sobha Hartland and Meydan Sobha, a joint venture with the Meydan Group. PNC Menon, the 67-year-old founder of Sobha LLC and Chairman Emeritus of the Sobha Group, told BusinessLine in an interview that he is focused on taking the Sobha brand, named after his wife, to the London market.
The real estate market seems to be in doldrums. How do you view it?
Real estate as a business is very cyclical in nature. And we try to map the cycle. We try to assume that the cycle in India is for five years. The positive cycle is for three years and the negative for two years. We carefully watch the cycle and try to find out what exactly is the cycle currently. The most important thing in the business is financial engineering. You have to be very stable when you go through the negative cycle.
In India, we have corrected, and are well engineered. Money is available for us all the time from the banks. We are one of the safest in the industry, along with Oberoi Realty and Godrej (Properties) and debt has not affected us as we are not over-leveraged. Our debt is secured debt. We have successfully been able to make profits in India even during negative times.
Does financial engineering mean you stop new launches?
No, it means pure fiscal prudence. Your debts should not be more than half the equity. So suppose your networth is X, you can go up to half of X. Internationally also, we are managing things this way.
Market behaviour in the real estate business is unpredictable. One thing we have understood is that real estate is one of the safest businesses under the sun so long as you know the negative side of the business. You have to understand the financial side of the business, geographical risks and the cyclic nature.
Where are we headed in terms of your global plans?
We are looking at London and UAE in a big way. In London, we have already started business by setting up an office, in the Mayfair area, looking at six properties and getting a partner. We are looking at a $5-billion development in six years. A joint venture with a UK-based family — through an entity called Sobha Europe Ltd — will lead all our investments, following a launch in 2017. London’s residential real estate sector has continued to generate long-term growth and stability despite market volatility in other major cities worldwide.
Will the investments be from the listed entity in India?
There is no relation between the Indian business and the international business. We own the business 100 per in Dubai — it is a family owned entity.
Do you form a significant number of project-specific joint ventures?
In Dubai we have a joint venture with Meydaan for one project; Sobha Hartland is our own project.
While Sobha entered the Dubai market in 2005, our most recent efforts have been centred on Sobha Hartland and Mohammed Bin Rashid Al Maktoum City - District One, which was launched in 2013. We can comfortably do a $2-billion business in these two geographies (Dubai and London). We expect to hit the peak by 2020.
What percentage of your clientele in the UAE is Indian?
About 20 per cent. The balance is from 52 nationalities across the globe.
Do have any India-specific plan?
I cannot comment on the business as it is not handled by me. It is a listed entity. A general overview is that it is growing in the right direction. Since we are in the mid and luxury segment, our business is seeing traction. My son (Ravi Menon) has entered the mid-segment in India as it has a huge affordability component. We have presence in Kerala, Bengaluru, Chennai, Pune and Gurgaon.