NRIs arrival to Kerala in December will increase our Volumes: JC Sharma, Sobha Ltd.

JC Sharma, Vice Chairman & Managing Director, Sobha Ltd., in an interview with Swati Khandelwal, Zee Business, talks about the reason for decline in realisations, expansion plans beyond Bangalore and liquidity concerns among others. Edited Excerpts: 
 
Q: Volumes have improved but the realisations have gone down in the quarter. Explain the reason for this variation? Is an effect of the affordable projects being undertaken by Sobha?
A: Yes, there is an improvement in volumes and 5 per cent of our total volume comes from the products that cost around Rs 1 crore or less than it. However, they have a contribution of 25 per cent in the volume. Earlier, the affordable projects (with cost below Rs 1 crore) had a contribution of 10-15 per cent. Our average realisations have gone down just because we are involved in 2BHK projects. But this fall didn’t have any impact on our EBITDA margins or PBT or PAT. In fact, it will be contributing to our growth without touching our margins.
 
Q: Do you think that you will have more contribution to affordable housing, if yes, then what will be its scope? What will be your product mix of luxury and affordable for FY 2019-20?
A: When it comes to product mix, then our affordable segment, which costs below Rs 1 crore, will have a contribution of only 35-40 per cent of the total volume. This is a reason that the average realisation will stand above 6000 annually.
 
One must not think that realisations will be reduced by decreasing the prices of our affordable and luxury products. The product mix has helped us in doing so and its effects will be visible in coming quarters. In fact, this practice will help us in increasing our volume in a sustained way in tuff situations.
 
Q: Did Kerala floods had any impact on your business including pricing, if yes, then to what level and is it behind you and will not be visible in future?
A: Prices is steady and intact. In fact, volumes will start going up from December 2018, as it is a season when NRIs start returning to Kerala. Impact of their return can be seen mainly in the next quarter (January-March quarter) and for one month in the ongoing quarter. However, there will be volume growth in the ongoing will go up when compared to last quarter. Kerala market is an important market for us and we know that floods had an impact on our business, but we will be able to perform well from the last financial year.
 
Q: How many new projects will be launched by Sobha in H2FY19? Would you like to comment on your projects in Delhi NCR region, especially in Gurugram?
A: Three of our projects of Bangalore has been sent for RERA’s approval and we hope that they will be approved by end of this month. In fact, we are ready to launch these projects in the ongoing quarter itself, if they are approved by the RERA. In addition, we will be launching a project in Chennai and have launched a project in Cochin.
 
As far as Gurugram is concerned, our performance in the last quarter was the best performance of the last five years and we believe that we will be able to continue the performance. Besides, 4-5 new projects are in pipeline in Gurugram and Delhi and their launch will help us in increasing our market share in the region. Their launch will also help us to expand our footprints outside the Bangalore market, where it has gone down to 70 per cent and we will be able to reduce it to 60 per cent. I feel we will be able to grow in the Bangalore market even if we are reducing our footprints in the city.
 
Q: Pollution is a major concern in the Delhi-NCR region. Do you think that increasing pollution can have an impact on the sales of your project in the region?
A: I think that pollution will not have any materialistic impact on it. In fact, we have recognized the problems and that is why we develop a building that adheres to the green building norms.
 
Besides, everyone is aware of the ongoing environment-related issues in NCR region and I hope that the government and citizens of the city will come out with a solution to the problem in next few quarters or years.
 
Q: There is a liquidity crunch in the market and did it had any impact on loans at buyer or construction or builder level? If yes, then let me know about the kind of impact?
A: Thanks for asking the question. To be true, we were not able to see such a situation in the market in past one and a half months. However, the public sector banks (PSBs) has gone aggressive and are offering higher value loans at fewer rates and we have tied up with them on certain products. When it comes to NBFC than you can have a look at HDFC, LIC Housing, PNB Housing who are offering loans to the developers as well as the customers. 

There is no slow down. But there are few NBFCs with asset mismatch and I feel that the news is exaggerated, as they are only delaying their payments to us. I can ensure you that neither our customers nor we, Sobha Ltd, is facing any problems in getting loans or construction finances from the banks in past 4-5 weeks and the conditions will improve in time to come. 
 
Undoubtedly, the rate of interest is being tightened and we are seeing that  our rate of interest, which stood at 9.3 per cent in the last quarter has reached the lowest point and there will be an increase in it in the ongoing quarter and it may reach up to 9.5 per cent and we will be able to manage our debt by end of the year.