Bengaluru key growth driver, share from other markets to rise in 2-3 years: JC Sharma, vice-chairman and MD, Sobha

Brushing aside concerns over the decline in Bengaluru’s share in sales during the July-September quarter, developer Sobha’s vice-chairman and managing director JC Sharma said, India’s IT capital is an important market for the company. However, in the next 2-3 years its share will come down to 50-55%, while that from other markets like Gurgaon, Kochi, Trivandrum, etc will grow to 40-45%. In an interview with Rishi Ranjan Kala, Sharma said other markets will continue to grow on a lower base, but at a faster pace. Excerpts:

Bengaluru’s share in overall sales fell from 74% in Q1 FY21 to 60% in Q2, which is among the lowest in around 6-7 years. Is the company focusing on other markets?

Our market leadership and penetration in Bengaluru has been deep across all price points. If you look at our future launches, again Bengaluruwill have the highest share. In land bank too Bengaluru is the key growth driver. For us, Bengaluru will continue to remain an important and critical market. We have not seen the growth momentum being lost. In July we had a week of lockdown, plus five Sundays. This impacted sales. In subsequent quarters we will see good recovery. At the same time, other markets in Kerala, Pune, Chennai and Gurgaon will continue to sustain. Volumes from markets other than Bengaluru should keep improving in the foreseeable future at a faster pace on a lower base, while Bengaluru will grow on a higher base, but at a lower pace. The idea is that in 2-3 years from now, Bengaluru should contribute, in my view about 50-55% and remaining will come from other markets.

Sobha’s average price realisations at Rs 7,737/ sq ft in Q2 FY21 is the highest in past five quarters. Will this momentum sustain?

The realisations on projects is not likely to come down. In Q2 FY21, we did well in Kochi and Gurgaon where realisations were a bit higher than other cities. Now when Bengaluru improves, the average realisation may slightly drop or rise, but the context is that overall price per sq ft is not going to come down. Our second half, H2 FY21, should be better than last fiscal’s second half.

Developers are reporting healthy sales during October and November. What has your experience been?
H2 FY21 will be better than last year’s second half based on our understanding of the traction in the market. I did roughly 1.9 million sq ft (MSF) of new space in volume terms in H2 FY20. So I should be doing at least that much or more in volume terms. In value terms, I am ahead of what I achieved last year. In H1 FY21, we did about 1.54 Million MSF. So comparing this to H2 FY21, it itself shows the confidence and that it is not pent up demand or a one-time thing.

How does your launch calendar look in H2 FY21?

It depends on multiple approvals. We launched a small project (Athena) in Bengaluru in Q2 FY21 and have applied for RERA approval for Sobha Windsor in Bengaluru. We have also got certain approvals for a large project on Hosur Road. Also approval process on other projects in Hosur, Chennai and Trichur is at an advanced stage. I think one project each in Bengaluru, Chennai and Trichur should get launched in Q3 FY21. We would have roughly 3 MSF of launches in Q3, and in Q4 again, one project in Bengaluru along with one or two projects here and there.

What change in consumer behaviour have you noticed since Covid-19 hit the country?

There are people who love real estate. For them plots is emerging as a good option. Then there are first time buyers which is why home loan disbursements have gone up significantly. Such people would like to own a home now as for them there are tax benefits, low interest rates and good savings. There is another small segment who feel the need to upgrade from their present accommodation. Some would keep their first home and buy a second one based on their savings, while others are looking at upgrading. A significant number are first-time buyers.
WFH concept makes one thing very clear that there will be a good number of full-time employees and equally or a larger number of part-time employees who will be having jobs, which will be driven from home as it saves rents, transports and other costs for both, the employee and the employer. My view is that in the coming decades in all big cities where new jobs are going to get created, the demand for even a far away suburban place with lesser infrastructure will be relatively better because of the cost arbitrage and Indians also think that way.

What is the response from NRI homebuyers?

They are getting better. Mostly NRIs are looking for apartments in all range and their affordability is relatively better.