Interview with DNA of J C Sharma, Managing Director - Sobha Developers Ltd

Reproduced from - http://www.dnaindia.com/report.asp?newsid=1241040

The slowdown in the real estate sector has created a buyers' market. With prices getting more realistic, this is the best time to go shopping for a property, says JC Sharma, managing director of Sobha Developers.

In a chat with DNA Sharma spoke about the industry's prospects, the company's foray into affordable housing and its plans to put some land parcels on sale. Excerpts:

When will the realty sector hit the road to recovery?
I feel the worst is behind us. The market is highly under-penetrated and still favours customers. Developers who reduced rates have seen good sales.There won't be any further erosion in prices. We are also focusing on below-the-line marketing and promotion.


Do you expect property prices to nosedive further?
Going by the current land and construction costs, we have reached a saturation point when it comes to reductions. There can't be further cuts by any measure. The prices have stabilised and the interest rates are back to 2005-2006 levels. Demand will increase with the rise in consumers' confidence levels.


What is Sobha's current inventory?
We have 23 projects in Bangalore, Pune, Coimbatore and Trichur, which will be completed by end of 2010-2011.


Would you raise money to fund your existing projects?
We have already invested Rs 1,000 crore in existing projects.We have credit lines available from banks and customer deposits, which is helping us. I won't say that we are in a comfortable position now, but we are definitely much more relaxed as compared to what we were 3-4 months back. We are looking to raise money for under-funded or non-funded projects and not for land acquisitions. However, I won't be able to tell you how much money will be raised. We are also in talks with PEs and VCs for funding current and future projects.


Would you complete your projetcs on schedule?
There have been delays in some of the projects that are now on the verge of completion. Projects which are 6 months to a year-old will be completed on time.


Do you plan to sell your land bank?
We have 3,000 acres of land and yes, we are looking to sell part of the land parcels. These measures are to see us through the difficult times and support our business, so that the perception of market and customer comfort get a boost.


Are you looking to restructure debt?
We have requested our banks and financial institutions to look at Sobha's revised cash flow. In principle, we are getting a positive response and the process should be completed by mid-April.


How do you plan to hold on to your niche in the market?
For us, both sales and margins are important. Slowdown made us realise we should not limit our focus to one segment. It taught us a positive lesson and will help us expand our market share.We are looking at a couple of new launches in Bangalore in the residential space. We are de-focusing (lowering focus) on commercial projects and would like to wait for the market to pick up. We are waiting for our core business to pick up -- residential and contractual properties. We plan to launch our affordable housing project in Bangalore by 2010 followed by Coimbatore.