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J.C. Sharma, vice-chairman and MD of Sobha Ltd.
J.C. Sharma, vice-chairman and MD of Sobha Ltd.

‘Cash flow management is key factor in any crisis situation’

  • We have been focusing on cash flow and debt management at an operational level, says J.C. Sharma

India’s real estate sector, which has been undergoing a prolonged slowdown, hit a new crisis earlier this year due to the pandemic, leading to a temporary halt in project launches and sales. However, with demand believed to be returning slowly, larger, established developers are poised to gain the most. Home sales recovered to 29,520 units in the September quarter from 12,730 units in the June quarter, according to Anarock Property Consultants, but still far behind pre-covid sales. In an interview, J.C. Sharma, vice-chairman and managing director of Bengaluru-based Sobha Ltd, spoke about market share gains, liquidity concerns and impact of the pandemic. Edited excerpts:

How do you evaluate the impact of the pandemic on real estate?

I think there is still uncertainty in terms of outlook but the impact has reduced. For Sobha, enquiries are at par with pre-covid times and sales are almost at that level. We have been able to protect prices. We believe the September quarter will be better than the April-June period. Salaried employees and large number of MSMEs have been impacted, so those who could save their jobs, and there are many, are the ones who are buying.

Interest rates are lower and people have been able to save in recent months. Being a Bengaluru-based developer, the IT sector is our key focus group in terms of customers, and it has been relatively less impacted compared to other sectors. Despite the uncertainty, we are confident that residential sales will recover fast.

Is liquidity crunch the topmost concern for developers today?

Cash flow management is a key factor in any crisis situation. If developers can manage their cashflows well for the next 4-6 quarters, and remain resilient, then they will be rewarded. At Sobha, we have been focusing on cash flow and debt management at an operational level, and have managed to not let debt rise in the June quarter.

Do you think a crisis like this could lead to further consolidation in the sector?

I do believe it will lead to consolidation and Sobha has gained market share. This is because demand is coming back for good developers. It’s quite clear that the market doesn’t believe in newer players and a corporatization will happen where real estate firms, backed by corporate groups, will have an advantage, and that has already happened in recent months. In the last few years, a lot of inefficient players have been weeded out and that will continue.

How are the various property markets performing?

In recent months, the markets outside Bengaluru have shown credible performance. The Kerala market has performed even better than last year; Pune, Delhi too.

In Kerala, non-resident Indians (NRIs) are playing a critical role as they believe they need to have a home in the state. High-priced, niche products are selling well there. Even in Gurugram, where our villa project was moderately selling pre-covid, has gained traction recently. Bengaluru is our mainstay and we are quite confident of it.

Bengaluru constitutes around 70% of our business now but we think that other cities will slowly gain more share in that pie. We believe the proportion of NRI sales will also rise.

What are homebuyers looking for?

The 1-2 crore category of homes comprises the largest share for us and those who have been able to retain their jobs are looking for bigger homes.

We expect the sub- 1 crore price category of home sales to also pick up.

Sobha is also looking to do plotted development projects in a few cities. It’s a good investment option, with less carrying cost and suits the Indian temperament.

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