Low interest rates will up realty demand: Sobha Developers

JC Sharma, vice-chairman & MD, Sobha Developers, says that once the interest rates start declining, there will be a positive impact on the real estate sector.

Below is the edited transcript of his interview to CNBC-TV18. Q: Interest rates have come down. SBI has reduced its rate by 25 basis points. Is the interest in real estate returning back? If not, by when do you think there could be a more sustainable recovery?
A: Bangalore has been a steady market and volumes are not impacted as it has impacted other markets. Once the interest rates start declining, we will surely see positive impact. Interest rates have a correlation with the improvement in volumes and it should be visible in the coming quarters. Q: Do you expect only volume growth or is there a little bit of capital appreciation, land price realisation?
A: In our markets the price realisations have been reasonably healthier, and we have seen 8-10 percent increase in realizations on a year-on-year basis. We do not expect price realizations to increase significantly. With declining interest rates, we expect price to remain steady and the environment is changing for the better. The demand should further pick up. Q: Will you sell any land?
A: No. Q: Is there any immediate big debt reduction programme?
A: Today, we are funding all our growth through our internal resources and we believe that we will continue to generate higher and higher cash flows with our increased volumes, which will help us in taking both out top and bottom line further up. Q: What is your debt now?
A: In the last quarter our debt was around Rs 1,200 crore. Q: You also have exposure in the Gurgaon market. Are there signs of any pick up?
A: For our company, Gurgaon is a niche market and we are selling a different product there which starts above Rs 4 crore. We are ahead in terms of our projection for this financial year. Gurgaon market will be the second largest market for our company in this financial year and we expect our P&L account to improve due to Gurgaon market. Q: The premium product will not be sensitive to interest rates, have sales been very steady? Is there demand or are people expecting prices to decline a bit and then the buying could come in?
A: Our volumes have been quite steady and improving. Our target is to do sales of Rs 2,000 crore and 3.75 million square feet in square feet-basis as well and we believe that we will definitely achieve our guidance in this financial year. We expect our first half to be better than expectation. We expect better performance going forward. Q: How much by way of million feet or by way of square feet you may sell in the rest of FY12 itself because you have launched on a very ambitious manner. You have quite a few launches with Sobha Grandeur, Dairy Circle, Sobha Jade?
A: We are not revising our guidance and we expect sales mark of Rs 2000-crore.