Hopeful of Kerala, NCR growing 30% in FY17: Sobha Developers

Sobha Developers Limited reported better sales performance in March quarter compared to preceding quarters. Speaking to CNBC-TV18, JC Sharma, VC and MD of the company, says the company has improved its realisation even without significant launches in Q4.With declining interest rates, overall volumes in the realty sector will increase, making the second half of the year better for realty, he says. "Looking at the number of launches that we have planned in this current financial year and the real estate regulation act along with the declining interest rates, the real estate on volume front should be doing better this financial year," he says.The company will launch projects spread across 10 million square feet of land in FY17, says Sharma, adding, the approval process for upcoming projects will be much faster. He is of the view that the Bengaluru market will continue to improve and Kerala and National Capital Region (NCR) markets may do significantly well. He is expecting these markets to grow almost 30 percent. Below is the verbatim transcript of JC Sharma\\'s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: It is good to see that there is an improvement in the trend of presales. Take us through what went about this quarter, what led to the improvement and how much of a growth do you expect to see in presales in the next couple of quarters?A: This was the quarter where we have performed the best among the last four quarters. We have not only improved our volumes, but also improved our realisation. This was the quarter again where without any significant launch, we could achieve these numbers.We believe that the sentiment especially in Bangalore market has started reviving. We also believe that even in NCR market, offlate, after the news about Dwarka Expressway and other things, sentiments have started becoming positive. Going forward, looking at the number of launches that we have planned in this current financial year and the real estate regulation act, the declining interest rates and all other factors putting together -- the real estate on volume front should be doing better this financial year than the previous year. Bangalore should continue to do well for company like ours.Latha: What did you say about the NCR market? What news is sparking positive sentiment?A: Dwarka Expressway now has become national highway. The Haryana government has assured that this year they will be completing the highway part in their territory and on the Delhi part, the government of India will be doing the needful.Latha: I wanted to also ask you about realisations in the Bangalore market, not necessarily only for you but are builders forced to give discounts or are discounts receding?A: There are discounts being offered by the builders. They have good amount of inventory to carry on and they know that this is the only way they can push their inventory. However, in a way we are seeing that the new launches are becoming less and less and this inventory is going at a much better pace. So, hopefully in a couple of quarters' time, we will see the improvement in the prices and discounts may start disappearing.Latha: It is volume driven rather than margin driven whatever improvement you get?A: Yes, you are right.Sonia: Can you tell us what the pipeline is for FY17 in terms of projects that you will launch, how many projects are you looking to launch next year and what would the sellable area be?A: We should be doing more than 10 million sq ft of new launches in this financial year. This will be spread across all the cities where we are currently operating.Latha: Any other market other than Bangalore where you are witnessing probably more volume sales?A: I don’t think that the kind of volumes that you are seeing in Bangalore can be replicated in any other place but in our view, Kerala should be doing significantly better in this financial year, NCR also should be doing significantly better this financial year.Latha: When you said significant, do you mean 30 percent?A: Yes, possibility is there because base is very low.Sonia: With all due respect this 10 million sq ft does look a bit challenging or aggressive because even on FY16, you had a guidance of 4 million sq ft and you couldn’t meet that as well, you did just about 3.3 million sq ft, how are you so confident that you will be able to do more than double in the next year?A: This depends upon the planning that you are doing vis-a-vis with new projects which have been lined up. All these projects that are coming, we believe that approval process will be much better from now onwards which will help us to launch the project bit faster than so far we have been able to do.Latha: This Q4 bump up to 530 million sq ft, is this a normal Q4 phenomenon, after all there is a rush in the January-March quarter?A: Second half normally for our industry is relatively better. Our sales and marketing people for the year-ending incentives and bonuses work little bit harder. From the customer\\'s point of view also I think they are being able to close it out before the year is over. This helps us in doing relatively doing better in Q4.Latha: There is a chance that we are going to hear some interest rates cuts from banks. Will that be a big booster for the first half of the current year in terms of sales?A: It is a very good question. Interest rates for housing loan has come down to 9.3 percent. Just about a couple of years bank, it was about 11 percent or so. No sooner it touches around 9 percent or below 9 percent, we have seen there is a great correlation provided the demand starts picking up. So, we believe that we are at that inflection point where some of the leading real estate finance company will bring down its interest rates, maybe up to 50 lakh or below 9 percent something like this and it should revive the market because there is a strong correlation and the falling interest rates definitely is likely to help this industry in a significant manner.