Bangalore’s front line real estate company, Sobha Developers reported sales of 0.8 million sq ft for the period April to June, improving significantly from the lows of demonetisation. On an annual basis, it grew by 20% from last year. In the past two financial years, Sobha has missed its target of 4 million sq ft. This time, the management has not outlined its guidance for the full year but analysts pointed out that if Sobha can maintain this run rate, it might be able to surpass its FY16 sales volume, making it the best among the last three years. At the moment, three sector analysts said they are penciling in annual sales in the range of 3.2 million sq ft. No doubt, these numbers indicate a recovery for the company. Last year, not only its sales but also its profits had fallen to historic low levels. But Dream Acres, its first mid-income offering, launched couple of years back, has been a savior of sorts. Improvement also hinged upon sales from Sobha International City, its project in Gurgaon, NCR (National Capital Region).
In both the markets, Sobha’s sales seems to have beaten the average fundamentals. For instance, according to a Knight Frank India report released last week, launches reduced to just 4,800 units in the past 6 months, a 73% decline on a year on year basis. Sales too shrunk by 26%.
“Sobha had an issue from the infrastructure point of view on the Gurgaon project, which is now resolved so the marketability of the product has improved significantly. Also, it is more price competitive in comparison to other projects in the vicinity,” said Abhishekh Anand, an analyst with JM Financial. So even in a market that has been hit so hard in the current slowdown, Sobha has somehow managed to insulate itself. Prices in this project is 10% to 15% lower than its peers.
In tandem with the rest of the industry, the company did not launch any new projects during the quarter, focusing on first getting its existing inventory RERA complaint. But expectation is rife that the company will re start its launches as October draws closer in Chennai and Bengaluru. Dream Acres still has 4.5 million sq ft of sale able area and is expected to be a cash cow for the company. “At a time when affordability is so critical, rumblings that the company will build affordable housing is positive,” Anand added.
Earlier this year, the IT sector was feared to have massive layoffs. With it, IT hubs like Bengaluru was expected to become more vulnerable.
“IT professionals who run the risk of losing jobs target to buy apartments priced between `4,000 a sq. ft and `10,000 a sq ft, making this a vulnerable segment,” said Shubhranshu Pani, managing director of strategic consulting, JLL India.
However, much of these fears seems to have been allayed for the moment. At least there is no evidence that job loss fear is specifically tempering sales. Industry experts agreed that policy measures such as RERA are far more relevant at the moment.