Tag Archives: Bengaluru property market

When father & son share the same business philosophy

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As Sobha Ltd stands at the top of Best Practices in Indian real estate, Ravi Sinha speaks to the father PNC Menon (Chairman Emeritus) and the son Ravi Menon (Chairman) to understand where they differ in perspective and what makes them stick to the core professional philosophy over such a long period of time.

PNC Menon, Ravi Menon, Sobha Limited,  Bangalore real estate, Bengaluru real estate, Bengaluru property market, Best practices in real estate, Clash of generation in business, Best real estate brand in India, Best business family in India, Best real estate family in India, India real estate news, Indian realty news, Real estate news India, Indian property market news, Track2Realty, Invest with reputed builderRavi Sinha: What has been the outlook of PNC Menon about best practices when he started the business?

PNC Menon: Coming from interior decoration business, I had always believed in delivering world class quality. When I decided to enter India’s real estate industry, I could clearly identify the gap in quality standards. As a result, I chose to build an organization that was more focused on creating a new, higher level of quality standards that India’s real estate industry had not yet experienced. Driven by our backward integrated business model, which is unique world-over, and timely delivery, we have achieved this objective.

Ravi Sinha: With market dynamics changing fast what are the recent changes you have introduced Ravi to sync the company with emerging best practices?

Ravi Menon: Market dynamics are changing and we are aware that urban population is rising, more so in India. There is massive shortfall in infrastructure and urban housing. Due to climatic change and rising environmental concerns, more resilient buildings which are environment friendly will be required. There is also a perceptible change in the way people live, work and play. People are living longer; households are getting smaller; there is increased mobility; and of course technology is transforming the way people think demand the kind of homes they want and carry on with their lifestyle. Keeping all these in mind, we have taken new initiatives at Sobha to stay ahead of the curve.

Ravi Sinha: How easy or difficult it was to manage your brand reputation in the initial days? Do you feel the burden of often unreasonable expectations today?

PNC Menon: I believe that any brand is established by consistent delivery of quality within committed timelines. There is no additional burden of expectation, except, of course, the ongoing passion to improve quality standards on a continuous basis. 

Ravi Sinha: In today’s digital world the buyers come together for mass campaigns. How do you differentiate between consumer activism and consumer blackmailing?

Ravi Menon: We welcome consumer activism and take up customer complaints/issues seriously and quite speedily as far as possible and deal with it with honesty and openness. We make efforts to understand their issues by adopting a personal approach and try to help resolve it. This signals to them that we value their opinions. This helps in managing expectations and reducing negative feedback.

In case of consumer blackmailing, we take the threat seriously but at the same time don’t allow it to cloud our judgment. In such situations, the key is to remain calm and professional. We try to look at options available and take steps to find a reasonable solution. However, if the consumer is unreasonable, irrational or fake, we leave them to get exposed amidst other stakeholders to draw their own conclusions. We value customer feedback and strive to accommodate as far as possible. However, we do not engage or encourage consumer blackmailing, if any.

Ravi Sinha: The buyer has changed today and so has expectations vis-à-vis transparency and communication at each and every level. What is your outlook on this change over the years?

PNC Menon: We have always believed in and practiced a philosophy of 100 per cent transparency and communication, regardless of whether we are interacting with our customers, investors, employees or any other stakeholders. This philosophy has not wavered. In fact, this approach has been embraced by our Board and as such, we have strengthened our communication channels across both Sobha India and Sobha Middle East.

Ravi Sinha: Dealing with informed buyers has its own challenges. What changes you had to make in terms of transparency and communication?

Ravi Menon: We want buyers to be more informed and rather strive to make more relevant information available to them. If buyers are truly informed, they will be able to discern better and can take a calibrated decision on parameters of quality, timeliness and transparency. They would also become aware about our uncompromising business ethics, values and transparency in all spheres of business conduct, which have contributed in making us the most admired and trusted real estate brand in India.

We have a two way communication with our customers through our various touch points such as customer care cell, a dedicated customer portal and our interactive corporate website. These help us in making available uniform and consistent information to the customers round the clock. Additionally, a dedicated Customer Relationship Executive (CRE) is available for any clarification/information at all times. Even after hand-over, facility management department provides valuable support to our customers in maintenance related issues. 

Ravi Sinha: During your early days fiscal management was simple game of profit & loss account. Do you find it too complex now with company being listed entity  and hence burden of compliances?

PNC Menon: Prior to our IPO in India, we had developed internal systems and processes to enable sustainable growth, which helped us to adequately meet the challenges of the industry. Our experience with the IPO has only further strengthened the organization’s ability to meet corporate governance requirements and stakeholder expectations.

Ravi Sinha: As the second generation did you ever feel the need to change the way fiscal management was traditionally being practiced?

Ravi Menon: We have been prudent in managing the finances from the very beginning by utilizing all our resources efficiently and keeping utmost transparency in our dealings. Post listing, we ensure that there is regular flow of correct information to all our stakeholders. 

Mastering the real estate cycles is key to our business as it is cyclical in nature. This has not changed fundamentally for us prior or post our listing. We have been able to use our capital wisely during different cycles primarily due to our integrated model which helps us to manage and control the supply chain to suit the changing conditions. 

Ravi Sinha: Scale to capacity mismatch is an inevitable reality of today’s market when every developer wants to grow bigger. How easy it was in the initial years?

PNC Menon: Sobha delivers a fully integrated model of real estate development spanning multiple activities of design, engineering, MEP, joinery, glazing, joinery, landscaping and infrastructure. We have also carefully assessed the market potential for real estate in India and accordingly have created the required organizational capabilities. Sobha currently delivers 7 million square feet delivery per annum across India, across all product segments.

Ravi Sinha: How easy or challenging has been the transition when you took a conscious call to expand the scale and geographical footprint? 

Ravi Menon: With over 7 million square feet of area for the past 5 years (including real estate and contractual business), the company has sufficient manpower and machinery to increase its delivery capability, if need be. In FY16, we did around 11 million square feet which was the highest execution done by us till date. We have the capacity to scale up further.

We conduct our own market study and post assessment of demand, we launch projects. We have observed good absorption level in all our projects which almost gets sold out by the time projects get completed. Therefore, we are left with minuscule unsold inventory, if at all. In the last FY15-16 our unsold inventory in completed projects was only 0.18 million square feet; out of this, 0.08 million square feet comprised of the plotted development projects.

We do not wish to establish ourselves as an opportunistic developer and will never launch more than we can deliver. Rather, if projects and business opportunities do not fit with our overall values, we do not pursue it. For us integrity comes first. If we see that an opportunity may threaten our corporate values, we see it as an opportunity not worth taking. 

Ravi Sinha: The branding cost was peanuts during your early days, compared to today’s multimedia age. Do you ever feel the company is nowadays spending more than necessary for image build-up?

PNC Menon: Regardless of sector or geography, brands get established only with consistent delivery of the product with the best quality and as per the committed timelines. There is a  growing need for organizations, including Sobha, to be seen and heard at various consumer touch points. Technology and especially social media facilitates this “connect” with consumers. We are constantly exploring new and innovative ways to leverage multimedia in order to raise our brand equity, not only at an organizational or corporate level but also at the project level. 

Ravi Sinha: Quest to be a brand instead of advertising to sell the project costs more. What is your outlook on brand management and its inherent expenses?

Ravi Menon: For us, our brand is very sacrosanct. People trust what existing customers say about the product that gives credibility to our brand. We rely more on the word of mouth publicity and consider our buyers as our brand ambassadors. This not only strengthens our brand image but also helps us sell better. Most of our customers are happy and they recommend Sobha Homes to their acquaintances and friends.

To engage deeper with our customers, we recently launched “Sobha Connect Program”. We believe brand management does not entail a gloss of heavy advertisement alone. A brand gets made if the intrinsic qualities of the product are world class, guided by uncompromising work practices and ethics and has top end delivery excellence, peppered with transparency and trust. 

Ravi Sinha: Do you feel the heat of increasing peer pressure and competitive challenge today, compared to your initial days?

PNC Menon: No! From my perspective, the challenge has always been an endless pursuit of excellence. It is more of an internal challenge. As an entrepreneur, I have always believed in building a meritocracy-focused organization. This has enabled me to identify top talent from multiple geographies, industries and backgrounds. Furthermore, this selection of top talent at the management team or Board level has provided me with great comfort and confidence – and the transition thus far has been a smooth one.

Ravi Sinha: Ravi, being the scion of the family business, how much do you control the organisational decisions and to what extent you allow the professionals to take independent decision?

Ravi Menon: Sobha is known for being a process driven organisation which is run professionally. All our practices and processes have helped strengthen our bonding with stakeholders including our employees and build immense trust. We have at present about 2,800 professionals on rolls and we value and promote professionalism and merit. 

We adopt newer cutting edge management practices. The pack is led by one of the most able professionals in the Indian realty sector, Mr. JC Sharma, Vice Chairman & Managing Director, who is most respected name in the industry. We believe in empowering our people and there is enough freedom to innovate and add value to our existing processes. 

Ravi Sinha: Defining demand was not a challenge in early days with real estate being a micro market business. Now with the challenge of geographical expansion and destination development, do you feel the sector is clueless with due diligence mechanism?

PNC Menon: Real estate demand is primarily driven by population dynamics and economic growth. As each of our key markets in India have different demographic and social factors at play, real estate demand for each of our cities must be assessed independently.

Ravi Sinha: What kind of professional functioning you have introduced for decision making in terms of identifying market, defining demand and adopting technological and scientific processes?

Ravi Menon: We have adopted the most advanced construction technology and have followed scientific processes to deliver eco-friendly projects. Achieving the highest standards of performance in each of the three pillars of sustainability being the economic, environmental and social aspects is what we as a responsible organisation aspire for. Our buildings are designed to be energy efficient. The best green practices are followed in all Sobha’s properties.

Today, facilities such as water recycling plants, solar powered lighting systems and organic waste converters are provided by default in most of Sobha’s projects. These facilities help in significantly reducing maintenance expenses. Sustainable initiatives are taken not only at our construction sites but also at our manufacturing facilities where every attempt is made to keep the carbon footprint low by following the best industry practices.

Ravi Sinha: What is one desirable best practice that you find missing in the business today? 

PNC Menon: Real estate is inherently a cyclical business. Well planned financial engineering is a critical strategic element that enables real estate developers to be well prepared for downturns, which are bound to occur. Based on my experience, the real estate business should be structured with 60 per cent of the total capital as equity and the balance 40 per cent as debt. This discipline of maintaining a healthy and consistent debt to equity structure is what all major developers have come to appreciate. In my opinion, those that will achieve long-term success will treat this best practice as a top strategic priority.

Ravi Sinha: What is one desirable best practice that you would like to adopt to be first mover in the business?

Ravi Menon: We believe in honest, transparent, value-laden hard work. We wish all employees to become true brand ambassadors of Sobha, know our process, the way we do and why we do it. We believe if each employee becomes our brand ambassador, it will surely fulfill our twin objectives of strengthening the brand and help sell better. We are looking at ways to make each employee knowledgeable, innovative and committed. Rest we think, will follow logically.


What makes Bangalore attractive business destination?

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Bottom Line: Bangalore has the highest office space consumption per household that indicates its high demand as attractive business destination. 

Bangalore City, Bangalore real estate market, India real estate news, Indian property market, NRI investment in Bangalore, Housing demand in silicon valley, Track2RealtyOne of the fundamental reasons why Bangalore has been the prime demand driver of residential real estate is that the city has a thriving economic activity. It is, as a matter of fact, the leading city in terms of the absorption of office space and that is fuelling the demand for the housing. However, it would be necessary to understand the dynamics of business & economy of the city to understand what makes Bangalore such an attractive business destination.

An analysis by Track2Realty vis-à-vis the volume of office space consumption per household – not only in India but also internationally in London, Singapore, New York, Tokyo etc concludes that there is equilibrium when the office space consumption is around 60-65 sq feet per household. In India it is rather surprising that the ratio per household even in a city like Mumbai is 25 sq feet. Kolkata has a dismal only 14-15 sq feet office space per household. In Delhi-NCR it is again 20-25 sq feet per household.

Bangalore is the only face-saver in India where the absorption is 50 sq feet office space per household which means the volume of office space and houses being supplied have been in equilibrium. That is the reason why Bangalore is a realistic market.

In London despite of so much population pressure it still has 50-55 sq feet per household. Singapore has 60-65 sq feet per household; New York has 160 sq feet per household. Now since Bangalore maintains that equilibrium it is so attractive to the end users. Investors won’t be attracted unless they are very long-term player. 

A JLLI report also points to the fact that Bangalore has helped India debut on the ‘City Momentum Index’ (CMI) Top 20 list this year– an annual survey carried out by Jones Lang LaSalle globally. Reinforcing the city’s status of being one of India’s premier technology centres, Bangalore figures at No. 12 in the Top 20 technology-rich cities globally. The economic as well as real estate momentum has gained pace as tech-industry majors line up to enter the market, or expand, here.

This also raises a question as to whether Bangalore is slowly shaping up as the next financial nerve centre. Ashish Puravankara, Managing Director, Puravankara Projects believes the companies are also realising the cost of doing business in Bangalore. The average rental cost of office space per sq feet in Bangalore is about 45 rupees and that works well for the companies. Then from the customers’ point of view, the average cost of housing in Bangalore is 5,500 rupees and that works well for their workforce. So, it is all supporting each other and it is not that one factor alone is driving the market.

“If the prices have become unaffordable due to high demand in the city, people would have started looking at Chennai. I am not sure about the question of whether Bangalore will be the next financial capital but this city has tremendous economic activity. The reason why companies are setting up offices here is cosmopolitan culture, great weather and access to educated workforce. So, all this is adding on to the employment and that employment is creating the housing demand. I know very many people who have moved from Delhi or Mumbai for work; they have no connection or roots here,” says Purvankara. 

With the share of per household office space consumption being highest in Bangalore, the question is whether the developers in the city have been beneficiary of this by default or they have been part of making the eco system conducive. 

Joe Verghese, Managing Director, Colliers International thinks it all came together and the developers have been lucky also and have also played very valuable role.

“I don’t want to undermine the value of their trust quotient. It is a fact that investor today trusts these guys more than any other developer in any other part of the country. The reason why they trust is that these guys have been more professional to keep their word. I don’t see too many disputes between the developer and investor or between the fellow developers in Bangalore market,” says Verghese.

It can be conveniently vouchsafed that even beyond the issue of cost of doing business and the ease of doing business, Bangalore has the potential to attract the business houses better than many other cities. One reason is weather and the other is safety.

For example, four large companies in Gurgaon are today planning to shift to Bangalore post the earthquake tremors in Delhi-NCR. They are large MNCs with 3-4 million sq foot facility in Gurgaon. The kind of list of compliances that they have, including safety, they have started working on moving to Bangalore.

Thus, while office market is a true indicator of the resilience of Bangalore real estate, there are several underlying factors supporting that. Collectively, they make Bangalore shape up as arguably the best business destination in the country.

Sobha HRC Pristine a tryst with nature

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Bottom Line: Sobha HRC Pristine could be described in one expression as ‘Nature’s Basket’. It is a classy low-density housing project that offers freedom from Bangalore’s pollution and traffic bottlenecks in city’s cleanest and least populated location.

Sobha HRC Pristine, Sobha property in Jakkur, Sobha property in North Bengaluru, North Bengaluru property market, Poject launches in North Bengaluru, Investment in North Bengaluru, India's top rated builder, Infrastructure of North Bengaluru, New property launches in Bengaluru, India real estate news, Indian realty news, Indian property market news, Track2RealtyIf there is any question mark over the residential investment of Bangalore, it is due to the increasing pollution and traffic bottlenecks. That is one of the reasons that the new growth corridors are coming up in North Bangalore where the pollution and traffic are relatively less. The desire to have greenery around the project could nevertheless make a hole in the pockets of the homebuyers.

It is here that the project SOBHA HRC Pristine in Jakkur, Located off-Bellary Road comes as a welcome break. It is a low-density project but the price point is lesser than many other villa projects in and around North Bangalore. What is all the more interesting is the fact that as per a study, the air quality of Jakkur is the best in the city.

The locality anyway has not one or two but very many USPs for the project to take off. The noise level is also lowest in the locality. The biggest concern of Bangalore, the scarcity of water and the receding ground water, is something that is exceptionally good in this region.

The locality is today dotted with very many projects at the two extreme ends of property market. One is the high rises to exploit the given FSI norms of 2.25 and the density norms of 55% ground coverage, and at the other end is the low density but high value villas to exploit the land value.

SOBHA HRC Pristine positions itself in between these two extreme ends of market pyramid. On a piece of 8.5 acre of land, the developer has also resisted the temptation to optimize the density norms and create a concrete urban jungle. 

On the contrary, the planning has been so aesthetically done that there are only 395 high and low rise apartments.  The project has 2 and 3 BHK apartments, row houses and penthouses and the unit size ranges from 1440 sq. ft. to 2463 sq. ft.

It seems the developer has compromised the salability to stand ahead of the curve in this micro market. May be the competitive market analysis have made them conscious of the fact that in today’s slow market the sales and brand goodwill rests upon project differentiation. They have hence conceptualized a project so tempting that the potential buyers can’t refuse. And hence, the density and ground coverage with the project is just 16.51%. 

And what impresses me the most is the price point which is more or less at par with other high-density apartments selling in the locality. The land parcel that has been a farmhouse is so beautifully landscaped amidst the nature that anyone would fall in love with the place. The clay cladding on the exposed walls will give these homes a stunning terracotta finish and a beautiful façade.

I was curious to know whether the real estate project with its heavy brick & mortar would change the very identity of the place. But my apprehensions are put to rest when I am told that the developer has hired an ecological agency to make sure the nature is preserved in a way that the place does not lose its original identity.

As a matter of fact, most of the trees, as old as 20 years and even earlier would be untouched and would continue to be part of natural landscaping of the housing project. 

There is also an old functional well and the developer has planned to convert it in to a bio pond with an integrated rainwater harvesting system. Similarly, a 145m long cascading water feature with tropical planting scheme and natural boulders with other amenities are incorporated in the natural topography.

Another unique feature of the project would be bird’s nest cove where these caverns, sheltered in the dense green foliage of matured trees, come with undulating platforms and built-in seating arrangements.

In terms of the locational vantage point, with the Kempegowda International Airport North Bengaluru has witnessed a rapid infrastructure development over the past years. Several malls, multiplexes, retail outlets, hospitals, schools and banks have made it a hotspot for real estate investment.

Besides this, close proximity to Manyata Tech Park, Aerospace SEZ and other IT parks gives the neighbourhood the right momentum for further social and commercial growth. Additionally, the completion of the elevated Expressway connecting Hebbal Junction to Kempegowda International Airport has made the connectivity to North Bengaluru from across the city seamless.

The upcoming infrastructure projects like expansion of Yelahanka Railway Station, Peripheral Ring Road, High speed Rail Link, Connecting Central Bangalore to BIA, Bangalore Metro Rail Phase 2 – BIA to Nagawara to Gottigere and Bellary Road, Hebbal – Devanahalli – Elevated Expressway promise to make the region even more attractive in future.

But more than these infrastructure projects, the desirability of the location is its lakes and lung spaces. Rachenahalli Lake is just 1 km from the property; Jakkur Lake is 2 kms from the property; and Lumbini Gardens is in the neighbourhood. 

With Manyata Embassy business Park, Karle Town Centre, Kirloskar Tech Park and Brigade Magnum already being job magnets in the vicinity, the region promises to emerge as a job magnet in future since many Multi-National Corporations (MNCs) have invested along this stretch due to availability of large land parcels and improved connectivity to the city centre and major tech clusters.

Companies like Shell, Airbus, Bombardier, Boeing, Tyco Electricals, Thyssen Krupp, AMADA, Starrag are expanding their presence in this micro-market.

In terms of social infrastructure in and around SOBHA HRC Pristine, there are shopping malls, like Elements Mall, Esteem Mall and RMZ Galleria Mall. Nearby hospitals are Aster CMI, Columbia Asia and Baptist Hospital. There are a number of schools & colleges in the vicinity.

The only negative point of this new launched project as of now is the fact that the internal road beyond the Main Jakkur Road to the project is a bit narrow. But then the kind of infrastructure projects that are at various level of planning one can hope that it would be addressed sooner than later.

Track2Realty assigns this project with ‘A’ category. A project that has been given this high ranking at the time of launch could easily upgrade into A+, if only the execution is at par with the standards set by SOBHA through its backward integrated model. 

Of course, the infrastructure of the region would also add to or take sheen out of the attraction of the project in the next couple of years. This is something that is beyond the control of the developer as well.

By: Ravi Sinha

Sobha’s Q3 net profit up 6% quarter-on-quarter

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News Point: The company’s revenue also increased by 6% quarter-on-quarter during the said period and stood at Rs 700.4 crore.

Sobha Logo. Sobha Ltd, Bangalore real estate, India real estate news, Indian property market, Track2RealtySobha Limited has reported a 6% quarter-on-quarter increase in its net profit during the Q3 FY18. Its profit after tax (PAT) increased from INR 50.3 crore in Q2 FY18 to INR 53.4 crore in the quarter ending December.

The company’s revenue also increased by 6% quarter-on-quarter during the said period and stood at INR 700.4 crore.

Interestingly, company’s revenue from real estate segment grew by mere 2% while its revenue from contractual and manufacturing increased by 25% during the quarter ending December.

Sobha has 48.54 million sq ft of developable area in progress, it said in a media release.

Highlights of Sobha results: 

Revenues at INR 7 billion on a consolidated basis

EBITDA of INR 1.46 billion; EBITDA margin improves at 20.7%

PBT at INR 825 million; PBT margin at 11.6%

PAT at INR 538 million; PAT margin at 7.7%

Revenue, PBT and PAT are up by 26%, 54% and 36% Y-o-Y respectively

Cash inflow of INR 6.74 billion

Net operational cash flow of INR 553 million

Average Cost of Borrowings at 9.74%

Registered new sales volume of 0.93 million square feet

Registered new sales value of INR 7.51 billion (SOBHA Share of INR 6.11 billion)

Achieved average price realisation of INR 8,045 per square feet (SOBHA Share of INR 6,541 per square feet) 

J.C. Sharma, Vice Chairman and Managing Director, Sobha Limited said, “We are pleased to report that we have achieved highest ever revenue for the quarter and highest ever cumulative revenue for 9 months, backed by good operational performance across all categories and all regions. This reflects the confidence of buyers in the brand Sobha in post-RERA era. In a tough environment, Sobha has been able to achieve new sales volume of 933,365 square feet in total, valued at INR 7,509 million with an average realisation of INR 8,045 per square feet (Sobha’s share of sales value of INR 6,105 million with an average realisation of INR 6,541 per square feet) in the third quarter of the FY18. The sales volume and total sales value are up by 8.4% and 11.2% respectively as compared to preceding quarter. Additionally, the sales volume and total sales value have increased by 52% and 92% respectively as compared to Q3 FY17.”

“It is heartening to note that Sobha has been voted as Number 1 choice of homebuyers nationally in Track2Realty’s Consumer Confidence Report 20:20. This report is one-of-its-kind of comprehensive study on consumer confidence and psychology about the Indian real estate market. This is the 4th consecutive year that Sobha has won top rank in the consumer confidence survey, making it an exceptional and a rare feat achieved by any real estate brand in the country,” he added. 

Exceptional Execution

Sobha’s superior execution capability is its core strength. Since inception, Sobha has completed about 88.93 million square feet of area.

The Company currently has ongoing real estate projects aggregating to 41.37 million square feet of developable area and 28.48 million square feet of saleable area, and ongoing contractual projects aggregating to 7.17 million square feet under various stages of construction.

The Company has a real estate presence in 9 cities, viz. Bangalore, Gurgaon, Chennai, Pune, Coimbatore, Thrissur, Calicut, Cochin and Mysore. Overall, Sobha has footprint in 26 cities and 13 states across India.