News Point: JC Sharma, Vice Chairman and Managing Director, Sobha Ltd, in an exclusive interview with Ravi Sinha.
JC Sharma has been witness to the emergence of Bangalore as the ‚ÄėDestination Indian Realty‚Äô. He feels it is not just the business potential of the city that makes it an investment magnet. Rather, there are real estate related catalytic factors, like the developers‚Äô focus on end-users, innovation with the product and adoption of advanced technology that makes Bangalore numero uno of Indian real estate.
Often referred as the best CEO in the business, his assessment of the sector is that sentiments may be affecting the grwoth of the business, Indian property market is not heading to correction. Excerpts of the interview:
Ravi Sinha: What makes Bangalore the best performing property market in India?
JC Sharma: Bangalore has remained the most happening city as far as the real estate sentiment is concerned for the last few years. The positive growth of IT/ITeS sector, resulting in large workforce requirement has created a big demand for housing needs in the city.
According to NASSCOM, the revenues from IT/ITeS sector is expected to reach US$ 300 billion by 2020, while the number of employees in the sector is expected to increase by 2.4 million to reach 5.1 million by 2022. A major part of this growth will emanate from Bangalore as in the past, which will further boost the real estate requirement in Bangalore. Keeping this in mind, many big players are entering the city with their large projects. Also, despite the slowdown, the demand for real estate in Bangalore has witnessed a steady pace.
Additionally, given its climatic attraction, high capital appreciation, decent infrastructure and connectivity, the market attracts more NRIs who are opting to settle in the city.
Ravi Sinha: Have developers in the city done something differently or the financial activities and liveability index are organically driving the city property market?
JC Sharma: The developers in Bangalore are focussed on end users. Emphasis is on providing ample useable space with regard to the built up area vis-a-vis the total saleable area. Moreover, the developers in Bangalore are experimenting with newer trends and¬† are bringing in innovations and advanced techniques in making their projects more compact, affordably priced with lots of amenities and yet trendy and comfortable. The development in the city is complementary with closer access to schools and hospitals and is more synergetic in nature. SOBHA has a good delivery track record and has thus built immense credibility amongst homebuyers through its international quality products, high precision work and eye for detail.
Ravi Sinha: But stress is quite visible in Bangalore market as well. Do you think the city property market will sustain the slowdown blues?
JC Sharma: The Indian realty market is connected with the overall market sentiment. For example, look at the impact of Chinese economy on the global markets.¬† Likewise, sentiments do play an important role in the minds of the homebuyers. When they see negative sentiments in other cities, they also start taking more time in decision making. However, we believe that the sentiments will start improving and Bangalore is expected to do well.
Ravi Sinha: Would you agree with the price correction expectations across the housing market?
JC Sharma: No, I do not agree to this. There may be some stray examples of some developers adjusting their prices at lower levels. However, the developers do not have the required margins/cushion to go for price correction across the housing markets.
Ravi Sinha:¬† A lot of developers have liquidity concerns and operating cash flows have taken a hit. Don‚Äôt you feel that lack of funding options will force the developers to cut prices?
JC Sharma: You may be right. Developers today are definitely having liquidity concerns.¬† But I am of the firm opinion that the real estate prices generally reflect the true value of different cities. The selling of products by reducing the prices cannot be a long term solution as it will be difficult for such developers to generate required liquidity to replace their existing inventory.
Ravi Sinha: Bangalore for the first time has more than one lakh unsold inventory. Will it force the developers to reduce prices, especially when the secondary market transactions are indicating some correction?
JC Sharma: The inventory is not a big concern for most developers. Recently, SOBHA has launched the largest residential project of approximately 7000 units in Bangalore. This is a fast moving product and at the same time such projects theoretically carry a larger inventory. We, therefore, need to look at inventory from the perspective of those projects which are completed but still remain unsold. In my view, most developers do not carry large inventory in completed projects.
Ravi Sinha: When and how do you think the sector will come out of present crisis of confidence in the housing market?
JC Sharma: The macro environment has been improving. Interest rates are coming down. India will be a big beneficiary of the falling commodity prices especially in case of crude and steel. I am of strong belief that markets will start improving from next year onwards.