The slowdown in realty sector is not preventing developers from launching new projects. Speaking to CNBC-TV18, J C Sharma, vice chairman and managing director, Sobha Developers , says he expects better margins in FY14 than its preceding year.
Though the company has seen weak demand in Gurgaon-NCR region, its projects in Bangalore and Kerala have meet good response.
Also read: Won't meet FY14 guidance; margins seen at 28%: Sobha
"We launched four projects of which two were in Bangalore and the other in Kerala. These projects total an area of 3.6 million square feet and have see really good response. Infact, we have seen Bangalore market perform 20 percent better," adds Sharma.
On the road ahead, Sharma expects to post good numbers in Q1FY15 as most of its latest projects were launched in March-end and hence, will be reflected in Q1 numbers.
"We expect the Bangalore market to keep the momentum going and though Kerala is a small market, we are hoping to capitalize on it. Though NCR and Mumbai haven't performed that well, they do have tremendous potential," he explains.
Below is the edited transcript of the interview to CNBC-TV18.
Sonia: Take us through the Q4 performance and extrapolate how the new projects in Q4 that you have launched will help you Q1 onwards?
A: We did launch four projects in Q4; two in Bangalore and two in Kerala, totaling about 3.6 million square feet. Both the projects in Bangalore met good response which means that our performance for the Bangalore, in this quarter as well as the overall performance for the year among all the cities for this quarter, was far better by about 20 percent more than the preceding quarter.
The prices also remained stable. In Bangalore we realized about Rs 6,747 per square feet in the last quarter and about Rs 7,000 in the whole year and the 10 percent overall increase in the price realisation shows that on year-on-year basis, we got 6 percent more in value whereas we lost out about 4 percent in volume throughout the year.
Going forward, we believe that since three of these four projects were launched, on the last seven-ten days of March month, the benefit of that should start showing from this quarter onwards.
Latha: How might this current quarter shapeup in terms of increased sales?
A: We will be coming out with our financial results early next month and at this point of time, we should be given the annual guidance for the whole year but we are confident that it would be better than what we have achieved this financial year or the preceding financial year both in value or in volume terms.
Latha: So margins also should be improving in FY15?
A: Margins are in alignment with our expectation but we cannot say whether it will further improve or not because the cost keeps increasing.
Sonia: You did see a big slowdown in the National Capital Region (NCR) Gurgaon region, do you think that will continue or are you seeing any signs of revival there?
A: We are still disappointed with our Gurgaon performance. Though it was the best quarter amongst all the four quarters, both in volumes as well as in value terms, but the numbers are significantly smaller than what we have achieved in the last financial year. The strong belief, however, remains that Gurgaon has to be a significant contributor in our overall scheme of things. Going forward hopefully, we believe that something better should emerge as far as NCR market is concerned.
Latha: Which are the markets that are looking positive for you and where would you be worried in FY15?
A: This year we expect our Bangalore market to hold on and still do better. It has good potential and there will be a good number of new launches. Throughout India, the Bangalore market should again stand out in this financial year as well. Our prominence in Kerala market makes us stand out. So the market is small but as far as Sobha is concerned we believe that we should be able to capitalize on our Kerala market also.
We are also planning a couple of launches in Chennai in this financial year and hopefully the Chennai market should be relatively much better than what we have achieved in the last two years.
As far as this Mumbai and NCR market is concerned, we believe that if the unsold inventory, interest cost issues are tackled, then the markets that have potential should see better improvement.
Sonia: You said that in Q4 the average realisation stood at around Rs 6,560 a sq ft, is that a run rate that you will maintain in Q1 of FY15 as well or do you think it could improve?
A: Sometimes it all depends upon the product mix but on balance we do not foresee that the price purchase realisation should decrease.
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