Inventory levels in the residential real estate market in India are close to the all-time high levels last seen in 2007, says a recent Jones Lang LaSalle report. At a time when estimates suggest residential stock is well above the comfort level of 14-15 months, JC Sharma, vice-chairman and managing director of Bangalore-based Sobha Developers, tells FE’s Shubhra Tandon that the company’s inventory levels are comfortable, sales volume are steady and price realisations have also picked up.
What are the inventory levels at Sobha (in terms of months, million sq ft and cost)?
The numbers are self-explanatory and indicative of the fact that we do not hold large numbers in our inventory. From April 1, 2011, to June 30, 2013, we have launched projects measuring 11.4 million sq ft and our sales volume during the same period was 7.97 million sq ft. At the end of the last quarter, we had a meagre 0.14 million sq ft of completed inventory that was unsold. As far as the ongoing projects are concerned, we have about 7.51 million sq ft of unsold area. This adds up to 7.65 million sq ft of unsold inventory amounting to R5,973 crore.
What is the comfortable level for inventories?
We look at maintaining inventory levels of ongoing projects to the order of 2 to 3 times our annual sales target of 4.2 million sq ft for the financial year 2013-2014.
What stage of completion is this inventory at?
Most of our large constructions happen in a phased manner. On an average, it takes three to four years to complete a project. As of today, we are on schedule with respect to all our projects.
Do you see any weakening in the absorption rate now?
As of now, we are not witnessing any weakening in our sales volume. We sold 2.78 million sq ft in FY 2010-2011, 3.28 million sq ft in FY 2011-2012, 3.76 million sq ft in FY 2012-2013 and 0.92 million sq ft in Q1FY14. We had set a target of selling 4.2 million sq ft in FY14. We are on target with respect to sales and shall not be revising it.
Could we see aggressive marketing and maybe cut in prices in projects over the next two-three months?
For us, it is business as usual. Our average price realisation in Q1FY14 was R6,548 per sq ft compared to R5,737 per sq ft in Q1FY13. Going forward, we do not