Sobha Limited (SOBHA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Sobha Limited Q1 FY '22 Results Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Adhidev Chattopadhyay from ICICI Securities. Thank you, and over to you, sir.

Yes. Good afternoon, everyone. On behalf of ICICI Securities, I'd like to welcome everyone today on the Sobha Limited Q1 FY '22 Results Conference Call. From the management of Sobha Limited, we have with us Mr. J.C. Sharma, the Vice Chairman and Managing Director; Mr. Subhash Bhatt, the Chief Financial Officer; Mr. Tejus Singh, the Head of Investor Relations and Finance; Mr. Ramesh Babu, VP Finance; and Mr. Vigneshwar Bhat, Company Secretary and Compliance Officer. I'd now like to hand over the call to the management for their opening remarks. Over to you. Thank you.

Good afternoon, friends. And happy Independence Day. We are pleased to connect with you today post declaration of our unaudited financial results for the first quarter 30th June 2021 through this con call hosted by ICICI Securities. Thank you, Adhidev, for the same. We have already shared the operational update of the company in the first week of July 2021. The investor presentation based on the financial results adopted by the Board can be downloaded from the website of our company. As far as the outlook of real estate sector is concerned, you are all aware that the sector has suffered a setback both during the first and the second COVID wave. Both demand and supply remained adversely impacted during the first 2 months of the April-June quarter of 2021, a period when most states remained under lockdown to contain the second wave of the coronavirus spread. However, sales and new launch numbers started to pick up in June when states began the gradual opening-up process. The average value of the properties in India's 8 prime residential markets have shown a marginal increase during the April-June period of 2021 as per the data available with PropTiger.com. India's real estate market is estimated to touch USD 1 trillion by 2030, driven by the rising demand and various reforms of the past 7 years. The important role played by the real estate industry towards the country's economic prosperity is well known to all of us. However, the structural shift in housing demand has been somewhat accelerated by this COVID pandemic. All requirements for housing homes are well aligned with growing working population, rapid urbanization, digital sales and marketing capabilities, work from home concept, shift to nuclear families, lowest interest rates, et cetera, et cetera. To sum up, the pandemic had clearly driven the point of having one's own home. According to RBI's recent financial stability report, unsold inventory levels have dropped steadily in the last 4 quarters to around INR 7 lakh, a 2-year low as on March 31, 2021, from around INR 8.5 lakhs in the first quarter of financial year '21. Launches of new units have progressively gone up in the last 4 quarters to over 6 lakh units in quarter 4 of financial year '21. Unsold inventories, a direct reflection of the health of the market, the RBI report said that all-India House Price Index also increased year-on-year by 2.7% in the fourth quarter, vis-à-vis 3.9% growth a year ago. We at Sobha have reinforced our typical processes and a huge technology to strengthen our systems and the way we engage with our customers. The company was able to withstand the adverse impact of 2 successive pandemic waves and had shown its resilience. We are better prepared and had already adapted to the requisite digital tools. It is in this backdrop that our operational performance needs to be seen. Like past many quarters in this quarter, also Sobha had performed well on all the parameters because of its self-reliant business model, strong brand equity and established track record for delivery on time with transparency. We believe that despite uncertain times, we are going to emerge stronger along with the market share gain in the coming quarters. I will now hand over Subhash Bhatt to share with you the financial and the operational performance of the company for the quarter. Over to you, Subhash.

Thank you, Sharma. Good afternoon to everyone. We are happy to announce that during first quarter of FY '22, we have performed considerably well in spite of the pandemic situation. This time, the lockdown are very stringent in Bangalore, along with the other operating cities that we operate from. But we are still able to achieve good sales performance across all the regions, and we achieved a total sales volume of 0.9 million square feet with a sales value of INR 6.83 billion. This resulted in a total average price realization of 7,626 per square feet. Bangalore continues to be one of the major markets for us. And this time, it contributed 74% of the volume in terms of the sales volume. But we have also seen continuous growth in other cities, such as Gurugram, Cochin, Thrissur, Pune and GIFT City. Of the planned residential launches of 12.56 million square feet across various cities, we are on track for launching the same over the next few quarters. These launches are expected to boost our sales in the coming quarters. We would also like to inform you that these launches are from our existing land bank and the balanced land payments will be made through internal accruals and not through fresh debt. As of June 2021, we have unsold inventory of 15.16 million square feet in ongoing projects, which we consider adequate in the current market scenario. As of 30th June 2021, we have unsold completed inventory of 0.47 million square feet, valued at INR 4.03 billion which is probably one of the lowest by the industry standard, and it shows our capability to sell inventory much before the project gets completed. Overall, we have delivered 113.88 million square feet of developable area, which is one of the highest in our success. We have achieved 59% sales on the area, which is released for our sales team to sell in the ongoing projects. The committed receivables from sold units today stands at INR 42.8 billion, which is providing 89% coverage for the balance cost to be spent on the same projects, which are offered for sale. On the financial performance, real estate revenues were lower due to Ind AS 115 revenue recognition methodology followed by us, which requires revenue to be recognized at a unit handover level after 100% project completion. It is worth noting that all of the cumulative sales done in the residential business as on 30th of June 2021, there is balanced revenue of INR 68.87 billion, still to be recognized in our books as revenue, which gives good visibility of revenue recognition in the coming quarters. Contracts and manufacturing revenues were lower due to the second COVID-19 wave. However, we believe that the same will improve with the healthy order book, which stands today at INR 20.54 billion as of end of June 2021. Margins have remained healthy due to various cost-cutting measures that have been adopted across projects by the company, along with the sales and marketing functions, which are being digitally optimized. The contract vertical as of 30th of June 2021, we have completed projects for the tune of 53.74 million square feet since our inception. The current ongoing contractual project aggregates to 5.24 million square feet and is under various stages of construction. Our order book, as mentioned earlier, as of 30th of June 2020, stands at INR 20.54 billion, which gives us good visibility into the operational capabilities and the trust that has been shown by our customers. With this backdrop, let me summarize the performance for Q1 30 June 2021. The cash flow performance. We achieved our total cash inflow of INR 7.18 billion during Q1 of '22, which is 31% higher as compared to Q1 '21. We achieved a real estate cash inflow of INR 5.48 billion, which were up by 63% as compared to Q1 of last year. We have generated net operating cash flow of INR 1.34 billion during Q1, and this was 44% higher as compared to Q1 of last year. The net debt got reduced by INR 0.36 billion during the quarter. And our borrowing cost has come down to 8.98% as of 30th June 2021. Now coming to the sales highlight. We achieved total sales volume of 895,539 square feet of super built-up area, valued at INR 6.83 billion. The total sales volume, sales value, Sobha's share of sales value and the total average price realization are up by 38%, 40%, 45% and 2%, respectively as compared to Q1 of last year. The Bangalore sales volume has grown by 37% as compared to Q1 of last year despite the stringent impact of the COVID second wave restrictions that were put in place by the government. During the quarter, Bangalore, Gurugram, Cochin, Thrissur, Pune and GIFT City have done very well as compared to Q1 of last year in spite of the COVID second wave impact. Turning to the financial and the P&L highlights. Total income for Q1 stood at INR 5.17 billion, which was 45% higher as compared to Q1 of last year with the real estate revenue at INR 3.77 billion, which was 69% higher as compared to the quarter 1 of last year. The contracts and manufacturing verticals revenue stood at INR 1.36 billion, which was 7% higher than the Q1 of last year. EBITDA for Q1 was at 20% with the rupees -- absolute value staying at INR 1.06 billion. PBT for Q1 came in at INR 0.13 billion, which was 133% higher as compared to Q1 of last year. The PAT was reported at INR 0.11 billion, which was up by 73% as compared to Q1 of last year. With this, I will request the floor to be opened up for questions.

[Operator Instructions] The first question is from the line of Abhinav Sinha from Jefferies.

So good to see the performance in the quarter. Sharma sir, is it possible to give a guidance for the current year in the light of where we are today? And if not that, can you also tell us a bit how June and July months have tenured on sales?

See what we feel that the last 1.5 months, that is July and August, what we are taking now it's much better than what we have done in the same period last year. And the second quarter should also be better than the second quarter what we have achieved in the last quarter as well as the first quarter performance. Overall, also because of the uncertain time, somewhere we will be able to figure out while what had happened or not happened, but if the things continue the way we see today on the ground kind of thing, definitely, we'll be doing better than what we have done in the last financial year. Overall also, and the growth will be not less than double-digit growth. That's what we are seeing, and Bangalore will continue to lead. And other markets also have shown a good amount of resilience and growth. So big picture what we are seeing now is that [indiscernible] of how the Indian economy is going to pan out. The residential sales from the large developers will continue to be better than what it was last year. On the pricing front, also, do you not ask the question, it seems that prices have stabilized and the tendency of these prices can only be going up. Smart, small corrections we have been able to do. Discounts are almost stopped, and we are succeeding in still getting the numbers. On the cash flow front, also, we see that we should be doing better than what we have done in the last financial year. On the input cost front, yes, there has been certain increases. But we believe that with the stoppage of discounts and others, the basic margins will remain protected. This is what we envisaged when we are in the middle of the second quarter.

That's quite a comprehensive guidance. On the launch bit, you had, I think last year -- last quarter, mentioned that you're looking for some close to 10 million square feet of launches in 2021 calendar. And you had, I think, crossed 3 million. So what's the status there? And are we on track to see 10 million this year?

See, again, thanks to the COVID, because the municipal authorities everywhere are the authorities which spend maximum time in controlling or managing this COVID situation. But for that, we are on track. The projects in Bangalore, the projects in Chennai, the projects in Gujarat, 3 more projects we hope that we should be able to launch in this quarter or maybe immediately after the end of this quarter kind of thing. And other projects are also in the pipeline at various stages of the progress. So let's see. But this is not going to add such in speed or hamper the sales part, the reasonable amount of inventory is yet to be released, and we believe that all the markets are at this point of time, in a good position to see that the sales momentum is not getting impacted, even if something on that front delays the whole process by a few months here and there.

The next question is from the line of Pritesh Sheth from Motilal Oswal.

So firstly, on the pricing, you have highlighted that the prices have stabilized and detection is only upwards. So have we already seen on a like-for-like basis maybe in first quarter or after the end of first quarter, some price hikes in our project?

Yes. Yes. We have seen one of our -- the largest project in Bangalore in Dream Acres, from this month onwards, we have been able to successfully increase the prices by about 2% to 3%, and it has not impacted the usual sales run.

Right. And if I understand it correctly, are Dream Acres project is largely 95% completed. So this is -- does the opportunistic price hikes that we or these are because of the cost pressure?

No, there are 70-plus towers there, and we are releasing it of roughly 1 lakh square feet. And we have inventory there.

So 95% is what we have released for sale. There is further area for release, which will come.

Okay. Okay. Got it. So should I say, I mean, this is -- these price hikes are to cover up on the cost pressures that we are seeing? Or these are on the back of the strong demand that we are seeing in the market?

See it is a combination of both. See the price rise of the input cost, we are quite helpless. We have -- literally speaking, hardly any negotiation power vis-a-vis [indiscernible] who supply steel or cement or the cables or other connected items. And the fuel cost has increased, transportation cost has increased. So we have to accept that. But at the same time, had the demand offtake be not positive, we would be not doing it because we still remain profitable. So with the price rise prompts us to keep making efforts. And that too in a very, very selected manner. Like I said that the discounting part and then the small increase part here and there continues. And basic idea is to protect that EBITDA margin what we've been consistently trying to register.

Right. Got it. Got it. And my second question is on the long-term story in terms of real estate market that you highlighted that it may touch $1 trillion by 2030. So -- and since you are catering to both the top -- amongst the top 7 cities as well as few tier 2, tier 3 towns. So how do you see the shift in demand from the top 7 cities? I mean do you also see the tier 2, tier 3 towns emerging as the next growth areas over the next decade?

It is a good question. Thank you. What we have tried to communicate vis-a-vis with experience what we have seen. So this is our 26th year of operations. And we have seen more number of down cycles than the up cycles. But at the same time, this pandemic impact-wise, what we find has been largely positive, where the interest rates and the focus of the banking system, what are may be the external regions, the kind of focus today, the India's best banks, best housing financial institutions, they are giving to this home loan, in my view, is unprecedented. And that too at a rate, which is the lowest ever. And that's too in an environment where the jobs, who have been able to protect, they have got reasonably higher savings. And that's too in an environment where in last 6 to 7 years, the sector has been facing one difficulties after another difficulty. You can say post demonetization till now, not a single year had gone by where industry has not faced the headwinds. So in such a situation, suddenly you find the residential space being liked by the full, of course, their jobs or their businesses should continue to be there at this point of time. And they believe that yes, this is the time that they should exercise. And that is what you are seeing on the one side from the demand perspective. When you look at from the supply side kind of a thing, bankers come and tell us nowadays that there hardly few dozen developers whose projects they are funding, I'm talking about the new projects, at home loans, which used to be in hundreds of developers. When you take a city like Bangalore, hundreds of developers projects were getting approved, were getting funded. So you clearly see somewhere the stress and the strain on the supply side. And when we try to put all these things together, we find that there is a favorable situation where in a cyclical industry, when such things do take place, what we have understood it as structural shift which sustains for at least a good number of years. That is the basis on which we are working, and we believe that this time, it should be there for all of us to see.

Got your point. And on the market that will emerge over the next decade, I mean, do you also see tier 2, tier 3 towns emerging where we'll see more supply coming in those markets?

You have a point, but that is where when we talk about a city like Thrissur or a city like GIFT City kind of thing, where on a thousand acre development, nobody is living sort of a thing. And we are the first guy to have gone and started the tallest tower. So we thought that something good will happen. But as we look at now, we are ready to launch our second project. Almost all the approvals are in place and have applied to the RERA. So this is the story. And you talk about Thrissur kind of a small city in Kerala also, it continues to keep surprising us. So the boom is not restricted too, according to me, with Mumbai or Delhi or Bangalore or Pune or Hyderabad. I think this is all [indiscernible]. And again, the work from home somewhere will allow these Tier 2 and Tier 3 cities as well to grow, its my view.

The next question is from the line of Kunal Lakhan from CLSA.

Sharma, just a generic question actually. In your industry outlook, we keep saying that the extended work from home is likely to stay, and people will continue to buy spacious homes. Just wanted to understand, say, 1 year out, right, we have today, I think most operators have started calling back people to offices. Once -- once people start spending more time in offices versus what they did during pandemic at home, how do you see the demand panning out. Because like it's essentially like the whole demand in the last 9, 12 months, 15 months have been driven by people locked up at homes. But once they go -- start going back to offices, I'm not just talking about like demand for spacious homes, I'm just talking about demand in general for sale. How do you see that panning out?

Kunal, look at -- there are certain simulated or the empirical evidences because you have got good public transport system doesn't mean, in Delhi or Mumbai, the personal cars are not being sold. You have good texis, Ola and Uber [ top of the ] world, they continue to gain the market share. But at the same time, the private car ownership continues to remain on a highest gear. You have to understand that the home ownership vis-a-vis the economic growth in last 10, 12 years, it has not kept pace. So while on the one hand, the services sector growth, the urban population growth, the double income and all these things have been happening. Somehow rather, in our view, the home loan has not kept pace, which is visible when we go to smaller cities like Dubai or Singapore or when you go to a country like China. They're nowhere. They're nowhere. Whereas the demographic composition of the country and the dominance of the services sector should have ideally led to a much bigger home growth. But then these things will become relatively the medium to long-term kind of a story, we should not start jumping to any kind of immediate conclusion. I'm just trying to give the big picture vis-a-vis that, what we are seeing is nothing. Even now also you can see the overall home sales, I do not think that it has crossed the first 3 COVID pandemic levels. It is primarily that the big players are becoming relatively bigger. Their balance sheet, their cash flows and other things seem to be better. At the same time, what you find is that the quality of inquiries less [indiscernible] with small [ those acts of ] earlier offering discount to being able to get certain better prices on the same project sort of thing, give us the direction part, yes, things seem to be better. And when you look at from the pure numbers, the opportunities that we are creating today, we decide with this what is happening now is at the record level. We have not seen before. And we do not find any reasons that it will stop. But you made a point rather will accelerate as more and more people, they start coming back to the cities where the offices get reopened. Some of them who are not right now exercising their, what you call, discussion or the desire to own a home. Once they start living in the cities, they will do the same thing. So we believe that what is happening in and around on the residential space, definitely is a positive development. On the site side, also, what you talked. We have seen a better offtake of the 3-bedroom apartment apple to apple, 1,500 square feet versus 1,800 square feet, apple to apple 1,800 square feet. And this goes on to prove that the affordability has remained intact, and that work from home kind of a concept is playing in their mind. So -- and if you look at the offtake of the so-called low-cost homes with input cost increase, is not that great as it was in the [indiscernible], doesn't mean demand is not there. But maybe there the job losses probably are greater. So we have to look at India where anything we can prove glass half full or glass half empty, you look at, but limited to -- from our perspective, the segment to which we cater to the city in which we operate and primarily on residential space front, we find that there is a space where we can stay relevant in coming quarters.

Sure, sure. Okay. And my second question was on the cash flow side. Firstly, 2 questions there. The JDA partner payments in this quarter were a little lower versus earlier quarters. Is this what -- is this the kind of run rate that will continue going ahead? Or this can increase with the increased collections?

The run rate will be in line with that 20% to 25% as payout because that's the average JD payout that's happening. Up and down will happen depending on which project gives us better collection. This time, we had good collections coming in from Sobha Windsor, which is our own land.

Correct. Got it. So basically on an ongoing basis, 25% of sales or collection should be towards JDA partner payments?

Continue to go towards the JD payments.

Okay. And my second question, again, on the cash flow was on the land payment side. So last year, we didn't spend much. But how do we -- how much do we envisage spending in this particular year? And secondly, like all land payments would be towards our existing land bank? Or do we also envisage or factor in some payments towards some land that we may buy for continuity or for any opportunistic in purchase?

Kunal, as I had mentioned during the last call also, our clear strategy is to look at our own existing land bank, look at how we can develop that. And if there is an opportunity which is coming from the market or a new project or a new line, we would rather look at DM model for them with the unique model that Sobha has developed, which is commercially DM, but legally and contractually a JD with the reputable share to the landowner. So with that in mind, we don't envisage too much of land payments happening from Sobha. But that is given the current situation. If we really get some really good opportunity as a very, very good land piece coming to us at a price which is very, very nice, we will certainly not hesitate to look at that and consider from the financial perspective. And going forward, we should have this year INR 75 crores to INR 80 crores payment basically for existing land bank. A biggest chunk of that will be the GIFT City payment.

Kunal, to add to what Subhash was telling, see, while we remain comfortable with our current cash flow, as had been demonstrated with the ability to keep winding down both the debt levels in absolute numbers and the interest cost as well, with the focus to bring down the debt further also will continue. So the, call it, the DM model, call it, right, using the existing land bank to a better advantage as we move forward, should help us on 2 counts. One, that incremental cost will be much lesser than what you will be seeing within the fraternity in our sector, A. And b, the ability to keep bringing down both the interest costs as well as the overall debt. Also, you will be seeing in the coming quarters. So it is a well thought-out strategy, we believe, which will not impact our sales momentum. And at the same time, this is the period where we believe that we should be able to bring down our debt as well because of the superior cash flows we hope to see in coming quarters.

The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.

So I think last quarter, we had showed a project in Delhi as part of our launch pipeline, which isn't there. So just wanted to check, I mean, what has happened to that project? Is it no longer in your plan?

Yes. So Parvez, last time when we had mentioned about the Delhi project, I had also shared with you that there are some commitments which the land owner has to fulfill before we can undertake this project which would mean cash outflow for the landowner. So currently, we don't envisage the land owner being in a position to undertake that cash outflow for the site. And that's the reason why we are not looking at launching it over the next 5 to 6 quarters.

Okay. Great. Sir, the second question is, you already highlighted that our land payment will be in the INR 75 crores to INR 80-odd crores maybe in the near future. But let's say, over the next 2 to 3 years, as demand continues to pick up, what can be in its trajectory? Or do you envisage even then it would be in this trajectory because we'll be able to probably monetize some of our old land?

The basic trajectory, what we are seeing for Sobha is, that's our ability to see to it that the debt in absolute numbers also and the debt equity. It keeps coming down. And for that, we need to go still a long way. But we will keep demonstrating that capability almost in every quarter from now onwards. Right now, we do not have any such commitment as Subhash was telling, which we have to pay. At the same time, things may change for the better, right, 2 to 3 years from now, as you are mentioning, we do not know. But the discipline of what we are going to demonstrate this time will be of superior quality than what this company had gone through in the last 10 to 12 years. Hope this -- hello?

Sure. Sir, last question. So what would be -- so is it fair to assume that our debt even in the worst-case scenario, will probably remain here only, I mean, in terms of net debt to equity levels?

[Foreign Language], I think it has to come down, right? Even in the worst scenario, also, we have to bring it down further. We are determined this time kind of thing. Volumes are there, inventory is there, margins are there, interest costs have come down kind of a thing. So we will assume reduction in our overall debt also.

We are still targeting the 1:1.1 debt equity which we have shared with the market earlier.

It has to be further coming down. And please also understand another good thing. The company is carrying more than INR 4,000 crores of customers advances as things stands today. And while we pay income tax on a percentage completion basis, right, the income is getting recognized only on the basis of full completion of the project. At the same time, as Subhash was telling, about INR 6,800 crores of revenue is yet to be recognized on the sold projects. So structurally, the balance sheet has become much stronger. The way we finished off inventory, right, the overall receivables, control of creditors, and the overall cash flow management or the working capital cycle management is now in a much better shape than what we have seen in last many years.

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

Sir, I'm looking at your Slide #9, which has projected cash flows. Are there really some important changes that you have done sequentially in terms of, I think, the area has changed -- has come down to 1.5 million, 2 million square foot. And your balance construction cost to be spent has gone up by INR 400 crores from INR 4,400 to INR 4,800. This is for the area released.

Yes. Sameer, we have looked at the sales value also. So that has also gone up. So the price increase that we took in October to take care of the inflation and the cost is now fully baked into this projected cash flow, both on the time inside of the revenue as well as on the cost.

If I see the sales value of unsold stock, that has gone from 6,300 to 5,480, no? Which has come down.

Yes. But if you look at the balance receivables from the sold also, because something would have moved into completed also from here. So you have to look at the total column and not only look at the area offered for sale.

Okay. Okay. Okay. I get your point. So it's more to do that your price resetting both for the construction cost and sales, sir?

Yes, that's right. That's right.

Okay. But are there any big project moving out and some big moving in also?

No, no, not substantially big projects. This quarter, we completed 2 projects, basically, about 4 lakh square feet developable area and about 3 lakh square feet of sellable area got moved out from ongoing to completed.

But the volume change that I'm seeing is about 1.5 million to 2 million square foot, which is from 21.9 million to 19.8 million. And the Sobha's share has moved down from 20.49 to 18.97. So 1.5 million square foot has been the volume reduction. It's on a sequential basis.

Sameer, what has happened is we have got Sobha Elan, the project in Coimbatore, which is now completely finished and it has moved out of the completed inventory because there is nothing unsold left there. So that is about 3 lakh square feet. Arena, Block 4, which was about 3,20,000 square feet again has completely been sold and moved out. And Oasis -- Silicon Oasis about 2,80,000 square feet has completely moved up. So that's 1.24 million square feet with a small unit in International City also moving out. So overall, about 1.24 million square feet has left this table.

Okay, this is very helpful.

Yes, we can discuss...

We can discuss offline.

Offline, we can share the numbers with you. So we are now reflecting only that where we have got unsold inventory in the completed projects.

Okay. No. Sir, the slide is very helpful. So maybe for these big entries and exits, if you can just make a footnote, that would help.

Okay.

And just one more question from my side is, any thoughts, any update on the large project had we always check once in a while, Hoskote one?

Yes, Sameer, there is -- on the ground, progress is happening. There is indeed -- a reasonably good progress is happening. But still, we believe that much before that, we have to unlock more than 50 to 60 acres of land parcels in and around Dream Acres, current, existing ongoing projects, which we will be the releasing first. And strategically, it helps because I can have about INR 1,000 per square feet extra realization with similar cost. And the precast plant also can be leveraged upon. So there is indeed a lot of progress happening on not only the Hoskote part, but even on Sriperumbudur or on Hosur front also, you will see a good amount of progress as an unlocking exercise from our existing land bank. And I believe that when we talk about Hoskote, 2 to 3 years from now that the release of these land parcels only will be one of the key positive differentiating factor Sobha will be having in our view.

Okay. So that's a time frame after which you will monetize Hoskote, 2 to 3 years?

Yes, yes, yes.

Okay. And you have fresh 50, 60 acres unused land around Dream Acres, that would come to market before that?

Even more than that -- more than 100 acres of land is there actually speaking. But at the planning stage, like in our forthcoming, there is 1 project which will come first, maybe in 3 to 4 months from now. And thereafter a large land parcel of about 27, 28 acres, then followed by 30 acres, 13 acres. There are a good number of parcels we have in and around the southeast part of Bangalore, which has been our mainstay. So basic idea is, the current realization in that area is the highest today in the suburban market of Bangalore. And the kind of land bank that we have, it is appropriate to start releasing. And at the same time, we see that the investment that we have made on the plant and machinery is also captured properly. So basic idea is this and thereafter, they have [ cost takeouts. ]

Okay. This is very helpful, sir. And one final. I can see Hosur on your forthcoming launches, 1.4 million. So what's the thought over there? Are you trying to sell plots? Or what's the idea here?

Plots only, plots only. Academically that India is largest at electrical 2 scooters -- 2-wheeler company, Ola, right? It is away from our land parcel on the same road, Hosur road sort of a thing. So this land also will get monetized. On top of this, second other things also we are doing on our land parcel, hopefully we'll be sharing in a couple of quarters about that as well to strengthen our backward integration model further.

The next question is from the line of Swagato Ghosh from Franklin Templeton.

Sir, I had 3 quick questions. Firstly, I just want to understand the large cancellation fee had in 4Q FY '20, 1.93 million square feet. How much of that has been sold since then? And has any of that being sold to be then existing buyers. Can you just confirm this?

What is your question, Swagato. Can you repeat?

Sir, 1.93 million square feet we canceled in 4Q FY'20, so sir...

Okay. It's the majority of the canceled units. They have been resold. They have been resold. Few of them definitely they have opted to continue. But I think significantly large amount of that inventory is gone to the new buyer. In a way, it helped us in unlocking like our tied up inventory. And at the same time, we could read out good buyers who were not comfortable going or not they're willing to pay as per the agreed terms and conditions. Please understand they had not gone for the cancellation. It was a proactive step. We have taken to see that we unlock the inventory line with big buyers, their payments were not forthcoming the way we had asked for.

Right, right. So sir, what will be the ballpark percentage sales to new buyers, 50, 60 or even more than that?

More than that. More than that. More than more than 2/3 of that inventory is gone.

As in more than 2/3 has been sold to new buyers or more than 2/3...

New buyers.

New buyers.

New buyers. Okay. Okay. Okay, sir. And one other clarification I was seeking. The area that you generally gradually release for ongoing projects, is there an elevated marketing expense and like some kind of high buildup around those new areas which are released, like similar to some other developers who actually term the new phases as new launches, you do not do that. Hence, I was trying to understand where the new area release in any particular quarter is like as good as like a new phase launch or a new project launch?

Swagato, prima facie, we have cut down on our print media and external marketing costs quite a bit. The whole marketing now is centralized and it operates out of Bangalore. The cost of lead had come down significantly. At the same time, the quality of sales and the control over the valuable data is today absolute. What we do at the time of new launch, your question is valid, is that nowadays in any new locations, we spent quite a bit in doing the mockup as well as demonstrating our backward integration business model to the new buyers, how do we control the quality aspect and how we are different visibly from the other developers on certain key requirements when a house gets constructed by a developer. So there is that onetime cost of this mockup depending upon the size of the projects, where good amount of money is spent. Otherwise, by bringing the marketing activities in-house, probably the only company in my view, which has been able to significantly reduce not only the cost as well as the brokerage costs and plus leveraging on the data what we have is significantly higher now what otherwise what it used to be in the past.

See the ownership of the data now is remaining in-house, which was not the case earlier when we used to depend more on the channel partners.

Right. So sir, now currently, we do have sales through channel partners, right?

Channel partner still are there as a significant volume, but it is -- for last 3 years, probably it has halved.

See we do not discourage [ when and I say this thing ], right? Your question was clear that on the sales, marketing, promotional activities, whether, the direction is upward or downward kind of the thing. What we are saying is while we are succeeding more in bringing more customers at site than ever before, the cost of doing this activity is significantly less.

Got it. Got it. No, no, this is clear. So sir, a third and related question is, can you just help me understand for a product like Dream Acres, how do we keep on selling after selling, say, about 5.5 million square feet in the same project. There is generally a strategy that generally comes after you sell certain amount of volumes in the same project, same location. But we are selling building after building at a very good rate. So what is the secret of that project success?

See, Swagato, that is the story which in India, which should be playing. With the government support, what you need to do is that -- this is our Singapore got built, I understand kind of thing. That high rise, low cost, less footprint enough of other opportunities, which comes free along with the ownership of the apartments and a community leasing, which just an unimaginable sort of thing. You will be surprised that one-bedroom apartment in that place is being offered at INR 22,000 rental in Dream Acres sort of the thing. And the 2 bedroom has exceeded 30,000, beyond our expectations also. And this is primarily because the best of what you call a flock together. I'm not being able to recall this thing, but probably you have understood. So the experience of community living is beyond comprehension. And if you see with world-class amenities, what the experience, nobody wants to leave thereafter. So that is the secret. I think India is ready. Of course, we need to have our own balance sheet strength. We need to have our own right comfort. But the context remains that India is ready today to see to it that the large neighborhood gets related in the suburban where walk-to-work kind of a concept remains relevant. And at the same time, people enjoy living together.

Got it. I congratulate the company on the last 6 quarters of very good performance and wish you all the best for the future. .

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you, friends, for your participation and listening to us so patiently. We believe that the uncertainties continue. At the same time, we believe that Sobha will stay resilient and will stay relevant in the coming quarters. Thank you very much.

Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.