Who will Sobha go head to head with? "We are not going to be competing with Ikea," Sharma said. He said the company’s furnishings and new products are an evolution from their already existing businesses that include an interiors division, a glazing and metal works unit, a concrete division as well as a mattress business under the brand Restoplus. At the interiors division, Sobha's woodwork factory is set up over a facility that is 325,000 sq ft, employs 1,000 people and makes doors, wardrobes, and interior fit outs. That's also where most of Metercube's products will be made to start with.
Sobha sells around 3,000 flats a year with an average price of Rs 1 crore, and its buyers all represent a target audience for the company. Aditya Yamsanwar, director at Team One Architects, which works closely with developers, said that historically its always been real estate consultants who run services that range from HVAC (heating, ventilation, and air conditioning) to nowadays even automatic logistics coordination for guests and visitors at facilities so that they need not fill out a piece of paper to enter the building. “Very few have done back-end integration to this degree,” Yamsanwar said, adding that Pune-based realtor Panchshil Realty is another rare example of a firm that custom builds bathrooms, and door frames.
Sharma said there was much deliberation before getting into the B2B (business-to-business) line. Originally, the company wasn't planning to sell products such as doors to other realtors. Eventually, that changed direction and today it makes on average 50,000 doors a year, of which 60 per cent is supplied to other realtors such as Prestige, Shapoorji Pallonji Real Estate, Mahindra Lifespaces, and others. That business is growing at around 20 per cent a year.
Sobha, generated Rs 3,500 crore last financial year with a net profit of Rs 296 crore. The interiors and furnishings business, which includes mattresses, generated around Rs 143 crore, company officials said.
According to Yamsanwar, the advantage of real estate add-ons being retained in-house is that it becomes easier to manage supply and demand as well as quality. “Especially for companies
doing a lot of business in office campuses, they are better geared to backward-integration than just pure-play residential because of the design and volume factors that are at play with regards to standardisation.”
Gulam Zia, executive director at Knight Frank, said that while furnitures and fit-outs are a value-add for a homebuyer, a developer doesn’t make huge margins on it unless the quantities are huge, which have recently been slower due to lowering sales volumes and velocities. “But, it will be a value-add for mid- to lower-range housing since upper- to luxury-end of market buyers tend to seek stripped down homes to fit it out,” Zia said. “That is innovation.”