Ladies and gentlemen, good day and welcome to Sobha Limited Q2 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saheshwar Ravikar. Thank you, and over to you, Mr. Ravikar.
Good morning, everyone. On behalf of ICICI Securities, I would like to extend a warm welcome to all the participants joining the Sobha Limited Q2 FY 2026 Result Conference call today. We are pleased to have with us Mr. Jagadish Nangineni, the Managing Director, and Mr. Yogesh Bansal, the Chief Financial Officer, representing the management of Sobha Limited. Before we commence with the proceedings, I would like to take this opportunity to wish everyone a very happy Diwali. With that, I would now like to hand over the call to the management for their opening remarks, following which we will move on to the Q&A. Thank you, and over to you, sir.
Good morning, everyone. This is Jagadish from Sobha Limited. Thank you, Saheshwar. We are pleased to connect with you today post-declaring our Q2 and FY 2026 financial results. We had already shared the details of the operational performance during the first week of Sobha. In continuation of our pursuit to improve our timing of declaring quarterly results, this quarter as well, we have done well, thanks to our improved processes across functions enabling this outcome. We delivered a strong and stable performance in Q2 this year, building on momentum already created in the previous quarter in terms of real estate sales, with highly integrated sales and marketing efforts. It also reflects the steady demand on the luxury real estate in a growth economy, with improving macroeconomic parameters and timely government interventions.
During the first half of this year, we achieved a real estate sales value of INR 3,981 crore, which is higher by 30% compared to last year in the same period. Bangalore has contributed 48%, NCR 38%, and 10% from Kerala region of the overall sales. Our total sales for the year were supported by the sale of 1,576 homes, 2.84 million sq ft across all operational markets, with an average price realization of INR 14,028 per sq ft. In Q2 alone, we have achieved sales of INR 1,902 crore, consisting of 770 homes, with Bangalore contributing 70% of the sales, despite any new significant project launch. Coming to new project launches, cumulatively in the past six quarters, we launched over 10 million sq ft in 12 projects.
However, the slower first half launches were impacted due to several external and internal issues, and we are making our best efforts to catch up in the second half and launch at least 8 million- 9 million sq ft for the entire financial year across 7-8 projects. We are happy to inform that during the current week, we will be launching Sobha Magnus in South Bangalore. Overall, we have a strong residential pipeline of 15.96 million sq ft across 13 projects in nine cities, and a commercial pipeline of about 0.74 million sq ft across all our operation cities. We envisage to launch these forthcoming projects in the next four to six quarters. Also, we are working on our subsequent project plans rapidly for about 24 million sq ft.
In addition to these launches, our existing inventory at the end of the quarter was about 10 million sq ft, with a potential sales value of INR 13,000 crore. Our project delivery teams have also increased the pace of project completions, with completions of 2.25 million sq ft in the first half of the year. During the quarter, we completed 1.18 million, which is 591 homes. We aim to complete overall at least 5.5 million sq ft in this financial year. Improved profitability would reflect as we increase the volume of project completions. In addition to this, our contract manufacturing operations are steady, contributing to about INR 700 crore in terms of revenue in this financial year. With this, I hand over the call to Yogesh, our Chief Financial Officer, to provide details on the financials.
Good morning, everyone, and thank you for joining us today. Wishing everyone warm greetings of the Diwali. I am pleased to share our financial performance for Q2 and H1 for the year 2026. I will begin with the cash flow, covering the quarterly and half-year performance and future visibility, and then briefly touch upon the P&L before opening the floor for the questions. During the quarter, from all businesses, we collected a total of INR 2,046 crore. We crossed the INR 2,000 crore quarterly collection milestone for the first time, thereby recording a higher historic high. For H1, we collected INR 3,824 crore, recording a healthy 30.9% growth over H1 2025. Real estate business contributed 90.2% to overall collection, that is INR 1,846 crore in Q2 and INR 3,445 crore during H1 period. Contracts and manufacturing businesses contributed INR 200 crore in Q2 and INR 380 crore in H1.
We generated INR 513 crore of net operational cash flow in the quarter for the half year, and it was INR 909 crore reaching a significant growth of 79.1%, allowing us more room for investing in future growth. We spent INR 632 crore on land-related activity, almost 2x the amount we allocated in H1 2025, in line with our commitment to further strengthen future pipeline for growth. Post-financial outflow, CapEx and dividend payout, we generated net cash flow of INR 63.5 crore during Q2 and INR 120 crore in H1 2026. Company closed the quarter with net cash position of INR 751 crore, underscoring a very healthy and strong financial footing. Weighted average interest rate had come down during the quarter by 60 basis points. Looking ahead, we have clear visibility of future cash flow expected from our ongoing and forthcoming inventory.
From all completed and ongoing projects, we expect a total of INR 22,867 crore of future inflow. The cost to complete this project is estimated at INR 13,000 crore, thereby generating marginal cash flow potential of close to INR 9,800 crore at project level post sales and marketing spend. We should be able to realize this over the next 4-5 years. Additionally, we expect to generate INR 7,100 crore of marginal cash flow from forthcoming projects of 16.69 million sq ft, which shall be launched over the next six quarters, and the cash flow relies over a five to six-year time frame. Overall, we have a strong financial footing with robust future cash flow visibility. We are achieving better operational efficiency every quarter, giving us the confidence to pursue further growth opportunities.
Now coming to P&L for the quarter, we recorded a total income of INR 1,469 crore and INR 2,371 crore for H1 FY 2026. Real estate income contributed INR 1,200 crore during Q2 and INR 1,889 crore for H1 FY 2026. Contract manufacturing and retail business contributed INR 209 crore in Q2 and INR 371 crore in H1. We generated EBITDA of INR 157 crore in Q2 with a margin of 10.7%. For H1, EBITDA was INR 231 crore with a margin of 9.7%. PAT recorded for Q2 was INR 72.5 crore with a margin of 4.9%. In H1, we recorded INR 86 crore with a margin of 3.6%. Our total balance revenue to be recognized from already sold units as of 30 September was close to INR 18,000 crore. This is Sobha share only.
During the quarter, we have received demand for ground rent from Bangalore Authority for OC granted in earlier years. As an accounting principle, we have made a provision of INR 27 crore in the quarter itself. Thank you all for your participation. With this, we can now open the call for questions.
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sucrit Patil with Eyesight Fintrade Private Limited. Please go ahead.
Good morning to the Sobha team. I have two questions, one for Mr. Jagadish and one for Mr. Yogesh. To Mr. Jagadish, my question is, as you scale in a market that's becoming more price-sensitive and competitive, what are the biggest execution challenges you foresee, especially in balancing design quality, delivery timelines, and customer experience? How are you preparing the organization to sustain this kind of a differentiation? Yes, sir. Thank you.
Thank you, Sukhrati. I think you had one more question for Yogesh, which we'll take once I complete this answer. As you are aware, Sobha has a unique execution model, which is backward-integrated, where the entire design, execution, and some parts of the manufacturing are done in-house. This gives us a unique advantage in terms of speed of delivery and also managing the cost of delivery. While that has not been very helpful during the very high, inflationary period, like which we have seen between 2021 to 2024, going forward, if the inflationary pressures continue to be stable, like we have seen in the past year or so, then we should have a unique advantage in terms of managing the cost and delivering within time.
As you know, the reliability and the quality of the delivery will clearly put us ahead of the competition when it comes to customer satisfaction, and that we are continuously focused on. We are building our teams across functions, and mainly the execution teams, to make sure that we enable the organization to deliver for the scale that we are preparing for.
Okay. Thank you. My second question to Mr. Yogesh is, with the rising input cost and the compliance burden, how are you planning to protect the margins going forward, especially in terms of procurement, pricing, and project phasing? What financial levers are you emphasizing to maintain profitability without compromising quality? Yes, thank you.
Thank you, Sucrit. As you are aware of, we are a backward-integrated company, wherein most of the things we are doing in-house. With this, we have a hand on all the costs and procurement. We real-time monitor all the costs. If we have to take price escalations because of increase in raw material, we take immediately so that we can protect our margins. That's why we keep track estimation of our costs on a regular basis so that financially we should be able to keep our margin intact.
Thank you. Mr. Patil, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Pritesh Sheth with Axis Capital. Please go ahead.
Good morning, and thanks for the opportunity. First, on the sales performance of this quarter, we saw a good surge in sustenance demand. Just wanted to know what actually worked, especially, I guess, in the projects like Town Park. What went right for us this quarter to have a healthy contribution? How do you see the Gurgaon projects, which were launched last year? Any sort of action you think you need to take there to have a good velocity on those projects? That's my first question.
Thank you, Pritesh. The Q2 sales, like you have observed, the majority of the contribution has come from Sobha for 70%, right? All of them are sustained sales. This shows a good on-ground demand for the end-user-based products, particularly within the ticket sizes of INR 2 crore-INR 3 crore. Town Park, one of the projects which has that kind of inventory, has done really well. Ticket size definitely helps in terms of the sales. Of course, our sustained sales and marketing efforts also have helped. Specifically, when it comes to projects like Town Park, where the scale of the project is large, the customers are far more gravitating towards larger projects where the communities are larger. This is a distinct advantage in certain projects like Town Park, and that has created that positive or virtuous cycle of good sales. That's on Bangalore sustained sales.
When coming to your question related to Gurgaon sales, the Gurgaon sales, like I mentioned earlier, we have made certain changes, and we are seeing reasonable end-user demand for our products now. We have made changes in our organization as well, in terms of people, and in terms of how we approach the channels that do provide impetus to the sales. Both these seem to be working positively, and we hope to see good results in the second half.
Sure. Got it. Just on Town Park, we launched this project, I think, in March or February this year. After 6 months, we are seeing this good set of demand. That's usually kind of timelines that people are taking now to decide on purchasing a home. Just trying to understand because at launch, we didn't see such good response that we are seeing now. Just trying to understand that this is more of a decision-making time that the customers are taking right now, or something else, which has not changed.
I would not say that at the launch, the response was lower. We did really well even in March when we launched the project. In the first quarter of this financial year, that's where we saw a little bit of hesitation in terms of customer purchase decision-making. Since we have multiple ticket-sized products and there is timing of ability to time their cash flows in terms of purchase in these large projects, those have really helped us push and accelerate the sales in this specific project. Otherwise, the project did start out really well, and it's a very large project. As we continue to progress during the last 6 months, we continue to release new towers, which has been very, very helpful in making customers take choices from multiple products that are available.
Thank you.
One other aspect which we have seen is also in Town Park itself. A few years ago, we had launched Manhattan and Brooklyn, which are parked in the same location, and we have started delivery of our first tower in Manhattan. Delivery confidence also is seen by the customers, and the kind of infrastructure that's getting developed around the whole location also gives a lot of confidence to customers.
Thank you. Mr. Sheth, please rejoin the queue for more questions. Next question comes from the line of Biplab Debarrma with Antique Stock Broking. Please go ahead.
Good morning, and wish you all a very happy Diwali. My first question is, you had a very good, strong quarter. Congratulations on that, although you didn't have any major launches. In the second half, I understand that you have a significant number of large launches lined up. If all these launches materialize as planned, looking at the strong absorption in Bangalore and Noida, you have a few launches in Noida. Is it possible we cross INR 10,000 crore of pre-sales this year?
Thank you for the wishes, Biplab. The launches in the second half seem to be on track. If the overall momentum continues and if we are able to achieve similar momentum in all the project launches, because these project launches are spread across some of the other cities where launch is not necessarily the biggest impetus to sales, there are steady launches in locations like Kerala and in Chennai. Given that, we would stick to our earlier guidance of about INR 8,500 crore of what we are doing. If we can do, we aim to do much better than that. If we are able to do it, definitely, it will be a positive surprise for all of us.
Okay, sir. That's okay. I think, yeah, that's good enough. Sir, the second question is, you know, your one project got delayed. I mean, launches. Good to hear that your project, Sobha Magnus, is getting launched in the third quarter, but it was supposed to get launched in the second quarter, but delayed due to approval-related issues. Sir, how are these approval things progressing? Do you see any risk of delays that could push some of these launches in this financial to current financial to the next financial year? I mean, how is this, how do you see this approval thing? Is there any risk uncertainty regarding that? Thank you, sir.
Good question, Biplab. Related to specifically the Sobha Magnus launch and around some of the aspects of OC that we have faced in the past quarter, the main reason for this was the restructuring of the BBMP, which is now Greater Bangalore Authority. That restructuring had taken a little bit of time for the actual coming into effect, which has, thankfully, come into effect. Now, once all the systems are in place for all the five corporations to be in operation, we don't foresee any major reasons for delay. Other than that, we have the rest of the approvals in Bangalore and in the rest of the country. They seem to be on track. As such, there should be no issues.
Thank you. Mr. Deeparva, please rejoin the queue for more questions. Next question comes from the line of [Krish Chaudhary with Edelweiss ] Please go ahead.
Hi. Good morning, Jagadish. The performance despite no launches is encouraging to see, and also, I mean, encouraging to see the cash flow, overall cash flow run. A couple of questions. Firstly, on the reported margins, again, we are seeing these to remain low. How do you think about these numbers and especially the current project level margins? If you can just give some view on the margins first.
Great. Thank you, Krish. On the reported margins, unfortunately, this quarter specifically, although we could recognize good revenue, there were, like Yogesh has mentioned in his initial comments, we had to take provision for certain charges which are related to DBMP ground rent, which were not earlier recorded because we had a favorable outcome in the previous whenever we completed projects. However, since because of new demands that have come in from the authority, we had taken that provision. Otherwise, we could have been slightly better than what we have done. There are a couple of other small transactions which we have done, which have led to slightly higher costs, and which are reflective in the numbers.
Otherwise, if you look at the overall big picture in terms of how we are going forward, which is where we have about INR 18,000 crore of revenue to be recognized from sold units, those margins are extremely protected. We are, like I have been mentioning in my previous calls, the EBITDA margins in those projects are between 30%-35%, or I mean, we estimate it to be closer to 33%-34%. Those will start getting reflected as we complete those projects. That said, in the near term, in the next quarter, also, we have several project completions. We are increasing the scale of completions. As those completions come through and some of those good margin projects come through, we should be able to do decent margins in this financial year.
From next financial year, as we complete some of the own projects like Neopolis, wherein we have good margins embedded in those projects, our margins should significantly improve starting from next financial year.
Got it. Got it. Very clear. Secondly, if you can give us some update on the Sobha Magnus launch, I mean, where are we in terms of the overall approvals and any thoughts on the phase one? If you can just throw some light on this project.
Yeah. There has been very good progress on the first phase of [skyvue] which we are aiming to do at more than 5 million sq ft, which we have included in the forthcoming projects this time in our quarterly presentation. We are making good progress towards the approvals. The design is completed, and we have applied for the initial plans. Our current aim is to launch the project in the first quarter of the next financial year.
Thank you. Mr. Chaudhary, please rejoin the queue for more questions. Next question comes from the line of Dhruvesh Sanghvi, an individual investor. Please go ahead.
Yeah. Hi, Dhruvesh. Am I audible? Yes, Dhruvesh.
Yeah.
Please go ahead. Thank you. At the industry level, across major parts of India, we see that almost all large real estate developers are in very good shape in terms of balance sheet. All are now competing for the larger-sized complexes because that's the clear trend. In this context, when we look at new business development that we probably at Sobha have encased, how would you rate Sobha's BD in the last 1 year? Why I'm asking this more specifically is to understand from a competitive landscape perspective that is the cost of acquisition increasing in a market where the sale prices are probably at hitting the roof now? You can give some sort of an understanding so that today's land acquisitions will lead to margins three or 4 years later. How profitable and how will the growth be in the future?
Growth is coming, but I'm just worried about the three-year-hands profits because that will be coming from today's decision-making.
Right, Dhruvesh. Good question, which is essentially surrounding BD for these projects. In fact, if the margins or the results of those new projects that we are going to do business development today would actually result in some kind of P&L impact probably after five years because you would do BD today and then probably launch the projects in a year or so, and those projects would start getting completed three to 4 years hence. I mean, the impact for that from a P&L point of view would come much later. That said, the basic question from your side is whether since BD has become competitive, would we be able to maintain margins?
If that's one of the questions, then it's no doubt that the competition has increased for land, and it has significantly made both challenges and also in terms of cost for new land acquisition, which is in which we think that we are uniquely positioned because, one, we have a clear pipeline of already done BD in the last few years. In our pipeline itself, it's close to about 25+15, close to 40 million sq ft, which is clearly out there. The ability to do BD now is more of actually two to three things. First is on our ability to be patient and actually do deals which fall in alignment with what we set out to in terms of financial objectives. That's number one.
Number two is our own capital structure has become better, and hence, some of the land parcels that we can really pursue would reduce the, I mean, we would do it in a reduced competitive environment. Third is we are being a little bit strategic in terms of the locations as well, as you have seen in the last one, 1.5 years when you're asking how do we reflect on our BD. Certain locations we have chosen where there has been a demand-supply gap. Those like Greater Noida, what we have seen, where we could quickly turn around, although invested, there is an outright and direct investment. We could convert it into a project and launch it and actually enable the monetization of the asset in the quickest possible manner. Similarly, we are doing some of the other transactions wherein speed is very helpful.
If not, we are getting much higher margins. It's a combination of many. In addition to what we are pursuing in new geographies, in existing geographies like Bangalore, what we have been doing is, again, we are pursuing opportunities of much more in consolidation and in locations where we are already comfortable with and where we get opportunities based on our track record, our presence, and our relationships. That has really helped us in procuring new opportunities in existing geographies.
Thank you. Just one more part on pricing. How do you see pricing overall in Bangalore particularly? What about the entry in Mumbai? Is the Mumbai launch a part of the second half that you were talking?
Yes, absolutely. The Mumbai launch is indeed in the plans for the second half. There also, we have made significant progress in terms of approvals. We are hoping to do the first phase of the launch very soon. Secondly, when it comes to the pricing specifically in Bangalore, I think we have seen good price increases in Bangalore for the last couple of years, 3 years. There has been a continuous rise, mainly due to the demand supply again. End-user demand has really pushed up the prices, whereas the supply has been reasonably stable. We are entering into a phase of steady demand and supply in Bangalore. Probably in some aspects, the supply might increase. If that does, then from a pricing point of view, we should see a stable or inflationary increase in the pricing than the kind of price rises we have seen in the last 4 years.
Thank you. Mr. Sanghvi, please rejoin the queue for more questions. Next question comes from the line of Abhinav Sinha with Jefferies. Please go ahead.
Hello.
Good morning, Abhinav.
Hi. Sir, can you hear me?
Yes, absolutely. Please go ahead.
Okay. Wait, Jagadish, good to see the uptake in numbers. Just two questions. Firstly, on the pipeline for the next 6 months, is there any NCR project that you are launching, or is this skewed in favor of Bangalore?
There are three projects that we envisage to launch in NCR. One small service apartment kind of project in Gurgaon and one phase of a residential project in Gurgaon. The third is there is a project that we plan to launch in Greater Noida. These three projects are also part of this. All these three put together, it would be about three and a half, roughly about 3.5 million sq ft.
Okay. This is all coming in the second half of the year, right?
Yes.
Okay, great. The second question is just a little more on the industry and what I see in the last 4 years in your own numbers as well. Basically, you know we hear a lot of data from the industry that volumes are now flat for a couple of years. I think in Sobha also, we have been selling the same 5.5 million , 6 millio n sq ft range, and this should be the fourth year of that. Do you think, I mean, both the industry and your own volumes have peaked out? It might be that value sales are higher, but volumes are as good as it gets.
It's directly a function of new launches, Abhinav. As we increase those and increase the diversity or geographical diversity of those, the numbers should become much better. That said, the majority value increase has come even for us specifically through price increase because of the change in the mix of the new launches and sales of new projects where the pricing is better than the earlier ones, right? It's done. For the next leg of the growth for us, it will be more led more by having new project launches and probably lesser by the further increase in pricing.
Thank you. Mr. Sinha, please rejoin the queue for more questions. Next question comes from the line of Gaurav Khandelwal with JPMorgan. Please go ahead.
Yeah. Hi. Good morning. Happy Diwali. Thanks for taking my questions. I have a question which is more generic on the industry norms rather than Sobha's operations in itself because you are pioneers of the business that you do. Which are some of the micro markets that you operate in where you're seeing concerns around growth? Is that growth concern a function of purely price increases in the housing sector, or is it something else which is driving that concerns around growth? Any curve on this would be really appreciated. Thank you.
Thank you, Gaurav. As you know, we are operating in 14 cities as of now. Our prime growth driver markets, specifically in the past 2-3 years, have been our mothership, which is Bangalore. Bangalore itself has several micro markets. Even in the micro markets that we are operating in, we have predominant presence in South and Southeast and East that continues to do well. While these are doing well in Bangalore, North Bangalore is also picking up really well because of the capacity constraints that we are seeing in the rest of the micro markets. Hence, from a micro market perspective in Bangalore itself, broadly, this is how we look at it, and we are looking at opportunities. We look forward to launching projects in all of these to capture the sustained demand in Bangalore. In addition to Bangalore, we have a good presence in NCR.
NCR, while there is Gurgaon with its good infrastructure, or at least from an accessibility point of view in the last few years, and there we have diversified our own presence in terms of micro markets. Earlier, we were present only in Dwarka Expressway. Now we are present in several other sectors in Gurgaon. That has helped us sort of de-risk our scale there. In addition to that, we have also moved to Greater Noida, which is also a very good growth market. Specifically, in the last 2 years, we have seen good demand due to the fundamental drivers there. Hence, that is also a geography that we would like to continue to focus upon. While these are two big growth drivers, we have been very steady in Kerala. We have small Kerala, four cities are doing well.
They are largely NRI demand, which is quite steady even in the last few years. However, there are challenges in Kerala in terms of both execution and the costs related to it. Hence, we would like to keep it as a steady market rather than a huge growth market. While these are the main three concentrated geographies we have operated in, there are a couple of other geographies. One geography which we would like to, which we have just started, which is what I have mentioned previously, is Mumbai. We are hopefully going to start our first launch in this next half. That is a very large geography. From a luxury housing demand perspective, it has one of the biggest shares in India. By being present there, it's a long-term focus for us, which is we are currently taking small steps.
As we progress there, based on how the demand is panning out, we would definitely continue to invest in that region also. We have other cities like Chennai, Hyderabad, Pune, and GIFT City. These are smaller markets, and this is where we would get opportunities, and we would invest in an opportunistic manner and not necessarily with any strategic focus.
That's very good . Thank you so much. Those were all my questions.
Thank you, Gaurav.
Thank you. Next question comes from the line of Himanshu with Steadford LLP. Please go ahead.
Yeah. Hi. Good morning. My question was on the margins itself. If you look at the first half, the revenues on the real estate have increased by near more than 50%. If I remove the other income from EBITDA, we are very nearly flattish. What happened in the 2022, 2023 phase, the projects what we sold, that the margins went so low because that was one of the periods where everybody was increasing their prices on the projects what they were selling. What gives us the confidence that those problems will not reoccur or things will not go that wrong in the future? Just from the learning perspective in the organization, some thoughts of yours will be helpful on.
Sure. No, good relevant question because margins is indeed a concern even for us. It's been our focus right from the beginning. This was, like I was mentioning before, a one-off period where we were operating in a very high inflationary environment. That said, that is one. Second is, while a majority of these revenues that we are recognizing now, while the prices were rising in 2021 and 2022, the costs also significantly increased. That's a reflection of what we are seeing in terms of margins. I don't think that issue would recur if we are able to increase our scale of our construction and timely delivery. Unlike several of the other real estate players, as you know, we are backward integrated. During that time, one of the biggest challenges is not only cost increases but also supply chain disruptions.
Due to that, there have been certain delays in the project. Because of that, our fixed costs also have come into our overall project costs. Hence, that's really dampened our margins. Going forward, if we do not encounter any such black swan kind of events, there should be no reason for us to continue to deliver the kind of margins that we have envisaged because timely delivery and ability to manage the cost in terms of change. If these two are done well, we are fairly confident of delivering the projects. Most important for us is to focus on the timely completions of the projects. That's where our current extreme focus is.
Okay. One small thing. On the commercial side, we have three, four projects. One is ongoing, and the rest are forthcoming. The forthcoming have been there for quite some time. For nearly 2 years, they have been in the forthcoming list. What is the thought process? Are we going back to the drawing board, rethinking those projects we want to do or not? There is some, let's say, approvals which are pending? What is the reason? Now we have cash. If we are really interested, we can go with those projects. The forthcoming on the commercial side remains forthcoming for quite some time now.
Right. One of the biggest forthcoming projects is a commercial in Gurgaon. The reason for us to sort of take time for us to launch the project has been change in, I mean, our approach because earlier, I mean, this is a land which we own entirely. We wanted to take advantage. Although initially, we planned to launch it with the current FAR that's available, then considering the cost of the land, land price increases in Gurgaon, we have changed our approach. Now we have loaded TDR onto the same land, and hence, we had to do both purchase of TDR, redesign. Hence, now we are nearly complete in terms of both those activities, and hence, we can launch. Otherwise, apart from this, I have not seen any major delay in the commercial projects.
Thank you. Mr. Himanshu, please rejoin the queue for more questions. Next question comes from the line of Parvez Qazi with Nuvama Group. Please go ahead.
Hi. Good morning and happy Diwali to the entire team. Two questions from my side. First, over the last four or five years, the industry clearly has seen the benefits of premiumization. Our own sales in terms of ticket sizes, the data that we see has clearly seen a move towards higher ticket items. Still, FY 2025. Now, in the first half of FY 2026, and especially in Q2, we again saw very good contribution from the up to INR 2 crore or INR 2 crore-INR 3 crore ticket sizes. I know one should not really focus too much on one quarter or half. Do you think now probably we have reached a point where the mid-income segment will probably claw back some of the share that it has lost? Do you think the premiumization trend is inevitable largely because the prices have increased so much over the last couple of years?
That's the first question. Second, it would be great to hear your thoughts on demand and some of the major markets that we operate, especially with regards to the upcoming sector season. Thank you.
Thank you for the wishes, Parvez. Coming to premiumization and the impact, actually, we have to look at probably two different aspects. One is the pricing premiumization, and second is the actual ticket size, right? Indeed, there was a big demand for larger homes as we saw it in COVID and immediately after COVID. The affordability for at that particular time, for the pricing and for that ticket size was very good. It is not only that there was a requirement for a larger home, but the ability to afford that larger home, given that at that point of time, pricing was both were in line. Hence, we could see a good surge in the demand towards that. As the pricing has continued to increase, certainly the budget and the ticket size, the aspect of these two will start kicking in.
That is very clear that now, again, the ticket size constraint is a big factor in how we mix our projects. Also, that is one in terms of when it comes to certain geographies or certain micro markets. It is entirely dependent also on the micro markets where we launch the projects, right? From a large volume point of view, you are right that it is largely, again, we are going back to drawing board and rethinking about some of the aspects which is with focus on ticket sizes. Affordability clearly matters. That does not mean that premiumization is going to vanish because customers are preferring higher quality products and not necessarily going for a, I mean, I would not term it as affordable housing yet.
Our own ability and the cost, irrespective whether it is a luxury project or an affordable project, largely remains the same because the cost of land is roughly similar. Our cost of delivery is there is very little difference between a high-end luxury project versus an affordable housing, given our quality emphasis on every product that we deliver. Hence, we would continue to focus on luxury products proudly, but maintaining within the ticket size. That is where the demand finally is the largest. That is one. Second is with respect to the overall pricing and the trend that we are seeing. Again, the pricing is, let's say, if I compare like to like in terms of the same project, what we have seen in the 6 months or 6- 12 months, the pricing we have taken small price increases.
However, that seems to be the increase in the pricing is not at the same pace as what we have seen in the past. That's very clear in the market, not just with us, but across several players. My view is that given the demand and supply, again, depending on the extreme micro market dynamics, largely there is steadiness on both sides. There should be, from a pricing point of view, only the increases in the pricing would be far more inflationary rather than because of demand-supply mismatches.
Perfect. Thank you.
Thank you, Parvez.
Thank you. Next question comes from the line of Parikshit Kandpal with HDFC. Please go ahead.
Hi, Jagadish. Congratulations on a decent quarter. I have two questions. One is that to total business development done across the city. You are going into a launch heavy season. I just wanted to understand how are you replenishing land in NCR, Gurgaon, Noida, Mumbai, and Bangalore? The second question is when you spoke about margins, and you said that next year could be seeing a substantial jump in margins. In light of that, I think which quarter, I'm not asking you which margins will improve from which quarter, but decisively in this year, I mean, is it third or fourth quarter where you will see the new launches, the contribution into the venues substantially increasing, and older projects getting phased out? In light of that, also, if you can quantify what was the ground rent which you have taken hit in this quarter. Thank you.
Thank you, Parikshit. From a business development point of view, we are active in growth markets, both in Mumbai, in NCR, and in Bangalore. We are continuing to do our under-the-radar consolidation and also any specific opportunities that we get due to our existing relationships or presence within a certain micro market. Replenishing the current inventory that we have is a continuous process. In Bangalore, we are quite confident since there is enough pipeline of new launches, which is spread for the next few quarters, and there is enough visibility in terms of future through the land bank. We are quite confident of maintaining that inventory levels in Bangalore. However, in the NCR market, it's a very dynamic market, and we are very active trying to look for new opportunities. We have been successful in the past six to nine months.
I think going forward also, our engine is quite active. Coming to Mumbai, we are actively looking at various opportunities. It's a continuous process. From a business development point of view also, we are quite active overall. As we make progress and our cash flow becomes even better and our own success in some of the markets becomes more clear, we would be far more active in some of these locations.
Jagadish, I'm looking more for a number. More for a number like in this financial year to date, how much this is developing? You would have done because you don't disclose this number separately like other companies. I just wanted to get a sense on those numbers. How much GDP addition has happened? Across the markets, if you can give us a little bit.
Yes. As you know, as a choice, we have not been disclosing the new business development numbers. Once we get comfortable to disclose those, we would do that subsequently, Parikshit. Coming to the ground rent matter, we have taken a provision of INR 27 crore in this quarter.
Thank you. Mr. Kandpal, please rejoin the queue for more questions. Next question comes from the line of Vipulkumar Anopchand Shah with Sumangal Investments. Please go ahead.
Hi. Thanks for the opportunity. My question relates to margin. One of your Bombay-based peers just released their numbers, and their operating margin is 60%. When I compare your margin, your margins are very low. Since we are backward integrated, I fail to understand why our margins are so low.
Thank you, Mr. Vipul. Like we have been mentioning in our earlier calls and even this call, the majority of the revenue that we are recognizing in this quarter and probably past quarters have been largely joint development projects where the cost increases have impacted in both ways, both for our construction costs and also land costs because land costs is part of the joint development cost. That's one. Second is also our method of accounting is a little different from some of the Bombay-based developers' accounting. Ours is on completion, whereas some of the other peers that we see in geographies like Bombay, it is more to do with percentage completion. There is an accounting difference also. Both these, I think, would reflect the difference in the numbers.
You mean to say you recognize when the project is fully completed?
Absolutely. We recognize revenue once the project is completed and once we hand over the units to the customers.
This is reflective of the sales and embedded margins that we have done in 2020, 2021, and 2022, and not of the sales that we have done and embedded margins that we are reflecting today.
Thank you. Mr. Shah, please rejoin the queue for more questions. Next question comes from the line of Pritesh Sheth with Axis Capital. Please go ahead.
Yeah. Thanks for the question. Thanks for the opportunity again. A continuation on business development. I think we have already spent INR 1,700 crore worth of capital raised through rights issue. Yet, we have a positive cash balance sheet, net cash balance sheet, I would say. Does it make sense for us to be a little more aggressive on business development versus what we have been doing since the last three, four quarters? What would be our target markets specifically? I mean, Bangalore, we do have a pipeline. Does it make more sense to then focus on NCR, Mumbai, which is our new markets where we are looking to strategically scale up our business? Yeah, that's my question.
Absolutely, Pritesh. That's one of the reasons for us to raise capital. That gives us enough leverage for us to do increased business development in the future. As you already also know, the new business development is coming at a much higher cost. We would like to look at margin of safety as well. Given that we need to balance both, we are building a healthy pipeline of new BD. From a geographic standpoint, it is both in NCR, Mumbai, Bangalore, all these three, and a little bit of Hyderabad. All these four geographic markets are where we are continuing to build up a pipeline, and we are making significant progress in all these, which one would start seeing in the coming future.
Sure. Just a second and the last one. On the forthcoming pipeline, I see some changes in the Gurgaon pipeline. We had earlier three projects. Now it shows only one. I think some of them have slipped over to subsequent launches. Is it just a rethinking of the product and we'll probably launch in 2 years from now? In a way, why these changes have come?
The main reason is we have looked at the product mix, and we wanted to make some changes in the product mix. That's why some of them we have moved to subsequent projects. As we, again, put back with the complete design and we start the approval process, we will put them back in the forthcoming.
Thank you. Mr. Sheth, please rejoin the queue for more questions. Next question comes from the line of Pankaj Bhabade with Affluent Assets. Please go ahead.
Thanks for taking my question. Happy Diwali to all. Sir, I would like to ask, I have a couple of questions. First is, you have in your 4th October press release, you have mentioned that our quarterly sales value was INR 1,903 crore, out of which Sobha's share was INR 1,537 crore. Whereas in this quarter, when we reported, the number is INR 1,407 crore. I just wanted to understand what is the discrepancy, what is the difference, what is the reason for this difference? Secondly, in your quarter one, you had mentioned that you would be growing at around 30% this year, that is in FY 2026, and over FY 2025, that is around INR 4,000-odd crore of top line. In FY 2027, you will be reaching around sales in the region of INR 10,000-odd crore.
In answer to your previous participants, you mentioned that you will be reaching around INR 8,000-plus crore in this year itself. I wanted to understand which of this should we consider. It would be better if you answer these questions first.
Thank you, Pankaj. First, I'll take the second question, which is, last year we did a little over INR 6,000 crore, and INR 8,000 crore is roughly about 33% over that. That's what we are aiming at. Largely, it's consistent with what we have been seeing every year, which is essentially growth over the last year and the previous year, which is roughly about INR 6,400 crore. Hence, the numbers that we are talking about in terms of percentage growth are similar. Coming to your specific question related to the Sobha share, not very clear on your question related to the Sobha share, but if our investor relations can reach out to you and clear that number, that would be better.
Sure. My final question is, is the worst behind us as far as legacy project is concerned, given the margins which have been tapering, which have cropped out now?
We see going forward, our margins reaching a previous high?
Yeah, absolutely. We are very confident of that. It's a reflection of, because in real estate, we already know what the revenue that's going to be recognized. We do have INR 18,000 crore of unrecognized revenue from the sales that we have already done. We know what the costs associated with those are. We are reasonably confident of delivering within those costs. Once those cost parameters are met, and once we start delivering these projects, we should start hitting much higher margins subsequently. The timing of that, project level margins are dependent on the project completions. As we gather pace in terms of project completions this year, and specifically from next year, some of the higher margin projects completions come in, the mix would definitely move towards the large, higher project margin, margins. Hence, that will be reflected in the overall P&L.
What can be the tentative margins for 2026 and 2027 on operating level, EBITDA margins?
I would not like to get into exact number at this stage, probably.
If you would, it would be fine if you give a range, 20s, 30s?
At our project level currently, we are at about over 20% on the gross margins. We should be able to increase it, move towards 30% subsequently, which is probably next year. We should start to move towards that. We have not yet estimated what exactly would be that. We can do that, and we'll be able to clearly state it out or have a view of that towards the end of this year.
Thank you. On behalf of Sobha Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.