Bengaluru: DLF Ltd, India’s largest real estate developer, plans to strengthen its portfolio of rental assets with its partner, Singapore’s sovereign wealth fund GIC Pte Ltd, monetize residential inventory, start the next construction cycle, and improve return on equity (RoE) in fiscal year 2020-21, said a top company executive.
While the residential business will continue to focus on Delhi and its suburbs, its core market, the company has also outlined a pan-India strategy to expand its rental office portfolio across Chennai, Hyderabad and Pune.
DLF currently has a rental portfolio of nearly 33 million sq.ft, of which office space comprises around 29 million sq. ft, and retail shopping centres make up for the rest. The vertical is set to grow by 17-18 million sq. ft, with the launch of new projects, including ‘Downtown’ in Haryana, the mixed-use development with GIC, and an IT park in Chennai’s Taramani.
“...We are commencing the next phase of projects. In Pune, we have land and we are exploring the market. We aren’t present in Mumbai and Bangalore...but we don’t have immediate plans for these cities," said Ashok Kumar Tyagi, whole-time director, DLF, in a telephone interview.
RoE shows how much profit a company generates with shareholders’ money. Tyagi said the aim is to double RoE to about 10% in 3-4 years.
Earlier this year, DLF promoters had infused ₹2,250 crore into the company, the last tranche of the planned investments of ₹11,250 crore, making it one of the largest promoter infusion in an Indian firm. The fund infusion took place after the promoters sold their entire stake in DLF’s rental arm, DLF Cyber City Developers Ltd, for ₹11,900 crore.
On the residential front, DLF plans to accelerate the monetization of its completed inventory, valued at about ₹10,000 crore, within the next three years. It is also entering a new cycle of expansion at certain locations, and has a project pipeline of nearly 16 million sq. ft, according to the company’s investor presentation.
Despite the challenges faced by the luxury housing market, DLF’s high-end project ‘Crest’ in Gurugram has received robust demand.
“...We are considering the next phase of Crest and also thinking what more we can construct in Gurugram," Tyagi added.
With DLF deciding to sell residential projects only after they are completed, it has started construction of the first phase of its 2 million sq. ft ‘Midtown’ project in Moti Nagar in central Delhi.
An ICICI Securities Ltd report said while DLF is on track to achieve its sales guidance of ₹2,700 crore for 2019-20, it also depends on continued sales momentum in its ‘Camellias’ project, which has unsold inventory of around ₹4,300 crore.
Tyagi said 2019 has seen the emergence of two distinct patterns in real estate, with commercial realty doing reasonably well and easier access to finance for building assets as well the successful launch of a Real Estate Investment Trust.
“...However, the residential story is more complex though demand is slightly better. Eachmicro-market is getting split between four and five developers who are doing well, but there is a multitude of smaller developers whose troubles are accentuated by the NBFC (non-banking financial company) crisis," Tyagi said.
“Projects that are stuck and half-complete are a big problem area, and the government’s last-mile financing scheme, in its revised avatar, will make an impact on a significant number of such projects," he added.