Markets
DLF builds on robust luxury home demand
Summary
- DLF is among the key beneficiaries of the ongoing sector consolidation, which has also bolstered its balance sheet
Buoyed by a robust demand for its properties in the ongoing fiscal year, real estate developer DLF Ltd has raised the pre-sales bar higher for FY25. It has already surpassed its pre-sales (bookings) target of ₹13,000 crore for FY24 within nine months of the year by clocking ₹13,316 crore, helped by new launches.
Thus, HDFC Securities now expects FY24 pre-sales at ₹15,000-16,000 crore. “Post this performance, concerns may emerge on FY25 pre-sales, which may be mitigated by a strong FY25 launch pipeline of ₹32,000 crore, of which ₹24,200 crore is earmarked for the luxury segment," said the brokerage in a report.
In FY25, DLF plans to launch 10 million square feet (msf) projects. These will include a super-luxury project in DLF Phase V and the Privana South Phase 2 project in Gurugram; luxury projects in Chennai and Goa; Phase I of the Mumbai project; and projects in Panchkula. The Mumbai project is an SRA (slum rehabilitation authority) one under the joint development agreement model. Given the elevated competitive intensity in the Mumbai Metropolitan Region and challenges relating to SRA projects, investors would be better off tracking progress here. For now, DLF seems to be in good shape. The company is eyeing what it calls a moderate 15% pre-sales growth in FY25.
“Strong new-launch pipeline guidance drives our FY24, FY25 and FY26 pre-sales estimates up by 2%, 9% and 12%," said Jefferies India’s analysts. The brokerage has also raised its earnings estimates for DLF for FY25 and FY26 by 2% and 5%, respectively.
In the December quarter results (Q3FY24) announced last week, DLF recorded its highest quarterly bookings of ₹9,047 crore, helped by three new projects totaling over 5 msf across multiple segments. The launches during the quarter were DLF Privana South, Gurugram- a luxury high rise development; Central 67, Gurugram–a shop-cum-offices plotted development; and The Valley Orchard, Panchkula-low-rise independent floors.
DLF witnessed healthy demand momentum across all these products and both projects in Gurugram were completely sold out in record time, the management said. This has led to lower inventory levels. Consequently, DLF also achieved its highest collections of ₹2,500 crore, giving its net cash position a boost.
In the commercial segment, after the recent relaxation in SEZ (special economic zone) rules, which allow for floor-wise conversion to non-SEZ buildings, DLF has already applied for conversion of 1.1 msf of space to non-SEZ. The approvals for conversion are expected by March/April. DLF will start marketing the space in March. Overall, the management is confident that the SEZ vacancy will return to normalcy within a few quarters. The potential improvement in occupancies should aid rentals.
Meanwhile, thrilled investors have piled into DLF shares, lifting them by a whopping 115% in the past year, comfortably beating the Nifty Realty index. The ongoing momentum in demand for high-end/super luxury residential property has aided sentiments. Further, DLF is among the key beneficiaries of the ongoing sector consolidation, which has also bolstered its balance sheet. Needless to say, the trajectory in new launches and sustenance of demand momentum in the luxury segment will be crucial triggers for the stock. On the flipside, some factors could spoil sentiments. “DLF has a long‐gestation land bank of 187 msf which could take more than two decades to monetize," said Nuvama Institutional Equities. It added that around 60% of DLF’s total land bank is concentrated in the National Capital Region, which exposes the company to concentration risks.
