Home / Markets / Mark To Market /  Stellar response to luxe project Arbour comes as booster shot for DLF

Buyers of luxury residential properties tend to be immune to rising home loan rates. DLF’s announcement to the stock exchanges on The Arbour project in Gurugram is testament to that. On Thursday, DLF said it clocked pre-formal launch sales worth about 8,000 crore of the luxury high-rise residences project. This comprises five towers with 1,137 homes priced at 7 crore onward per unit.

“While the earnings impact from a revenue perspective from The Arbour project will come over a period of time, near-term cash flows will improve," said Parikshit Kandpal, institutional research analyst at HDFC Securities Ltd.

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Graphic: Mint

The project marks DLF’s foray into Gurugram’s micro market of Golf Course Extension. It’s worth mentioning that the company has said more than 95% of the buyers are individuals who have bought into The Arbour for their end usage. “We highlight that social media and sales channels were abuzz, with strong sales from the project by end-February, the company has formally made the announcement only now," said analysts from Kotak Institutional Equities.

Despite rising interest rates, the mid and premium residential categories have shown resilience with listed companies reporting robust pre-sales in recent quarters. In the nine months ended December (9MFY23), DLF clocked pre-sales or advance bookings of 6,599 crore. “But with this kind of pre-sales, the base for next year will be higher, making sustainability of sales momentum crucial," added Kandpal.

To be sure, for now, this has helped the stock stay on firm ground. So far in CY23, DLF’s shares have been flat; however, the Nifty Realty index has declined by almost 8% during the period. A relatively higher exposure to the luxury housing segment is aiding the stock, along with the company’s focus on paring debt. But a meaningful upside from the current levels could be slow.

Kotak’s analysts point out, strong sales should prompt DLF to lay down its plans for the next leg of land monetization, which is a key catalyst for stock performance.

“Continuing monetization of the residual land bank could add incremental value to the company—we expect to see strong activity on this front in the next few quarters," said the Kotak report dated 16 March. Factoring in accelerated sales from The Arbour in its estimates, Kotak has revised DLF’s fair value to 430 per share from 400 per share.

On Friday, DLF’s shares closed 4.2% higher at 375.25 apiece on NSE.

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