DLF to launch more mid-income projects

DLF to launch more mid-income projects

BS REPORTER Mumbai, 1 May

http://zameen-zaidad.com/dlf.aspxDLF, the country's largest real estate developer, plans to launch more mid-income housing projects in Kochi, Bangalore and Hyderabad, among other cities, and divest stakes in some hotel projects to generate liquidity in the current fiscal, a top company official has said.

The company's net profit has fallen 93 per cent in the fourth quarter of 2009, due to slowing sales and price cuts it offered to customers.

"Somewhere, prices and rates had gone very high but now things are fine. There is sufficient demand for homes if you price them correctly. We have proved it by selling 1,350 homes in a day in New Delhi," said Rajeev Talwar, group executive director, DLF, which had 36 million square feet under development by the end of the fourth quarter.

The company had to take a revenue hit of Rs 688 crore and pare its profit before tax by Rs 302 crore in FY 2009 due to price resets.

Analysts, however, say price cuts will not help in the long run as buyers anticipate more cuts. "DLF's strategy of leading price cuts in the residential segment has helped revive volumes, but we believe the initial positive response will peter out as buyers look for further price cuts. The double whammy of narrower margins and elongated working capital cycles will translate into an 82 per cent fall in housing profits in 2008-10," international stock brokerage CLSA said in a recent report.

DLF was also planning to sell some of its hotel projects to generate funds, Talwar said. The company has 41 hotel projects, out of which nearly 22 are under construction in various parts of the country.

DLF has also received an advance of Rs 800 crore from group company DLF Assets (DAL), which raised the money through lease rental discounting on leased properties.

In the fourth quarter, DLF suspended the sale of its commercial assets to DAL and said it had not fully completed the originally proposed volume of delivery. The company has already booked Rs 5,450 crore revenue from sale of the 5 million sq ft it has sold to DAL.

DLF said it had appointed independent directors to evaluate options after the suspension of sales and these directors had appointed advisors to facilitate the initiatives.

CLSA estimated that nonresidential sales of DLF would fall 94 per cent in FY 2010 given the severe slowdown in the office and retail space.

Analysts feel that first quarter of FY 2010 will be better than Q4 of FY 2009 as the company has removed the reset clause in the sale of new properties and revival of demand in residential properties.

Courtesy BS: 2/5/09

ABSENCE OF INDEPENDENT ASSET VALUERS MAY DELAY LAUNCH OF REALTY FUNDS

REALTY MFS HIT A RATING BLOCK

A year after the market regulator, the Securities and Exchange Board of India (Sebi), cleared the deck for real estate mutual funds, some players are showing interest, but the market may have to wait longer for the first realty fund in the absence of independent asset valuers.

While issuing guidelines for real estate mutual funds (REMFs), Sebi had asked rating agencies to make a list of accredited valuers. The market regulator is yet to hear from the rating agencies, people familiar with the matter said. "There is still no clarity as to what progress rating agencies have made in this regard," said a Sebi official.

As per the guidelines, real estate fund managers have to take the services of a rating agency with accredited valuers to rate the assets. The valuation has to be done by two external valuers and the lowest value suggested by them will be taken into A/c. The assets in cities specified by Sebi will be rated by valuers once in 90 days.

Top fund houses such as HDFC MF, ICICI Prudential and SBI Mutual Funds as well as a few real estate developers had expressed their desire to float funds that invest in live real estate assets such as apartments and commercial real estate. But adverse market conditions and the crash in real estate prices have forced them to go slow on their plans to launch REMFs. "By end-2008, real estate became a sector no one wanted to touch even with a barge pole. We do not think we'll be able to collect money to invest in real estate for the next two years," said the chanel head of a fund house that wanted to launch a REMF. A year later, two real estate developers -HDIL Constructions and Kumar Housing Corporation -have come forward and sought Sebi's permission to float REMFs. The regulator recently asked them to make presentations regarding the finer details of the fund, said a person familiar with the matter.

These companies were asked to elaborate on aspects such as the conduct of fund, safe-keeping of investor money and payout details, he said, requesting anonymity.

The process of getting an in-principle approval will take up to a year, while it will take up to two years before the proposals get the final approval, he said. According to real estate developers, the regulator is not keen to allow builders start REMFs on their own, even though the guidelines state that any real estate firm with five-year project experience can set a trustee board and start a fund.

PARSVNATH, OMAXE PLAN QIP ROUTE

Senior executives at the two companies, who asked not to be named, said separately plans were being firmed up by them to raise between Rs 1000-2000 crore each through the qualified institutional placement (QIP) route.

The two firms did not respond to separate ET queries asking them to comment on any QIP plans, although analysts said it would not be surprising if they took advantage of the rising appetite among investors for real estate stocks.

Earlier this week, Indiabulls Real Estate successfully raised Rs 2,656 crore through the QIP route, the third company to have raised funds in recent weeks. Last week, promoters of the country's largest real estate firm DLF sold a 9.9% stake in the company and raised Rs 3,860 crore. Unitech was the first to do a QIP in a turbulent market last month and raised Rs 1,600 crore.

Shares of Omaxe and Parsvnath closed 20% higher on the BSE at Rs 84.75 and Rs 75.15, respectively, on Wednesday, contrasting a 1.69% drop in the benchmark 30-share BSE index. Parsvnath's shares are up 57% since last Friday, with Omaxe having risen 51%.

Courtesy:- ET dt:- 21-05-2009