DLF Plans to sell non-core assets for Raising Debt.


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DLF
, India’s leading real estate developers, plan to raise an amount of Rs. 2700 cr. this financial year by selling non-core assets in order to reduce its debt of over Rs 16,421 cr. by about 33%.

The realty giant plans Rs. 5000 cr. to be cut from its debt. Out of these, Rs. 2700 cr. will be raised from sale of non-core assets and the left over from internal accruals. Last year, DLF could raise only Rs. 1800 cr. from sale of non-core assets while it planned for Rs. 5500 cr.

This fiscal, DLF has to compensate Rs 2,500-2,700 cr. in debt and also an interest of Rs. 1800 cr. Also, officials believe that this Divestment of non-core assets is not just a means to reduce debt but is a strategy to focus more on the core business operations.

Rs. 7,855 cr. was the overall revenue during financial year 2009-10 which is reduced by 25% as compared to Rs. 7,855 cr. in financial year 2008-09. The firm sold an area of 12.55 million sq ft across the world in the last fiscal.

Hilton International To Expand Base In India

The US-based hospitality major Hilton International Co is thinking of bringing more of its global brands, including luxury chains Waldorf Astoria and Conrad, to the country.

I think it's smaller
Photo by Melkir
The company is willing  to expand its base in India particularly after it got into a joint venture with real estate major DLF in 2006-07, in which the American chain holds a 26% stake. At that time, the JV had announced plans to invest $ 1.5 billion to open 50-75 properties across the country over next few years. Now it is believed that the company has sought permission to either invest or acquire stake in other Indian hospitality firms as well.

According to some official sources, Hilton International Co had sought an approval from the Foreign Investment Promotion Board (FIPB) to allow it to bring forward more brands such as Doubletree and Hampton by Hilton, Waldorf Astoria and Conrad which was deferred by the FIPB in its meeting held last month.

It had sought a change in existing approval by the FIPB, under which it operates a joint venture with DLF for running four of its brands in India. The brands include the serviced apartments under the Hilton Residences and Homewood Suites and serviced segment Hilton and Hilton Garden Inn.

In its application to the FIPB, the hospitality major also sought permission to invest in or acquire equity stake in other Indian companies, which are into hospitality and tourism sectors.

“The existing JV remains on track. The new partnerships will be for its other brands that it intends to bring to the country,” the sources from the company said.

Hilton Worldwide has global revenue of over $ Eight billion and currently operates over 3,200 properties across 80 countries. It owns, manages or franchises a portfolio of over a dozen brands.

Hilton currently operates 2 hotels in Delhi. One of which is under the JV and the other under a franchise agreement with a local partner.

With so many world’s leading corporations coming to India in the year ahead the country’s economy is on  a roll.

Realty Promises a more Cautious 2010

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Indian developers are looking forward to more feasible studies of any project before actually launching them so that they can avoid the excesses that resulted in the real estate downturn in 2009.

They are sending out a message that antagonism in the market will not be accepted any more and gigantic projects will be replaced by developments that buyers want rather than speculators.

Some fairly new measures will be taken in such a sector dominated by family-run businesses. According to property consultants they are entering into strategic alliance for labour and raw material, appointing project management consultants, and outsourcing construction work for faster delivery.

Aditi Vijaykar, executive director (residential) at Cushman and Wakefield India said,‘Builders are back with a bang but not an aggressive one. They want to try out new locations for projects and are trying to test a product before launching it’.

India’s largest developer by market value, DLF, will not buy land in current year and the next neither it will launch any new projects until and unless it has regulatory approvals. Presently the working capital model of DLF will depend on cash flow from pre-sales, customer advances and bank debt. Though it is not that easy to stop abstract buying, but a system like one home per family is required.

The realty sector is now conducting feasibility studies on the sizes and pricing of homes to ensure the right profile for its projects which was rarely done in previous years. Developers are also looking at special purpose vehicles or joint ventures instead of purchasing land outright. The real estate firms are also raising money though initial public offerings are aiming to use the funds for ongoing and proposed projects or to retire debt. This is extremely different from what it was done in 2006 and 2007 when everybody was interested in making money.

Parsvnath Developers wants to construct around 45 million square feet of space in the next 24 months and build around 1.25 million square feet in the last quarter. There is a need for the developers to ensure a rational profile for their projects.
Ramesh Jogani, managing director and chief executive of Indiareit Fund Advisors recommended that there is no need to build a 30 to 40 storey tower but just offer a mid-range quality product.

2BHK is in trend

The maximum demand currently is for 2BHK residential apartments and finally supply is following demand. Such has been the response that there are developers who claim as much as 55% of their inventories comprise two bedroom units.

According to Atma Sharan, GM-Marketing, Ashiana Housing Ltd, “About 55-60% inventory would be 2BHK. This definitely is the fastest moving segment, particularly among first home buyers.

The 2BHK end user is attracted by the price tag, affordability factor, and lower EMIs. Developers who were primarily focusing on plush housing earlier are including smaller units in a big way in their projects. They are coming up with new initiatives in this line which is expected to attract the young service class people in a big way. So, be it DLF, Unitech or Jaypee, they all have at least 30% inventories as two bedroom units in their projects and plan to increase the percentage with time.

All apartments sold within 2 hours

DLF has launched the 2nd phase of its residential project in the heart of national capital, has sold all the apartments within 2 hours. The company sold all the flats, offered at prices of up to Rs 1.86 crore, though it has increased the selling price of its units by up to 26% compared to 1st phase.
TC Goyal, MD- DLF said, “Even with increased price, we have received tremendous response for our product. We initially planned to launch six hundred fifty units in 2nd phase, but due to huge demand we planned to offer more”.
The company has launched 2nd phase of the project at Rs 6,750 (2-BHK), Rs 7,500 (3-BHK) and Rs 8,000 (4-BHK) per square feet.
However, the effective rate would come down to Rs 5677, Rs 6363 and Rs 6820 per square feet respectively as DLF would offer a discount of five hundred rupees per square feet for timely payment and 8.5% rebate on down payments.

Real estate recovery is now visible

As we all know that property buyers are coming back to market, this time can be marked as market revival time. Once again the buyer has lots of choices and the seller has more profit from dealing. After observing the increase in demands in real estate industry, developers are all set to increase the prices of realty projects. If we talk about real estate companies, almost every company including DLF, are working on the same strategy.

With the wish to see real estate at its best in near future, I hope that the buyers will have more and more choices available to fulfill their needs.

DLF drops mall proposal

DLF has dropped its plans to develop a mall on upmarket Commander-in-Chief Road in Chennai due to the ongoing economic recession.

The company has now sought permission to develop the land as a premium residential project. DLF Southern Homes director KK Raman said, “We have completed the design process. We are awaiting approval to announce the launch of our residential project during October-November 2009”.

Sometime in 2005, DLF Commercial Developers acquired the 4.41-acre property from German major Mico Bosch for about Rs 138 cr and had intended to develop it as a retail-cum-office complex. Later, it revised the plans and applied for a multi-storeyed building status, hoping to develop the property as a mall.

Now, for the second time, the company is revamping its plans. It has approached the Chennai Metropolitan Development Authority to permit its reclassification so that the land can be developed as a residential project.

DLF to sell more land and wind power business

Debt-ridden realty player DLF said that it will sell more land and wind power business this financial year to raise Rs 1,900 crore and lowered the sales figure for flats.

With a total debt of over fourteen thousand crore rupees to start the year 2009-10, DLF had been doing everything conceivable, including sale of promoters’ equity in the company as also different projects. DLF has sold 2500 flats during 3 months ending June.

Rival Unitech on the other hand has been able to bring down its debt to below Rs 5,000 crore and today it is believed to have some cash surplus.

Both DLF and Unitech shares appreciated by 11.44% and 8.62% to close the day at Rs 330.10 and Rs 70.60 a share respectively.

As part of its management of debt, DLF sold Rs 1,000 crore worth of land during April-June period and is planning to garner 900 crore rupees to part-repay the debt by exiting its wind power business.

DLF to sell stake in JV to raise fund

Ritz-Carlton Hotel, CharlotteDLF is looking to raise Rs 300-500 crore by selling its stake in a JV with Mumbai-based realtor Akruti City for a commercial project in Andheri.

DLF has already scrapped a 5 star hotel project in Prabhadevi in Mumbai with Akruti. DLF was the majority stakeholder in the project. DLF has been looking to monetise its non-core assets to raise funds over the next one year to pay off its debt.

The company had net debt of Rs 13,958 crore, of which Rs 3,591 crore is due for repayment this fiscal. The developer has also put its wind power business on the block and is expecting to collect about Rs 900 crore from it. DLF said it would reduce its outstanding debt by half in this financial year by raising about Rs 5,500 crore through assets sales, plot sales and cash flow from the business.

Mumbai is the next target for DLF and Unitech

Mumbai seems to be the next destination for realty giants DLF and Unitech. Both companies are trying to restart some of their projects in Mumbai which were on hold.
Unitech, said, “We have a number of slum redevelopment projects in Mumbai. We also have a focus on affordable housing and some projects will be announced by the end of 2009.” A company official said that the focus would now be on residential projects and prices would be lower than the current market rates.

DLF plan could hit barrier

Plans by the promoters of top real estate company DLF to buy out hedge fund DE Shaw’s investment in family-owned DLF Assets (DAL) could hit a roadblock because of a little known rule in the country’s foreign exchange laws.
Under a ‘put’ option signed between DE Shaw and three companies controlled by DLF-promoter KP Singh’s family in May 2007, the US-based fund, which invested $400 million in convertible preference shares of DAL, could exit its investment and get a fixed return of at least 27%.
As per the ‘put’ option with DLF Investments, Kohinoor Real Estates and Buland Consultants, DE Shaw is supposed to get back around Rs 2,500 crore after forex adjustments. But FEMA classifies all equity investments that carry a fixed return as debt, which could bring DE Shaw investment under the purview of external commercial borrowing (ECB) guidelines.
With ECBs not allowed in the real estate sector, investors holding convertible stock with fixed returns could find their exit option blocked.