India’s largest developer is looking to venture beyond the comfort of its home turf again, but it is treading carefully as it prepares to capture new markets.

Gurugram-headquartered DLF Ltd is eyeing a pipeline of new launches worth ₹1 trillion over the next 5 years, but has no plans to rush into projects unless the margins are attractive, Aakash Ohri, Joint Managing Director and Chief Commercial Officer, DLF Homes, said in an interview with Mint.

Although the National Capital Region of Delhi will remain DLF’s focus, the company is gearing up to launch a project in Mumbai in January-March with apartments priced at ₹6 to 8 crores, Ohri said. DLF is also set to launch a villa project in Goa and a residential project in Panchkula in Haryana, with apartments priced at ₹3 to 5 million.

“DLF is not in the rat race of just producing and launching products for the sake of launching,” Ohri said. “We ensure that there are products with margins and products that will keep our customers’ interest intact and alive.”

“NCR will always be our primary focus. Our hub will continue to be there – and there is phenomenal growth in the NCR,” he added. “We have a strong focus on retail sales. We don’t want wholesale sales,” he added. “We will carefully select our buyer regardless of demand. It’s a change of strategy.”

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The Delhi-based developer had also planned to enter the luxury residential development space in Chennai last year, as revealed by Ohri during the company’s 2023-December 24 quarter earnings calls with analysts . But in March this year, DLF sold a 4.67-acre plot of land in Chennai for ₹735 crore to Cholamandalam Investment and Finance Co. Ltd, according to a regulatory filing.

“In 2005-2006, the DLF became national. They bought land in Chennai, Mumbai, etc., but very few projects came to fruition. They were in trouble and had to sell some key assets,” said Pankaj Kapoor, founder and chief executive of real estate rating and research firm Laises Foras. “This type of strategy is therefore consistent with their own past learning and is a cautious approach. »

Not without challenges

DLF’s booking momentum faltered in the September quarter. However, the company retained its pre-sales advice for the entire financial year with new launches boosting its bookings, including the super luxury project The Dahlias in DLF Phase 5, Gurugram.

Meanwhile, other prominent developers are experiencing rapid expansion across the country.

Mumbai-headquartered Lodha Group entered Bengaluru in 2022, while Bengaluru-based Puravankara Ltd returned to Mumbai after three decades in 2021. Mumbai-headquartered Godrej Properties Ltd entered Hyderabad last year with two land acquisitions.Mint reported. Emaar India, after launching projects in North India, plans to enter the Mumbai real estate marketaccording to a Hindustan Times report.

Additionally, DLF may struggle to tailor its projects to the unique tastes, lifestyle preferences and economic dynamics of a local market, said Shalin Raina, managing director of residential services at Cushman & Wakefield, a firm real estate services.

Unlike Gurgaon, where DLF has established itself in prime locations, securing premium land in high-demand areas of other cities can pose a challenge, he added.

On a group scale, DLF has a development potential of 220 million m². in all of its development and rental activities. DLF Ltd alone has a development potential of 131 million sq ft (excluding new launches) across India, according to the company’s second quarter presentation to analysts. Of this total, approximately 125 million square feet. the value of developable area is in Delhi-NCR (including new launches).

Free yourself from debt

DLF was collapsing under a regime almost ₹The debt burden stood at `27,000 crore in the second quarter of 2017-18 (July-September 2017), according to the company’s analyst presentation.

The company got some respite when its promoters moved out ₹16,561 crore from its books to DLF Cyber ​​City Developers Ltd in February 2018, Mint reported earlier. DLF’s consolidated net debt reduced to ₹5,513 crore in December 2017 after sale of strategic stakes and monetization of assets.

Last year, DLF’s debt fell to “net zero.”

Additionally, DLF’s net cash position improved significantly, reaching ₹2,831 crores in the last second quarter of ₹142 crore in the same period a year ago.

“DLF has historic land reserves. We monetize them first,” Ohri said. “Today we would say the debt burden is, let’s say, not there.”

A leading renewal

A key factor in favor of DLF, given its focus on super luxury, luxury and high-end projects, is the revival in demand for such residences across India.

High-end accommodation for more than ₹10 million ( ₹1 crore) has emerged as the largest segment, wrote Shishir Baijal, chairman and managing director of real estate consultancy Knight Frank, in a recent report titled ‘Residential and Office Market – January-June 2024’.

This segment represented nearly 41% of sales during this period, he writes.

Read also | For DLF, luxury is the taste of the season

“Markets like Mumbai and Delhi-NCR are at the forefront of this trend, with Gurgaon standing out as a hotspot for luxury product launches, strong sales and significant capital appreciation,” added Raina of Cushman & Wakefield . “Bengaluru and Hyderabad, traditionally mid-segment markets. , have also seen an uptick in demand for high-end and luxury properties recently, signaling a shift in the residential landscapes of these cities. »

Factors such as changing lifestyle aspirations, the growing number of ultra-wealthy individuals in India and continued interest in prime real estate as a reliable investment are likely to support this asks, Raina said.

While he expects growth in the premium and luxury segments to continue over the next few years, Raina added that “sales of large luxury homes (4BHKs) may witness moderation as rates and “higher prices have made these properties less attractive to investors, who make up a significant portion of the market.”