Slowdown had a sobering effect on DLF’s meteoric rise in the early years of this decade. With a new look and renewed vigour, the company attempts to claw its way back to its glory days. by Virat Bahri
Demand in the commercial segmentis still lacklustre. Around 60 msf of the 200 msf planned between 2009-11 have been delayed or are in cold storage. Anuj Puri, Chairman & Country Head, JLLM comments to B&E, “We will continue to see a supply overhang in the medium term (in commercial space). On a more positive note, rental values have corrected up to 40% across markets, and have in fact reached 2005-2006 levels in many geographies.” DLF plans to lease out 3-4 msf of commercial space in the current fiscal and focus heavily on execution of existing projects. Retail isn’t too robust either, with supply in 2010-11 expected to be 16.4 msf and absorption at around 54.3% (JLLM). DLF’s present impetus here is towards ensuring 100% occupancy in existing operational malls.
DLF’s share price of Rs.287.85 as on June 22 is a far cry from Rs.1000 plus levels in late 2007 and early 2008. It wouldn’t otherwise be a problem for now, but for the recent government ruling making it mandatory for listed firms to have 25% public stake holding (DLF promoters will have to dilute 3.64%). Companies like DLF are looking for a more flexible time frame to offload stake, to be able to extract maximum value. As that debate rages on, the company is on its way to script an optimistic, yet measured turnaround. And for that, residential is its most convincing bet as on date.
“luxury is back”
Anuj Puri
Chairman & Country Head, JLLM
B&E: How is the shift towards non-urban and affordable housing shaping up?
AP: There is a strong revival in residential real estate, particularly in the primary cities. Mid-income/affordable housing seemed to be going strong two quarters ago, but the scenario has changed now. One, middle-income and even luxury homes are selling again and developers are once again focusing on this segment, which presents them with higher profit margins. Two, it is difficult for builders to develop affordable housing in meaningful price ranges within larger cities due to high land prices. There isn’t much incentive for them to cater to the budget home segment if they cannot make a profit on such projects in central regions. Much depends on the Government, which must either promote re-development of old buildings or provide world-class infrastructure to distant suburban locations where the population could reside while continuing to work within the city.
B&E: Any downside risks that you see for the sector as a whole?
AP: There are doubtlessly some concerns about the European sovereign debt problems and their possible negative impact. This is a reasonable concern, but only to the extent that merchandise and software services exports to Europe may be affected. On a more positive note, there is a possibility that global firms of European origin may now consider investing in growing markets like India.
Demand in the commercial segmentis still lacklustre. Around 60 msf of the 200 msf planned between 2009-11 have been delayed or are in cold storage. Anuj Puri, Chairman & Country Head, JLLM comments to B&E, “We will continue to see a supply overhang in the medium term (in commercial space). On a more positive note, rental values have corrected up to 40% across markets, and have in fact reached 2005-2006 levels in many geographies.” DLF plans to lease out 3-4 msf of commercial space in the current fiscal and focus heavily on execution of existing projects. Retail isn’t too robust either, with supply in 2010-11 expected to be 16.4 msf and absorption at around 54.3% (JLLM). DLF’s present impetus here is towards ensuring 100% occupancy in existing operational malls.
DLF’s share price of Rs.287.85 as on June 22 is a far cry from Rs.1000 plus levels in late 2007 and early 2008. It wouldn’t otherwise be a problem for now, but for the recent government ruling making it mandatory for listed firms to have 25% public stake holding (DLF promoters will have to dilute 3.64%). Companies like DLF are looking for a more flexible time frame to offload stake, to be able to extract maximum value. As that debate rages on, the company is on its way to script an optimistic, yet measured turnaround. And for that, residential is its most convincing bet as on date.
“luxury is back”
Anuj Puri
Chairman & Country Head, JLLM
B&E: How is the shift towards non-urban and affordable housing shaping up?
AP: There is a strong revival in residential real estate, particularly in the primary cities. Mid-income/affordable housing seemed to be going strong two quarters ago, but the scenario has changed now. One, middle-income and even luxury homes are selling again and developers are once again focusing on this segment, which presents them with higher profit margins. Two, it is difficult for builders to develop affordable housing in meaningful price ranges within larger cities due to high land prices. There isn’t much incentive for them to cater to the budget home segment if they cannot make a profit on such projects in central regions. Much depends on the Government, which must either promote re-development of old buildings or provide world-class infrastructure to distant suburban locations where the population could reside while continuing to work within the city.
B&E: Any downside risks that you see for the sector as a whole?
AP: There are doubtlessly some concerns about the European sovereign debt problems and their possible negative impact. This is a reasonable concern, but only to the extent that merchandise and software services exports to Europe may be affected. On a more positive note, there is a possibility that global firms of European origin may now consider investing in growing markets like India.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
“We will change your outlook” - The Sunday Indian on B-SCHOOL RANKING SCAMSTERS EXPOSED! A must read...
The Sunday Indian:-
B-SCHOOL RANKING SCAMSTERS EXPOSED!
For Exclusive Footage by Sunday Indian Click Here
Outlook Magazine's B School Ranking Scam Exposed
Business Standard Exposes the Outlook Magazine Money Editor
Don't trust the Indian Media!
IIPM enters into media education
IIPM makes record 10,000 placements in five years
TSI exposes b school ranking scamsters Mahesh Peri of Career 360 and Premchand Palety of C fore. - For Complete Sting Operation Video Click Here
Pioneer Exposes the fraud called Mahesh Sharma and Mahesh Peri of Career 360 and Barbel Schwertfeger of mba-channel.com
IIPM: An intriguing story of growth and envy
Prof Arindam Chaudhuri of IIPM on MF HUSAIN
No comments:
Post a Comment