DLF stalls 2 of its biggest projects

Facing acute liquidity crunch and poor buyer sentiments, the country’s biggest property developer, DLF, has stopped work at two of its biggest mid-income housing projects. The move comes after the developer stalled at least a quarter of its commercial projects.

The New Delhi-based builder has halted construction at DLF New Town Heights in Gurgaon Sector 90 and Express Greens in sector M1 in Manesar, both in Haryana. The two projects were launched in January and August 2008, respectively.

Even after a year, the company has merely begun some basic work at its New Town Heights project, according to a report by Nomura Financial Advisory and Securities. In the Town Heights project, DLF has merely undertaken excavation work while in the Express Greens project, the company has just marked the boundary with its bill boards, the report said.

According to sources, the company has sold most of its apartments in New Town Heights in the first few months, offering 3 and 4 BHK apartments at Rs 2,125 and Rs 2,505 square feet, respectively.

However, sales in the Express Greens that offers 3 and 4-bedroom apartments for Rs 1,760 and Rs 2,125 respectively have not been very good. DLF did not respond to a detailed questionnaire sent on Friday.

DLF’s third quarter profit has dropped by 69 per cent to Rs 670.79 crore. The developer has stalled work on nearly 16 million square feet of office and retail mall space out of the 62 million square feet under development.

“All big developers have invested future earnings from soft launches in buying land for future projects. With the demand for new projects drying up, they don’t have money to complete the pre-sold projects,” said an analyst.

However, buyers who have booked houses at the DLF projects may be partly compensated if DLF fails to complete the project in 36 months after the launch, a company official, who declined to be identified, said. The company’s debt has spiralled by Rs 1,500 crore to reach Rs 14,800 crore in the third quarter of FY09, compared to the previous quarter, according to sources.

DLF had recently announced that new mid-income housing projects in Panchkula, Gurgaon, Hyderabad, Bangalore and Chennai to cater to the increased demand in this segment. However analysts say if the company could not start construction on its already sold mid-income housing projects, it is unlikely that the company can come up with any new projects.