DLF to sell finished stocks to maximise sales revenue

With huge slowdown in housing sales, realty major DLF today said it will complete ongoing projects covering 20 million sq ft of area over the next 12-18 months to create finished stocks and achieve better realisation when housing demand picks up.
The company has an unsold inventory of about Rs 15,000 crore, which include finished stocks and unsold units in the projects launched but under-development, DLF CFO Ashok Tyagi told analysts in a conference call.
DLF also plans to restructure its rental business for monetising office and retail assets comprising 30 million sq ft of area with an annual rental income of Rs 2,400 crore.

The monetisation of rental assets could be through launch of Real Estate Investment Trusts (REITs) or partnership with long-term investors. Final decision on this issue would be based on the report of a committee of independent directors.
"We will focus on executing current projects. We will deliver 20 million sq ft in next 12-18 months," Tyagi said.
The completion of development of 20 million sq ft would create substantial amount of finished stocks, DLF Senior Executive Director (Finance) Saurabh Chawla said.

The strategy is to create finished stocks and wait for the market to improve to achieve higher realisation, he added.

In analysts presentation, DLF said: "Despite muted demand conditions in most micro markets, the company is focused on execution to create finished product. The company believes that this is a superior strategy as compared to launching new projects. Once the demand comes back, the company shall be able to sell completed, finished products".
DLF maintained its sales bookings guidance of Rs 3,500-4,000 crore for this fiscal.
On rental business, Chawla said DLF plans to monetise commercial assets and settle the matter of CCPS (Compulsorily Convertible Preference Shares) held by promoters in a DLF's subsidiary that holds large rental assets.
He outlined the possible options of "launching REITs or setting up of a rental platform with third party shareholders".

However, Chawla said the clarity about the structure of rental business would come after the report of committee of independent directors.
"We are waiting for the committee report which will provide the rights resolution for the CCPS settlement," he said, adding that this exercise should be completed in the next few quarters.
In 2009, DLF had merged its subsidiary DLF Cyber City Developers Ltd (DCCDL) with promoter firm Caraf Builders & Constructions. DCCDL had then issued CCPS worth Rs 1,597 crore to promoters.