At a time when the realty market is in a sluggish patch, Monday’s ruling by market regulator Sebi restraining DLF from raising funds for three years could force the realty major to cut prices or offer flexible payment options to actively woo buyers, analysts said.
DLF is the dominant player, and its approach dictates the market trend. “If it ends up selling land and development projects and ongoing projects at a discounted rate, it will have an impact on the overall real estate-market sentiment,” said a real estate consultant, who did not wish to be identified.
The non-resident Indian market may also see a decline of around 5-10%.
Smaller developers may face the brunt as cash flows are stretched. The real estate market as a whole, including DLF, has been witnessing low sales in the residential segment. For DLF the sales were 25% down in the April-June quarter at Rs 1,725 crore, against Rs 2,314 crore a year ago.
Many brokers in the NCR market said they had been hoping the festive season would improve the market sentiment, but Sebi’s ruling has come as a blow. DLF commands nearly 60% market share in the Millennium City, Gurgaon.
Over the last few years the company has sold the luxury hotel chain Aman resorts, sold off 17 acres of prime land in Mumbai to Lodha Developers and exited its wind energy projects in Tamil Nadu and Rajasthan.
If it now decides to raise capital by launching new projects in its existing land parcels in Delhi-NCR, it still has the option of raising money through the private equity route.
It may also try and take the FSI (floor space index) route and join hands with another developer, rather than sell its land in NCR, said a real estate expert on the condition of anonymity.
The company might also need to dig deep into its commercial properties put out on rent, analysts said.
“The saving grace in its portfolio are assets that earn annual rentals of more than Rs 2,100 crore. It can always — in the worst case scenario — sell these income-producing assets to generate more than Rs 20,000 crore, which is equal to their total debt,” said another consultant.
DLF has about 21 million sq ft of leased assets across the country.