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New launches to drive residential growth ahead

Office portfolio scale-up on track; Retail portfolio to double in the next 5-6 years

DLF hosted its Analyst Meet on 26-27th May’22 to showcase its completed and ongoing developments in Gurugram, New Gurugram and Delhi and share the outlook on its residential, commercial and retail segments. The key takeaways are mentioned below:

High quality land in supply-constrained markets enabling pricing power

DLF owns a large parcel of land in Delhi and Gurugram’s established markets (such as West Delhi and DLF City), and other key emerging markets along the southern Peripheral Road and Gurugram-Manesar master development plan (New Gurugram). With a large part of land in these markets being privately owned, new supply is likely to remain constrained. DLF’s history of execution along with its best in-class offerings and amenities in these supply-constrained markets enables: (1) premium positioning with its projects being available at around 20-70% premium (corroborated through our channel checks) to its next door peers, and (2) strong pricing power.

Cautiously targets double-digit growth in the residential segment

DLF’s pre-sales figure in FY22 came in at INR73b, which rose 136% YoY and was the highest ever in the last 10 years. Ultra-luxury Camellias project contributed INR25b to FY22 pre-sales while 6msf of new launches accounted for INR47b of pre-sales. For FY23, DLF expects double-digit growth in its pre-sales primarily driven by 7.6msf of launches. The contribution from Camellias is likely to decline with only INR22b left in the inventory part of which is earmarked as serviced residences. Ex of Camellias, DLF expects to grow its pre-sales by 45% YoY.

Scale-up in office portfolio on track; REIT not a compulsion

Progress on the company’s two Downtown projects in Gurugram and Chennai remains on track as the first phase (1.7msf) is likely to be delivered in 1QFY23E and construction has commenced at phase 2 – Block 4 (2msf). Standard Chartered’s block (1msf) at Downtown Chennai will be delivered in May’24E while Phase-1 (2.3msf) will be completed in May’23E. Apart from the downtown projects, DLF’s standalone entity is also executing: a) a Tech Park at Noida (0.8msf) that will be delivered in Sep’22E and b) an office complex (Atrium Place, 2.9msf) in Gurugram under a JV with Hines that will be completed by 4QFY24E. As indicated in the 4QFY22 results call, exit rentals at end-FY23E will be INR44-45b. While DLF is preparing its portfolio to be REIT ready, the eventual decision will be taken by both shareholders of DLF and GIC.

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