DLF stalls a fourth of its projects

DLF stalls a fourth of its projects
Business Standard, February 03, 2009, Page 6

BS Reporters / New Delhi/ Mumbai

DLF, the country’s biggest real estate player, has suspended work on more than a quarter of its commercial projects in a bid to save costs as demand for homes and offices slows.

The Kushan Pal Singh-led realty major has halted construction work on nearly 16 million sq ft of office and retail mall space out of the 62 million sq ft of planned construction. In the office space, the developer has stalled construction on nearly 12 million sq ft of office space out of the 36 million sq ft of space being planned.

DLF Vice-Chairman Rajiv Singh said the projects will remain suspended until its finances improve and there is a demand push.

The disclosure comes amid a 69 per cent drop in the company's consolidated third quarter profit to Rs 670.79 crore. The real estate developer’s move to limit its expansion to save cash hasn’t helped it control debt, which spiralled by Rs 1,500 crore to reach Rs 14,800 crore in the quarter compared to the previous quarter, sources said.

DLF is now in talks with public sector banks to substitute Rs 4,000 crore short-term debt with asset- backed long-term debt in next six months. The company has already substituted Rs 1,000 crore worth debts with long-term debts with a maturity period of 2 to 5 years, Rajiv Singh said. Another Rs 2,000 crore will be raised during the current financial year, he added.

The credit crisis in DLF worsened after receivables from DLF Assets (DAL), a group company that purchases bulk of the office space from DLF, mounted due to reduction in demand for leased office space. DLF’s total outstanding debt is over Rs 15,000 crore of which Rs 2,250 crore is expected from DAL during the January-March quarter.

DAL has so far been unsuccessful in its attempts to raise over Rs 2,500 crore from private equity players.

Stating that DAL’s private placement will happen very soon, Singh said DLF has suspended future sales to DAL. The company has also put on hold development of 2-2.5 million sq ft office space due to the demand slump.

“Given the softness in demand for leased office space, the balance delivery to DAL will be substantially delayed,” Singh said.

The continuing uncertainty in the credit and liquidity conditions has also compelled DLF to tighten its cash outflow by putting several of its new projects on hold.

Realtors to cut rates
New Delhi-based real estate developers DLF and Parsvnath plan to cut property prices by as much as 15 per cent in the next few months to boost sales. The cut comes as part of their plans to launch affordable housing project to lure buyers. Referring to slowing sales, Rajiv Singh, VC, DLF, said the cut in prices will be visible in the next three months. The developer has already cut prices in Hyderabad. The new projects are expected to be at least 10-15 per cent cheaper than similar projects that were announced a year ago, he said.

Parsvnath promoters pledge 10% shares
Pradeep Jain, founder of New Delhi-based real estate developer Parsvnath, said he had pledged 10 per cent of the promoter's shares with lenders to fund expansion plans. He declined to give more details. Jain and his family members own more than 80 per cent of the company. The cash-strapped real estate developer is in talks with banks to restructure its outstanding debt of Rs 1,825 crore. The company is seeking longer repayment tenure with a one-year repayment moratorium, Jain said.