Realty rates to fall by 20% in 3 mths: DLF

Realty rates to fall by 20% in 3 mths: DLF
The Economic Times, February 3, 2009, Page 5

Firm To Raise Rs 2k Cr Via Sale Of Non-Strategic Assets

Our Bureau NEW DELHI

PROPERTY prices will fall further by 15-20% in the next three months, DLF vice-chairman Rajiv Singh said on Monday. India’s largest real estate company, DLF, which reported a 69% decline in profit for December quarter, said it was expecting to raise over Rs 2,000 crore through sale of ‘non-strategic’ assets, including wind power business and land parcels that are unlikely to generate revenue for the next 10 years.

Mr Singh said he expects to raise over Rs 2,000 crore through private placement in the promoter group company DLF Assets(DAL), that buys IT space from DLF. Meanwhile, either of the two investment firms - DE Shaw and Symphony Capital- is looking to exit its investment in DAL.

DLF’s shares fell 13.5% on Monday to close at Rs 153 while the benchmark Sensex fell 3.8%. If there was a potential of 40-45% of price correction from the 2007 level, 30-35% is already factored in and rest would happen in the next three months, by when we will see a drop of maximum 20% in prices from current level, Mr Singh said, clarifying that lower prices will be visible only in the new launches. He said prices in three months will reach an inflation-adjusted level of 1998.

Mr Singh said there was a ‘virtual shut down’ of the markets in September-October. DLF sold only 77 residential units in November and December, against an average 400 units per month. The company says it plans to focus on new home launches in the Rs 20-40 lakh category. “If the product is well priced and well located and if general economic scenario improves, people will start looking to buy property from the middle of the current year,” Mr Singh said.

He says lower prices will bring down its margin from 35% to 25% for non-rental business, which currently contributes around 80% of total profits.

One of the two investment funds—US-based DE Shaw and UK-based Symphony Capital— who have put in money in DLF Assets (a privately- held firm floated by the promoters of DLF), is looking at exiting its investments, DLF vice-chairman Rajiv Singh told analysts in a conference call on Monday. Hedge fund DE Shaw which invested $400 million in DAL in 2007, is widely believed to be the fund looking to pull out of DAL. But this could not be independently confirmed.

“One of the two investors is looking at exiting DAL either at the time of listing or before that,” Mr Singh said, without naming the investor citing non-disclosure agreement. He added that the promoters are considering an IPO for DAL.