Economics Project

The Rise of D.L.F

The real estate giant in India

Group B-7

Submitted By
Dhruv Chadha 09910052867
Shivam Behl
Chirag Vashishta
Rachna Mishra
Amit Kumar
 Index

Introduction
3

Literature Review 5

GENERAL TRENDS IN THE INDUSTRY.

5

Real Estate Giant 7

Demand and supply

13

Impact of recession
17

Conclusion
26

2
 Introduction

Real estate or immovable property is a legal term (in

some jurisdictions) that encompasses land along
with anything permanently affixed to the land, such as
buildings. Real estate is often considered
Synonymous with real property (also sometimes called
reality), in contrast with personal property (also
Called personality). However, in technical terms, real
estate refers to the land and fixtures themselves
And real property are used primarily in over real estate.
The term real estate and real property are used
primarily in common law, while civil law jurisdiction refers
instead to immovable property. In law, the word real
means relating to a thing as distinguished from a person.
Thus the law broadly distinguishes between real property
(land and anything affixed to it) and personal property
(everything else e.g.
clothing, furniture, money).
Real Estate Business Includes: With the development
of private property ownership, real estate has become a
major area of business. Purchasing real estate requires a
significant investment and each parcel of land has unique
characteristics, so real estate industry has evolved into
several distinct fields.
Some kind of real estate businesses include-
• Appraisal – Professional valuation services
• Brokerage – Assisting buyers and sellers in transactions
• Development – Improving land for use by adding or
replacing buildings
• Property Management – Managing a property for its
owner(s)
• Real Estate Marketing – Managing the sale side of the
property business
• Relocation Services – Relocating people or business to
difficult country
Types of Ownership Interests: Real property (immovable

3
property) can refer to the real estate itself or to various
types of ownership interests in real estate, including:
• Freehold: Provides the owner the right to use the real
estate for any lawful purpose and sell when and to whom
the owner wishes.
• Life estate: An interest in real estate which is granted
to a life tenant until that person dies. The interest
terminates upon the death of the life tenant.
• Estate for years: Similar to life estate but term are a
specified number of years.
• Leasehold: The right to posses and use real estate
pursuant to the terms of a use.
• Reversion: The right to posses the free interest in real
estate after the expiration of a life estate, estate for years
or leasehold.
• Concurrent or co-tenancy: The ownership of an
interest in real property by more than one party. Rights of
any single party may be limited in various ways depending
on the jurisdiction and type of concurrency.
Participants of Real Estate Market: The main
participants in the real estate markets are
Owner/User: These people are both owners and tenants.
They purchase houses or commercial property as an
investment and also to live in or utilize as a business.
Owner: These people are pure investors. They do not
consume but rent out or lease the property to someone
else.
Renter: These people are pure consumers.
Developers: These people prepare raw land for building
which results in new product or the market.
Renovators: These people supply refurbished buildings
to the market.
Facilitators: This includes banks, real estate grocers,
lawyers and others that facilitate the purchase and sale of
real estate.
The owner/user, owner and renter comprise the demand
side of the market, while the developers and renovators
constitute the supply side. In order to apply the simple
demand and supply analysis to real estate markets a
number of modifications need to be made to standard
microeconomic assumptions and procedures.
Real estate can divided into three categories: These

4
are
• Commercial
• Residential
• Agricultural
We can invest into all the given areas and can make
return by capital appreciation, rental income, agricultural
produce, lease and commercial use.
The following factors influence the price and cost of the
real estate:
1. The physical characteristics of the property
2. The property rights
3. The time horizon of holding the property
4. Geographical area
5. The development rate

Literature Review
DLF has always been a key player in the real estate
industery since its formation . The firm has risen in all
aspects over the period of time . The decision of going
public was a wise one but perhaps the firm did not
anticipate what the future had in store for them and
did not utilize the funds wisely .The Company had also
increased home and office prices by a great deal but
was forced to reduce them after the demand
dissapeared .Later on the firm has regained some
strength and is all set for the future . According to the
Harvard university, the indian economy has been
affected by the impact of recession but as paul imbesi
points out, there is still a great limit for growth for the
industry. Although the indian real estate sector was
booming before the onset of the recession , yet it has
still not recovered completely from the impacts of it
although the road to recovery has begun
steadily.according to the journal of the construction
industry in india, the housing sector is showing better
recovery than the commercial while the growth of the
infrastructure has been supperted by the government
by a change in policies inviting fdis and fiis along with
the formations of several public-private partnerships
as mentioned by the construction industry.

5
The real estate industry also derives support from the
banking sector whose lowering of the interest rates in
the recent past has further helped to boost the growth
of the real estate industry post recession.

GENERAL TRENDS IN THE INDUSTRY.

The Indian real estate sector plays a significant role in the

country's economy. The real estate sector is second only
to agriculture in terms of employment generation and
contributes heavily towards the gross domestic product
(GDP). Almost five per cent of the country's GDP is
contributed to by the housing sector. In the next five
years, this contribution to the GDP is expected to rise to 6
per cent. According to industry players, housing accounts
for 4.5 per cent of gross domestic product (GDP) with
urban housing accounting for 3.13 per cent.

According to Jones Lang LaSalle, faster economic growth

in Brazil, Russia, India and China (BRIC) could result in the
property markets of those nations recovering at a faster
rate than the UK and US real estate markets. It has also
been suggested that India's property sector could begin to
improve from late 2009 and may attract up to US$ 12.11
billion in real estate investment over a five-year period.

The IT and ITES sector alone is estimated to require 150

million sq ft of office space across urban India by 2010.
Organized retail is also responsible for the growth in
commercial office space requirement. The organized retail
industry is likely to require an additional 220 million sq ft
by 2010. Moreover, growth is not restricted to a few towns
and cities but is pan-India, covering nearly all tier-I and
tier-II cities.

Almost 80 per cent of real estate developed in India is

residential space, the rest comprising of offices, shopping
malls, hotels and hospitals. According to the Tenth Five-
Year-Plan, there is a shortage of 22.4 million dwelling
units. Thus, over the next 10 to 15 years, 80 to 90 million
housing dwelling units will have to be constructed with a

6
majority of them catering to middle- and lower-income
groups.

The real estate rental trends in commercial sector are

momentous as the key tendency among the investors is to
rent a commercial space instead of buying. It will facilitate
low risk and less worry on maintenance. Commercial
rentals including corporate office space, BPO spaces, mall
space, shops
and showrooms are an integral part of the commercial
rentals in India. Buying good space in high quality
development and leasing it to a good brand is a wise
investment decision. Usually, commercial lease
agreements specify a 15% escalation in the real estate
rental in every three years which is a good
enough yield. For those considering regular rental returns
rather than capital appreciation, mall space has the
distinction to be an excellent option. It gives returns
higher than that received with office space and much
higher than the rental returns from residential space.

A REAL ESTATE GIANT IS BORN……

In early 1946,way before our independence, a company

was started by Chaudhary Raghuvendra singh and Mr.
K.P. Singh .This company was christened as DELHI
LEASING AND FINANCE pvt ltd .The first assignment of
the company was to build up the Krishna Nagar colony in
east delhi which was completed in 1949 and after which
there was no looking back for the company. Many of
Delhi’s poshest areas like Greater Kailash, Hauz khaz,
Kailash colony, South extension have been built by DLF.
After the passage of the Delhi development act in 1957,
the company was forced to operate elsewhere and it was
during this time that DLF acquired land at very low prices
in regions surrounding Delhi.
Their first landmark real estate project included the DLF

7
QUTAB ENCLAVE which has now been rechristened as DLF
CITY which was a township built in 3000 acres area.
Traditionally, DLF’s core business included 3 prime
divisions: residential, commercial and retail but now they
have added 3 more divisions ie hotels, infrastructure and
sezs.

INTRODUTION ON DEMAND AND SUPPLY

The Indian real estate sector has witnessed a revolution,

driven by the booming economy,
favourable demographics and liberalised foreign direct
investment (FDI) regime. Growing at a scorching, 35 per
cent the realty sector is estimated to be worth US$ 15
billion and anticipated to grow at the rate of 30 per cent
annually over the next decade, attracting foreign
investments worth US$ 30 billion, with a number of IT
parks and residential townships being constructed
across-India. This substantial growth has been the result
of increasing DEMANDS from off-shoring businesses.
Off-shoring consulting houses and call centres have
generated DEMAND for DLF INDIA to the extent of more
than 10million sq.ft. Every year, 78 percent of the money
spent on real estate goes to the GDP (Gross Domestic
Product). About 80 percent of the real estate development
in India has been in the field of residential housing. The
remaining 20 percent of the real estate includes office,
shopping malls, entertainment centers, hotels, multiplexes
and hospitals.
What prompts an average person to try his fortune in the
real estate sector? The reasons are
numerous, the first and foremost being the myth that the
real estate business is riskless. The second reason is the
growing Indian middle class with a low propensity to
consume and more botheration about future. Thirdly, the
ever growing housing needs fueled by low interest rate.
Last but not the least, herd behavior leading to the
'keeping up with the Joneses' notion i.e. investing in the
sector where everywhere else does can also be cited as
one of the important factors leading to heavy investment
in this sector.

8
 Overview

The Indian economy has transformed substantively over

the last two decades, growing consistently at an average
of 8 percent and is poised to take place among the leading
economies in the years to come. The economic
performance of India has provided strong impetus to the
real estate sector, which has been witnessing heightened
activity in the recent years. Substantial end users and
investor interest, large scale investment in infrastructure
and rapid urbanization have contributed to the growth
trajectory of Indian real estate. The real estate growth
story is clearly visible in urban centre’s such as Delhi,
Mumbai and Bengaluru which have acquired global
character and recognition. Growing at a rate of 30 per
cent, the real estate sector has emerged as one of the
fastest growing investment areas for domestic as well as
foreign investors. The sector will remain as a booming
sector and more investment is expected in the coming
years. Construction and allied sectors are considered as
one of the largest employing sector in India
(including construction and facilities management). This
vital sector is linked to about 300 ancillary industries like
cement, brick and steel. So this sector has a strong
backward and forward linkages and the growth will
translate into an overall positive impact on these ancillary
sectors too. Resultantly, a unit increase in expenditure in
this sector has a multiplier effect and
the capacity to generate income as high as 4.5 times.
According to ‘Housing Skyline of India 2007-08’, a study
by research firm, Indicus Analytics,
there will be DEMAND for over 24.3 million new dwellings
for self-living in urban India alone by
2015. As a result of this, this real estate sector is likely to
throw huge investment opportunities. In fact, an
estimated US$ 25 billion investment will be required over
the next five years in urban housing, says a report by
Merrill Lynch.

9
 Scope

"If the human race wishes to have a prolonged and

indefinite period of material prosperity, they have
only got to behave in a peaceful and helpful way
toward one another." -Winston Churchill.
The heresy of typical Indians has changed the orthodox
mindset of building and designing a house to live in it. A
ramification of this is that houses are nowadays counted
as a transitory asset. The idea of buying a house that will
last a lifetime has gradually vanished. The buzzword
nowadays is 'investment'. Both the policymakers and the
stock-brokers share an united view in this aspect.
The second largest employing sector in India (including
construction and facilities management), real estate is
linked to about 250 ancillary industries like cement, brick
and steel through backward and forward linkages.
Consequently, a unit increase in expenditure in this sector
has a multiplier effect and the capacity to generate
income as high as five times. The scope of this project is
to analyze the DEMAND/SUPPLY pattern in the Indian real
estate industry(DLF INDIA). Also, it will give you a detailed
insight to the impact of the DLF INDIA on the Indian
economy.

Objective

· Analyze DEMAND dynamics of the DLF INDIA.

· The SUPPLY analysis of this Industry.
· Current Scenario
· Analysis of the real estate market in certain regions of
India
· Impact of the economy of the country on the DLF INDIA.
· FDI in Real estate.
· Economic role of the Government: Its effect on the Indian
real estate industry.

Methodology

We have collected secondary data from journals,

magazines, newspaper articles and the internet.

10
Thereafter we have analyzed the data to find out the
following:-
· DEMAND and SUPPLY pattern of the real estate industry
in India,
· Factors affecting the DEMAND and SUPPLY of DLF INDIA
· Impact of the economy on the DLF INDIA.
· Current scenario and future prospects of the industry.

Limitation

Due to time constrain we have relied only on the

secondary data taken from internet and
newspaper articles. We have taken the DEMAND and
SUPPLY conditions of certain regions of the country which
we believe are the major contributors of this sector. Our
analysis is based on the DEMAND and SUPPLY prevailing in
these regions
.
DEMAND Side Analysis
Law of DEMAND
The law of DEMAND states that, citerus peribus, DEMAND
decreases with increase in price and vice versa. There are
various other factors which affect the DEMAND for DLF
INDIA. Based on these factors we can derive the DEMAND
function for DLF INDIA.
The DEMAND Function is
D= f {I, P, Cb, Cr, T, Ti, Ps}
D- DEMAND for DLF INDIA.
I- Income of consumers
P- Price of housing
Cb- Cost of borrowing
Cr-Availability of credit
T- Consumer’s preferences
Ti- Investors’ preferences
Ps- Price of substitutes and compliments
Rising income levels of a growing middle class along with
increase in nuclear families, low
interest rates, modern attitudes to home ownership (the
average age of a new homeowner in 2008 was 32 years
compared with 45 years a decade ago) and a change of
attitude amongst the young working population from that
of 'save and buy' to 'buy and repay' have all combined to

11
boost housing DEMAND. Simultaneously, the rapid growth
of the Indian economy has had a cascading effect on
DEMAND for commercial property to help meet the needs
of business, such as modern offices, warehouses, hotels
and retail shopping centers.

Growth in commercial office space requirement is led by

the burgeoning outsourcing and information technology
(IT) industry and organized retail. For example, IT and ITES
alone is estimated to require 150 million sq. ft across
urban India by 2010. Similarly, the organized and
unorganized retail industry is likely to require an
additional 220 million sq ft by 2010.
With the economy surging ahead, the DEMAND for all
segments of the real estate sector is likely to continue to
grow. The Indian real estate industry is likely to grow from
US$ 12 billion in 2005 to US$ 90 billion in by 2015. The
IT/BPO sector is expected to generate 100Mn sq ft of
DEMAND for office space over the next five years. The
rising middle class and its consumer DEMAND is driving
the retail boom – around 22 malls are under development.
Income of consumers, price of housing, cost of borrowing,
availability of credit, consumers
preferences, investors preferences, price of substitutes
and compliments are the major
determinants of the DEMAND for housing. The large
shortage in the housing sector will continue to fuel the
growth in the residential market. The real DEMAND is not

12
in the high end residential
market but in the affordable housing segment and this will
be the driver for the residential market

This huge DEMAND will spill over to all parts of urban

India. Lease rentals have been picking up
steadily and there is a strong DEMAND for quality
infrastructure. A significant DEMAND is also
likely to be generated as the outsourcing boom moves
into the manufacturing sector.

SUPPLY Side Analysis

Law of SUPPLY

The law of SUPPLY states that other things remaining

constant, more of a good is supplied at a
higher price and less of it is supplied at a lower price.
However, in examining the forces
determining the SUPPLY curve, we need to analyze the
factors upon which the SUPPLY of a good depends.
The factors determining SUPPLY of DLF INDIA can be
stated in the form of a
SUPPLY function:
S= f {P, A, B, Cr, L}
S- SUPPLY of DLF INDIA.
P- Price of the property

13
A- Availability of land
B- Efficient builders
Cr- Easy accessibility of credit
L- Skilled labor
In future, a high proportion of SUPPLY of IT/ITes space will
come from Special Economic Zones
(SEZs). According to the C&W report, of the 366 formally
approved SEZs in the country, 62% are dedicated IT-ITes
SEZs. The availability of space within SEZs is expected to
reduce the attractiveness of STPIs, as both developers and
occupiers will enjoy considerable tax benefits
within SEZs. The residential sector, which accounts for 75-
80 % of the turnover of the entire real estate sector,
has been on a high growth path. According to the ministry
of housing and urban poverty alleviation, there is a
shortage of 24.7 million houses in the country. The LIG
and EWS segments account for a majority of this shortage.
However, in the luxury segment, there is already an over
SUPPLY in some pockets of the country, such as the NCR.
Another major development within the residential real
estate segment is the development of integrated
townships. The DEMAND for quality lifestyle and walk-to-
work concept are some of the drivers of DEMAND for
integrated townships that offer commercial, retail,
residential, and leisure facilities within a given area.
Approximately, 400 townships are expected to be
developed over the next five years around 30-35 major
cities in the country. Hiranandani Gardens (Mumbai), JP
Nagar (by Keppel Land Development in Bangalore), DLF's
9,178-acre township at Bidadi near
Bangalore, and Magarpatta City near Pune are some of the
examples of integrated townships.

So far, the situation in both the office and the residential

market has been that whatever is built gets sold or rented.
In future, as SUPPLY increases, developers will have to be
more careful about factors like location and target those
segments for which they are developing their products. In
this SUPPLY-rich environment, accurate DEMAND
estimates will become very important. Currently, the real
estate sector is quite fragmented with most players
having presence limited to select cities or regional

14
geographies and relatively few players having national
presence. Ernst & Young expects a radical change in the
next 2- years with most of the larger regional players
anticipated to expand aggressively across the country.
While at least 10 major developers are estimated to have
a national level presence, some of the well known city
focused developers are expected to venture out into other
locations based in that region. Larger regional developers
increasing their footprints across the country include
Rahejas (Mumbai), DLF (NCR), Ansals (NCR), Unitech
(NCR), Sobha(Bengaluru) who have already started
penetrating other regions and have announced several
projects.

Analysis of the Industry in Key Regions

15
 Mumbai

Mumbai is a mature and well-developed Real Estate

market. It is a DEMAND-motivated market;
where the property is bought for current use and not with
the aim to speculate and sell it in
future. This has led to the burgeoning of the Mumbai
Real Estate market. The spurt in DEMAND
as well as SUPPLY of Real Estate products and the
consequent increase in capital values are
encouraging High Networth Investors (HNI) and other
investors to make active investments in
the Mumbai Real Estate market.

Chennai

Chennai real estate is a budding market. Chennai being

the fourth largest metropolitan city has regional offices of
all major corporate houses and is among the trade
capitals of India. It thus offers tremendous real estate
influx and is a hub of some of the top real estate builders
and developers of India. Chennai Real Estate Builders
follow a trend of the best quality at the most affordable
prices.

16
 Delhi

Absorption across NCR was approximately 6.6 million sq ft

during 2007 and recommitments amounted to an
additional DEMAND of 4 million sq ft. Gurgaon Accounted
for 4.64 million sq ft or 70 per cent of total absorption in
the NCR. Noida, the next biggest market, accounted for
1.37 million sq. ft or 21 per cent of total absorption. Delhi
witnessed absorption of 0.66 million sq ft Of this
approximately 3.28 lakh came from new developments in
Jasola, while the remaining 2.95 lakh sq ft came from
older, second-generation developments in the CBD and
South CBD. The total SUPPLY in the NCR amounted to
11.53 million sq ft. Gurgaon accounted for the largest
share of approximately 6.4 million sq ft Noida and Delhi
accounted for 4 million sq ft and 1.7 million sq ft
respectively. Availability of land, improving infrastructure,
and better connectivity are some of the factors why most
of the SUPPLY came in the suburban areas. Prime
locations and buildings in most micro markets have low or
negligible vacancy. DEMAND for grade-A Properties
Continues to rise in NCR, as is evident from the pre-lease
commitments signed

17
 Kolkata

Kolkata is one of the oldest urban agglomerations in the

country. Kolkata lost its position as the
erstwhile commercial capital of India to Mumbai due to the
socialist manifesto adopted by the West Bengal
government post independence. Now JLLM believes the
state is witnessing a resurgence driven by government
policy and support for the service industry and
infrastructure development that is once again attracting
industry and capital to the city.

Bangalore

Real estate values around Bangalore have shot off the

charts since 1991. Land on the outskirts of Bangalore that
was selling for US $0.10 per square foot rose to $2.00 per
sq. ft. Prices started to drop in 1995 and are now
beginning to show gains again. Real estate investors
and real estate developers in Bangalore have been on a
wild ride.

Hyderabad

Of late, Hyderabad has witnessed a remarkable growth in

real estate business, thanks to a
predominantly information technology driven boom in the
1990s and the retail industry growth
over the last few years spurring hectic commercial
activity. However, the real estate prices have
spiraled only in some hot spots of the city and continue to
be flat mainly due to the slow down
witnessed during the last few quarters.

Impact on Economy

Real estate has been instrumental in India emerging as

the top destination in Asia (excluding Japan) in attracting
private equity investments during the first ten months of
this year. Real estate accounted for 26 per cent of total
value of private equity investments, with 32 deals valued

18
at US$ 2.6 billion. And according to industry estimates,
another US$ 10-20 billion would pour into
the sector in the next three years. The flow of private
equity continues in 2008. During the first five months of
2008, PE commitments into the Indian real estate
companies has surpassed US$ 3 billion, which
incidentally is the total PE investment into the Indian real
estate companies for the whole of 2008.

FDI in DLF

In 2002, the Government of India permitted 100 per cent

foreign direct investment (FDI) in housing through
integrated township development. The merits of FDI are
well known – it provides the much needed investment in
the sector brings professional players equipped with real
estate expertise and facilitates the introduction of new
technology. However, the FDI rules in its current form are
rather stringent - prior approval of the Foreign Investment
Promotion Board is required which admittedly can be
rather tedious and there is a lock-in for repatriation of
original capital invested for a period of three years. What
is rather self-defeating is the stipulation of a minimum
land holding of 100 acres. Getting 100 acres of free land in
an urban area is almost
impossible and consequently barely a handful of projects
have been approved. If the minimum area restriction is
reduced at least by half and repatriation of profits after
the construction period is completed is allowed, FDI in this

19
sector will certainly pick up. In this aspect, I think we have
a lot to learn from our Chinese compatriots. Recently, the
Securities and Exchange Board of India,
India's capital market regulator has permitted venture
capital funds to invest in real estate - this
augurs well for the industry.

ROLE OF FDI IN DLF INDIA IN INDIAN ECONOMY

According to the Associated Chambers of Commerce and

Industry of India (Assocham), the DLF INDIA is likely to
see a growth rate of 40-45% in 2012. The organization
expects that more than $ 10 billion worth of FDI is likely to
flow in the sector by the end of the year. Also the
organization believes that the rate of growth is likely to be
stable for the next three years when it might go down a
little. Also most of the FDI investment is still predicted in
the tier 1 cities. Since FDI in DLF is beneficial to economy,
measures should be taken to increase to
provide congenial investment atmosphere to foreign direct
investors. There is also a need to completely overhaul
the union and state legal system governing various
aspects of real estate. There is need to open up more
avenues to facilitate long-term finance for the

20
housing sector.
Computerizing land records and circulation of and
access to this database, would be one of the most
useful features of reform in this country. Like the IT,
banking and insurance sectors, the real estate sector too
should have certain specialized institutions and vocational
courses for professionals. This will go a long way in
shaping the real estate scene in the country. Moreover,
foreign design and consultancy companies should
be encouraged to set up offices in the country to
introduce world class designs and technology

Conclusion
From the above data we can conclude that there is a
significant demand for quality housing in india.
India is on a growth path with a significant element of
consistency & fundamental strengths to boot. Economic
indicators such as the GDP (Gross Domestic Product), Per
Capita Income, Forex reserves, FII's (Foreign Institutional
Investments) & Industry growth rate which includes the
manufacturing & farm sector are all at their record highs.
Also a tender Stock Market & a significant shift from a
traditional agriculture & manufacturing based economy to
a service oriented one, especially in Urban & Semi-urban
segment; are factors which most economists would
support. Mumbai, Delhi & their respective suburbs have
predominantly witnessed the
highest growth; with some projects being benchmarked
against global standards. Rationalization by the respective
state governments with regard to allowing divestment of
non-operational textile mills & other such manufacturing
units which had so far occupied large tracts of land in
prime locations; have been an important factor
responsible for exciting new creations. Also, quite a few
home-grown family run property development companies
have truly gone professional while
facing competition from real estate off-shoots of larger
corporations from the organized sector. The road ahead,
while needing a well chalked out vision & infrastructure
support, does in fact seem bullish.
Another case in point is Gurgaon, a suburb of New Delhi,

21
which has seen a radical change in not just its skyline but
also in its basic urban demographics. Gurgaon was once
described as just a little town built on a cow pasture. But
in the past three years, Gurgaon has budded six malls -
with five more under construction and has a skyline of
shiny new office buildings and call centers. Gurgaon is a
shopper's paradise and the malls are vertical versions of
their US counterparts: five story high bazaars, housing
almost every international brand be it Nike, Nokia,
Tommy Hilfiger, Levi and McDonalds along with multiplex
cinemas, escalators and huge parking lots. The advent of
call centers, programming houses and other such BPOs in
India has led to an influx of over 785,000 new jobs.
Outsourcing has changed the face of commercial real
estate in India, but its greater impact has been the
demographic shift characterized by rising
disposable incomes and increased consumerism.
The real DLF in India predominantly continues to remain
unorganized, fairly fragmented, mostly characterized by
small players with a local presence. Traditionally,
developers were viewed with an element of skepticism.
Developers were often identified with dealing with large
amounts of unaccounted money, lacked transparency and
would use unscrupulous means to obtain various
regulatory approvals. Lending to developers was
perceived as being risky as builders were known to borrow
for one project and utilize it for another or overstretch
their limits and not have sufficient funding to complete the
building. But things have clearly changed today: for
starters, developers have realized the merits of
corporatizing themselves and enhancing transparency in
terms of their financials. While earlier even the reputed
builders had difficulty accessing formal channels of credit,
today almost every bank and housing finance company
has relationship tie-ups with developers and are keen to
lend to them at competitive rates. Lenders are also
monitoring the projects more closely. For instance lending
developers is often through a mechanism which ensures
that funds are utilized only for that particular designated
project. Today specific projects of developers are also
being rated. The
objective of the ratings is to help the financers as well as

22
the end users to take a decision while investing in a real
estate project. The rating system also means a greater
amount of transparency and disclosure on the part of
the developers. DLF INDIA have increased in number in
recent times due to the boom in the real estate sector
itself which again was a function of the information
technology boom in India in the last few years,
accompanied by the growth of the Indian economy at 8%.
The soaring prices of real estate in India have led to
corporate attention to this sector, with a number of India
real estate companies jumping onto the real estate
bandwagon in recent years. The demand for property is
constantly getting steeper in India and as a result, the
growing
numbers of real estate companies in India comes as no
surprise. India real estate companies have witnessed
growth in business in the last few years. The
government, however, needs to keep an eye on this sector
to ensure that the infrastructure
provided by these companies is of international standards,
at least in the IT sector. The
government also needs to ensure that India real estate
companies are fair in their dealings with
people.

The Impact of Recession

January 18th 2008 saw the biggest slump in the Indian
stock market , FII’s started withdrawing their funds to
cope up with the subprime crisis in the USA , land prices
were the one that initiated the Global meltdown . India
soon followed ,with the fanatically growing constructions
in NCR coming to a halt al of a sudden . Builders took
advantage of the high demands of real estate and had
soon risen the prices to an extent that was out of reach of
a common man . The major point to be considered is that
were these prices justified by any means ? The answer is
no , This phenomenon was not justified , instead this was
a major reason for the slump in the real estate market . As
soon as their was a news of USA entering into recession
the prices came crumbling. The constructions in progress

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were stopped due to lack of funds , delays in possession
were a ususal sight . The real estate giant went public on
June 11 , 2007. The firm primarily controlled by Kushal Pal
Singh entered into a new era .The firm had never faced
liquidity crunches prior to 2008 , perhaps that is the
reason that within 1 year of its listing the firm issued
interim dividends to cherish its shareholders. DLF was it
and it was hit hard .It suddenly came to face the reality of
business , loans mounted, sales crashed ,losses crept in.
Net income fell to 1.59 billion rupees ($32 million) in the
three months ended March 31, from 21.8 billion rupees a
year earlier.
This fact is more evident from the charts below .

Profits of DLF(crores Rupees)

No matter how strange the chart looks, this is how it

should be . The profits peaked in 2008 .
This was just the beginning for DLF , lack of funds and
fallingdemand of home and offices prohibited it from
starting new projects to cover up the mounting losses. DLF
estimated a revenue loss of 6.9 billion rupees following
“one-time price resets and other benefits to customers.”
The impact of the reductions on profit was estimated at 3
billion rupees. Full-year profit fell 41 percent to 46.3 billion
rupees and sales fell 28 percent to 105.4 billion rupees,

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the company said. The figures include 1.63 billion rupees
of losses from non-real estate businesses such as DLF
Pramerica Life Insurance Co., hotels and power.

Sales figures of D.L.F in crore Rupees

Its strange that firm that declares interim dividend in 1 year comes to near
bankrupcy in the next . The major issue for DLF though was the
repayment of its loans . The projects in which it had ventured into in
various cities such as Delhi , Gurgaon, Bangalore, Chennai etc had forced
the firm to go in for the debt option . The banks were not at all pleased
with the near end in the sales , the question at stake was weather or not
the DLF the largest realtor in India would come sailing through the
hardships .DLF has converted 30 billion rupees of short-term
debt into long-term debt by securitizing cash flows, it said.
The quality of the debt portfolio has improved
substantially with an average maturity in excess of three
years. DLF reviewed the strategic relationship with DLF
Assets, based on the fact that in the last quarter DLF had
suspended further sales to DLF Assets and by end of the
fiscal year has not fully completed the originally proposed
volume of delivery. The DLF board appointed advisers to
evaluate the strategic initiative, an exercise expected to
be completed by the end of the current quarter.

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Home prices may have dropped by as much as 40 percent
across India and lease rentals for office space fell an
average 20 percent in the three months to March 31,
according to Jones Lang LaSalle Inc.
Most micro markets are plagued with high vacancy levels
and values are expected to remain under downward
pressure over the next few quarters,CB Richard Ellis said
in a report on the quarter to March 31 released April 20.
Mumbai, New Delhi, Bangalore, Chennai, Hyderabad, Pune
and Kolkata witnessed further drop in both rental and
capital values.

Its confusing to analyze if DLF caused the real estate

slump or the real estate slump caused the DLF episode .
What point I have stressed upon in this project is that ,
The situation is possible either way . One cannot expect
the real estate market to be normal after its biggest
players gets on its knees , and one can certainly not
expect the biggest player to be unaffected if the game
itself goes haywire .
Recently various articles and magazines have reported
that the worst Is behind us . DLF too works on the same
principle . The sales have grown to an extent for the firm
to allocate funds for its debt repayment .
New projects were always the key for its survival and
funds ensured their beginning .Recently DLF undertook
the metro project of Gurgaon for all its recidential
blocks .Ensuring the development of its assets and the
rise in land value of its housing and office proects after the
metro is completed .

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 Conclusion

 DLF has always been a key player in the real

estate industery since its formation .

 The firm has risen in all aspects over the period of

time . The decision of going public was a wise one
but perhaps the firm did not anticipate what the
future had in store for them and did not utilize the
funds wisely .

 The Company had also increased home and office

prices by a great deal but was forced to reduce
them after the demand dissapeared .

 Later on the firm has regained some strength and

is all set for the future .

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