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 (Rs 6.7 billion).
The real estate developer's move to limit expansion to save cash hasn't helped it control debt, which spiralled by Rs 1,500 crore (Rs 15 billion) to reach Rs 14,800 crore (Rs 148 billion) 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 (Rs 40-billion) short-term debt with asset- backed long-term debt in next six months.
The company has already substituted Rs 1,000 crore (Rs 10-billion) worth debts with long-term debts with a maturity period of 2 to 5 years, Rajiv Singh said. Another Rs 2,000 crore (Rs 20 billion) will be raised during the current financial year, he added.
The credit crisis in DLF worsened after receivables from DLF Assets, 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 (Rs 150 billion) of which Rs 2,250 crore (Rs 22.5 billion) 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 (Rs 25 billion) 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.
The cost-cutting measures may also include sale of non-core businesses such as its wind power and utility business.
"In the next three months, we may identify some of our non-strategic, non-core and non-contributing assets that can be divested. This can be land also", Singh said.The new initiatives will mostly be residential projects, including affordable homes in various parts of the country.
"We are planning few launches in select cities and suburbs to test the market. The price of two-bedroom flat or a tight three-bedroom apartment should be in the Rs 20-25 lakh (Rs 2 to Rs 2.5 million) range. We have had a soft launch in Hyderabad recently and will test it in other markets soon," Singh said.
Delhi, Gurgaon, Bangalore, Kochi, Chennai and Panchkula are the other centres identified for project launches by the company. DLF also said the profit margins for the new projects will be around 25 per cent.
