At a time of rising penchant for luxury homes, DLF Ltd is on firm ground. The residential realty developer clocked pre-sales or bookings of ₹6,404 crore in the June quarter (Q1FY25), up more than 200% year-on-year. This whopping increase was driven by the launch of the second phase of the luxury project Privana West in New Gurugram. The project was fully sold out, with bookings of ₹5,600 crore. Its ultra-luxury project, The Camellias, in DLF 5 area, also saw decent traction.
The company’s management is confident of demand sustaining, and has guided for 15% year-on-year pre-sales growth to ₹17,000 crore in FY25. With unsold inventory levels falling, timely new launches are crucial to meet this mammoth target. DLF’s launch pipeline for FY25 stands at around 12.8 million sq. ft (msf) with a gross development value (GDV) of ₹42,000 crore, out of which ₹40,000 crore is earmarked for the uber-luxury segment.
DLF has raised its FY25 launch pipeline by 17%. This upgrade is driven by the DLF 5 project, whose size is now estimated at ₹25,000 crore. Beyond FY25, the target has been increased to ₹62,500 crore to be launched over two-three years. Also, the DLF management has clarified that it does not see a big impact on its residential pre-sales due to the taxation changes (removal of indexation benefit on property transaction) announced in the Union budget.
Higher exposure to luxury and ultra-luxury categories should give DLF’s medium-term margins a boost, since these segments are more margin-accretive than others. The healthy sales momentum and strong growth in collections helped DLF further improve its net cash position to ₹2,896 crore. Remember, DLF turned net cash positive in Q2FY24.
In FY25, DLF targets launch across various segments and geographies including Gurugram, Mumbai, Goa and Chandigarh Tri-city. It also expects to launch its Goa project in Q2FY25, the super-luxury project in DLF Phase 5 in Q3FY25, and the Mumbai project in December 2025/January 2026. Further, DLF is undertaking a slum rehabilitation project under the joint development agreement model in Andheri West in Mumbai and its phase 1 is expected to be launched in Q4FY25. Of course, whether DLF successfully manages to tackle the challenges of a rehabilitation project and deliver the project on time, remains to be seen.
On the commercial side, occupancy across its non-SEZ/SEZ portfolio remained flat sequentially at 97% and 86%, respectively. SEZ is short for special economic zone. Its retail portfolio was almost fully leased with 99% occupancy. With improving demand for Grade A office spaces, DLF anticipates vacancy levels to drop further. By FY25-end, DLF projects its annuity income to increase to ₹5,000 crore and further grow to ₹5,800-6,000 crore in FY26. This is expected to be aided by the flow of rental income from new assets at Gurugram and Chennai.
Despite this, the DLF stock has lagged in recent months. So far in 2024, it is up 14%, versus the 37% gain in the Nifty Realty index. True, DLF enjoys strong brand recognition in the National Capital Region where a vast portion of its land bank is situated. However, there have been concerns on the steep price appreciation in DLF’s key Gurugram market, which in turn may lead to a saturation in demand for luxury housing projects beyond a point. To allay concerns, the DLF management said that it does not see any demand issues. In this backdrop, the pace of DLF’s diversification into new geographies is also seen as an important trigger to drive medium-term pre-sales growth momentum and boost stock returns. “The company’s faster-than-expected expansion beyond the Gurgaon market could lead to potential valuation upside,” said HDFC Securities Ltd.
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