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DELHI LAND &FINANCE Strategy or Serendipity

Presented by: Hari prakash jindal Manjula verma Neha jain Prabash singh Rashi nailwal Shubhra jain

INTRODUCTION
 DLF was a real-estate developer in India primarily into development of residential, commercial and retail properties. They spanned all aspects of real-estate development, from the identification and acquisition of land, to the planning, execution and marketing of projects, through to the maintenance and management of completed developments. Since the founding in 1946, the business focused on real estate development in the National Capital Region, including Delhi and Gurgaon.  App. Saleable/ Lettable area of Projects of DLF Area(million sq. ft.) Residential Commercial Retail TOTAL Completed Projects under Developments development 21.6 4.7 2.3 28.6 44.4 40.9 16.3 101.6 Planned projects 95.6 15.9 6.2 117.7

INCEPTION
Realty Giants DLF was incorporated as a company before INDEPENDENCE on September 18, 1946.It was started by Chaudhary Raghvendra Singh. He built landmark residential colonies like Greater Kailash, South Extension & Hauz khas, also developed 21 colonies in Delhi between 1947 and1961 by persuading farmers to sell their holdings on credit .Later on , all development in Delhi was taken over by DDA which forced DLF to diversify into batteries and cables, electric motors in a joint venture with Universal Electric USA & car batteries. Did not succeed in any aforesaid venture and sold off. DLF had 30acres rural & deserted area which was not under DDA jurisdiction. Mr. Singh slowly and gradually acquired parcels of land from farmers using STRATEGY of BUY NOW & PAY LATER delivering interest cheques on first of every month & providing money on call for emergencies. It was a tedious &painstaking exercise as landholdings were small and ownership was divided between several family members.

 Mr. Kushal Pal Singh, CEO, DLF Universal, said that he has been a champion of FDI in the construction industry. However the leadership is threatened, because of opening up the sector to foreign players.DLF is a leading professional managed company emerged as one of the foremost enterprise in a real estate development. We are expanding our organization substantially. We are looking at property development in other states as well. It is our ACID TEST: will we remain No.1?

WINDFALL(S)
 Mr.K.P.Singh inherited the business as Chaudhary Raghvendra Singh did not have any sons.  When Mr. RAJIV GANDHI entered govt., took up cause, that enabled K.P.Singh to secure licences & permissions to reclassify agricultural holdings as non agricultural & develop them.  But when Mr. Bansilal became CM, licences were cancelled and reinstated after a period of two years.  Singhs philosophy was to lobby for changing the law rather than breaking it. Witnessing the success of K.P.Singh, his Father-in- law often expanded DLF to DAMN LUCKY FELLOW.

 When prices tumbled, Singh bought 1500acres of land. Although FBD & GBD were also emerging but neither had Gurgaons appeal. Being closer to farm houses of the rich & famous, Gurgaon had more social cachet. However, so as to make people feel it was not a distant suburb of the city ,DLF cleverly called its first project Qutab Enclave after the historical monument in South Delhi . Still, there were few takers for Gurgaon in the 1980s.  Then he built DLF City, Asian s largest 3,000 acre township in Gurgaon south of Delhi just across the Haryana border. The transformation of barren expanses of farmland into a busy, selfcontained, suburb that became Indias call centre capital ,was a major achievement. Multinational companies that found South Mumbai or South Delhi too expensive located their head offices at Gurgaon.  The consultants valued these properties between Rs.965billion and Rs.1,066 billion and after deducting the notional developer profit of 20%, the land value was between Rs.772billion and Rs.853 billion.

BUSINESS LINES
Residential Development  They build and sold a wide range of properties including houses ,duplexes and apartments of varying sizes ,with a focus on higher end of the market.  The first residential colony, Krishna Nagar, was completed soon after independence in 1949. Since then, they developed over 8,800 acres of colonies and townships and developed or launched over 20million sq. ft. of residential space. They implemented innovative approaches to the development and marketing of residential projects and were one of the early developers to focus on theme based projects. e.g. The Magnolias development in DLF City, which included a GOLF COURSE. Commercial Development  They built, leased and sold commercial office space, with a focus on properties attractive to large multinational tenants built to international standards

 The first commercial development was DLF Centre opened in 1992  The majority of other commercial properties were in DLF City, Gurgaon.  COMMERCIAL REAL ESTATE DEVELOPMENT

Infinity Towers DLF Cyber Green Kolkata Towers Chandigarh Infosys Park Ericsson DLF Centre

1.3 0.9 1.0 0.7

2004 2004 2004 2004

2006 2005 2005 2005

0.2 0.3

2003 1989

2004 1992

Retail Development

 The retail business line, established in 1940s, focused on developing, managing and leasing or selling shopping malls, including cinema complexes.  Since 2001, they were developing air-conditioned mega malls and other retail spaces.By2006, they became one of India s leading developers.  DLF had six-retail real-estate development formats catering to the entire spectrum of the retail market to serve the needs of customer with different buying patterns and purchasing power. These formats were standalone stores, shopping centers, prime downtown shopping districts, neighbourhood malls, destination malls and super luxury malls having aesthetic design, high quality infrastructure ,leisure and entertainment options viz. cinema complexes, food courts and restaurants.  DLF had MOU with TRENT, retail business of TATA GROUP and with Metro Cash& Carry for joint development. The firm also planned to diversify into development of SEZs ,infrastructure construction through joint venture with Laing O Rourke plc. and development of hotels.

STARTED

COMPLETED 2004 2003 2000 2000 1993 1119 1028 1421 2000 14 4520 4003 4676 1256 2460

DLF mega mall DLF city centre Galleria Super Market 1 Park-N-Shop

0.3 0.3 0.3 0.2 0.01

2002 2001 1996 1996 1992

PROJECT IMPLEMENTATION PROCESS


Land Identification and Acquisition  The land acquisition team monitored real estate markets and emerging trends by assessing selected markets to identify cities and localities with development potential. After a preliminary land title evaluation and review by local lawyers ,a preliminary agreement was entered into with the landowners for the purchase of the land. Project Execution  Its process commenced by obtaining regulatory approvals based on areas marketability, target customers & potential returns. The proper concept was finalized with architects & consultants to maintain high health &safety standards in all real estate developments.

Sales and marketing  Three sales & marketing departments were maintained for residential, commercial & retail business lines. The co. encouraged participation of former buyers or tenants in the new product launches & was concluded both directly to customers &through brokers. Mktg. approaches included launch events, corporate presentation, web mktg., direct & indirect mktg., as well as newspaper &outdoor advertising. In commercial & retail business lines, mktg. was through property consultants & relationships with existing tenants. Approx.120 brokerage firms marketed the properties. Most of the sale bookings were at project sites, although sales were also made at the corporate offices. Sales teams had positive & negative compensation incentives tied to their sales performance. A client servicing team served the customer from the booking process, through to the transfer of property to the new owner. Relationships with various banks & housing finance cos. facilitated provided convenient access to finance to customers and also shared some advertising costs.

Strategy DLF had a mission to build a world-class real-estate development co. with the highest standards of professionalism, ethics & customer service and to thereby contribute to & benefit from the growth of the Indian economy. The 7 key elements of business strategy included:  Increasing land reserves in strategic location: For growth strategy, DLF identified 62 cities & by APRIL 30,2006,they had partial payments to acquire 2,893 acres of land across the country.  Expand core business lines nationally: DLF evaluated projects throughout India, involving the development of residential, commercial & retail developed area of approx.96 million sq. ft., 16million sq. ft., & 6million sq. ft., resp., totaling over 118m. Sq. ft.  Diversify into SEZ development: SEZs were a new concept in India , & provide attractive fiscal incentive for both developers & tenants. Each SEZ would be developed as an integrated township & include residential, commercial & retail space as well as schools, hospitals & hotels.

 Undertake Infrastructure Development: DLF entered into a joint venture with Lang ORourke plc, a leading UK-based construction co. with a strong track record of major construction projects globally for projects including bridges, tunnels, pipelines, harbours, runways & power projects. The Joint Venture would create the opportunity to exploit new sources of revenue & new opportunities in the core business area.  Diversify into Hotel Development: DLF planned to developed100 hotels in the four-star, five-star & deluxe segments & other tourism& leisure related assets, such as clubs, & golf courses. DLF planned in the hospitality sector.  Move to a sales revenue based business model: DLF adopted a new business model, based on the development &sale of commercial & retail properties.  Enhance execution capabilities: To improve the construction quality a substantial part would be outsourced to the DLF Laing ORourke joint venture.

INDUSTRY AND COMPETITIVE SCENARIO


The real-estate development industry in India, although fragmented, was highly competitive with most of the real-estate developers having a city specific or region specific presence. The Indian real-estate sector divided into:  ORGANISED SEGMENT: comprised of private developers, govt., or govt. affiliated entities. e.g. Hudco, state- housing bodies & private realestate developers like DLF, Unitech ltd. ,Ansal Properties and Infrastructure Ltd., the Hiranandani group, the Raheja group & Gesco. They were actively considering townships, multiplexes&shopping malls to derive their business prospects.  UNORGANISED SEGMENT: Acconting for over 70%of the housing units constructed. It comprised small builders &contractors .  In Mumbai; the Hiranandani group forayed into Hotel through its hotels Rodas; while Rahejas established hotels in association with Marriott.

 Projects were funded through the promoters contribution & intra group loans. The margins on a residential property varied depending upon the location of the project, the amenities provided and developers reputation/title.  Firms faced competition from large domestic & international property development & construction cos. as a consequence of , among other things, the relaxation of the FDI policy for real-estate sector, rising govt. expenditure on infrastructure & various policy initiatives for the development of SEZs.  Development in the real estate sector were driven by:  Demand for more housing units in cities & towns because of growing urbanization of Indian population, burgeoning middle- class, Increased disposable income, easy availability of housing finance at cheaper rate & tax incentives. The growing trend of urbanization coupled with the factors like faster growth in incomes in the middle & higher income categories, decline in EMIs due to the fall in housing finance rates &availability of tax incentives on housing loans were pushing up the requirements for housing units in cities & towns.

 Demand for office premises by growing IT industry esp. BPO, India was a preferred destinations for setting up back operations. The growth in IT/ITES was likely to translate into real estate investments of RS.25 billion by 2007-8.  Demand for shopping malls by growing retail segment. The boom witnessed in the service sector not only pushed up the disposable income of the urban population, but also made people more brand conscious, resulted in higher sale of branded goods. Initially mall development restricted to major cities like Mumbai & Gurgaon, it would extent to other cities like Surat , Pune & Ahemdabad.  Demand for multiplexes by evolving entertainment sector. Growth of multiplexes was driven by favourable government polcies  Demand for hotels /resorts by growing tourism industry. With the increase in PDI, the propensity of spending a large portion of their income on tours & travels was going up. India was emerging as a major destination for global tourism which in turn pushed up the demand for hotels /resorts across India.

THE ROADS AHEAD


DLF was in the process of adopting a new business model for commercial & retail properties. They intended to develop & sell, whereas they previously developed & leased. However, they would retain ownership of retail developments & even if they sold the units in mall, they would retain the management of the mall, charging a management fee from the tenants, as well as the ownership of the key common areas , in order to control the quality of the retail space & maintain an appropriate mix of tenants. The size of the malls would also increase due to consumer demand for greater retail diversity &size would be an important determinant of the success of a mall. Thus, DLF planned city centre malls ranging in size from 200,000sq.ft.to 1m.sq.ft.& out -of -town destination malls would each have approx.2m.sq.ft.in line with the changed business model, DLF planned their growth for each of the three segments.

 PLANNED RESIDENTIAL REAL ESTATE PROJECTS  DLF planned to built this across India. They acquired 23 acres of land for a super luxury residential development in chanakyapuri, N.D. & were acquiring , land for township development in & around Amritsar, Bangalore, Chennai, Chandigarh, Goa, Gurgaon, Ludhiana, Indore, Jaipur, Mumbai, Pune & Shimla.  They also won a bid together with a joint venture partner to acquire 35.8 acres of land in N.D. which would be used for residential development. This development would a Public-Private partnership between the joint venture & the DDA, which includes certain proportion of low income housing in the development.  Because such arrangements were effectively using the private- sector to finance public sector housing requirements, DLF expected similar arrangements in other municipalities across India, where local authorities had insufficient funds to build low-income housing themselves.

 PLANNED COMMERCIAL REAL ESTATE PROJECTS  IT &ITES were driving demand for commercial real estate. DLF planned to develop extensive commercial properties in selected cities, built to international standards in order to attract multinational tenants & further strengthen their position as a leading developer of commercial realestate.  PLANNED RETAIL REAL ESTATE PROJECTS  A significant proportion of DLFs planned malls would be situated in prime city centres, although a number of destination malls were also planned for the outskirts of Indias major cities, with about 20 malls in north India.

NEW BUSINESSES
 Special Economic Zones  DLF perceived an opportunity window when GOI took measure to encourage foreign investments in &exports from the country .DLF set up plans to develop integrated or multi product SEZs, which include residential accomodation, commercial and retail facilities, as well as schools, hospitals, hotels and other support infrastructure, and captive power generation facilities.  Hotels  DLF was also looking at developing hotels in 4-star, 5-star and deluxe segments in other tourism and leisure related assets, such as service appt., clubs and golf courses using their existing real estate capabilities as well as joint venture to build these assets. They identified 21 sites for the hotels.  DLF constructed16 storey Hilton hotel off EM Bypass in KOLKATA forRs.154cr.  DLF outbid ITC & the Raheja group to acquire a 5.54acre Calcutta Metropolitan Corporation plot on which it was planning to develop a 5star deluxe hotel in partnership with Hilton International.

DLF VISION, MISSION AND VALUES


 DLF VISION  To contribute significantly to building the new India & become worlds most valuable real-estate company.  DLF MISSION  To build world class real-estate businesses across six business lines with the highest standard of professionalism ethics,quality& customer service.  DLF VALUES  Ethical &professional service.  Sustained efforts to enhance customer quality &value.  Compliance & respect for all community, environmental & legal requirements.

THE VALUE CHAIN


 TECHNOLOGY DEVELOMENT  DLF provided maintenance & management services for power distribution, back-up power generation, central air conditioning, water supply, drainage pumping, janitorial services, security services, parking mgmt., pest control, fire detection & solid waste disposal &mgmt.  Most of these operations were outsourced to qualified & experienced vendors with DLF services taking responsibility for developing standard operating procedures , maintenance schedules & addressing complaints.  DLF service was ISO 9001:2000 certified which appealed to multinational clients who expected superior quality standards.  DLF power had 5 power plants in Eastern India of aggregate capacity of 55MW.  GENERAL ADMINISTRATION  The management team is highly experienced, qualified &motivated with a high reputation for project execution.

 HRM  The Cos philosophy on corporate governance is built on a rich legacy of fair, transparent & effective governance.  This includes respect for human values ,individual dignity & adherence to honest, ethical & professional conduct.  This enables customers & all stakeholders to be partners in the Cos. growth & prosperity.  DLF is committed to a fair& competitive free market system.  PROCUREMENT  DLF LTD has acquired 60% ownership & control in DLF Assets Pvt. Ltd.(DAL), a closely held company of the promoters by renouncing its 40% ownership & control in DLF Cyber City Developers Ltd.-its 100% subsidiary still it is proudly termed as a cashless transaction. Most of the operations mentioned at x above were outsourced to qualified & experienced vendors with DLF services taking responsibility for developing standard operating procedures, maintenance schedules & addressing complaints. DLF SERVICES WAS ISO 9001:2000 CERTIFIED WHICH APPEALED TO MULTINATIONAL CLIENTS,WHO EXPECTED SUPERIOR QUALITY STANDARDS.

SWOT ANALYSIS

STRENGTH Employment &Training opportunities in the field of construction. Private sector housing boom & commercial buildings demand. Construction of the multi building projects on the feasible locations in the country.  Low cost well-educated & skilled labour force is now widely available across the country.  Sufficient availability of raw material & natural resources in the country is supportive for the industry.    

        

WEAKNESS Chances of Natural disadvantage are there. Distance between construction projects reduces business efficiency. Training itself has become a challenge. Changing skills requirements & an ageing workforce may accentuate the skills gap. Improve in long-term career prospects is highly required to encourage staff retention & new entrants. External allocation of large contracts becomes difficult. Lack of clearly define processes &procedures for construction & its management. Huge amount of money need to be invested in this industry.

 OPPURTUNITES  Continuous private sector housing boom will create more construction opportunities.  Public sector projects through Public Private Partnerships will bring further opportunities.  Developing supply chain through involvement in large projects is likely to enhance the chances in construction.  Renewable energy projects will offer opportunities to develop skills & capacity in new markets.  More flexible training delivery techniques are now available.  Financial supports like loan & insurance & growth in income of people is in support of construction industry.  Historical cultural heritages like the TAZ MAHAL encourage & provide a creative platform for the industry.

 THREAT  Current economic situation may have an adverse impact on construction industry.  Political & security conditions in the region & Late legislative enforcement measures are always threats to any industry in India.  Infrastructure safety is a challenging task in construction industry.  Natural abnormal casualties such as earth quake & floods are uncertain & can prevent the construction boom.  Insufficient accessibility in planning & concerning the infrastructure .

Comparison of revenue in real state developers


600 537.73 497.7 500 503.33

412.16 400 333.92 305.01 300 256.8 247.08 212.9 200 135.55 112.2 100 68.8 176.54 263.01 235.63 286.88 dlf ansal group parsavnath unitech 373.96 358.26

0 2001 2002 2003 2004 2005

Comparison of operating profit in real state developers


100 80
77.5 71.98

60
42.33

40
23.01

dlf
19.58 16.45

20
10.99

18.43

19.31

12.12 10.19

ansal parshavnath unitech

2.72 0 2001 -6.19 -20


-22.81

2002 -2.92

-5.15

2003

2004

2005

-40
-43.54

-60

Profit after tax major real state developers


90 80.38 80 70 65.89

60 47.77

50

dlf parshvnath

40

37.18

36.53 28.87

unitech ansal

30

25.09 18.41 14.07 10.02 20.83

20 10.539.19 6.97 8.42

14.74 11.32 10.64

10

0 2001 2002 2003 2004 2005

5 FORCES STRATEGY
 RIVALRY AMONG INDUSTRY  DLF has a high ratio of market share(almost to monopoly).  DLF is differentiated because it is continuously implementing innovations in the construction & booking.  High concentration ratio that indicates a high concentration of market share. With only few firms holding a large market share, the competitive landscape is less competitive (closer to monopoly)  NEW ENTRANTS  DLF PAT is already high in comparison to its competitors. This characteristic protects the high profit levels of the firm in the market which prohibits rivals from entering into the market.  SUBSTITUTES  No close substitute. Demand is inelastic.  Threat of substitute mainly has an impact on the industry through price competition

 BUYERS  DLF has acquired a significant portion of land for construction. So buyers are concentrated because there are fewer buyers with significant market share.  SUPPLIERS  The suppliers to the DLF are also getting benefits by rising of the industry. Many other industries were also depend on this industry.

MAJOR DLF REAL ESTATE DEVELOPMENTS


 TRINITY TOWERS Located 5km.from Cybercity,19km.from Delhi international Airport  DLF EXCLUSIVE FLOORS 19km from airport & 7km from Cybercity, comprised 172 plots.  INFINITY TOWERS
Designed by Hafeez Contractor ,consisted of 3 interconnected multi storied tower, located close to DLF Cyber Green.  DLF CYBER GREEN It consists of 5 multi-storied towers, high speed elevators, service lifts, a multi-level car park &power back-up facilities.

Gateway tower(Gurgaon)

 DLF CITY CENTRE Situated in Gurgaon along Mehrauli-Gurgaon development,housed cinema complex &many restaurants.

road,2.8acre

 DLF MEGA MALL Located in phase 1 of DLF city in Gurgaon ,provides parking for 800 vehicles.  THE ARALIAS,THE MAGNOLIAS,WESTEND HEIGHTS,DLF IT PARK KOLKATA,JASOLA, DLF PLACE.  COURTYARD MALL Located in Saket targeted an affluent catchment area.