DLF: Real Estate Leadership in India: Vikas Kujur

DLF: Real Estate Leadership
in India
Vikas kujur
DLF: Real Estate Leadership in India
DLF was the leading real estate player in India, and its visionary chairman, Mr. K.P.
Singh, had played a large role in this. In April 2008, he was conferred an Honorary
Degree of Doctorate in Science by the prestigious G.B. Pant University of Agriculture
& Technology, in recognition of his 'invaluable contribution in the field of Business
Administration.'
Describing his vision, Mr. K. P. Singh said in his acceptance speech, 'In my own
humble way, it has been my endeavour to pioneer a movement to make Housing and
Urban Development the new Sunrise Sector of our economy.'
'I am acutely aware that although my company DLF is today regarded as the largest
real estate developer in the world and has a pan-Indian presence with over 50 million
square feet under construction, India needs not one DLF, but hundreds of companies
like DLF to meet the rising aspirations of the people for better living standards, better
homes and better all round infrastructure.'
Mr. Singh further said, 'the ground reality is that due to neglect of this crucial sector
in the past, our urban infrastructure is today crumbling and our urban centers are
unable to cope with the burgeoning population. Everything is in short supply, whether
you talk of housing, power supply, roads or sanitation. This has led to the degradation
of the human condition in our cities and towns, where fifty per cent of the population
are slum dwellers, lacking even basic hygiene facilities and slum children, the citizens
of tomorrow, are growing up in an environment where character building has no
place.’
On the occasion, Dr. A. P. Sharma, Vice-Chancellor, G.B. Pant University said that Mr.
K. P. Singh has made 'historic and lasting contributions to the building of modern
India through his pioneering role as a real estate developer and corporate leader with
a vision to transform the urban landscape of the country'. Mr.K.P. Singh also set 'new
standards in the housing and urban development scenario' emerging as the 'driving
force'
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The Real Estate Sector in India

The real estate sector plays an important role in the overall development of the country. Real estate
involves the purchase, sale and development of land, residential and non-residential buildings. Real
estate sector activities also encompass activities in the housing and construction sector.
The size of the Indian real estate sector is estimated to be over US$12 billion. The contribution of
the housing sector to India's GDP is a meagre 1% against 3-6% of developing countries. If the
economy grows at the rate of 10%, the housing sector has the capacity to grow at 14% and
generate 3.2 million new jobs over the next 10 years.
In the last 3 years, the construction activity in the real estate sector has been buoyant, after going
through a recession between 1995 and 1999. High growth in the economy, growing contribution of
the services sector, changing demographic profile (increasing proportion of young and working
population, increasing disposable incomes and urbanisation), rising demand from the technology
sector and favourable government policies are expected to drive the demand for real estate in India.
The housing boom is expected to continue, despite a marginal firming up of the interest rate on
housing loans.
Key Characteristics
The Indian real estate sector has traditionally been dominated by a number of small regional or
local players with low levels of expertise. The sector has seen limited inflow of institutional capital
and has used high net-worth individual (HNI) and other informal sources of financing as the major
source of capital, leading to low levels of transparency. This is rapidly changing as the sector is
witnessing far higher growth rates and significantly improved quality expectations as India gets
better integrated with the global economy. Some of the key characteristics of the Indian real estate
sector are:
a) Highly fragmented market dominated by regional players - Rapid growth in the last decade has
seen the emergence of larger players that have differentiated themselves through superior
execution and branding. Further, these players are now able to capitalize on their early mover
advantage with high market share, but remain confined to local or regional markets. While these
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larger players are now initiating efforts to develop a broader geographic presence, their home
markets continue to generate majority of their profitability.
b) Local know-how critical success factor in the development phase - One of the key reasons for
emergence of local developers is the critical importance of local knowledge and relationships in
ensuring successful and timely development of real estate projects. Property is a state subject in
India and the rules and regulations that affect, among other things, approval processes and
transaction costs vary from state to state.
c) High transaction costs -The sector has traditionally been burdened with high transaction costs as
a result of stamp duty on transfers of title to property that varies state by state. Though efforts are
being made at the state level to reduce the stamp duties, they continue to be as high as 11 % in
certain states.
d) Enhanced role of mortgage financing -Over the last five years, a significant portion of new
acquisitions, particularly in the larger cities in India, has been financed through banks and financial
institutions. This has been aided by a sharp decline in interest rates and broad availability of
financing products, due to aggressive marketing and product development by financial institutions.
Reforms in the Real Estate Sector

In recent years various reforms have been initiated at the Central as well as State level which is
leading to greater organisation and transparency in the sector. These include:
i) Support from the GOI for the repeal of the Urban Land Ceiling Act (introduced in 1976), with
nine state governments having already repealed the Act. The law was repealed by the Central
Government in 1999. However, land being a state subject, the law is still in force in some states
like Andhra Pradesh, Assam, Bihar, Maharashtra and West Bengal;
ii) Modifications in the Rent Control Act to provide greater protection to homeowners wishing to
rent out their properties;
iii) Rationalisation of property taxes in a number of states;
iv) The proposed computerisation of land records; and
v) FDI being permitted in the real estate sector, subject to certain conditions.
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The trend towards greater organisation and transparency has contributed to the development and
organised investment in the real estate sector by domestic and international financial institutions
and has also resulted in greater availability of financing for real estate developers. Regulatory
changes permitting foreign investment are expected to increase investment further in the Indian
real estate sector. These trends have been reinforced by the substantial recent growth in the Indian
economy, which has stimulated demand for land and developed real estate. Additionally, the tax
and other benefits applicable to SEZs are expected to result in a new source of demand.
Overview of DLF as a company

DLF is a real estate developer in India and their primary business is the development
of residential, commercial and retail properties. Their operations span all aspects of
real estate development, from the identification and acquisition of land, to the
planning, execution and marketing of their projects, through to the maintenance and
management of their completed develop. They also intend to diversify into other real
estate related businesses such as the development of SEZs, infrastructure
construction through their joint venture with Laing O’Rourke plc, and the
development of hotels and apartments. They are in the process of adopting a new
business model in respect of their commercial and retail properties. They intend to
develop and sell, whereas previously they developed and leased, such properties.
Consequently, the nature of their future revenues and revenue growth are expected
to be substantially different from their historical results. The following map illustrates
the locations of developments, projects and lands across India, as of April 30, 2007.
Strengths
Their primary competitive strengths are :
An established brand name and reputation for project execution

They have a 60 year history of service excellence. They have been responsible for the
development of 21 urban colonies aggregating 5,816 acres as well as an entire
integrated 3,000 acre township - DLF City. Their position as a leading property
developer is largely due to their established execution capabilities. Their reputation
for providing prompt payment to landowners upon the acquisition of their land,
developing and completing projects in a timely manner and conducting their business
with transparency has created a relationship of trust with their customers and
suppliers, many of whom have been involved with them across generations.
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Extensive land reserves
As of April 30, 2006, their land reserves under development aggregated 1,372 acres
representing approximately 102 million square feet of developed area or area
available for development. In respect of properties representing an aggregate of
approximately 228 million square feet in 64 locations across India, Cushman &
Wakefield has opined that the land value of these properties is between Rs. 772
billion and Rs. 853 billion and Jones Lang LaSalle has opined that the land value of
these properties, as achievable by DLF, is approximately Rs. 853 billion.
Scale of operations
Their size allows them to benefit from economies of scale. They are able to purchase
large plots of land from multiple sellers, thus enabling us to aggregate land at lower
prices. They enjoy greater credibility with sellers of land as well as buyers of
properties as a result of their reputation and their scale of operations. The large scale
of our developments within a business line creates demand for our other business
lines.
Strategic locations
Their projects are strategically located. Their luxury residential developments benefit
from desirable locations that appeal to higher income customers, while their
townships are developed with easy access to city centres. Their commercial
developments are located in areas that are attractive to our multinational clients,
particularly in the IT and ITES sectors.
A tradition of innovation
They were one of the first developers to anticipate the need for townships on the
outskirts of fast growing cities and are generally credited with the growth of Gurgaon.
We were one of the early developers to focus on theme-based projects such as The
Magnolias development in DLF City, which includes a golf course. They are one of the
few developers in India to provide commercial space with floor plates of over 100,000
square feet and were an early developer of large shopping malls with integrated
entertainment facilities.
Experienced and dedicated management
They have an experienced, highly qualified and dedicated management team, many
of whom have over 20 years of experience in their respective fields. Because of their
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established brand name and reputation for project execution, they have been able to
recruit high calibre management and employees. They provide their staff with
competitive compensation packages and a corporate environment that encourages
responsibility, autonomy and innovation.
Business level strategy

DLF continues to lead and set benchmarks in the fast-growing real estate industry. Its
transformed unique business model would facilitate its aspiration of capitalising on
the ‘India Growth Story’. It is organising itself into a high-growth development
company. It seeks to minimise risks by having multiple business across geographies,
which will complement each other in case of mixed land use
Since 2006, DLF has successfully transformed and established its business model as a
unique proposition. At one hand it is adopting a development company, while on
other hand it is retaining few retail and commercial projects in its books for
continuous cash flows in forms of rental earnings. The company is focusing on
minimising business and financial risk through diversification & a range of de-risking
initiatives.
The transformed unique business model

1. Previous model focused on ‘sale of assets’, wherein current model envisages to enjoy
development and rental earnings. DLF is adopting ‘developmental company’ business
model and retaining few commercial & retail assets for leasing income.
2. It is taking exposure across business, segments and geographies to mitigate any down-
cycles in the market.
3. DLF intends to sell most of its commercial properties and offices to improve cash flows
and sustain large scale land acquisition in the initial years. Most commercial properties (IT
Parks, SEZs) have tax benefits; hence there is no tax impact. It also intends to sell few
properties (commercial/residential) through sale of shares.
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4. A separate asset company, i.e.DLF Asset Ltd.(DAL), to buy assets from the ‘development
company’ on an ar,’s length, transparent basis through ‘open bid’ process with conditions
like ,1) if the market price of the asset be less than the 10% cap, dlf can execise a put option
on DAL, causing it to compulsorily buy the asset, and 2) DLF shall have an option to sell
assets, to the external ‘third party’ customer as well.
5. Mitigating financial & business risk by a range of initiatives, (refers A Risk Mitigating
High Growth Approach below)
A Risk Mitigating High Growth Approach
1. Mitigating risk by continuing its diversification plan, i.e, multiple business across
geographies;
2. Mitigating funding risk in its existing and future businesses;
3. Minimising risk in existing business through optimal product segmentation &
continuous cash flows in terms of development and rental income;
4. Complementing existing & future businesses in case of mixed land use and
mitigating execution risk by having tie-ups with best in class global organisations;
5. De risking businesses through the virtuous cycle, asset monetisation & value
unlocking and sub vertical level fund launches;
6. More de risking by monetising retail and leisure businesses( raising funds by
launching retail and convention centre REITs);and
7. Intends to have a larger footprint in vertical or project level fund management to
be managed through its own AMC.
Three Phased Strategy

In line with emerging opportunities, DLF has set an ambitious target of becoming a major
player not only in the real estate industry in India, but also when benchmarked against
global peers. Accordingly, it was aggressively pursuing land acquisition to build land
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reserves in the last 1-2 years for fulfilling its growth agenda a until 2020 & beyond. The
company has kicked off four key strategic initiatives;
a) Separation of development and asset ownership by creating two entities;
b) Completing the acquisition of necessary land bank at a rapid pace; and
c) Establishing of a civil construction JV with LOR to ensure scaling up;
d) Diversify into other businesses & successfully complement them with existing business.
Horizon 1
Focus on building core business and land bank acquisition.
2006-08
• Achieve market leadership in core business using standard formats. Eg;
 Group housing for homes in NCR and metros
 Prime downturns shopping and neighbourhood malls for retail
 Office spaces for IT and non IT
• Complete land bank acquisition for Horizons 2 and 3,
• Finalise partners and develop pilot properties for emerging business, eg; SEZ,
hotels
• Build leadership position in top 4-5 cities,
• Create presence in top 10-15 cities.
Horizon 2
Aggressive rollout of existing business and new business
2008-12
• Expand product line within core business, e.g
 Destination malls for shopping
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 Develop townships in tier 2 cities
• Grow hotels and SEZs
 Aggressively roll out hotels
 Increase presence in SEZs across country
• Consolidate position in top 10-15 cities
• Create presence in next 30-40 cities.
Horizon 3
Create huge upside beyond current business plan
2012-16
• Aggressively expand geographic spread in all the business
• Explore additional growth platforms
 Incremental growth
 More cities becoming tier 1
• Complete presence in next 30-40 cities
In line with initiatives and stratergies formed by DLF, it is pretty much on the
path of following its three –phase strategy. Its current land reserves are sufficient to
last for its horizon 2 and 3. Its land reserves are widely spread across geographies
and is optimally segmented across different verticals, i.e, residential, commercial,
retail, plots. As seen from land concentration table , which is in line with DLF Horizon
1, top 10 cities account for almost 94% of land reserves. It is now present in all
regions of India and has been able to create a successful diversified portfolio with in
its existing business . i.e, optimally divided land reserves between residential,
commercial(including IT/IT SEZ) and retail. The company has also been able to draw
an effective line in between its sale and lease projects.
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It has finalised partners for its ambitious hotel ventures and is on its way to roll out
4,000 hotel rooms by end -2010. It has acquired 51 hotel sites having a potential
development of ~ 9,000 rooms.It has received in-principle approvals for six of its SEZ
& has initiated the process for acquiring land. Land acquisition for its Manesar SEZ &
South Maharashtra SEZ has already begun.Despite having the largest development
plan in the country across segments and geographies,we expect DLF to continuously
bid for large projects( contiguous plots or large infrastructure projects), which will
further help DLF in mitigating the risk of any down-cycles in the market by
complementing its acquired projects with other verticals through mixed land use.
A Peep into the operational strategy: Project Execution

Methodology
They have established a systematic process for land identification and acquisition,
project execution and the sales and marketing of their completed developments.
Land identification and acquisition

Their land acquisition team monitors real estate markets and emerging trends. The
team assesses selected markets to identify cities and localities with development
potential. The initial assessment and selection of the land involves a detailed
assessment of the plot with a focus on the land’s development potential and location.
After they conduct a preliminary land title evaluation and the land title is reviewed by
local lawyers, a preliminary agreement is entered into with the landowners for the
purchase of the land. Following title clearance, they either acquire the land or enter
into a joint development agreement with the owners.
Execution
The project execution process commences with the obtaining of requisite regulatory
approvals, including environmental approvals, and the development of a project
concept based on the area’s marketability, target customers and potential return.
After a detailed review of the site parameters, they formalise an architectural brief
based of the project concept which is subsequently finalised with selected architects
and other external consultants. They closely monitor the development process,
construction quality, actual and estimated project costs and construction schedules.
Sales and marketing
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They operate three separate sales and marketing departments, one for each of their
residential,
commercial and retail business lines. Their sales and marketing function is illustrated
in the chart (source: DLF IPO Red Herring prospectus)
Segmental snapshot
Residential business
• Aggressive launch of mid income housing projects in second half of Q3FY08
with primary focus on Chennai, Indore, and Kolkata.
• The New Town Heights in Rajarhat witnessed aggressive absorption; it was sold
out with in four days of its launch.
• Selling prices of the luxury housing category increased.
• New tools like one house per family and one year lock in period were used to
cut down speculative demand.
Commercial segment
• Aggressive growth in area under construction; it increased by 16% and 35%
over Q2FY08 and Q1FY08, respectively.
• On track to achieve lease volume target of 12 mn sq ft per annum.
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• Average lease rates have dropped over the past quarter by more than 30%,
primarily due to change in location.
Hotel segment
• Management has identified 51 hotel sites compared to 39 in the previous
quarter.
• The first Hilton Garden Inn is set to open in Saket (New Delhi) by end 2008.
• 4,000 hotel rooms expected to be operational by FY10 end with a long term
target of 25,000 hotel rooms in the next six-seven years.
• International Convention Centre at Dwarka, New Delhi, is in advanced stage of

design and development.
• Acquisition of “Aman” gives a significant thrust to the hotels business unit, with
a strong international footprint.
SEZ business
• Five SEZs got notified, aggregating to 27 mn sq ft.
• Six SEZs have been sent for final approval.
• Land acquisition for both Manesar and Ambala SEZs is in progress.
• For Goa, land acquisition process has just begun.
New land acquisition

• DLF added 26 mn sq ft during the quarter, adding 748 mn sq ft compared to
738 mn sq ft in the previous quarter. The new acquisitions were as follows:
• Hyderabad Raidurg: Acquired two parcels of 26 and 30 acres of land.
• Adjoining site of Chennai IT Park: Acquired 1.73 acres site adjoining

Chennai IT Park.
32 milestone: Executed collaboration agreement for 10.45 acres for new site at
Village Silokhera Gurgaon
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They have a loyal customer base and encourage the participation of former buyers or
tenants in their new product launches. They employ various marketing approaches
depending on whether the project is residential, commercial or retail. These include
launch events, corporate presentations, web marketing, direct and indirect
marketing, as well as newspaper and outdoor advertising. Their marketing team sells
both directly to customers and through brokers. In their commercial and retail
business lines, they market space primarily through property consultants and by
using their relationships with existing tenants. Different marketing approaches are
used to target anchor commercial and retail tenants. They use approximately 120
brokerage firms to market their properties.
Mergers & Acquisitions (Joint Ventures & Partnership)

In November 2006, DLF has entered into a joint venture with the UK-based design and
engineering consultancy firm WSP to ensure quality work in India. The joint venture
provided the design, engineering and project management services along with
infrastructure and environmental facilities.
Mr. Rajiv Singh, Vice-Chairman, DLF Ltd, said, "We are sure that while WSP will bring
in its own strengths, we at DLF will set new benchmarks in the design and
construction industry."
In February 2006, DLF has entered into a joint venture with UK's leading construction
company, Laing O'Rourke Plc to form DLF Laing O’Rourke with an initial investment of
about Rs 500 crore. Both partners had contributed Rs. 250 crore each to the initial
corpus of the joint venture and it had also floated a dedicated fund with a corpus of
$1.5 billion for infrastructure projects. The joint venture company completed the most
prestigious projects of DLF like- IT Parks, The Mall of India, The Magnolias and many
of DLF's retail destinations. The joint venture company will help DLF group in
executing its infrastructure projects like harbors, tunnels, power plants, pipelines,
bridges and roads,
"The joint venture will help DLF become a major player in the country's construction
and infrastructure development programmes. It will tap potential across infrastructure
sector covering express highways, airports and hi-tech construction involving power
plants and mega projects," the DLF Universal Vice-Chairman, Mr. Rajiv Singh, said at
a conference”
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DLF signed a memorandum of cooperation with Frankfurt Airport Services Worldwide

in April 2007 to explore airport projects and modernization. It launched a special
purpose vehicle, DLF Fraport SPV, specializing in development and management of
airports in India.
On March 2007, DLF2 signed a 50:50 joint venture with Nakheel, a large property
developer from the UAE for two integrated townships in India with an initial
investment of $10 billion..The joint venture company will develop 40,000 acres at
Gurgaon and between Mumbai and Pune in Maharashtra. Construction of these two
projects is expected to start the same year only and the first phase of the
construction/development is targeted to complete in next three years. The cost of the
land is only 40% of the $10 billion investment. Approximately 70% of the land has
been acquired by DLF.
In November 2006, DLF signed a joint venture with Hilton Hotels Corporation. The
plan of the joint venture company is to develop and own 75 hotels and service
apartments throughout India over the next seven years and Hilton will invest up to
$143 million in the joint venture. 74% stake was held by DLF in the joint venture and
the rest will be held by the Hilton Hotel Corporation as a symbol of its commitment to
the joint venture. The first stage of the joint venture was to involve 20 hotels in key
locations like Kolkata, Chennai, Hyderabad, Bhubaneswar, Kochi, Delhi and
Chandigarh.
DLF made a partnership with IBM for a 10 year contract to transform and manage
DLF's IT Infrastructure. DLF tried to leverage IBM's Information Technology
infrastructure management solution to get high quality information that will be
efficiently managed in a cost-effective manner.
Rajeev Singh, Vice Chairman DLF thinks “As part of the partnership IBM and DLF will
also set up a Technology Innovation Council (TIC) with joint participation. The TIC will
focus on identifying and deploying new solutions for DLF and Indian Real estate
industry. Some of the solutions under consideration are advanced security
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management solutions like Digital Video Surveillance, utilizing technology for land
acquisition process and other management systems. Some of the other focus areas
would include IT solutions for building management and intelligent buildings.”
DLF signed a joint venture with U.S. based Prudential Financial Inc. This agreement
allowed Prudential Financial Inc to expand its international investments business and
make a relevant mark of its official entry into the Indian mutual fund market. Under
the terms of the joint venture, DLF will own the 39 percent and Prudential Financial
Inc. will hold the majority stake in the joint venture with 61 percent interest. The
asset management joint venture is based in Mumbai and provides a wide range of
mutual fund and investment related products, including domestic and international
mutual funds to Indian retail and institutional clients
Competition
Even though many players are present in the real estate space in India, the top 5 of
them are as under:
• DLF Ltd.
• HDIL
• Sobha Developers Ltd.
• Omaxe Ltd.
• Parsavnath Developers
We analyse each of these competitors and there relative positions in the real estate
space in India.
HDIL
HDIL - Housing Development and Infrastructure Limited, is a listed real estate
development company with significant operations in the Mumbai Metropolitan Region.
HDIL's business focuses on Real Estate Development, including construction and
development of residential projects and, more recently, commercial and retail
projects, Slum Rehabilitation and Development, including clearing slum land and
rehousing slum dwellers, and Land Development, including development of
infrastructure on land which the company then sells to other property developers.
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HDIL has an integrated in-house development team which covers all aspects of
property development from project identification and inception through construction
to completion and sale.
Since incorporation in 1996, HDIL has developed 23 projects covering approximately

19.29 million square feet of saleable area, including approximately
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12,730,000 square feet (1,183,000 m ) of land sold to other builders after Land
Development, primarily in the Mumbai Metropolitan Region. HDIL also have
constructed an additional 1,900,000 square feet (177,000 m2) of rehabilitation
housing area under slum rehabilitation schemes.
HDIL's residential projects generally comprise groups of apartments, towers or larger

multi-purpose “township” projects in which individual housing units are sold to
customers. The commercial projects are a mix of office space and multiplex cinemas.
The retail projects focus on shopping malls. They usually follow a “build and sell”
model for the properties they develop.
HDIL was the most profitable company out of the 5, with Operating profit margins as
high as 51.4% for a 3 year average, and Net Profit Margins as high as 43.75% for the
3 year average (refer Appendix >>>>___ for detailed comparison). Furhter, its 3 year
CAGR was a whopping 251%, which was also the best in the industry. Among the 5
players, It controlled 36, 50 and 62% of the market In terms of revenue in
proportionate distribution terms. (refer appendix for details)
Sobha Developers Ltd

Sobha developers was founded by Mr. P N C Menon in the year 1995. He did this with
the clear vision to "transform the way people perceive quality" in the real estate
industry returned home from the Middle east where he was acclaimed for quality
interiors and construction since 1977. Sobha developers is now a Rs. 12 billion plus
company, and is one of the largest and only backward integrated company in the
construction arena.
Since its inception Sobha's reputation is built on rock solid values, benchmark quality
standards, uncompromising business ethos, focused customer centric approach,
robust engineering, in-house Research and development and transparency in all
spheres of conducting business. They also had a successful IPO in 2006 when the
issue was oversubscribed by 127 times. The company had completed 18.8 million
square feet of area as of September 2007, 42 completed residential/ commercial in
house projects, 36 ongoing projects and 104 contractual projects beginning with the
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first residential project in Bangalore in 1997. The locations it was present in were
Bangalore, Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Harayana
and Maharashtra.
Its OPM and NPM for a 3 year average were 22.86% and 14.60% respectively. Its 3
year CAGR was also lower than competition at 60.62%.
Omaxe Ltd
The company was originally set up as Omaxe Builders Private limited in 1989,
promoted by Mr. Rohtas Goel , the founder, to undertake construction & contracting
business. The company further changed its constitution to a limited company known
as Omaxe Construction Ltd., in 1999. The name of the company has now changed to
Omaxe Ltd from 2006. The company began life as a civil construction and contracting
company, has successfully executed more than 120 prestigious Industrial,
Institutional, Commercial, Residential and Hospital construction projects. The
company entered the Real Estate Development business in 2001 and in now amongst
the large Real Estate Development companies in India. Mr. Rohtas Goel , a first
generation entrepreneur, a civil engineer by qualification and a visionary having more
than two decades of experience in Construction and Real Estate Development.
Omaxe received a number of awards from the industry, recognition of its continued
efforts towards achieving excellence and quality. The company became the first
Construction Company of northern India to receive an ISO 9001:2000 Certification.
The company is at present developing over 156 million sq ft of area across 31 towns
in 10 states in Northern , Central India and Southern India.
In terms of its financials, it still lacks behind its competitors as its OPM and NPM
average over 3 years was 19.33% and 10.72% respectively. Yet, it was a fast growing
company with a 3 year CAGR of 206.82% which was second only to HDIL.
Parsavnath
Parsvnath had a commitment to `building a better world’, which they tried to fulfil by
transforming barren tracts into landscaped green belts housing world class
commercial, residential and recreational properties. They believe in creating
architectural marvels using state-of-the-art technology and global architectural,
construction and business practices. They provided cost-effective and holistic
solutions for our customers while creating and adding value for our partners and
stakeholders. They had a pan-India presence in over 51 cities in 18 states, where they
built contemporary residential spaces, state-of-the-art office complexes, luxurious
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shopping malls and hypermarkets, posh hotels, futuristic multiplexes, and ultra
modern IT Parks and special economic zones.
They were a relatively smaller player compared to the rest, and had only 10% of the
proportionate distribution based on revenues among the top 5 real estate players. Its
profit margins weren’t too encouraging either, with 3 yr NPM and OPM averages being
18.21% and 22.45%. Their growth rate (CAGR, 3 yr average) was a healthy 140%.
HR Strategy of DLF
The housing sector alone is likely to generate 40 lakh new jobs within ten years. The
prime reason for such a huge demand of personnel has been due to great demands for
residential and commercial real estate projects. Moreover, the sector offers attractive
opportunities to people with roles such as developers, architects, strategy and urban
planners, civil engineers, and contractors. It also offers a plethora of opportunities which
are not confined to profiles of contractors and builders only, but extend up to
professionals including people with marketing, law, finance, and advertising
backgrounds. Many property management companies also work tightly with the sector,
thereby, resulting into indirect generation of employment.
Coming to the trends of talent acquisition, most real estate firms are becoming
proactive in terms of hiring and are adopting latest talent acquisition and recruitment
trends like on-campus recruitments, e- recruitments using recruitment portals, executive
search and so on. To meet the demands for highly skilled professional, companies like
DLF are looking out for campus recruits from top business schools like IIMs. The job
options range from real estate appraisal to property managers, advisors, investment
bankers, entrepreneur, retail buyers and merchandisers, visual merchandisers, supply
chain distributors and logistics and warehouse managers.
Challenges for HR:
• Lack of quality talent:

There is a gap between the requirements and the availability of quality
manpower. The sector is growing quickly and the amount of human resources
available is not at par with the rate at which the sector is growing. A large amount
of talent is absorbed in mega infrastructure projects. However, the continued
growth of the industry is adding to the dearth in the existing talent pool within the
country.
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• Less Supply of freshers from educational institutions:

Since real estate sector is a burgeoning one, not every one was earlier attracted
to it. Students were lured by other sectors like IT who offered better salary
packages than real estate. As a result, people with high potential opted for
computer science degrees rather than civil engineering courses. Its only recently
that some of the universities have started offering diverse courses in real estate.
Moreover, candidates are now recognizing the opportunities real estate sector
provides.
• Retention:
It is becoming increasingly difficult for the companies to retain talent with them. The
attrition levels in the sector have touched 12.08 per cent in last year. To retain the
potential, companies are paying hefty amounts to their employees. The salary hike was
recorded at 25.2 per cent in 2007 and is expected to be followed in coming years.
• Inculcating values:
Times have been changing for the real estate sector and earning profits has become top
priority for every company. With respect to this, the companies often forget to comply
with quality norms or ensure integrity in practices. It becomes a challenge for the HR to
inculcate values of integrity and commitment towards customer satisfaction in all the
employees. A majority of companies now also emphasize on transparent dealings and
methods while doing business. This will be an on-going challenge since the sector has
enough weak links outside their companies, which also need to be changed.
• Lack of second line leadership:
By MNCs entering the realty markets take away the cream of talent at the first level.
Other players thus look for candidates with high leadership skills. The challenge for HR,
here, becomes to develop the second line of management and if possible even the third
line, which is capable of undertaking enormous work pressure from the top line.
The changing face of realty sector is posing great challenges for the companies in terms
of talent shortage and high attrition. To deal with such challenges becomes the sole
responsibility of the HR departments of the companies so as to keep pace with the
growth of the sector.
CSR Initiatives
"For DLF, Corporate Social Responsibility is not just an add on; rather our business and
social commitment are mutually reinforcing and neither will be sustainable without the
20
other. We have a continuing social responsibility towards the people of the area in which
we operate more so towards the less fortunate. It has been our constant endeavor to
create sustainable economies and transform stagnant lives into active partnerships
through synergized proactive handholding in areas of infrastructure, education, training,
health and environment. We have made a public commitment to carry on these trusted
relationships." – CEO Mr. K.P.Singh.
Rural Interventions: Towards better living conditions

• DLF decided to solve the local problems of Gurgaon when DLF was setting up the DLF
township in Gurgaon.
• Solved the sewer problem in Nathupur and Chakarpur villages by connecting them to the
DLF’s own sewer line system.
• Constructed the internal roads at Wazirabad and Chakarpur.
• Provided electricity in Chakarpur and Nathupur.

• Constructed the class rooms at the Chakarpur school and electricity work at the Nathupur
Higher Senior Secondary School.
21
Appendix: Set of Exhibits
Exhibit 1: Organisational Chart
22
Exhibit 2: Map showing locations of developments, projects

and lands across India, As of April 30, 2007.
23
Exhibit 3: Financial Analysis – P&L account

The growth rate of expenses and income is drastic at around 200% for the last few
years. Though, this growth is expected to remain high for a couple more years as the
company is still to cash in on the number of projects going on. Important thing to note
here is that the company is utilising the economies of scale and will keep on doing so
in the future as the size will increase many fold. This not only improves the margins
for the company but also gives a huge boost to the bottom line.
24
Exhibit 4: Financial Analysis – Balance Sheet

The size of the firm is growing in sync with the expectations; especially after the IPO
in 2006-07. Also, we see that future growth is secured as the reserves increase
drastically due to the strong cash inflow. This will help the company in acquiring fresh
plots of land at premium locations as the cost of land increases. Other than that we
can see that it is a strong balance sheet with strong projections too.
25
Exhibit 5: Financial Analysis – Cash Flows

Cash Flows: The company has a strong cash flow as the projects mature and deliver
the outputs. Other than that, we can see that the company easily meets its capex
requirements and thus is not dependent upon external sources for growth.
26
Exhibit 6: Financial Analysis – Key Ratios

Profitability & Operating: Since the company is in growth stage, right now the ROE,
ROCE, and margin ratios are very healthy. As the business and the industry matures,
these ratios are expected to come down to a certain stable and realistic level.
Liquidity: Due to strong cash flows, liquidity is not at all an issue in this case.
Leverage: This might be a cause for concern today but as the projects cash in, the
debt will be repaid by the company. This will decrease the financial risk for the
company; which might be considered a bit high today. But considering the
development sector in real estate, the debt-equity is usually high due to unknown and
large financial requirements.
27
Exhibit 7: Growth Story for DLF
28
Exhibit 8: Competitor Analysis

Comparative Ratio Analysis
Company Name OPM(%) Average 3-Years NPM Average 3-Years
DLF Ltd. 59.76% 36.06% 36.83% 25.70%
HDIL 71.01% 51.40% 59.26% 43.75%
Sobha Developers Ltd 24.86% 22.86% 16.04% 14.60%
Omaxe Ltd. 29.17% 19.33% 13.26% 10.72%
Parsvnath Developers 22.45% 21.59% 16.50% 18.21%
Financial Comparison
Revenues 3- Year PBDIT 3-Year PAT 3-Year
Company Name
(Rs Cr.) CAGR(%) (Rs Cr.) CAGR (%) (Rs Cr.) CAGR (%)
DLF Ltd. 1,101.66 63.47 986.11 171.32 405.77 144.83
HDIL 2,379.87 137.43 1,758.22 251.89 1,410.51 251.86
Sobha Developers Ltd 1,422.51 50.83 365.36 61.21 228.30 60.62
Omaxe Ltd. 940.87 54.30 281.12 208.54 124.83 206.82
Parsvnath Developers 643.83 139.60 154.50 167.64 106.25 140.23
29

DLF: Real Estate Leadership in India: Vikas Kujur

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DLF: Real Estate Leadership

The Real Estate Sector in India

Reforms in the Real Estate Sector

iii) Rationalisation of property taxes in a number of states;

iv) The proposed computerisation of land records; and

Overview of DLF as a company

An established brand name and reputation for project execution

Extensive land reserves

Experienced and dedicated management

Business level strategy

The transformed unique business model

A Risk Mitigating High Growth Approach

Three Phased Strategy

a) Separation of development and asset ownership by creating two entities;

b) Completing the acquisition of necessary land bank at a rapid pace; and

c) Establishing of a civil construction JV with LOR to ensure scaling up;

 Group housing for homes in NCR and metros

 Prime downturns shopping and neighbourhood malls for retail

 Office spaces for IT and non IT

• Complete land bank acquisition for Horizons 2 and 3,

• Build leadership position in top 4-5 cities,

• Create presence in top 10-15 cities.

Aggressive rollout of existing business and new business

 Destination malls for shopping

 Develop townships in tier 2 cities

• Grow hotels and SEZs

 Aggressively roll out hotels

 Increase presence in SEZs across country

• Consolidate position in top 10-15 cities

• Create presence in next 30-40 cities.

• Explore additional growth platforms

 More cities becoming tier 1

• Complete presence in next 30-40 cities

A Peep into the operational strategy: Project Execution

Land identification and acquisition

Sales and marketing

• Selling prices of the luxury housing category increased.

• On track to achieve lease volume target of 12 mn sq ft per annum.

• International Convention Centre at Dwarka, New Delhi, is in advanced stage of

• Six SEZs have been sent for final approval.

• Land acquisition for both Manesar and Ambala SEZs is in progress.

• For Goa, land acquisition process has just begun.

New land acquisition

• Hyderabad Raidurg: Acquired two parcels of 26 and 30 acres of land.

• Adjoining site of Chennai IT Park: Acquired 1.73 acres site adjoining

Mergers & Acquisitions (Joint Ventures & Partnership)

DLF signed a memorandum of cooperation with Frankfurt Airport Services Worldwide

• Sobha Developers Ltd.

Since incorporation in 1996, HDIL has developed 23 projects covering approximately

HDIL's residential projects generally comprise groups of apartments, towers or larger

Sobha Developers Ltd

Challenges for HR:

• Lack of quality talent:

• Less Supply of freshers from educational institutions:

Rural Interventions: Towards better living conditions

• Constructed the internal roads at Wazirabad and Chakarpur.

• Provided electricity in Chakarpur and Nathupur.

Appendix: Set of Exhibits

Exhibit 1: Organisational Chart

Exhibit 2: Map showing locations of developments, projects

Exhibit 3: Financial Analysis – P&L account

Exhibit 4: Financial Analysis – Balance Sheet