DLF plans to sell out nearly 81 million shares. Through this, the realty major aims to raise over Rs.2000 Cr. The shares will be sold via institutional placement program (IPP).

Though the developer has announced its plan, the timing is not yet announced. However DLF is reported to sell its shares in the first half of May. By selling 81 million shares, the firm aims to comply with the guidelines prescribed by SEBI.

Last year, the Securities and Exchange Board of India had ordered all the listed firms to limit their shares by 75 percent while making 25 percent available for the public.

Currently the promoters of DLF hold 78 percent of its stakes. This will come down to 75 percent after selling the shares.

The developer group officials said that the shares will be sold under IPP. Under the IPP, the shares can be sold either at the market price or with a maximum discount of five percent. Rs.2 is taken as the face value of each share.

For conducting the sale of shares, the realty firm has already appointed eight banks. UBS, Standard Chartered, Kotak, JP Morgan, HSBC, Deutsche Bank, CLSA and Bank of America-Merrill Lynch are the eight banks mandated to conduct the sales.

Though by selling the shares, DLF may comply with the guidelines of the market regulator; this is not the primary objective. The main objective is to cut the debts down. The debt of DLF, till December 2012, is Rs.21, 350 Cr.

So the realty major may achieve many things by selling the shares. Among all these, the most prominent and most important will be cutting short the debt of the real estate firm.

Competition Commission of India (CCI) plans to frame a new agreement between the property buyer and the developer. The new Agreement is designed on the context of DLF Case. CCI hopes that the new agreement will solve out most of the issues existing between the buyer and the developer.

Earlier the commission had fined real estate developer firm DLF for resorting to anti-competitive practices. The real estate firm was proved guilty of abusing its dominant market position. DLF was fined Rs.630 Cr.

Hearing the appeal of DLF, the Competition Appellate Tribunal (COMPAT) asked the Competition commission to frame a new agreement. COMPAT asked the Commission to prepare a framework which should become a model for all commercial agreements.

The fair trade regulator prepares the model framework in relation with DLF case of violation of dominant market position. The commission received petitions against the real estate major from home buyers of two DLF projects in Gurgaon.

Chairman of CCI Ashok Chawla said that he expect the new agreement to become a standard agreement for all commercial dealings. He was answering about the questions about the new agreement. He revealed his hope that it would be a benchmark for the entire market.

Mr. Chawla seemed confident that once the agreement passes through the judiciary test, it would certainly take care most of the commercial aspects. It would bring a better understanding between the buyers and the builders.

COMPAT had asked CCI to revise the existing agreement and bring out a better agreement. The Tribunal pointed out that there exist a need of establishing a balanced and agreement between buyers and builders. CCI remains optimistic to finalize the main parameters required for implementing a balanced agreement.

Mr. Chawla said that CCI is not considered about how the building is built but rather how the sale of the building is done. Authority of CCI is confined to look into the matters related to the buyer- seller agreements. CCI mainly looks at whether any anti-competitive practices are involved in the sale of the property.

Delhi real estate will receive some fresh DLF launches.

DLF has sold its Aman Hotel stakes with double purpose. Firstly with the amount the firm will be able to cut off its debt and secondly the firm will be able to begin developing some Delhi real estate projects as well.

Delhi real estate is expected to have some fresh DLF launches within a span of three to four months’ time. This was further firmed when DLF’s Sr. Executive Director Sriram Khattar informed that the firm will begin its Delhi real estate projects sooner.

DLF has just sold its stake in Silverlink Resorts Ltd that controls Aman Resorts. Many hotels such as Amanwana are run by Aman Resorts. Hotel Amanwana, situated close to the Tambora Volcano, in Indonesia’s Sumbawa Province, became famous when late Princess Diana paid her visit.

After spreading over to various business endeavors such as hotels and wind farms, finally DLF plans to concentrate more on real estate again.

They even had expansion- plans to export processing zones too. It seems that their expansion -attempts were not as successful as they were in the real estate sector. This might be what made them return to real estate.

By selling the Arman shares DLF would be able to cut off over one- fourth of its total debt. Further the DLF expects to attract some real estate investors. If so they will be able to move forward with their Delhi real estate projects.

Once the news was out there was a slight rise in the DLF shares. Currently DLF share prices are almost 57% lower than its initial public price. It is counted third among the worst performing shares. With the rise of 0.3 %, at present the market price for DLF shares stand on Rs.225.9. However this is very lower to Rs.525, the initial share prices of DLF.

Sale of the 17-acre plot is seen as part of DLF’s plan to sell some of its assets to pare its debt of about $4 billion. DLF bought the land for about 7 billion rupees ($129 million) in 2005.

Mumbai-based developer Lodha has emerged as the front-runner for the land parcel in central Mumbai said the sources, declining to be named as the matter is not public yet.

DLF declined to comment, while a spokesman for Lodha said the company was not in talks with DLF.

Ultimately, CREDAI expelled some builders, as they did not comply with the directives despite the body having issued several notices to them. DLF, Hirco and Hiranandani Realtors have been expelled from the Chennai Unit, whereas four builders have resigned from the Bangalore unit. CREDAI has further decided to expel non-compliant builders in NCR and informed the expelled builders that they can be a part of CREDAI unit only if they sign the code of conduct.

The order was passed by the commission to prevent the opposite party from abusing its dominant position to the detriment of allottees during pendency of the proceedings. The CCI also severely admonished the builder for discriminatory behaviour towards members of the owners’ association and other allottees/owners.

The cancellation letter for one Vipin Mahajan was issued on January 28 last year when the interim order was in force. According to Mahajan, despite the directions being in force to date, the opposite party issued a letter in January last year, cancelling the booking of his apartment and forfeited a sum of Rs 23,06,778 out of the total amount of Rs 44,89,503.

While the CCI accepted this restoration of status quo and therefore felt that no further direction needs to be passed as far as restitution of Mahajan’s apartment was concerned which had been a great relief for the allottee concerned, the CCI as prescribed by the Competition Act 2002 “is obliged to impose penalty because of the deliberate non-compliance”. This, the order stated, was a violation of Section 42 of the Act.

Also, Section 48 of the Act makes it a liability of every person for penalty, who at the time of contravention was in charge of or was responsible to the company for conducting its business. DLF will now have to disclose the name of the errant persons who were responsible for the misconduct and also give a showcause notice as to why the penalty should not be imposed. The case on the same is up for hearing on May 17.

Meanwhile, a spokesperson of DLF Ltd clarified that the company had “restored the ownership of the apartment which was %cancelled due to non-payment of dues by the %allottee”.

While DLF is seeking a valuation of 30 billion rupees ($571 million) for the 6.8 hectare property, the potential buyers are negotiating at between 20 billion and 22 billion rupees, the newspaper said, citing an unnamed person.

“Even as all the parties had talks with DLF, the developer is yet to make up its mind, as it is expecting higher valuations,” it quoted the person as saying.

DLF bought the land for 7.02 billion rupees in 2005 from state-owned National Textile Corporation.

Abhisheck Lodha, managing director of Lodha Developers, said the company was not in talks with DLF while an executive at Runwal group also responded in the negative, the paper said.

DLF does not comment on market speculation, the company’s spokesman told.

“Reserve Bank’s decision to cut the repo rate by 50 basis points and abolish pre-payment penalties is a good move for home buyers,” Confederation of Real Estate Developers Association of India (CREDAI) Chairman Pradeep Jain said. In its annual credit policy, RBI has asked banks not to levy foreclosure charges or pre-payment penalties on home loans extended on a floating interest rate.

The country’s largest realty firm DLF also welcomed the decision, saying it would significantly improve the cash flows of developers. “It is positive news although very-very delayed. This will benefit home buyers besides the industry. It will improve cash flows tremendously,” DLF Group Executive Director Rajeev Talwar said.

Jain too said that liquidity for developers would improve and cost of funds would be cheaper. On demand, Credai Chairman said the move would definitely boost housing demand. However, property consultant DTZ India CEO Anshul Jain felt more measures need to be taken to have a positive impact on housing demand.

“It is a step in right direction although lot more measures need to be taken before we see any effect of the rate cut on the real estate sector,” said Jain of DTZ. The housing demand, which is very subdued currently, would only rise if the interest rates on home loans come down to below 10 percent, he added.

For which, Magnolia Flat Owners’ Association had filed a complaint against DLF Universal, Haryana Urban Development Authority and the Director Town and Country Planning, Haryana, with the Competition Commission of India (CCI).

CCI director general found in the report that DLF has issued allotment letters, and apartment buyers’ agreements were signed even before it got approvals from the town planner. Also, the building plans have been revised by the builder and also applied for increasing the height of the towers after collecting 90% of the money from the buyers, and two months after the original date of delivery promised by the company.

DLF has also been found guilty of abusing its position at the Park Place Project in Gurgaon by CCI, where they asked the company to cease and desist from imposing unfair conditions on buyers. The order had also directed DLF to suitably modify the unfair conditions imposed on existing buyers within three months.

President of the Magnolia Flat Owners’ Association, Drish Paul, said that “Many people are living on rent, waiting for apartments to be handed over. We would eventually like to get compensated for the loss due to the delay in completion of the project.”

Commission has found DLF to be in contravention of section 4 (2) (a) (i) of the Act in the current order relating to Magnolia, which says that there will be abuse of dominant position if an enterprise or a group, directly or indirectly, imposes unfair or discriminatory condition in purchase or sale of goods or service; or price in purchase or sale (including predatory price) of goods or service

In the past, CCI had slapped a fine of 630 crore on DLF for unfair practices, abuse of market dominance and disregard for consumer rights in its Belaire residential project in Gurgaon in a similar order in August 2011.

With this increase in demand, many developers including Ansal API, Unitech, DLF, Emaar MGF etc are jumping into this business and plan to launch huge number of housing projects within next six months, where the cost of each single unit will be over Rs. 2 cr.

According to the executive vice-chairman and managing director at Emaar MGF, Shravan Gupta, since the recession period is over and job market is looking up, there are chances of realty boom too.

Within six months, cities like Punjab, Gurgaon, Bangalore, Hyderabad and Kerala will be overloaded with such projects.

Currently, a restructuring worth 23.5 billion dollar is going on in the Dubai World.

In April 2009, Limitless said that since authorities there have not bought the required land, so it was looking a 12 billion dollar project; both residential and commercial in India.

In October 2007, India’s DLF and Limitless first time went into the construction of Bidadi city on the outskirts of Bangalore.

As per the data collected by leading stock brokerages show, it is expected that in the June quarter, the realty companies will undergo around a 20% growth in the net profit and a growth of 38-40% in net sales. As per the data of last year, there had been a net profit of over 80% which certainly brings the conclusion that market has experienced a decline in sales and profit.

A stock analyst with a Mumbai-based brokerage said that as compared to the June quarter of financial year 2010, the numbers look somewhat flat in this financial year.

For instance, the gross margins of DLF were 49% and had a growth of only 4%. Similarly, Unitech’s net profits had a growth of just 1%.

After a meeting of the Board of Approval which is the nodal body for SEZ-related matters, Mr. D K Mittal, the Commerce Ministry Additional Secretary told the media that the DLF’s SEZ in Kolkata has been granted re-notification by the Board of Approval.

In June, 2008, DLF had come up with four SEZ projects out of which one was SEZ Kolkata.

DLF have gained this notification after a long struggle since it had to approach the Commerce Ministry for reviving this IT/ITeS tax-free zone. Finally, once the demand for IT/ITES leasing space came up, the company allowed for resuming the project.

DLF

The realty giant plans Rs. 5000 cr. to be cut from its debt. Out of these, Rs. 2700 cr. will be raised from sale of non-core assets and the left over from internal accruals. Last year, DLF could raise only Rs. 1800 cr. from sale of non-core assets while it planned for Rs. 5500 cr.

This fiscal, DLF has to compensate Rs 2,500-2,700 cr. in debt and also an interest of Rs. 1800 cr. Also, officials believe that this divestment of non-core assets is not just a means to reduce debt but is a strategy to focus more on the core business operations.

Rs. 7,855 cr. was the overall revenue during financial year 2009-10 which is reduced by 25% as compared to Rs. 7,855 cr. in financial year 2008-09. The firm sold an area of 12.55 million sq ft across the world in the last fiscal.

Besides the joint venture with DLF, a leading real estate firm, the company also has a keen interest in expanding its existence in India. Also, it is believed that they have sought permission to either acquire stake or invest in other Indian hospitality firms.

A company insider told that the company has sought an assent in order to operate in India. It is now looking forward for some partners for the completion of the task of bringing its different brands into the country.

It has successfully acquired the permission from government of India to bring four of its brands into the country.

Currently, there are two hotels by Hilton in Delhi. One of them is under the JV and the other is in partnership with a local partner.

According to Atma Sharan, GM-Marketing, Ashiana Housing Ltd, “About 55-60% inventory would be 2BHK. This definitely is the fastest moving segment, particularly among first home buyers.

The 2BHK end user is attracted by the price tag, affordability factor, and lower EMIs. Developers who were primarily focusing on plush housing earlier are including smaller units in a big way in their projects. They are coming up with new initiatives in this line which is expected to attract the young service class people in a big way. So, be it DLF, Unitech or Jaypee, they all have at least 30% inventories as two bedroom units in their projects and plan to increase the percentage with time.

With a total debt of over fourteen thousand crore rupees to start the year 2009-10, DLF had been doing everything conceivable, including sale of promoters’ equity in the company as also different projects. DLF has sold 2500 flats during 3 months ending June.

Rival Unitech on the other hand has been able to bring down its debt to below Rs 5,000 crore and today it is believed to have some cash surplus.

Both DLF and Unitech shares appreciated by 11.44% and 8.62% to close the day at Rs 330.10 and Rs 70.60 a share respectively.

As part of its management of debt, DLF sold Rs 1,000 crore worth of land during April-June period and is planning to garner 900 crore rupees to part-repay the debt by exiting its wind power business.

DLF has already scrapped a 5 star hotel project in Prabhadevi in Mumbai with Akruti. DLF was the majority stakeholder in the project. DLF has been looking to monetise its non-core assets to raise funds over the next one year to pay off its debt.

The company had net debt of Rs 13,958 crore, of which Rs 3,591 crore is due for repayment this fiscal. The developer has also put its wind power business on the block and is expecting to collect about Rs 900 crore from it. DLF said it would reduce its outstanding debt by half in this financial year by raising about Rs 5,500 crore through assets sales, plot sales and cash flow from the business.

According to the assessment of Assocham, over 20 million people in about 25 tier-II and tier-III cities, who want to purchase dwelling units, but had to back out on account of rising borrowing costs.

This, in turn, has compelled most real estate developers to defer projects, Assocham said, adding that the rising cost of raw materials like brick, cement and steel has worsened the situation for them.

In tier-II and tier-III cities, property purchases had registered a growth of over 25% between April and September last year.

Higher interest rates have also upset payment plans of borrowers, it said.

The chamber’s assessment is based on feedback from real estate members operating in cities such as Chandigarh, Meerut, Pune, Bhopal, Indore and a slew of smaller urban centres across the country.

Developers giving the feedback include Parsvnath, Omaxe, DLF and Unitech.

With the Reserve Bank of India (RBI) tightening money supply and increasing interest rates to fight inflation, the developers are facing liquidity crunch. Banks are getting jittery over loan disbursals to real estate developers. Even if the developers manage to get loans from banks, they are hard-pressed to keep more collateral with the banks.

“With debt market getting dried up, developers facing the heat of liquidity crunch and PE funds shying away from real estate investments and speculative investments at an all-time low, we can expect a 15-20% correction by the first quarter of 2009,” Jones Lang LaSalle managing director Anuj Puri said.

The global credit crunch which has affected the Indian market has taken the sheen off large property firms like DLF and Unitech. The two are seeing their market cap eroding almost completely and their fund raising plans hitting a rut due to unavailability of funds. To further aggravate the situation, the property market has also been witnessing a drop in PE fund flow.

PE investors, who had been happily picking realty deals earlier this year, appear to have tightened their purse strings now, with September witnessing only two transactions worth just $12 mn compared with August, when PE funds pumped in $427 mn into Indian realty sector.

According to data compiled by Grant Thornton, while the number of deals during January-September was higher at 45 against last year’s 39 deals, the average ticket size of the transactions has come down substantially in the first three quarters of 2008, reflecting softening valuations across the crisis-ridden real estate sector.

The rate of interest on home loans has drastically shot up from around 7.75% in 2004 to around 12.75% now. Almost 90% of home buyers opt for loans to buy homes. With interest rate on home loans on a rise and the severe liquidity crunch in the banking sector on the back of the global financial turmoil, fuelled by real estate crises, banks are unwilling to lend.

“Now the time has come when you have only genuine buyers for a property. Speculators who believed in short-term investments in properties have completely vanished from the scene. Therefore, to help genuine buyers , developers will have to cut prices,” real estate consultancy realty verticals head Rajan Ahuja said.

On further price correction in real estate, Unitech MD Sanjay Chandra said: “The prime issue is of affordability. It’s not about per sqft rate, but about the overall price tag of a house. We are reducing ticket size. We now offer three-bed room flats, which is much smaller in size than we earlier used to sell, thereby bringing down the price of a flat.”

According to a report on the Indian office market by CB Richard Ellis, a global real estate consultant, seven major Indian cities, including Delhi, Mumbai, Kolkata and Bangalore, showed a marked decline in demand during the quarter ending September. The report also said leasing of office space had slowed down in the first two quarters of the year.

The realty index opened at 2,720.59 points and touched an intra-day low of 2,701 points in the first few minutes of trade. It was later quoting at 2,716.17 points, down 3.16%. Led by Indiabulls Real Estate, which plunged by over 11%, sto cks of all major realty firms fell in the range of 3% to 11% in the morning trade on the BSE.

Indiabulls Real Estate touched an intra-day low of Rs 108.70, down 11.63%. Marketmen said that weak sentiments have gripped the market as a whole, which is pulling down all the sectors and realty is no exception to that.

Shares of the country’s largest realty major DLF, whose share buyback would commence from October 17, on Wednesday dipped 3.09% to touch an intra-day low of Rs 301. It was later trading at Rs 306.20, down 1.42%. Over 1.38 lakh shares got traded in the market.

The news of Lehman’s collapse brought the BSE realty index down by 7.65% on Monday, while the benchmark Sensex declined 3.35%. Both DLF and Unitech fell 7.5%.

Lehman’s fall signals a deepening of credit crisis for Indian developers, who have lately been battling falling sales, rising cost of construction and tightening credit. It is expected that the US-based firm is likely to go for a fire sale of its assets.

The financial service major was very bullish on India and was among the active investors in Indian real estate. Early this year, it had leased out an office space in Mumbai paying Rs 1 crore per month as rental. This would divert a part of fresh funds seeking to invest in Indian realty.

This is because global fund houses have country-allocations. And as they buyout Lehman’s stake in some of the Indian assets, they will end up diverting some of the fresh funds-in-hand to existing assets rather than investing in new projects.

“Lehman’s departure will impact future cash flows of real estate companies. In a market situation like today’s, it will be all the more difficult for the firms to raise funds,” says Karvy Stock Broking vice-president Ambareesh Baliga.

Lehman invested $200 million in DLF promoter group company DLF Assets last year and bought 50% stake in Unitech’s Mumbai project for $175 million a few months ago. It had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million.

Lehman’s other investments include a 40% stake in an IT park project of Peninsula Land in Hyderabad for an initial investment of Rs 50 crore. It had also teamed up with Mumbai-based developer HDIL to bid for the redevelopment of Asia’s largest slum Dharavi.

Wherever the developers had received fund, they are safe. But where the funds are yet to come, the developers could get stuck. Some analysts say a distress sale by Lehman will impact the valuation of existing projects.

DLF CFO Ramesh Sanka had earlier told ET that Lehman’s sale of investments in DAL would not impact DAL’s valuation. Unitech MD Sanjay Chandra said that his company had already received funds. So, the company won’t get impacted by Lehman’s bankruptcy.

Some industry executives say that FDI norms of a three-year lock-in period may prevent Lehman from making an immediate sale. But analysts argue that the lock-in period in case of bankruptcy may not hold.