DELHI LAND &FINANCE – Strategy or Serendipity Presented by:
INTRODUCTION
DLF was a real-estate developer in India primarily into development of residential, residential, commercial and retail retail properties. 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.)
Completed Projects under Developments development
Planned projects
Residential
21.6
44.4
95.6
Commercial
4.7
40.9
15.9
Retail
2.3
16.3
6.2
TOTAL
28.6
101.6
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 South Extension Extension & Hauz khas, also developed 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 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. 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 Mr.K.P.Singh .Singh inherited inherite d the business as Chaudhary Chaudhar y Raghvendra Raghven dra 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. Mr. Bansilal became CM, licences were cancelled and reinstated after a period of two years. Singh‟s 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. FELLOW.
When prices tumbled, Singh bought 1500acres of land. Although FBD & GBD were also emerging but neither had Gurgaon‟s 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 India‟s 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 RE AL ESTA ESTATE DEVELOPMENT
Infinity Towers
1.3
2004
2006
DLF Cyber Green
0.9
2004
2005
Kolkata Towers
1.0
2004
2005
Chandigarh Infosys Park
0.7
2004
2005
Ericsson
0.2
2003
2004
DLF Centre
0.3
1989
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 air-conditioned mega malls 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, complexes, food courts and restaurants. 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
DLF mega mall
0.3
2002
2004
1119
4520
DLF city centre
0.3
2001
2003
1028
4003
Galleria
0.3
1996
2000
1421
4676
Super Market 1
0.2
1996
2000
2000
1256
Park-N-Shop
0.01
1992
1993
14
2460
PROJECT IMPLEMENTATION PROCESS Land Identification and Acquisition The land acquisition team monitored monitored real estate markets 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 process commenced by obtaining obtaining regulatory approvals based on Its process area‟s 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 sales & marketing departments were maintained maintained for residential, Three sales 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. mktg. was through property consultants & relationships 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. 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., resp ., totaling over 118m. 118m. Sq. ft. Diversify into SEZ development: de velopment: SEZs were a new concept in India , & provide attractive attractive fiscal fiscal incentive 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 O‟Rourke 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 O‟Rourke 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: SEGMENT: comprised of private developers, developers , govt., or ORGANISED SEGMENT: 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 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 developer‟s 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 likely to translate into real estate estate investments 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. sector. Growth Growth of multiplexes was driven by favourable government polcies Demand for hotels /resorts by growing tourism industry. 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 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, Amritsar, Bangalore, Chennai, Chandigarh, Goa, Gurgaon, Ludhiana, Indore, Jaipur, 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 effectively using using the privateprivate- 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 RETAIL REAL ESTA ESTATE PROJECTS PROJ ECTS be situated in prime A significant proportion of DLF‟s planned malls would be city centres, although a number of destination malls were also planned for the outskirts of India‟s 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 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 world‟s most valuable real-estate company. 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 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 management team is highly experienced, qualified qualified &motivated &motivated with a high reputation for project execution.
HRM The Co‟s philosophy on corporate governance is built on a rich legacy of fair, fair, transparent & effective governance. This includes respect respect for human values values ,individual ,individual dignity & adherence adherence to honest, ethical & professional conduct. This enables customers & all stakeholders stakeholders to be partners partners in the Cos. Cos. growth & prosperity. DLF is committed to a fair& competitive free market system. PROCUREMENT DLF LTD LTD has acquired 60% 60% ownership ownership & control in DLF Assets Assets Pvt. Ltd.(DAL), a closely held company of the promoters by renouncing it‟s 40% ownership & control in DLF Cyber City Developers Ltd.- it‟s 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 ANALYSIS
STRENGTH Employment &Training &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 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 Natural disadvantage are there. Distance between construction projects reduces business efficiency. efficiency. Training itself has become a challenge. Changing skills skills requirements 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 amount of money need to be invested in this industry 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. 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. 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 600 537.73 503.33
497.7
500
412.16 400
373.96
358.26
333.92 305.01 286.88
300 256.8
ansal group
263.01
247.08
parsavnath
235.63
unitech
212.9 200
176.54 135.55 112.2
100
68.8
0 20 0 1
2002
dlf
2003
2004
2005
Comparison of operating profit in real state developers 100
77.5
80
71.98
60 42.33
40 23.01 18.43
20 10.99
9
dlf 19.58 16.45
19.31
12.12 10.19
parshavnath
2.72
unitech
0 2001 -6.19
2 0 02 -2.92
-20 -22.81
-40 -43.54
-60
ansal
-5.15
2003
2004
2005
Profit after tax major real state developers 90 80.38 80
70
65.89
60
dlf
47.77
50
parshvnath 37.18
40
unitech
36.53
ansal 30
28.87 25.09
10
20.83
18.41
20 10.53 9.19
6.97
8.42
14.74 11.3210.64
14.07 10.02
0 2001
2002
2003
2004
2005
5 FORCES STRATEGY
RIVALRY AMONG INDUSTRY RIVALRY 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 it‟s 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 because there are fewer buyers with significant market share. SUPPLIERS The suppliers to the DLF are also getting benefits by rising of the industry. industry. Many other industries were also depend on this industry. industry.
MAJOR DLF D LF REAL REA L ESTA ESTATE DEVELOPMENTS DEV ELOPMENTS
TRINITY TOWERS
• Located 5km.from Cybercity,19km.from Cybercity,19km.from Delhi international Airport
DLF EXCLUSIVE FLOORS • 19km from airport & 7km from Cybercity, Cybercity, comprised 172 plots.
INFINITY TOWERS
•
Designed by Hafeez Contractor ,consisted of 3 interconnected multi storied tower, 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.
•
p
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.
•
