Sluggish demand and debt concerns mean that it is putting aside its once aggressive pan-India plans to focus on the familiar territory of its home market in northern India.
DLF, founded in 1946 a year before India's independence as Delhi Land and Finance, said that new projects in other parts of the country take a back seat.
‘For new launches the larger focus is on north India whereas the overall focus in the south is to complete the large projects we have already initiated,’ said Mohit Gujral, vice chairman and managing director of DLF India.
Indian developers are facing a faltering economy, weak home sales in key cities, and high interest rates, prompting them to scale back or put on hold projects planned during the boom years of 2005/2007 in Asia's third-largest economy.
DLF, which builds homes, offices and malls, said it plans to break ground on about 10 to12 million square feet this year, compared with 1 2 million square feet in the year that ended in March and half the 24 million square feet it launched in March 2008, according to brokerage Ambit Capital.
Most of its new projects will be in north India, which makes up 70% of its business, in cities such as Gurgaon, Lucknow, and the Chandigarh area.
With loans of about $4 billion to service at an average cost of 12.75%, DLF is left with little free cash so it is prioritising projects that will maximise profits, which fell to a six year low in the financial ending in March 2012.
That means a focus on lucrative luxury homes and away from affordable and mid-range housing that is more sensitive to rising prices of steel, cement and labour, said Gujral.
‘In the north we have high value projects that have a better contribution to the bottom line. Unless we replenish our land banks in the south with higher yielding projects, even though we may have large volumes there, it will have a skewed contribution to the bottom line,’ he explained.
DLF will follow through on some of its lower end projects outside north India, such as Maiden Heights in Bangalore, an affordable housing joint venture with Bank of America Merrill Lynch where homes cost as little as $45 a square foot. By comparison, apartments in DLF's Magnolias project in Gurgaon, the Delhi satellite city developed by DLF that is its most profitable market, can cost more than $360 per square foot.
Property tends to be a local business in India and most developers stick to home markets, where they own land and know the bureaucracy. DLF and a few others like Unitech and Indiabulls Real Estate have been more ambitious.
During the boom, many developers dreamed of transforming the urban landscape with millions of square feet of homes, offices and malls and set off on an aggressive expansion financed with debt that at 6% interest was cheap by Indian standards.
But in 2011, home sales in the financial hub of Mumbai fell 45% from a year earlier while sales in the New Delhi region were down 20%, according to consultant Jones Lang LaSalle India.
Sales in the southern cities of Bangalore and Hyderabad were also lower, with Chennai recording the lowest fall at about 5%.
DLF still plans to expand in Chennai, but in some cities planned projects remain plots of land on which the company is in no hurry to build. Some it plans to sell.
