DLF to spend 15% revenue on increasing landbank
By Mrs Gupta, Section GN
Posted on Wed Sep 03, 2008 at 10:43:17 PM EST
India's largest real estate developer DLF intends to spend 15% of its revenue on an ongoing basis to purchase additional land. DLF has carved out a land replenishment fund, wherein 15% of the sale value of its real estate development is credited.
DLF CFO Ramesh Sanka says the company's land replenishment fund will not be a fund "in a conventional sense". "As a matter of discipline, we will credit 15% of the sales towards land purchases on an ongoing basis, so that we have at any point of time enough cash for a good opportunity." He says DLF is "not desperate" for new land purchases, but should be ready to bid for attractive projects, as and when they come up. Incidentally, the company claims it has enough land bank to last for ten years.
DLF increased its land bank from 574 million sqft to 751 million sqft in 2007-08. The company fully owns 92% of its current land bank while, the rest is held in joint ventures with others. According to the company, 85% of its land resource is located in top seven cities. DLF is putting in place a geographical information system to keep track of its huge land bank. The new system is intended to keep track of acquired lands as well as prospective lands for acquisition.
Click on "Full Story" for more...
Analysts and investors had put a premium on companies holding large land banks last year as many realty firms, including DLF, went public. But with slowdown setting in the real estate sector this year, land banks have lost their sheen in the eyes of the investors, with actual sales and execution capability of developers gaining currency.
A sluggish realty market has hit cashflows of realty firms as sales declined and credit became expensive. These factors, combined with rising cost of construction, have dissuaded many developers from acquiring more land, ending the mad rush to build huge landbanks.
Many realty firms, including Unitech, Parsvnath and Omaxe, have said they were not rushing in to acquire additional land in the short term and were rather focusing on executing existing projects. Meanwhile, with buyers fading away from the market, land prices too have stagnated at several places.
Source: Economic Times, September-04-2008
