From bulk sales, DLF goes piecemeal

This story first appeared in DNA Money edition on Tuesday, January 22, 2013.

DLF Ltd is staggering inventory from its projects to benefit from frequent price increases and protect margins from cost escalations.

India’s top realtor, which launched quite a few projects in the last year, has been offloading inventory in bulk till now.

Rajeev Talwar, executive director of DLF, said, “We are now releasing limited stock so that the increase in costs will be met through differential pricing over each subsequent release. While the idea is to release a large number of projects, taking a piecemeal approach will help us increase returns.”

In the absence of an escalation clause, cost increases had to be borne by the developer. Over the next 3-4 years, DLF expects new projects to generate Rs2,000-3,000 crore in sales annually. While launches would happen across the country, most would be in the National Capital Region and some pockets in south India.

The realtor launched a couple of residential projects last quarter including the luxury development DLF Sky Court at Gurgaon. Talwar said all projects have received a good response.

DLF Sky Court was launched at `6,000 per square foot (psf) and is currently being sold at Rs6,250 psf, according to real estate brokerage, InvestInNest.com.

On revival in real estate, Talwar said traction in the commercial space will largely depend on how soon the economy improves. The residential market, on the other hand, has kept up with people’s aspirations, he said.

“As the economy gets better and incomes get distributed, there will be greater traction in the entire residential segment – be it luxury, premium and middle-income. We are quite certain that future launches will elicit a much higher response than what was seen in the last 2-3 years,” he said.