NEW DELHI: India's largest real estate firm is one of the major beneficiaries of recent policy reform allowing 51% foreign direct investment in multi-brand retail and also an expected rate downcycle, says a report by brokerage firm Motilal Oswal.
For DLF, the recent announcement of 51% FDI in multi-brand retail and relaxation of FDI norms in single brand retail will have a positive impact on demand for retail real estate space.
"While actual demand creation may take 1-2 years, the development is a strong sentimental positive for developers like DLF BSE -0.87 % with exposure to retail vertical," says the report. DLF has 1.4 million sq ft of operational retail area and another 1.8 million sq ft under construction in Noida. It is also expected to start construction on India's largest mall in Gurgaon sometime next year.
The lowering of interest rates is an additional positive for the company.
The company's focus on operating consolidation and large ticket divestments is likely to pay off, says Motilal Oswal in its report. "Expect meaningful improvement in operating cash deficit (break-even by FY14) on the back of re-aligning core operations to premium business mix, focus on margin protection, and execution ramp-up."
DLF has also started to outsource its construction to reputed third party companies like L&T and Shapoorji Pallonji, which is expected to "improve project certainty and turnaround time, enhance brand value of its projects, and aid faster cash conversion cycle."
The real estate major has also decided to focus on the premium segment and that too in markets closer to its base in Gurgaon. "Its recent NCR launches have seen impressive sales momentum along with 20-40% premium in realizations. Market-mix apart, DLF is also focusing on its product-mix," says the report.
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