Why DLF is walking on eggshells beyond Gurugram, its home turf

Much like consumers falling over each other to buy the latest iPhone, this voracious homebuyer appetite for its premium properties helped DLF, India’s largest real estate developer in terms of market capitalization, become the second-highest-selling developer in 2024-25, after Godrej Properties Ltd. However, the company’s ₹21,223 crore residential sales came largely from Gurugram, its home market, unlike Godrej, which operates in most of the top cities.

And despite the creditable sales performance, the residential and commercial property developer has given a rather flat guidance for 2025-26—projecting sales of ₹20,000-22,000 crore. Analysts at Elara Securities say the projection is cautious and conservative. In comparison, DLF’s top three competitors—Godrej Properties, Lodha Developers Ltd and Prestige Estates Projects Ltd—are more optimistic, having guided for higher sales growth this year.

From DLF’s perspective, rather than making short-term gains when the property market is on a high, the focus appears to be firmly on the long term. In line with this thinking, the company has laid out a five-year roadmap with a project pipeline of over ₹1 trillion that will roll out between 2024-25 and 2029-30. That roadmap involves land monetization, close to becoming zero gross debt at the group level, scaling up rental revenue, focusing on luxury sales, and generating ₹25,000 crore of gross cash for its development business.

Becoming debt free is a huge step for the company psychologically. Between 2008 and 2017, DLF’s net debt had soared to ₹26,000 crore, the bulk of it due to the development business, and it had to sell a land parcel in Mumbai, a stake in its rental arm (DLF Cyber City Developers or DCCDL) and other non-core assets to ease the intense pressure on its balance sheet. In 2023-24, DLF took a big step in this direction when it hit the zero debt mark in its development business, and became net cash positive to the tune of ₹1,547 crore. Last fiscal, the development business had net cash of ₹6,848 crore.

The rental arm, DCCDL, however, has a debt burden of ₹17,488 crore. Analysts aren’t too concerned about that debt, however, noting that it is low-cost and necessary given the capital-intensive nature of the business. The company, however, wants to pare it sharply.

DLF’s prospects look much brighter today, but a concentration risk looms large over those prospects, because most of its eggs are in one basket: the National Capital Region (NCR), particularly in Gurugram. In the earlier boom cycle, the developer burnt its fingers with its pan-India ambitions, spreading itself thin and piling up debt. The scars from that experience appear to be heavily influencing its cautious approach this time around, as it tests the waters in Mumbai and Goa. While the company is being conservative, investors expect it to continue its good run.

Over the past three months, the DLF stock has soared 22.07% to ₹848.60 (as of 23 June) in the wake of multiple launches, outperforming the Nifty Realty Index, which was up 18%. The stock beat the sectoral index over the last 12 months as well.

Building in the boondocks

Delhi Land and Finance (DLF) was founded by Chaudhary Raghavendra Singh in 1946. In the first couple of decades, it developed multiple plotted and housing colonies across many Delhi neighbourhoods. In the years that followed, the company acquired vast amounts of land in Gurugram and the NCR.

DLF took off under the leadership of the founder’s son-in-law, Kushal Pal Singh, a former army officer and now chairman emeritus of the company, whose vision for that neck of the woods in Haryana stretched out decades ahead.

Singh gave a hint of that vision through an anecdote in the book Why The Heck Not?, published last year, which he coauthored with Aparna Jain. On a muggy Sunday afternoon in 1980, he had driven down to Gurgaon (as the area was known then), where DLF had a 30-acre land patch. As he sat chatting with the villagers in Haryanvi, a Jeep broke down on the nearby Gurgaon-Faridabad Road. The vehicle’s owner, Rajiv Gandhi, was on one of his habitual long weekend drives.

When they met, Gandhi asked Singh what he was doing in the “oppressive heat”. Singh said, “Right now, I am sitting here twiddling my thumbs, but I could be building a brand new city.”

“Building a city in these boondocks?” Gandhi asked. “Tell me more.”

Today, DLF has a land bank with 205 million sq. ft of development potential for its businesses, large enough to keep it busy for another 20 years. None of its peers can boast of such a long runway—they have to buy land at current market prices, and then develop it, which is a longer and more expensive process. Moreover, the low-cost land, coupled with premium and luxury offerings, allow DLF to enjoy higher margin accretion.

If at first you don’t…

At the peak of the real estate boom in 2005, DLF bought 17 acres of mill land in central Mumbai for ₹702 crore. Then, in 2012, when the markets turned bad, and its debt was piling up, the developer sold the land to Lodha Developers for ₹2,700 crore to exit the non-core market. In the following years, DLF slowly withdrew its pan-India strategy to focus on the NCR for its residential business.

Now, several years later, it is turning westward again, focusing on high-end projects with good profit margins. In the coming months, DLF is set to re-enter Mumbai, the country’s most valuable property market, to launch its first housing project there, a slum redevelopment effort in suburban Andheri, in partnership with Delhi-based Trident Realty. The project is premium—pricing for the first phase is expected to be at ₹5-7 crore per unit—but not in the luxury category.

“Our product and approach may be tailored to local sensitivity, but DLF will not dumb down or discount its projects,” asserted Aakash Ohri, joint managing director and chief business officer, DLF Home Developers Ltd.

But Mumbai is different terrain and a very competitive market. Established developers such as Lodha, Oberoi Realty, K Raheja Corp and newer entrants such as Prestige Estates are all jostling with each other for a slice of the lucrative pie.

Several years later, DLF is turning westward again, focusing on high-end projects with good profit margins. In the coming months, DLF is set to re-enter Mumbai.

“The property market was speculative in 2005, and developers such as DLF took aggressive bets by entering multiple cities. The market is rational now. DLF is re-entering Mumbai when there is demand assurance, and the company has a loyal investor base,” said Pankaj Kapoor, managing director, Liases Foras Research. “Still, it is important for the first project to do well for them to expand further.”

In 2025-26, DLF will also launch ultra-luxury villas in its first project in Goa, a market it had attempted to enter in the past without any success.

With the residential business, DLF will stick to a few markets, Delhi-NCR and Mumbai, with Gurugram remaining its core hub. The rental business, however, will expand across more cities, including Chennai and Hyderabad.

Expanding commercial realty

Beyond its more-talked-about, glamorous, luxury residential projects, DLF also has a big rental portfolio of premium offices and shopping malls.

The existing rental portfolio (including office and retail) is about 46 million sq. ft, and another 16 million sq. ft is under development, making it almost as large as Embassy REIT, the country’s largest office real estate investment trust in terms of area.

Data centres is a relatively new bet for the company, which has completed and leased two data centres in Noida, with a third one under construction and already pre-leased.

To propel growth, DLF will pump in ₹10,000 crore over the next two years to build offices and shopping malls.

Sriram Khattar, vice-chairman and managing director (rental business), DLF, says the strategy is focused: to cater to the growing demand of global companies that want to come and set up their operations in India.

“Besides demand from global occupiers, there is domestic demand from Indian companies: IT-ITES firms, other corporates, and flexible space providers. The flexi providers also lease the space to international companies,” said Khattar. “India offers competitive advantages, both in terms of global quality real estate at a low cost and an English-speaking, tech savvy young population.”

Given the pace of development, rental revenue, which was at ₹5,000 crore last year, is likely to double in the next four-five years.

DLF’s upcoming projects are in Gurugram, Chennai and Noida. With a huge licensed land bank available for future expansion, the rental business is set to grow fast.

“Last year (2024) was a record year for commercial office leasing in the country. Large office developers such as DLF are looking to expand on the back of good demand from both global and domestic occupiers,” said Ram Chandnani, managing director, advisory and transaction services, at property advisory CBRE India.

The company’s retail or shopping mall portfolio is also set to double to 8.2 million sq. ft This year, it will open three new properties—DLF Midtown Plaza in Delhi, Summit Plaza in Gurugram, and Promenade, which will be Goa’s largest mall. It is also building a two million sq. ft ‘Mall of India’ in Gurugram.

“The pace of expansion will be quicker from hereon, aided by economic growth, higher disposable income and low organized retail penetration. After the experience we have gathered over the years, we now have a better understanding,” said Pushpa Bector, senior executive director and business head at DLF Retail.

Competition at home

Despite a slight fall in housing sales last year, the top four developers—Godrej Properties, Prestige Estates, DLF and Lodha Developers—are collectively aiming to cross ₹1 trillion in housing sales in 2025-26, marking the strongest year yet for residential developers.

DLF is possibly the only listed developer with a sizable residential and rental portfolio and is looking at large mixed-use developments combining both office and retail in a few cities. While Godrej Properties and Lodha largely focus on residential projects, Bengaluru’s Prestige Estates is rebuilding its office and retail portfolio, after selling a bulk of its commercial assets to Blackstone a few years ago.

Across its business verticals, DLF is also not keen on small-sized, random projects. It recently exited Kolkata, which it had entered two decades ago, selling an IT/ITes special economic zone and an office property.

DLF’s peers are, however, far more aggressive. Godrej Properties is expanding its pan-India presence further and has been on a land-buying spree. It also has a presence in Gurugram today. Prestige Estates and Mumbai’s Oberoi Realty will also enter DLF’s home turf going forward. But just as DLF faces challenges in other parts of the country, the invaders will find it hard to take on the leader in Gurugram.

“The difference between DLF and the other developers in Gurugram in size and scale is huge. There are many customers who invest only in DLF. It won their confidence because of its delivery, track record and return on investment,” gushed Santhosh Kumar, vice-chairman, Anarock Property Consultants. “Some DLF projects may have been delayed in the past for various reasons…but it eventually delivered. That’s how it can command a premium in the residential as well as office segments,” he added.

As DLF chairman Rajiv Singh put it during the company’s March analyst meet, “In our industry, many people are aggressive, and far more optimistic. We were like that too. There is a certain stage of growth and evolution where you need to be like that. Luckily, we have crossed that point. We have got all the buffers already built up.”