Assignment For

Strategic Management
On
DLF India Ltd.

Submitted to-
Dr. Devang Desai

Submitted by-
• Prakhar Beohar AP17261
• Abhishek Kumar AP17264
• Faraaz Mohd. Khan AP17298
• Nehal Paunikar AP17284
INTRODUCTION

The DLF Group, is India's largest real estate company in terms of revenues, earnings, market
capitalization and developable area. It has a 62-year track record of sustained growth, customer
satisfaction, and innovation. The group has over 231 msf of completed development and 423
msf of planned projects, and has pan India presence across 32 cities.

DLF's primary business is development of residential, commercial and retail properties. The
company has a unique business model with earnings arising from development and rentals. Its
exposure across businesses, segments and geographies, mitigates any down-cycles in the
market. DLF has also forayed into the infrastructure, SEZ and hotel businesses.

The business of DLF is organized on a SBU basis. The Homes SBU caters to 3 segments of the
residential market - Super Luxury, Luxury and Mid-Income. The product offering involves a
wide range of products including condominiums, duplexes, row houses and apartments of
varying sizes. DLF has 214 msf of developed area under homes and residential plots. Currently,
DLF has more than 319 msf of land resource targeted towards residential business.

The Office SBU took DLF across the country, predicated on the customer demand for office
space at different geographic locations. Nearly 17 msf of ongoing projects forms a strong
portfolio for DLF offices.

The Retail Mall's and Commercial Complexes SBU is a major thrust area for DLF. Currently,
DLF is actively creating new shopping and entertainment spaces all over the country. The
company has 12 msf of retail projects and commercial complexes under construction.

DLF Hotels has also entered into a JV with Hilton to set up a chain of business hotels and
service apartments across India. DLF holds 74% and Hilton holds 26% equity in the JV.

DLF has a strong management team running independent businesses, though complementing
each other in cases of opportunities of mixed land use. DLF's mission is to build a world-class
real estate development company with the highest standards of professionalism, ethics and
customer service and to thereby contribute to and benefit from the growth of the Indian
economy.
 DLF’s SBU

RETAIL OFFICE COMMERCIAL SPACE HOTELS RESIDENTIAL GROUPS

Vision, Mission & Values

DLF Vision

To contribute significantly to building the new India and become the world’s
most valuable real estate company.

DLF Mission

To build world-class real-estate concepts across six business lines with the
highest standards of professionalism, ethics, quality and customer service

DLF Values

• Sustained efforts to enhance customer value and quality

• Ethical and professional service
• Compliance and respect for all community, environmental and legal requirements.
DLF's Presence

The following map illustrates the locations of our developments, projects and lands across
India-
Corporate Governance

Code of Conduct

1. Introduction
DLF Limited and its subsidiaries (‘hereinafter referred to as the ‘Company’) is a leading
professionally managed Company emerging as the one of the foremost enterprises in real estate
development. It has over 60 years of experience, an established brand name, a highly
experienced, qualified and motivated management team with a high reputation for project
execution. The formation and management of many subsidiary and partnership companies is
considered necessary in real estate development to ensure effective governance in dealing with
legal and commercial requirements.
The Company’s philosophy on Corporate Governance is built on a rich legacy of fair,
transparent and effective governance. This includes respect for human values, individual dignity
and adherence to honest, ethical and professional conduct. This enables customers and all stake
holders to be partners in the Company’s growth and prosperity.
The Company’s Code of Conduct not only ensures compliance with the Company Law,
the provisions of the listing agreement with Stock Exchanges and other laws, but goes beyond to
ensure exemplary Corporate Governance. Accordingly, the Board of Directors of DLF Limited
have adopted the following code that details the following:

• Guidance on ethical standards of conduct on various matters including conflict of interest,

acceptance of positions of responsibilities, treatment of business opportunities etc.
• Responsibility to comply with Insider trading regulations and applicable laws and
regulations; and
• Procedure for annual affirmations to the Code of Conduct by Directors and the Senior
management.

2. Objective
This code of conduct document has been created in furtherance of the Company’s commitment
to building a strong culture of corporate governance by promoting the importance of ethical
conduct and transparency in the conduct of its operations. This code lays down the standards of
conduct that shall apply to its Directors and all Employees of the Company and shall come into
force with effect from 21st day of March, 2007.

3. Definitions
The definitions of some of the key terms used in this Code are given below
i. “Director” means any Executive, Non-Executive, Nominee or Alternate Director of the
Company.
ii. “Employee” means any employee or officer of the Company.
iii. “Relative” means ‘relative’ as defined in Section 2(41) and Section 6 read with schedule
1A of the Companies Act, 1956.
iv. “Senior Management” means personnel of the Company who are members of its Core
Management team excluding the Board of Directors and shall include all personnel above
the level of Vice-President and all function heads.

4. Applicability
This Code is applicable to the following:
a. All Employees of the Company including Senior Management; and
b. All Directors of the Company.

This Code does not address every possible form of unacceptable conduct and it is expected that
the Directors and the Employee shall apply their sound judgment to comply with the principles
set forth in the Code.

5. Standards of Conduct
The Directors and employees shall conduct the Company's business in an efficient and
transparent manner in meeting its obligations towards the shareholders and other stakeholders.
The Directors and employees shall not be involved in any activity that would have any adverse
effect on the objectives of the Company or against national interest. The following elucidates the
Company’s position on the manner of conduct of the Company’s business and transactions:

a) Compliance with applicable laws

DLF requires that its employees and Directors strictly comply with the applicable laws and
regulations in the conduct of its business, both in letter and spirit. If the ethical standards set
forth in this policy are more rigorous than the applicable laws and regulations, then the standards
of the DLF Code of Conduct shall prevail.

b) Conflict of Interest
Conflicts of interest may appear where on account of either on undertaking or in the act of
influencing a business transaction, relationship, or an activity, the Director or Employee is in a
position to derive a personal benefit for himself or for a relative or a related party (as described
in the Companies Act,
1956). It includes instances where the independent judgment of such a Director or Employee to
work towards the best interests of the Company may be or perceived to be impaired.
In case of an Employee, where such conflict appears at any time or is in existence at the
time of the implementation of this policy, such Employee shall forthwith make a disclosure in
writing to the Chief Executive (Corporate Affairs), who in turn shall compile such disclosures
for review by the Corporate Governance Committee. Upon review by the Corporate Governance
Committee, the Employee may be directed to avoid/resolve the conflict or to take such remedial
action as is deemed suitable by the Corporate Governance Committee.
A Director shall disclose any potential conflicts of interests to the Board of Directors or
any Committee thereof and abstain from participating in the decision making or in influencing
the decision on the areas resulting in the potential conflict of interest in accordance with the
applicable rules under the Companies Act. In addition, the Director shall provide on a periodic
basis, such disclosure as is required by the Board of Directors or any Committee thereof.
c) Business opportunities
The Directors and Employees are hereby prohibited from taking for themselves personally, any
opportunities that are discovered through the use of Company’s property, information or position,
unless the opportunity is disclosed fully in writing to the Corporate Governance Committee and the
Corporate Governance Committee authorizes the said Director or the Employee to pursue such
opportunity. The Directors and Employees are also prohibited from competing directly with the
business of the Company.

d) Acceptance of Employment / Position of responsibility

Employees are expected to devote their total attention to the business interests of the Company.
Prior approval of the Corporate Governance Committee must be sought in writing prior to
accepting any position of employment or responsibility (such as Directorship etc.) outside the
Company.
Directors other than Non-Executive and Independent Directors are required to obtain the
express approval of the Corporate Governance Committee prior to accepting any Directorship
outside the Company.

e) Insider Trading and fraudulent & unfair practices in the securities market
A Director or the Employees and their relatives shall not derive any benefit or assist others to
derive any benefit from the access to and possession of information about the Company, which is
not in the public domain and thus constitutes insider information. They shall also ensure
compliance with SEBI (Prohibition of Insider Trading) Regulations, 1992 as also other
regulations as may become applicable to them from time to time in addition to the Company’s
Policy for Prevention of Insider Trading.
The Company also prohibits its Directors and Employees in undertaking any fraudulent
or unfair trade practice in connection with the securities of the Company.

f) Financial reporting and disclosures

The Company is committed to ensuring that its financial statements and reporting:
i. Does not contain any untrue statement;
ii. Does not omit any material fact or has contents that might be misleading; and
iii. Strives to present a true and fair view of the Company's affairs in compliance with the
prevailing Accounting Standards and applicable laws and regulations.
The Directors and Employees shall ensure that there shall be no willful omission of any
Company transactions from the books and financial records and all required information shall
be provided to the Auditors.

g) Health, Safety and Environment

The Company strives to provide a safe and healthy working environment and comply, in the
conduct of its business affairs, with all regulations regarding the preservation of the
environment of the territory it operates in. The Company is committed to prevent the wasteful
use of natural resources and minimize any hazardous impact of the development, use and
disposal of any of the intermediaries or direct materials used in its product and service offerings
on the ecological environment.
 h) Protection of the Company’s Assets
The Companies Assets shall be protected from theft, loss, damage or misuse and shall not be
employed for conducting any illegal activity or for purpose other than of conducting the
business of the Company.
The Directors and the Employees shall not use the Company’s tangible assets such as
equipment and machinery, systems, facilities, materials etc. or intangible assets such as
proprietary information, relationships with customers and suppliers, etc. for their personal
benefit or for the benefit of a related party.

i) Competition
DLF is committed to a fair and competitive free market system. The Directors and Employees of
the Company are prohibited to take any action that are anti-competitive or otherwise contrary to
laws that govern competitive practices in the marketplace.

j) Public Representation
It may be necessary to communicate information relating to the Company, its operations and
performance to its stake-holders, media, stock-exchanges etc. In all its public appearance with
respect to disclosing any information in relation to the Company’s activities or performance to
any public constituency such as the Media, financial community etc, the Company shall be
represented only by duly authorized personnel. This policy establishes that matters relating to
public representation of the Company shall be handled by the Chairman or Vice-Chairman or the
Managing Director or the Head of Corporate Communications department (or such person to
whom the Head of Corporate Communications has delegated his authority) or such persons as
are authorized by the Board of Directors or the Chairman. In addition, the Chief Financial
Officer is duly authorized to make suitable public representation in relation to financial matters.
Where a Director or an Employee seeks to publish a book, article or manuscript containing
reference to the Company or its business/processes, such person should obtain prior approval of
the Corporate Governance Committee. The Committee may grant such approval on terms and
conditions that it may deem fit such as pre-review/changes to such publication by the
Committee, inclusion of disclaimers etc.

k) Confidentiality of Information
Any information concerning the Company’s business, its customers, suppliers, etc. to which the
Directors or the employees have access or which is possessed by the Directors and the
employees, must be considered privileged and confidential and should be held in confidence at
all times, and should not be disclosed to any person, unless

1. Authorized by the Board; or

2. The same is part of the public domain at the time of disclosure; or
3. It is required to be disclosed in accordance with applicable laws
l) Gifts and Donations
The Company, its Directors and Employees shall neither receive nor offer or make
directly/indirectly any illegal payments, gifts, donations or any benefits which are intended to
obtain business or unethical favours. However, the Directors or Employees may receive such
nominal gifts which are customary in nature or are associated with festivals.

m) Electronic Usage
Electronic resources provided to the Directors and Employees by the Company should only be
used for the conduct of the Company’s business. The Company prohibits any uses which are
illegal or infringe on the privacy of a person or result in the transmission of inappropriate
messages. The Company also reserves the right to monitor electronic usage and files on the
system as and when deemed necessary.

n) Fair treatment of Employees, Working Environment and Child Labour

DLF is committed to recruiting, employing and promoting employees on the sole basis of the
qualifications and the abilities needed for the work to be performed, without regard to race, age,
sex, caste, national origin or any other non-relevant category.
DLF is furthermore committed to providing a working environment that is free from
unlawful harassment and prohibits any sexual harassment and harassment based on race, age,
national origin, caste, medical condition, childbirth or related condition, physical or mental
disability or any other form of harassment that is unlawful. Where the employee has been
unlawfully harassed, he/she should submit a complaint to the Chief Executive (Corporate
Affairs). Where an employee feels that he/she has been sexually harassed, he/she shall submit a
complaint to the ‘Officer’ designated for receiving these complaints.
It is DLF’s policy to offer to its employees a safe and healthy workplace. DLF is against
all forms of exploitation of children and believes in abiding by the laws and applicable
regulations for prevention of child labour.

6. Consequences of non-compliance with the Code

The matters covered in this Code are of the utmost importance to the Company, its stockholders
and its business partners, and are essential to the Company's ability to conduct its business in
accordance with its stated values. We expect all of our Directors and Employees to adhere to
these rules in carrying out their duties for the Company.
The Company will take appropriate action against Director or the Employee whose
actions are found to violate these policies or any other policy of the Company.

7. Consultation and reporting

In case of any doubts/clarifications in relation to the application of the Code of Conduct,
Employees are requested to consult in writing with the Chief Executive (Corporate Affairs) in
the Company. Where Chief Executive (Corporate Affairs) in the Company or the Directors need
any clarifications in relation to the application of the Code of Conduct, they should consult in
writing with the Corporate Governance Committee.
 Where any Director or Employee notes an act inconsistent with the principles set forth in
the Code of Conduct, he should report the same to the Chief Executive (Corporate Affairs) in the
Company. Chief Executive (Corporate Affairs) in turn is required to compile all such instances
in a report along with suitable recommendation on the action required to the Corporate
Governance Committee. Such report should be presented at least on a quarterly basis or sooner,
depending on the nature of the complaint. Alternatively, the Director or Employee may use the
Whistle-Blower mechanism provided by the Company to report any instances of violation of the
Code of Conduct.

8. Amendments and waivers

The Code may be amended or modified by the Board after due consultation with the Corporate
Governance Committee. Any waiver of any provision of this Code for a Director or the
Employee must be approved in writing by the Company's Board of Directors.

9. Acknowledgement and annual affirmation

Directors and Senior Management personnel shall acknowledge the receipt of this Code
indicating that they have received, read and understood, and agreed to comply with the Code and
send the same to the Chief Executive (Corporate Affairs). New Directors will submit such an
acknowledgment at the time when their Directorship begins and in case of other Management
personnel when they assume the responsibility of Senior Management personnel.
All the Directors and the Senior Management personnel to whom the Code applies shall,
within 10 days of close of every financial year affirm compliance with the Code indicating their
continued understanding of and compliance with the Code. The duly signed Annual Compliance
Declaration shall be forwarded to the Chief Executive (Corporate Affairs).
➢ ANALYSIS OF EXTERNAL ENVIORNMENT

ASSESSMENT OF CHANGES IN THE ENVIORNMENT

ANALYSIS OF REAL ESTATE SECTOR

Real estate is one of the fastest growing sectors in India. Market analysis pegs returns from
realty in India at an average of 14% annually with a tremendous upsurge in commercial real
estate on account of the Indian BPO boom. Lease rentals have been picking up steadily and there
is a gaping demand for quality infrastructure. A significant demand is also likely to be generated
as the outsourcing boom moves into the manufacturing sector. Further, the housing sector has
been growing at an average of 34% annually, while the hospitality industry witnessed a growth
of 10-15% last year.
Apart from the huge demand, India also scores on the construction front. A Mckinsey
report reveals that the average profit from construction in India is 18%, which is double the
profitability for a construction project undertaken in the US. The importance of the Real Estate
sector, as an engine of the nation’s growth, can be gauged from the fact that it is the second
largest employer next only to agriculture and its size is close to US $ 12 billion and grows at
about 30% per annum. Five per cent of the country’s GDP is contributed by the housing sector.
In the next three or four or five years this contribution to the GDP is expected to rise to 6%.
The Real Estate industry has significant linkages with several other sectors of the
economy and over 250 associated industries. One Rupee invested in this sector results in 78
paise being added to the GDP of the State. A unit increase in expenditure in this sector has a
multiplier effect and the capacity to generate income as high as five times. If the economy grows
at the rate of 10% the housing sector has the capacity to grow at 14% and generate 3.2 million
new jobs over a decade. The relaxed FDI rules implemented by India last year has invited more
foreign investors and real estate sector in India is seemingly the most lucrative ground at present.
Private equity players are considering big investments, banks are giving loans to builders, and
financial institutions are floating real estate funds. Indian property market is immensely
promising and most sought after for a wide variety of reasons.

FACTORS THAT EFFECTED REAL ESTATE SECTOR DURING RECCESION

Real estate sector is second to only the agriculture sector where employment generation is
concerned. This can be further proved by the fact that the real estate sector contributes a good
5% towards the country’s gross domestic product (GDP). However, recent financial crisis
followed by economic slowdown have placed huge strain on this sector. While all sectors of the
economy were under tremendous pressure, demand in the real estate industry was the lowest.
This was largely as majority of the homes were taken on loan and an unexpected rise in the
interest rate had its obvious impact. According to KP Singh, Chairman, DLF, "If there is a lack
in demand, the projects eventually close down. There is a lack in demand because most people
take mortgage loans. In fact, currently the interest rate is at 11–12 per cent, which should
actually not exceed seven per cent. This also leads to higher EMIs."
Also, the credit freeze stemming from the collapse of Lehman Brothers prompted
investors and speculators to withdraw investments from this sector. Property developers, who
raised funds through external sources, were left stranded with minimal cash flows and huge debt
obligations surfacing in the near term.
There are several factors that have influenced the real estate sector's performance. Some
of these factors include the unemployment rate, income level, FDI investment, rise in the number
of young working population, and easy availability of home loans. With this industry being one
of the primary contributors to the GDP over the past few years, it is indeed interesting to note the
performance of companies in this sector during the economic slow down.
The sectoral ranking, based on consolidated revenues, revealed that top three companies
within the sector had retained their positions from the previous year. There have been major
changes in the list of market leaders as compared to last year. Out of the 10 companies in the
previous year, only four retained their position among India's top 500 companies. The current
challenging economy along with the sluggish demand had a significant impact on the top-line of
most of the realty developers in the country. Some of the companies that witnessed a substantial
dip in revenues include Omaxe, Ajmera Realty, Parsvnath Developers, Ansal Properties &
Infrastructure, JMC Projects and Indiabulls Real Estate. Collectively, no developer could sustain
the revenues base recorded in FY’08.
DLF, Unitech and Housing Development & Infrastructure (HDIL), though witnessed
>20% fall in revenues, maintained their first, second, and third positions respectively in the ET
sectoral list. This means, the negative impact of the financial crisis affected all top real estate
companies equally. Sobha Developers climbed up three positions to number four, despite a 58%
decline in revenues. Its steady climb was primarily due to a sharp fall in revenues of other
developers. Overall average revenues for these developers fell by 28% from the previous year.
According to Sanjay Chandra, managing director of Unitech, “We have changed our strategy
from maximisation of realisation to that of volumes in order to improve operational cash flows.”
A closer look into the financials elucidate that developers faced stiff margin pressure,
resulting from the drop in real estate prices. Real estate prices have been sky rocketing for
several years and a sharp correction has been long overdue. Average net margins of the four
developers slipped by a colossal 890 bps to 39.7%. This indicates that the companies faced
higher liquidity pressure which consequently led them to unwind inventories at lower rates. The
companies which have huge land bank and are primarily funded through external sources have
been wiped out of the market and are yet recovering from losses incurred.
Valuations of the companies have bottomed out. The BSE realty index is trading at a
Price/Book value of 2.69x this year as compared to 21.11x in 2007 and 13.36x in 2008. Players
like Unitech and DLF have lost more than 75% of their values. DLF, which debuted the market
in July 2007 entered the bear phase and remained below its issue price. Recently, the markets
have seen immense recovery with the realty index gaining 88% from its previous low in 2008.
The relaxed FDI regulation has invited several players to invest in the real estate market. Various
private players are considering investment in the sector as banks are now readily giving loans
due to a rise in the consumer confidence index. By 2010, it is expected that nearly 150 million
square feet of office space across urban India would be utilised by the IT sector. The retail
industry is also likely to utilise an additional 220 million sq ft by next year.
 According to the Tenth Five-Year-Plan, there is a shortage of 22.4 million dwelling units.
Thus, over the next 10-15 years, 80 to 90 million residential units will have to be constructed
with a majority of them catering to middle- and lower-income groups. This will create immense
opportunities for real estate companies. “Now that property prices have dropped and the risk of
job layoffs has diminished, the service class is likely to actively participate in property
absorption, leading to a strong recovery in residential demand,” says Suman Memani, associate
vice president, Religare Capital Markets.

In conclusion, with early signs of recovery currently reflected by the drop in unemployment rate,
easing liquidity and aggressive government initiatives to pull back the sector, increased activity
in the real estate sector should be expected.
➢ DLF’S STRENGTH AND WEAKNESS

STRENGTH

• Uniquely positioned in emerging, profitable segments:

o DLF has a sizable presence across several key cities (Delhi NCR, Mumbai, Bangalore,
Chennai, Kolkata, Chandigarh, Goa etc) and clear market leadership position in
commercial, retail, and lifestyle/premium
o apartments. These segments are highly profitable and have significant entry barriers.
The estimated market share at ~16% in commercial offices and ~8% in retail space
absorption in India over the next 2 years.

• Better placed to face the macro challenges:

o Commercial, retail, luxury and premium housing account for 67% of DLF's estimated
Gross
o Asset Value (GAV). Middle income housing segment accounts for just 24% of DLF’s
GAV (56% of the development area). This segment is more susceptible to emerging
macro concerns and challenges, and thus even 50% lower absorption v/s estimates
would impact GAV by ~11%

• DLF huge land bank

o DLF’s current land bank stands at 13,055 acres (addition of 2,800 acres since filing of RHP)
and total developable area at 612m sq ft (addition of 43m sq ft). Recent land bank addition of
~2,800 acres has been done at Rs19.3b (average cost of Rs230/sq ft, assuming FSI of 1x).
For DLF, land cost stands at Rs154b, i.e. an average of Rs252/sq ft, which provides
competitive advantages.

o Large companies such as DLF, which have holding power, are best positioned to take
large bets by acquiring large tracts of contiguous land, which could create value through
‘land bank ageing’ and ‘integrated development’. It is believed that this strategy will
generate better returns, which would lead to continuous upgrade in NAVs and allow for
higher asset turnover.

o Successful implementation of monetization strategies will lead to lower capital costs and
create conditions for building integrated property business models, comprising property
development, re-development, acquisitions, divestitures, leasing and management
 WEAKNESSES

DLF due to its predominant positioning in the commercial office, retail and premium
apartment segments is relatively less vulnerable to the emerging macro challenges. We believe
that a significant part of the concerns pertaining to the sector are getting compounded in middle
income housing segment, which is more sensitive to prices and higher interest rates.

• Macroeconomic risks:

Any weaker-than- expected GDP growth for the domestic economy could negatively affect
sentiment of buyers, leading to elusive demand, which could render sales and earnings estimates
for DLF unrealizable. Also, any further tightening measures and policy changes by the
government (with regard to mortgage applications and approvals, project financing, and property
pre-sales) to curb speculation
and overinvestment could adversely affect the bottom lines and cash flows of property
developers and sentiment of home buyers

• Real risk of decline in property prices, and concentration in Gurgaon:

Conservatively, we have assumed ‘NO’ price increase in the NCR region for apartments during
FY08-17 and for commercial and retail during FY08-FY12. From FY13, we have assumed a
price CAGR of 5% in commercial and retail space in NCR. Other than NCR we have assumed
stagnant prices for all projects and all verticals (residential, commercial and retail) for FY08 and
FY09. Given the sharp acceleration in real estate prices over the past three years, there exists a
real probability of a price correction in certain pockets. Also, NCR region still accounts for 42%
of the development area for the company, thus exposing it to significant price movements in the
region.
 DLF’S COMPETITORS

India Bulls HDIL Ackruti City Omaxe Group Unitech

New rivals

Bombay Dyeing, Golden Tobacco and Century Textiles. There has been a precedent with groups
like Tata, Mahindra and Godrej having turned developers. The Tata group has Tata Housing and
Tata Realty while Mahindra’s venture is called Mahindra Lifespace Developers. Godrej’s
venture goes by the name of Godrej Properties.

A prominent case is that of Bombay Dyeing, a well known player in the textile business. While it
has entered the real estate business, it does not have a separate company in place.

DLF’S IPO LAUNCH IN 2007

The future grand plan after the IPO launch:

DLF has outlined a three-pronged growth strategy:

1} Strengthening its pan-India presence,

2} Building up land reserves at strategic locations, and

3}Leveraging its real estate capabilities in related areas be it special economic zones or
hospitality.

The company will primarily be a developer and sell its properties retaining limited assets to be
leased out. The money raised through the IPO would go towards buying more land (Rs 3,500
crore -- Rs 35 billion), developing existing projects and repayment of loans.
Going by the scale of development done so far, DLF is the largest real estate player in the
country with land reserves of 10,255 acres or about 574 million square feet (msf) of
developmental area. Of this, 171 msf is located in or near developed urban areas while 404 msf
is urbanisable.
"About 90 per cent of the total land bank is available as large contiguous plots enabling large
integrated development", says, chief executive officer Rajiv Singh.

After being centered around Delhi for many years, the company now has a nation-wide presence
across 31cities and towns. It has developed 29 msf of residential, commercial and retail projects
and integrated townships spread over 3,000 acres in Gurgaon so far. Currently, some 44 msf of
development is under progress and projects involving 524 acres is planned over the next few
years.

The company intends to focus on its core competence while partnering with leading global
players such as Nakheel (SEZs), Laing O'Rourke (construction), ESP (engineering and design),
Feedback Ventures (project management) for better execution.

Right from acquiring low cost land to creating a full fledged township to realise the true potential
of the land, DLF has amply demonstrated its success in Gurgaon. One key advantage is that
DLF's average cost of acquisition of land is fairly low at around Rs 274 per sf which will enable
it sit out the cycles and not indulge in distress sale ever.

Some key determinants of profitability for real estate companies apart from the land cost, is the
developer's land acquisition and aggregation skills, relationship with the state authorities and
reputation -- on all these DLF scores highly.

And with its unquestionable capabilities as a successful developer, DLF seems best placed to
capitalise on the booming real estate market, which is expected to grow at 20 per cent-plus
annually from the current size of $40-45 billion.

Even more, the national capital region, where the company has over 50 per cent of its land
holdings, is among the fastest growing markets in the country.

Apart from the boom in retail malls and residential owning to rising disposable income, there are
several new vistas opening up for developers which DLF is planning to tap -- for instance, SEZs
which offer opportunities to create integrated townships, hotels and serviced apartments,
multiplexes, airports and the list goes on.

According to a newly devised strategy, the company would, instead of leasing out commercial
projects, indulge in outright sale to potential buyers including DAL. This model rests on the
ground that DAL would be able to garner low cost capital by tapping the alternative investment
market overseas and pay a higher capitalization rate for DLF's properties resulting in faster
growth in revenues and better margins too.

Thus DLF wanted to apply cost differentiation leadership strategy where through
economies of scale they reduce the cost and achieve differentiation in each of its strategic
business units.
KEY ELEMENTS OF ITS EXISTING BUSINESS STRATEGY

Brand reputation

 DLF has a 60-year history of service excellence. Since it was founded in 1946, it has been
responsible for the development of 21 urban colonies aggregating 5,816 acres, as well as an
entire integrated 3,000-acre township - DLF City.
DLF reputation for providing prompt payment to landowners upon the acquisition of its land,
developing and completing projects in a timely manner and conducting its business with
transparency has created a relationship of trust with its customers and suppliers. The company
retains internationally and nationally renowned architectural, construction and consulting firms
for all its projects.
Extensive land reserves are the most important resource for a real estate developer. As of
April 30, 2006, DLF land reserves under development aggregated 1,372 acres representing
approximately 102 million square feet of developed area or area available for development and it
has made partial payments to acquire a further 2,893 acres in various regions across India. It is
estimated that it will be able to develop over 118 million square feet of saleable or rentable area.
The Company benefits from economies of scale and is able to purchase large plots of
land from multiple sellers, thus enabling it to aggregate land at lower prices. The company has
the ability to anticipate market trends and, in some cases, to influence the direction of such
trends provides it with opportunities to acquire strategic locations of their choice.
 DLF is one of the first developers to foresee the need for townships on the outskirts of
fast growing cities and is credited with the growth of Gurgaon. The company is one of the early
developers to focus on developing theme-based projects such as The Magnolias in DLF City.
The Company has an experienced, highly qualified and dedicated management team, most of
whom have over 20 years experience in their respective fields. DLF encourages responsibility,
autonomy and innovation among its employees with an attractive compensation package

➢ DLF’S SOME STRATEGIC DECISIONS

DLF Laing O’Rourke (India):

DLF Laing O’Rourke (India) Ltd is a joint venture between DLF, Laing O’Rourke Plc and LOR
Holdings Ltd. According to the agreement, the JV company would carry out development
activities in identified DLF projects for a built up space of 50m sq ft over five years with
minimum of 6m sq ft each calendar year. Laing O’Rourke will issue a corporate guarantee in
favor of DLF to secure the JV company’s performance under the projects.

Joint venture with Hilton:

DLF has entered into a joint venture with Hilton International for development and ownership
of a chain of hotels and serviced apartments in India. DLF will hold 74% and Hilton will hold
26% of the equity share capital of the JV company, which would develop and own 50-75 hotels
and serviced apartments with an equity investment of US $550m over the next five to seven
years.The hotels and serviced apartments would be managed and operated by Hilton’s
subsidiaries. DLF has agreed not to develop and manage any hotels or serviced apartments that
target the same market segment as of the JV company.

Joint venture with WSP Group:

The JV company has been established to provide engineering and design consultancy and project
management services for DLF’s real estate plans. Both DLF and WSP Group have equal
shareholding in the JV company and have identical rights and privileges. The JV company will
provide consulting services to DLF for an initial 18 months after which the JV company can
target new clients in
India as agreed by the parties. WSP is permitted to provide independent services to its current as
well as new clients.

Acquisition of stake in Feedback Ventures:

Necia Builders and Developers Pvt Ltd, a subsidiary of DLF, has acquired a 19% stake in
Feedback Ventures at Rs72.5/ share. Feedback Ventures provides consulting, engineering,
project management and development services for infrastructure projects in India.
MoU with Nakheel:
DLF has signed an MoU with Nakheel LLC, a leading property developer in UAE, to develop
real estate projects in India through a 50:50 JV company. The initial two projects of the JV
company would be 20,000 acres SEZ each in NCR and South Maharashtra and/or Goa.

Joint venture with Prudential Insurance:

DLF has entered into a joint venture with Prudential Insurance to undertake life insurance
business in India. DLF would hold 74% and Prudential would hold 26% of the equity share
capital. DLF’s 30% equity share capital and Prudential's entire shareholding would be locked in
for seven years. Remaining shareholding of DLF would be locked in for 10 years. After the lock-
in period, if any shareholder intends to transfer the shares, first offer should be made to the non-
selling shareholder. No transfer of share is permitted to the competitor.

Joint venture with MG Group:

DLF has entered into a 50:50 joint venture with MG group for real estate development. The
board shall consist of 4-12 members. Each party is entitled to appoint one half of the board. A
non-executive chairman would be nominated by DLF.

Joint venture with HSIIDC:

DLF has entered into a joint venture with HSIIDC for developing two SEZ projects. A SPV
would be created in the form of a limited company to implement the project. Shareholding
pattern is 90% in favor of DLF and 10% in favor of HSIIDC. The equity holding of DLF in the
SPV cannot fall below 51% and HSIIDC cannot increase it above 26%. In the event of initial
public offering, DLF would contribute its share for the lock-in period of three years and shares
held by HSIIDC would be locked in for one year. HSIIDC has the right to sell its shares and
DLF has the first right to purchase it at market price. On DLF’s refusal, HSIIDC would have
right to offer the shares to the public.

Memorandum of Co-operation with Fraport AG Frankfurt Airport Services:

DLF has signed a MoC with Fraport AG Frankfurt Airport Services Worldwide to establish DLF
Fraport SPV. The SPV would focus on development and management of certain airport projects
in India. The shareholding of each party shall be mutually agreed such that each of parties shall
hold not less than 26% in the management company.

DLF in talks with AT&T for mobile services

Real estate major DLF Ltd is talking to US telecom giant AT&T as a strategic partner to roll out
pan-India mobile services.
AT&T has also applied for a universal access service licence (UASL), which allows
operators to offer services in both GSM and CDMA technology, with the Mahindra & Mahindra
group, for 22 circles. The US company, however, has stipulated that it wants a majority equity
stake in the mobile venture.
This will be AT&T’s second coming in India after it exited Idea Cellular a few years ago. DLF
had also applied for a pan-India licence on its own and without a foreign partner. A senior DLF
executive said: “We are in talks with various international telecom operators; all the big
operators will approach us.”
Sources close to the development, however, confirmed that DLF has been approached by
AT&T. An AT&T India spokesperson said: “We do not comment on market rumours or
speculation.”
Insiders also said DLF is talking to other international telecom majors apart from AT&T. With
over 300 Indian companies applying for pan-India UASLs, the race is on to get international
partners with experience in the telecom sector as strategic partners. This is because the industry
expects the government to offer only two or three licences in each circle.

Hybrid business model

DLF has a hybrid business model, which is a blend of ‘sale and lease’. It is estimated DLF’s rental
income to increase from Rs6b in FY08 to Rs43b by FY12, comprising an asset base of 46m sq ft in
the commercial and retail verticals. The rental stream would enable the company a steady
income source and also provide monetization opportunities, leading to a long-term, self -
sustaining growth phase.

SHAREHOLDING PATTERN:
NO. OF % OF
SHARES TOTAL
PROMOTERS 1502823120 88.26%
INSTITUTIO 124231366 7.30%
N
GENERAL
PUBLIC 75657427 4.44%
GRAND 1702711913 100%
TOTAL
Analysis of the Indian economy with Respect to Real Estate Sector

According to the United Nations Population Fund (UNFPA),India is getting urbanised at a faster
rate than the rest of the world and by 2030 more than 40.7 per cent of the country’s population
would be living in urban areas. Presently, more than 28.7 per cent of India’s area is urban as
against the global average of 48.7 per cent. However, the growth rate of urban areas was 2.3 per
cent in 2005, as against the world average of 2 per cent. The urban population of India was
estimated to stand at 316 million in 2005 and is the second largest in the world after China. It is
estimated to reach 590 million by the year 2030 retaining its second position.
India’s cities have been the driving force in shaping India’s socio- economic profile. Urban areas
which constitute only 28.7 per cent of the population, have been a major contributor to
the GDP with a major share of industry and almost the entire services sector concentrated in the
urban agglomerations.
During the last sixty years, post independence the population of India has grown two and
a half times, whereas urban India has grown by nearly five times. According to Census of India
2001 estimates, 30 per cent of the total population of India would be living in urban areas by
2011. The number of cities with one million plus population is further expected to double from
35 in 2001 to 70 by 2025. India’s ‘Mega-Cities’ of Mumbai and Delhi would be the world’s 2nd
and 3rd largest cities by 2015.
With a rapid influx of migrants in these cities there is a corresponding increase in the demand for
space.
Rapid urbanisation is fostering real estate growth in India.

Increasing number of households

The growing popularity of nuclear families in India has decreased the average household (HH)
size in the country, leading to an increase in the number of households in the
country. The average HH size in India has declined from 5.4 persons per HH in 1981 to 5.1
persons per
HH in 2001. In 2001, there were roughly 192 million HH in India, about 40 million more than
those in 1991.

Growing number of first-time home buyers

India has a much younger population compared to mostother economies. Currently the
population in the working age group (16-65 years) is about 700 million representing
about 64 per cent of the total population. India is expected to emerge as the highest contributor
to the global work force by 2010. Given that a majority of the population would still be young
the per capita income generation capability of India would continue to remain
robust. With the average age of home buyers declining fast the young working population would
further push demand for housing units higher.
First-time home buyer numbers have multiplied over the years and the median age of
home buyers has reduced from 38 years in the early 1990s to about 28 years today.
Increasing income levels:
The per capita disposable income has grown manifold in the past one decade. The current
annual per capita disposable income stands at around US$ 693 and is further expected to grow
by 8-13 per cent in the next five years.

Robust economic growth, particularly in the services sector has led to an increase in income
levels in the country. Several studies have indicated that salaries in India have been increasing by
an average of
10-15 per cent on a year on- year basis. This has increased the affordability of homes in spite of
higher property prices and has further created more discerning buyers

Affordability of housing:

As per estimates from the National Council of Applied Economic Research (NCAER) the
proportion of
HH in the top five income brackets (>US$ 11,651 per annum) has increased from 0.6 per cent in
1996 to 2.4 per cent in 2006 and is likely to increase further to 4.5 per cent by 2010. Also, the
number of HH in the top four income brackets (>US$ 23000 per annum) is expected to grow at a
CAGR of over
20 per cent till 2010. Thus, housing is expected to become increasingly affordable especially in
the mid-market and premium segments.
Retail Real Estate:
The Indian retail industry is witnessing a structural change with individual small format
stores making way for large format shopping malls and hyper-markets. On the policy front,
the partial relaxation in FDI regulation (51 per cent FDI in single brand retailing) has
provided a boost to the retail segment.
Presently the top seven cities of India account for a dominant share in mall space. The
total organised retail space absorbed for the year 2006-07 in the top seven cities was around
19 million sq. ft. The following chart depicts the absorption scenario of organised retail space
for the year 2006-07. National Capital Region (NCR), one of India’s most affluent urban
centres, dominates the absorption scenario followed by Mumbai and Kolkata. Bengaluru is
also emerging as a major retail hub owing to its cosmopolitan character

Special Economic Zones (SEZ):

Following the success of China in boosting manufacturing exports, India has adopted the
SEZ model albeit with private participation to provide world class infrastructure to boost its
industrial export performance.
With the fiscal benefits extended to IT Parks expected to end in 2009 several
upcoming and proposed SEZs are expected to provide the next generation impetus to the IT
commercial office space development in the country.
Offering significant fiscal benefits, SEZs are being preferred by the IT/ITES and
other services sectors. IT/ITES sector accounts for more than 50 per cent of the approved or
notified SEZs. 2006-07.Till date under the new SEZ policy, formal approvals have been
granted to 366 SEZ proposals out of which 142 have already been notified as SEZs as on
30th August, 2007. In addition, around 176 proposals have been granted in-principle
approvals.
In terms of industry focus, Information Technology (IT) and Information Technology
Enabled Services (ITeS)/ Electronics/Hardware sector witnessed the maximum number of
approvals followed by Bio-technology, Engineering etc.
With respect to type of SEZs, almost 90 per cent of the SEZs approved, were sector
specific followed by multi-product (5 per cent), multi-services (2 per cent) and FTWZ (1 per
cent).
Geographically, the maximum number of approvals were bagged by the State of Maharashtra
(75) followed by Andhra Pradesh (61), Tamil Nadu (53) and Karnataka (36).
In a recent move the Government has withdrawn the freeze on new approvals however at the
same time the rules have been tightened by capping the land size to a maximum of 5,000
hectares in case of a multi-product SEZ

Rea l Estate Opportunities:

• Health Cities: Large scale integrated development
• Hospitals: combining the services of a hospital and a Hotel
Low-cost Budget Housing:
As per the Working Committee of the 11th Plan (2007-12) the total shortage of dwelling
units at the beginning of Eleventh Plan Period i.e. 2007 was 24.7 million. As per the
estimates by National Housing Bank (NHB), going forward, the gap of housing unit shortage
would further widen to about 45 million units during the Eleventh Plan (2007 – 2012) period
E&Y estimates that more than 70 per cent of the shortage of dwelling units is for middle and
low income brackets.

Rea l Estate Opportunities

• Slum-rehabilitation
• Mass housing.