Tuesday, September 23, 2008

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DLF to issue pink slips to 300

Forwarded by Venkat
India’s largest real estate developer, DLF, is retrenching around 300 employees across all its centres and subsidiaries as it decides to slow down its project execution, especially in tier II cities, in the face of shrinking demand and expensive borrowing.

“Over the past month, around 300 employees have been asked to leave. The company had earlier decided to cut double the number, but later brought down the target,” said a DLF executive.

The DLF spokesperson, however, denied that the company was downsizing. Another senior DLF executive said tough times in real estate have forced the company to rationalise manpower and bring down costs.

He said the company has decided to go slow on the execution of projects, mainly in tier II cities, where there is hardly any demand for office and retail space at present.

“The management is not yet inclined to bring down rates even at the cost of losing business to rivals and has, therefore, decided to build less or no offices or malls in places where there is less demand,” the executive said.

Until a few years ago, DLF had its business concentrated only in the National Capital Region, especially Gurgaon. But the real estate boom of the past five years has seen the realty giant spread its activity across the country.

The company does business through a multitude of subsidiaries and its activities span almost all segments, including housing, offices, retail and SEZs.

But the global credit crisis and double-digit domestic inflation have slammed the brakes on the unprecedented realty growth in India. Indian firms are now looking for ways to deal with it. Most realty firms are cash-starved today, as much of the cash they earned during the good times were deployed in land acquisition.

Now, with home buyers deferring their purchases following multiple interest rate hikes, developers’ cash flow is choked.

Meanwhile, vacant space is piling up in several malls forcing developers to convert their under construction malls into office space.

But even office and IT space has started seeing oversupply in some pockets impacting rentals. A higher interest rate has also made borrowing expensive for developers. And for medium to small developers, bank credit is largely unavailable. In the given circumstances, some new small entrants are just falling by the wayside.

DLF is far bigger than any of its rivals and has the ability to sustain itself in a depressed market for much longer. A DLF executive said the company is reprioritising its projects. “

The company may sell some land to bring in additional cash, instead of initiating price cuts resulting in a market crash,” said the executive.

The biggest issue for DLF today is raising funds for its private unlisted promoter group firm DLF Assets (DAL), which buys all the office properties of DLF. Offices account for over half of DLF’s revenue. Global financial turmoil forced DAL to defer its listing in Singapore early this year.

The firm hasn’t since been able to raise enough funds to pay back DLF, to whom it still owes over Rs 3,000 crore for the properties it bought last year.


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