India's largest real estate firm DLF Ltd said a pickup in office leasing has helped it rent out close to 1.5 million square feet in 2014-15, even as most residential micro-markets it is present in are experiencing muted sales.
"As more absorption is happening, rentals are rising," Saurabh Chawla, executive director for finance at DLF, said in a conference call with analysts, referring to its main office district Cyber City in Gurgaon.
DLF has very little space left to lease in Cyber City, though there are several leases that have come to an end in recent quarters and new leases have been signed at much higher rentals.
The company is considering building another office tower in Cyber City by the middle of the current fiscal. "This building will have about 2 million sq ft of space," said Ashok Tyagi, group CFO at DLF.
DLF is also preparing to launch its first real estate investment trust by the end of this year that will list a part of its office portfolio.
On the residential sales front, while the company has sold 1.23 million sq ft in the DLF phase 5 area of Gurgaon in its projects Crest and Camellias, apartment sales in New Gurgaon and in other parts of the country have been dismal due to the continuing slowdown in the overall real estate market. Chawla termed sales in phase 5 as a saving grace.
"Sales will continue to be muted in that part of the market for another 12-15 months," said Chawla.
The company is now looking at close to 10 million sq ft of new launches in the next 12 months, said Tyagi.
"As 'normal' sales momentum is still some quarters away, the company is in dialogue with a few PE players for part cash out in some marquee projects and mitigate cycles before launching in FY16," according to DLF's analyst presentation for the quarter.
It is planning to launch new developments near its Capital Greens project in Delhi, which has an additional potential of building 6 million sq ft.
The company has given a sales guidance of Rs 3,500-4,000 crore for 2015-16, while its rental income, which reached Rs 2,200 crore in the quarter to March, is expected to rise to Rs 2,700 crore by March 2016 and Rs 3,000 crore by March 2017.
On Wednesday, DLF reported a 22% year-on-year drop in its consolidated net profit for the March quarter at Rs 171.62 crore. Income from operations during the quarter too fell, albeit marginally to Rs 1,953.69 crore from Rs 1,969.45 crore. For 2014-15, DLF's net profit was down 16% to Rs 540.24 crore. Income from operations dropped 8%
The real estate firm's net debt rose by Rs 628 crore during the March quarter to Rs 20,965 crore.