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  1. National Capital Region property market to take time to recover: Morgan Stanley

National Capital Region property market to take time to recover: Morgan Stanley

The residential business remains sluggish while rental business is getting the benefit of repricing/escalation.

By: | Published: December 13, 2016 6:48 AM

The residential business remains sluggish while rental business is getting the benefit of repricing/escalation. The NCR market will take some time to recover owing to the currency replacement programme (aka “demonetisation”) and oversupply. DLF has roughly Rs 150 billion unsold inventory (a fair bit nearing completion), which the company aims to sell over the next four-five years. This assumes Rs 30-35-billion net sales pa, vs Rs 5 billion done in F1H17. Management’s main focus item for FY17 remains the completion of the CCPS transaction (financial restructuring).

The due diligence process (legal, land, financial and technical) has been completed and two investors have submitted their offers for the CCPS deal (purchase of a 40% stake in the rentco). The offers shall be placed before the committee of independent directors for their approval. Management seeks to complete the transaction in FY17, but it may take a little longer (early F18) owing to regulatory approvals (including CCI). The company plans to continue to hold the remaining 60% of DCCDL rental assets. According to management, it may do all future rental asset development (3-4msf per annum) in DCCDL.

The impact of currency replacement may take two-three quarters to normalise (expect a flat 3Q and a dip in 4Q sales). The company aims to complete its legacy projects over the ensuing nine months.

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