DLF defends numbers in mega realty deal

Till date, DLF has confined itself to malls and residential complexes in and around Delhi, particularly Gurgaon. But the company has been for some time keen on reaching out, having recently unveiled an 8 lakh sq ft IT park in Chandigarh.

Not surprisingly, the company was at pains to clarify that it had valued the deal correctly. ‘‘The bid was made after taking into account the large upmarket landmark destination that the mill is,’’ said Ajay Khanna, Executive Director, DLF Retail. The pricing was calculated after careful studies based on the economies of the project, he said.

Khanna agreed on the expansion part: ‘‘The Mumbai bid is part of our plans to go national’’; but differed on the valuation: ‘‘We’ve been in the field for almost five decades now to recognise a viable project.’’

Though it is still early days, DLF plans to invest around Rs 250 crore in the project to turn the plot into a mega retail space comprising a large shopping mall, family entertainment centres and an amphitheatre.

Overpriced or not, analysts sing Khanna’s tune that the project is viable considering that the property is centrally located and comes amid a booming phase for the sector. ‘‘The successful bid value represents the higher end of the pricing spectrum and is likely to have been driven by the highest and best end use of development — retail and hospitality,’’ said Sanjay Verma of Cushman & Wakefield India, another consultant.

Colliers Jardine’s Kumar too is in agreement here: ‘‘The aggressive bid is a clear indication of the bullish market in India. And Lower Parel in Mumbai has got great potential in terms of visibility and growth.’’

Global merchant banker Merrill Lynch recently forecast that the growth in the country’s real estate sector would be propelled from the current $12 billion to $45-50 billion by 2010.

For the boom factor alone, analysts are willing to discount DLF’s late entry into Mumbai. ‘‘The current market prices are at Rs 11-12,000 per sq ft. Considering that DLF has bought the plot at around Rs 7,300 per sq ft and another Rs 1,700 would go into construction, the company would still be able to make sizeable returns,’’ said Anuj Puri, MD, Cushman Wakefield.