Ladies and gentlemen, good day, and welcome to DLF Limited Q2 FY 2024 Earnings Conference Call. We have with us today on the call Mr. Ashok Tyagi, Whole-time Director and Managing Director DLF Limited; Mr. Vivek Anand, Group CFO; Mr. Sriram Khattar, Vice Chairman and MD, Rental Business; Mr. Aakash Ohri, Joint Managing Director and Chief Business Officer. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star ten zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vivek Anand. Thank you, and over to you, sir.
Thank you. Good evening, and welcome to DLF Limited Q2 Financial Year 2024 earnings webcast. Thank you for joining us today. We are happy to announce that our business delivered a strong performance across parameters. I will start with the financial highlights for Q2 , Financial Year 2024, DLF Limited consolidated. The consolidated revenue stood at INR 1,476 crores, gross margin at 57%. EBITDA stood at INR 591 crores, reflecting year-on-year growth of 19%. Net profit at INR 629 crores, reflecting year-on-year growth of 29%. Record surplus cash generation from operations at INR 1,147 crores. New sales booking for the quarter stood at INR 2,228 crores, in line with our guidance. Our new products and existing inventory continue to remain strong consumer interest.
Our Super Luxury offerings, the Camellias and DLF 5, Gurugram, saw healthy demand during the quarter and continues to set new benchmarks, indicating strong demand for high-quality residential products backed by a strong brand. We continue to see sustained demand momentum across all segments and hence keep a positive outlook on the housing cycle. Our new product launches that have been planned for the second half of the fiscal remains on track, and we remain committed to bringing calibrated supply across our key markets and leverage this growth cycle. Collections continue to remain healthy, resulting in record cash flow generation during the quarter. Consequently, post-dividend payout of INR 990 crore, we achieved a net cash position of INR 142 crore at the end of the second quarter. We have therefore delivered on our commitment to achieving a net debt zero position.
We will continue to further strengthen our balance sheet through consistent cash generation. I'll now move to the financial highlights for Q 2 Financial Year 2024, DLF Cyber City Developers Limited consolidated results. Rental income grew to INR 1,069 crores, year-on-year growth of 9%. Consolidated revenue of INR 1,463 crores, reflecting a 7% year-on-year growth. EBITDA stood at INR 1,109 crores, a year-on-year growth of 6%, and a net profit at INR 416 crores, reflecting a year-on-year growth of 17%. Our office occupancy improved to 91% at the end of the quarter versus 88% in the previous quarter. Occupancy across the non-SEZ segment has inched back to 97%, demonstrating the high quality and inherent demand for such products, while SEZ occupancy stood at 85%.
Our new office developments continue to garner occupier interest and consequently have achieved a pre-leasing of 89% across our two new office complexes, DLF Downtown in Gurugram and Chennai. Retail business continues its growth trajectory, and our progress towards expanding our retail offering stays on track. We expect construction of a large retail complex in Gurugram to start during the fiscal. I'm happy to share that U.S. Green Building Council recognized the sustainability achievements and commitments of our rental business at the Green Building International Conference and Expo, held in Washington, D.C., USA, and recognized the business as a whole as a world leader in LEED Zero certification and LEED for Existing Building Platinum Certified Space. This recognition is a testament to DLF commitment towards sustainability and adoption of green building practices in the country.
We strongly believe that our healthy pipeline of new products, along with a resilient as well as a steadily growing rental portfolio, will result in delivering consistent and profitable growth across our businesses. I will now like to hand over to Sriram to say a few words, right, before we open this to Q&A session.
All right. Thanks, Vivek. It gives me a lot of pleasure to share with all of you that the U.S. Green Building Council, at their annual expo, recognized DCCDL and DLF as world leaders in sustainability. I'll just read out parts of the facilitation that they did there. It says: DLF has become the worldwide leader in both LEED Zero certifications and LEED for Existing Buildings Platinum Certified Spaces, which are extraordinary achievements. It also goes on to say that as the largest publicly listed real estate company in India, your actions and leadership are influential and inspirational. You are setting a standard for sustainability excellence to which others may aspire. I am honored to recognize you for creating a sustainable built environment in the Green Build International Conference and Expo.
U.S. Green Building Council could not be prouder to work with a global partner like DLF, leading the transformation and regeneration of the built environment across India and throughout the world. I think this was an extraordinary achievement for us, recognized by the highest body in sustainability in the world, and we continue on our journey on this. We have got the LEED Zero for Waste certification for our Cyber City in Hyderabad, and now we are replicating it across all our projects. This is in line with our long-term goals of being the leaders, definitely in India and preferably across the globe in sustainability. Thank you, Vivek. Back to you.
Thanks, Sriram. Thank you. Yeah, we can open it up for Q&A now. Yeah, moderator, we can start with the Q&A.
Just said. I think you need to call him.
Moderator, can you hear us?
Hello?
Yeah. Yeah. Can, can you hear us?
Yes, sir. Yes, I can hear you, sir.
We can begin the Q&A now.
Yes, sir. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Saurabh Kumar from JP Morgan. Please go ahead, sir.
So congratulations, team DLF, for achieving this positive net cash after guiding for almost seven years. It seems to be a seminal quarter for you guys. I had a few questions. One is, you know, on Camellias, Akash, so 14 apartments for, you know, INR 712 crore. Fair to say that the pricing has now gone to INR 70,000-INR 75,000? If I just kind of do some back calculation on this, unit sales. That's the first one. The second is on your cash flows. You know, your construction spends are still relatively low.
Now, as your construction spends kind of move to the, y ou have 30 million sq ft under construction, so as your construction spends maybe ramp up to maybe INR 2,000-INR 2,500 crore a year, would you think that your cash flows now reset still to this INR 1,100-INR 1,200 crore that you are kind of generating right now? Or, is this, you know, in some sense, peak cash flow, what we are seeing? The third is essentially just on your debt. So what's the logic of keeping INR 3,000 crore of debt and then INR 3,200 crore of cash on balance sheet? That I could not finally figure out. And lastly, one for Mr. Khattar. Sir, so it seems to me, basis your presentation, you don't have any space available for marketing in the non-SEZ space in DCCDL.
Whereas you may have some vacancies in SEZ, but the non-SEZ space is not available. So what are your thoughts in terms of, you know, getting that space to market? Because that's where the demand seems to be. So these are a few ones. Thank you.
Okay. So, thanks, Saurabh. So, in Camellias, we are above the INR 75,000, you're right, mark. And, now, as you know, we've got the last few to go. But I'm sure, you would have read the Economic Times article, so very happy for Gurgaon to have reached that INR 100 crore mark, for one apartment. And I think that is something that is obviously everybody is quite excited about. So yes, Camellias is upwards of the number that you mentioned. So what you actually mentioned was the previous pricing, and then it's gone up further. It's closer to what you know was being reported, and the only difference being that we have a price distinction between lower, mid, and high floors.
So, that's where we are with Camellias, and, I think you've been part of this journey, so from where we started to where we are. And thankfully, it's backed by, not just speculation, it's backed by solid demand. And therefore, the new Superlux product that we were talking about earlier also, where we've also mentioned about it in our guidance. So based on the services, operations, so demand, I'm happy to also mention to you that today Camellias has become the benchmark for the country, and, very proudly so. So not only here, but anywhere in the world, you know, when real estate is mentioned, I think Camellias today is being referred as an India product.
I think that is a bigger satisfaction than just reaching the INR 100 crore mark. So yeah, that's where we are.
Yeah. Saurabh , on the construction spends, first of all, last year, our total spends, annual spends were close to INR 1,200 crores. First half, we've spent INR 650 crores, and the second half, our estimate is we'll be spending close to INR 1,000 crores. So on an annualized basis, we'll be, we'll be spending around INR 1,700 crores. Second half, we expect to start giving possessions for a large part of our floors, so that will increase our spending. Plus, the Arbuor project pace is going to pick up in the second half, so there will be a large part of outflow coming up in the second half. The second part of your question was cash flow from operations. Yes, in the first half, we have achieved a cash flow from operations of INR 200,000 crores.
If you remember, the guidance I had given was upwards of INR 3,000 crore on an annualized basis. So yes, considering our performance in the first half, I see an upside in our cash flow operations on a full year basis. Then your other part of the question was: What is the logic of keeping INR 3,000 crore of gross debt when we have cash of INR 3,165 crore? Just to remind you that out of INR 3,165 crore of cash, the free cash which is available is only INR 450 crore. Rest of the cash is locked in various escrow accounts, right? So therefore, we'll have to really live with this gross debt till the time we are able to generate free cash.
We are confident that as we are able to mature our product projects, and we are able to give OC, right, we'll be able to generate free cash, and that will be utilized to repay the debt. So yeah.
So, Saurabh, on your question of space available in non-SEZ, yeah, it's with the complete modesty that we have sort of done well in the last few quarters in terms of leasing. In fact, in Downtown in Chennai, where there was about 250,000 sq ft of space that was left, that was also committed yesterday. And therefore, Downtown Chennai is also fully leased. So the space that we have available now is about 3-3.5%, which is about 6-7 lakh sq ft of space. In addition to that, we have some of the hard options which the tenants may not want to take up, which keep coming up, which will get re-leased.
My sense is they will get re-leased at rates which are current market rates and higher than the rates at which the hard options were. Three, as our program is to complete Downtown 4 in Gurgaon by the end of 2024, calendar 2024. In the first quarter of 2025, the Atrium Place, which is our joint venture for about 3 million with Hines, in which DLF has two-thirds stake, will start getting completed. Now the leasing and operations teams are working on marketing Atrium Place, and they have a head start of more than a year before the first building comes up to lease.
In addition, this has also enthused us, and we have marginally accelerated the start of construction of phase II in Taramani, which we should start in the Q4 of this financial year. We are also starting the construction in the next few weeks on the phase II of Downtown in Gurugram, which is a multi-use development of about 8 million sq ft, 8-8.5 million sq ft, with a 2.7 million sq ft of a mall, a destination mall, and about 5-5.5 million sq ft of office towers.
Thank you, sir. Sir, just one follow-up, back to the residential side. So, I mean, how concerned are you about the sharp price rise you're seeing in Gurgaon? You know, is there a concern that prices go up too much, and then that basically impacts affordability, or that's not a concern for you right now? Thank you.
Sort of prices going up, see, there is a latent demand. As far as concern is concerned, you know, you're right now referring to the real estate thing for resi, but tell me where the prices are not going up, whether it's, you know, eating out in a hotel or an air ticket or even a holiday. So I don't think, s ee, right now, what is going up, the only thing is that there is a demand for better products and good products, you know? So prices that are going up, if you see this carefully, is going up for products which are in a certain genre, you know, so luxury and above. So if the-
Post-COVID, what has happened is that the demand and the, the spend, spends have kind of changed to, a certain, habit that people have got into in terms of, you know, they, they've realized that life is finite and all that, so therefore live it up. So the demand for better, bigger homes is there today. Again, I'm not going to get, caught into this luxury definition and all that, everybody kind of misuses it, but I'm saying better, bigger, more spacious homes is what the demand is today, and therefore, the price is a resultant of that, Saurabh. So it is not something which is, you know, just something, in the air that, you know, you're talking about a smaller apartment with c ertain price points.
With inflation, with price points going up everywhere, this is where it is today. And, buying a residential real estate today has become, I've repeated this, and I'm gonna repeat it again, it's become a priority for people, to kind o, y ou know, it is the number one priority today for most of the people. So thankfully, a lot of people who were in the, on the fringe and all that, and would always live on rentals and do other stuff, have also jumped into the fray. And I'm talking about the younger crowd, which is very heartening to see that, you know, the 30-40 bracket is today making real estate purchases. But the good part is that they are, everybody is wanting to punt, and take bigger homes.
So therefore, the rise in price points today are reflection of a certain mindset, which is changing on ground, Saurabh. So it is, it is not about speculators, it is not about what used to happen 10 years back. These are people who want to buy homes for themselves. And if you see the rentals, if you see, rentals are a, a good parameter for what is happening today. And also, if you see the habitation charts, there is, there are various reports in Gurgaon which will tell you that most of the condominiums are now over 90-95% inhabited. So I think these are. This is what you should see. So at this point in time, I won't be concerned about that.
But let's see how it goes, and obviously, you know, things will settle down even further as we go along. But if you are saying that, you know, it's a ll I can say is that there are enough people out there right now for wanting to better their experiences, and I'm looking at those people. They're not only just first time, and not only people who are habitual real estate investors, but also a lot of first-timers, which is very heartening to see. Saurabh?
Thank you. Thank you, sir. Thank you, Aakash. I'll come back in the queue with questions.
Thank you. Our next question is from the line of Kunal Tayal from Bank of America. Please go ahead.
Sure. Thank you. Two questions from my side. You know, there would be about INR 19,000 crore worth of launches in the next six months, and after which, you know, you're largely left to the pipeline of about INR 23,000-INR 24,000 crore, and seems like, you know, about one year's worth of launches on the new base. So, is there a thought process already to start planning for the next phase of launches, which should come by for FY 2026 onwards? So that's question number one. The second one is on the office side. You know, your IT services tenants have actually been very stable, something that we've not seen from the peer set. So, is there any indication that you have from them that there is no intention to vacate any existing space? Thank you.
So the first question is, s ee, we plan for almost three years ahead, and based on which geography we are getting into and what we are doing. So that, as an exercise, we continue to do internally. So yes, visibility may be shown for maybe a year or year and a half, but we plan three years in advance of what we are intending to do. So if I've been able to answer that question.
So, Kunal, I mean, while we have. We have sort of, you know, documented the pipeline for the year after, it's not that, you know, our planning process is sort of shutting down. So we will have. I mean, we have enough land bank, and we will have a constant stream of pipeline flowing out.
Yeah.
Kunal, on your question of indication from IT services companies of any vacancy, that has sort of ebbed. I dare say the impact of COVID is now behind us. This has been helped by two or three, for two or three reasons. Reason one is that, during COVID, the space take-up was poor to a lot of exits, and therefore, b ut at the same time, the hiring was very good, and therefore, that is now coming back in terms of tenants either not leaving spaces or asking for additional spaces.
Two, what has happened is that some of the larger IT companies are no longer looking at 80 sq ft per desk, ect. , which had become the norm pre-COVID, and would like to have more network, collaborative, open spaces, and therefore, the demand has gone up to 100 and the size they look at is about 120-130 sq ft per desk. However, having said that, I may add a word of caution here that the companies are still working on and on their individual hybrid models, and that is something which has not yet stabilized. One thing is sure that it's going to be hybrid, but what form or shape the hybrid takes is still being worked out by companies, and there are companies who want to hot desk for hybrid.
There are others who want to give individual desks for hybrid. There are others who say even if it is hybrid, hybrid, they have to cater peak performance. Number one. Number two, while attendance in our IT parks has improved dramatically, the larger IT services companies till now have been able to manage the increased manpower in the existing spaces. And last about a quarter or so, we are seeing the green shoots when they have now started planning for the next year and two years and started looking for space.
So if this come back to office starts working in a positive way, and India is far ahead of the West on that, then I see that the demand from IT services will go up. The issue of vacancy then we will be managing, you know, much more subdued.
Yeah, pretty encouraging. All right, thank you so much.
Thank you. Our next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you so much, and congratulations on good numbers. My first question is on the DevCo's commercial portfolio, the DLF 5 and City Centre. The GAVs there seem to have fallen on a quarter-on-quarter basis. Can you comment what's happened there?
The?
The GAVs have fallen. So honestly, the GAVs are keep on getting adjusted basis the rentals. So this time, to be fair, on some of those assets, you know, we have done a very thorough analysis of the rentals that have been, t hey are not there, there just today, but the rentals that have, that those buildings have been earning for the last six or seven years, and I think that is the reason why the GAVs may have been slightly adjusted. As you know, these numbers have no bearing on the balance sheet or on the balance sheet or P&L for...
Yeah, no, I understand. It's a 20% fall, which is what bothered. Yeah. Just wondering-
So maybe I think a part of the devil is that the earlier number may have been a slightly optimistic. That's the best that I can say. Because this year, we've done a very scientific thing of what the rentals are, taken a full nine year cash flow, discounted it, like a private equity, and then come with these numbers. But again, tomorrow, if I were to go out to sell it, I'm sure we could get INR 50 crore less than this or INR 100 crore more than this. That will be a bilateral coordination, I mean, bilateral negotiation issue, not that we are in the market for selling any of these.
Got it. And second, DCCDL used to give dividend typically in Q2. This time, there was a dividend, but very small. So any thought process behind that?
No . So, Puneet, I think if you go through the cash flow of DCCDL in the last one year, DCCDL gave a hefty dividend in the end of Q4. Yeah. - which really was a substitute for the, for the final dividend, so hence the final dividend was a very small one. DCCDL has again given its half-yearly dividend, but that obviously has come at the end of September, so that's come in early October, once DCCDL did their second quarterly results meeting. So DCCDL continues to be in the cycle to give two dividends a year, which is what we have been attuned to for the last couple of years.
Okay. So the cash would come, would have come in October instead of September.
October, absolutely. Because as you'd appreciate that once the first half results are declared, then the company declares the interim dividend for the last six months.
I understand. Thank you so much. And secondly, on the cash tax liability for the DevCo, that seems to be quite low. How long do you think will that advantage persist?
Sorry, cash tax liability?
Cash flow tax.
You know, the cash tax, the cash flow statement.
Part of this, Puneet, is linked to the massive change in accounting policy that happened when the new Ind AS accounting standards got notified, you know, in that sense. Part of this is linked to that. I mean, we do believe that, in our tax returns, we don't foresee a significant tax liability for the next couple of years, you know?
Okay.
But, these are things which are constantly litigated between us and the department, which is par for the course. But we don't foresee a significant amount of cash outflow, at least for the next couple of years. Am I right?
Yeah , absolutely.
Understood. That's it. And lastly, you know, the collection run rate has gone up to almost INR 2,200-INR 2,300 crore. Is that a sustainable run rate or was there some completion-related additional collection that came through?
So, Puneet, if you remember, the guidance I had given on collections was a growth of almost 13%-15%.
Yeah.
That means maintained absolute numbers of close to INR 6,400 crore-INR 6,500 crore. So yes, collections have been good in first half, and I see a potential upside coming in collections, and the same upside, I expect will flow in the OCF as well, which I clarified in the earlier part to Saurabh.
Understood. And you lastly guided that construction cost would go up by roughly 50% over the previous year. That should be approximate, right?
Yeah. INR 1,200 crore of last year going close to INR 1,700 crores, so that will be almost a 40% increase. A large part of it, you will see it in the second half.
Understood. That's very helpful. Thank you so much.
Thank you. Our next question is from the line of Kunal Lakhan from CLSA. Please go ahead.
Yeah, hi, good evening. So just on the phase V side, you talked about pricing. We are getting closer to 100,000 per sq ft. When I just look at your slide ten, like, you know, when we are talking about 5 million sq ft of luxury valued at about INR 12,400 crore. I mean, that's like 25,000 sq ft, right? So does this number see a significant upward revision? Because I believe t he bulk of this would be phase V.
So what, what you are seeing is, for a ready-to-move-in, or, ready apartments. And as far as valuations is concerned, definitely you will see, there is a tremendous upside there already. And, as far as this is concerned, if you go back to what it was earlier on, on certain price points at launch, they were, if I just go back seven years, there was an X price, and today that price is about four times that value. So, I wouldn't want to speculate on, on future values, but all I can say is there is a, there is a reasonably good upside to what you have just mentioned.
Right now, as what Mr. Tyagi was saying, that, when we come closer to launch is that's when we make t he pricing, and we true up the whole thing. But at this point in time, this is just a guidance given. But as I said, you will obviously put two and two together also. But there is a good, you know, reasonably positive outlook there. But again, we are not in the numbers game there in terms of this is going to be a staggered kind of a launch as Super Luxury deserves, and there will be price points at various intervals that will go up, you know, based on how much stock we bring in at that point in time. And that's how we'll be approaching the DLF 5 story.
And just to add to what Aakash said, Kunal. See, when we had given this guidance, we had given this guidance towards the end of last fiscal year, and a lot has changed in the last six months. And therefore, in keeping it short, yes, these numbers will undergo a change, and there is a potential upside to this number.
Yeah.
So again, Kunal, to what Vivek and Aakash said, absolutely, these numbers will undergo a change as the product and the pricing gets trued up closer to the launch. I mean, we had the objective, we had internal debate of whether we should change these numbers now or what as they are closer to launch. Honestly, I mean, you know us as a company, we are conservative people. We don't, w e are not in the business of trying to milk every guidance, upside, you know, from a market standpoint, and so we are okay with this. But obviously, these numbers will undergo a positive change as we hit closer to launch.
Got it. And secondly, can you just comment a little bit on the, you know, new launches status in terms of like where we are in terms of approvals and timelines, for example, for Sector 76 and also for phase V ?
In 77, that's Privana. The approval process is on, and so far, so good. The other one you mentioned was the DLF 5, right? That is also on track for a Q4. That was, as we had said, Q4, Q1, so that is also on track. So far, based on what we are doing internally, all approval processes are on track. And also for the Valley Orchard in Panchkula, you know, the SCO in Gurgaon. So all the approval process and, you know, right now we are meeting those timelines as we speak
Panchkula will be in Q3, just confirming, right? Panchkula is in Q3.
Yes.
Yes, that's right.
DLF 5 will be in Q4.
Yeah. Q4, Q1. Yeah.
Oh, okay. Q1. There's a possibility of it slipping to Q1?
Not slipping. It's part of the thing, because this is, as you know, it's a big, very big, project, and it's coming after Camellias was 2014. This is, it's almost a decade. So, these products require that kind of an attention. So, you know, one month here, there, won't really matter. But I'm just saying you should know, where we are as far as the planning is concerned. But so far, it's on track. It's just that we have to just, we'll take that call closer to Q4, or maybe the beginning of Q4. We'll know exactly, say, by January, we'll know, you know, which route to take.
Either way, Kunal, our sales guidance of 13,000+ is under no threat there. You know, frankly, even if one of these projects tends to slip by a few weeks here and there.
Sure, understood. And my last question is on, again, like, I think, on the utilization of free cash flows. Like, we are clocking almost like INR 1,100-INR 1,200 crores a quarter now, and with debt behind us now, how should we look at it, you know, incrementally going ahead? Because we, we'll end up piling a lot of cash, you know, in coming quarters and years.
So I think, as Kunal, I had said earlier. It's very clear. I think the first priority is to really generate as much free cash as possible. And while we have INR 3,100+ crore of cash, the free cash available is INR 450 crore. So the first priority is to make sure that we complete the projects, get the NOCs, and convert that into free cash.
So once we have free cash, yes, one of the things we could possibly do is to really repay some of the debt. Second, is to really put the cash behind growth, right? And third is to continue to reward the shareholders. I think that's consistently what we are following.
Sure. Sure. Thank you so much.
Thank you. Our next question is a text question from the line of Parikshit Kanpal from HDFC Securities. Can you update us on the status of the Tulsiwadi and Andheri project?
Okay. So the Andheri project is on track, you know, as we had mentioned last time. The slum rehab is making very good progress. I think of the first phase of 30-odd-storied slum rehab, 27, 28 stories are already ready. And we stay on track for a potential launch around, I'd say definitely before June of 2024. That does look to be on track, and the first phase should be about 1 million sq ft of launch, give or take. Tulsiwadi, you know, has been in a significant legal mess, and it's just gone further deeper in that.
You know, we had made a bid for acquiring 100% of the shareholding of the company to the then lender, PNB HFL, who was unable to give us position of 100% of the shares. Then they sort of sold off the loan to an ARC, which sold off the stake to an entity. We and Shapoorji Pallonji both went to court against the completely non-transparent method of that the process was done. The Delhi High Court has made some scathing observations and has put all the shares in suspended animation.
I think both us and SPCL are exploring the complete legal options on both, on both counts, A, to restore the shareholding of the company back to where it should have been, and, B, to ensure that our outstanding debt from that company to us is not jeopardized. So I think we are on extremely strong, solid, I mean, legal ground. Delhi High Court has, you know, by and large, in their, in their interim conclusions, supported our stand. And now I think we, it's just a question of sort of taking that legal issue, you know, through, through all its right, I mean, I guess, course. I think we just landed up, you know, in some sense, in an unfortunate situation of what could have been a great project.
But, we do hope that we'll eventually be able to come out of it without a financial loss, maybe with the shareholding also restored. And we are in the midst of that legal battle. Andheri project is working on track.
Thank you. Our next question is from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Yeah, thanks for taking my question. First, to Mr. Khattar. So I think very good leasing quarter across the operational and the under construction portfolio. I just wanted to get a sense of that leasing. You know, 3 lakh sq ft each leased out in, you know, both SEZ, non-SEZ space. Where is the demand exactly coming from? Is it the existing tenants expanding, or are we also seeing some new tenants, specifically in SEZ spaces as well?
I will start with the non-SEZ spaces. The demand is coming from new tenants and existing tenants. As I have mentioned earlier in the earlier analyst calls also, the majority of the demand continues to be from the so-called global capability centers, which find India a very compelling location to look at because of its strong digital backbone, high quality global quality infrastructure and office spaces at a fraction of a cost, and very high quality, young, English-speaking skilled manpower. These, they are expanding in the country, and I personally believe that in the next 4-5 years, they will be a major contributor to the growth of the offices market.
And then, in downtown Gurgaon, we have been able to establish a rental of INR 150, and in downtown Chennai, we've been able to establish a rental of INR 100. In the SEZ space, fortunately, we are slightly better off than what the competition is. We have a vacancy of about 14%-15% odd. We believe, and we are given to understand, that the Ministry of Commerce is in the final stages of allowing floor-wise denotification. And once that comes, we will, we believe that the demand for our quality spaces, even in SEZs, will go up. And over the next 4-5 quarters, we'll see a fair amount of traction there also.
To add to this, what Saurav asked in the beginning as to where the stock is, we believe that floor-wise denotification will also give us about 800,000-1 billion of stock in the next year or so.
Sure. And just to, just to follow up on that, SEZ space is also seeing demand from new tenants, or it's just existing tenants expanding?
It's a combination of both. It is, it is existing tenants expanding, say, about 60%-70% and 30%-40% new tenants coming.
Got it. Got it. You know, just one question on Camellias again. Whether the inventory that is there right now in the, in our slide, it's repriced to, you know, INR 1 lakh per sq ft, or what's the pricing assumption there? Because I'm seeing, like, if I add up what the sales that we have, that we have done this quarter, plus the inventory that is there balanced, t here's a 20% jump in the inventory value. So, you know, what's the pricing assumption now in Camellias?
Well, so pricing is, as I mentioned earlier also, it's the lower, middle and higher floors. Higher floors go upwards of the number that you're talking about. The lower floors are basically based on that. There's a preferential location thing which is, a 20%, difference between the three segments that I just mentioned. So that's where the valuations will be. So some of the inventory that is left, some of them are on a higher floor, some mid and some low. So based on that is what the valuation is going to be. So i f I've been able to answer that for you.
And so the...
Yeah, the range would be. Sorry, you can go ahead.
So what we've done is that the current value of inventory is based on the average price realization of quarter two, right? So, and what Aakash is saying, that the current price is certainly more than that. So answering your question, right, there will be a potential upside there in pricing.
Got it. That answers my question. Thank you. That's it from my side. All the best.
Thank you. Our next question is from the line of Abhinav Sinha, from Jefferies. Please go ahead.
Hi. Sir, a couple of questions. Firstly on Privana. So is there a rethink on the product that we have there versus the mid-rise that we were envisaging?
No. So product, not rethink in that way, but there was already there were a couple of towers of high-rise in Privana. So it was, that's just been some more towers basically have been added as high-rise to the mid-rise scheme. That's all. So, this, you know, in the plan there was already high-rise a mix of that with some mid-rise. But right now there is, I think it's just we've added more high-rise to the scheme.
Yep.
So we feel that the demand there is, you know, more. And then, of course, the way it's coming out, again, you know, if I can call it an Arbour 2, because it's just, it's the same kind of spec and layouts and all that. And, you know, the approach infra, you know, closest to the biggest green lung in Haryana. You know, so for a home, it's, it can't be more perfect, you know? So that's what it is right now, and it's just gotten, I mean, to answer that, it's just now the product is enhanced even more, and therefore, you know, that's what it is.
Right. So we look for similar sell-throughs, and, does it also lead to better, you know, let's say, FSI utilization there, or, that's not the idea here?
So, Abhinav, really, if what we are launching, you know, there right now is barely covering a quarter of the total site that we have there. So we have an enormous degree of flexibility in terms of how to use the maximum FSI available on that site. So I think what the product changes that Aakash is alluding to have been more driven by, A, the success of Arbour, and, B, by what I think the customers today are looking for versus just, i t's not a standalone site, where if you don't build now, you lose the FSI for life, you know, because this is a part of a far bigger land parcel.
Yes, I mean, to Aakash's point, currently, what we are looking at is a product frankly far closer to Arbour than originally envisaged.
So adding to Mr. Tyagi's point, because just, just for you to put it in perspective, you can, I mean, only a colloquial way of saying it, it can be called a DLF 6, but, there's so much to do there, you know?
Yes, I like it.
There is so much to do there because it's a good parcel and we'll kind of build it from scratch.
Okay, so secondly, you know, congratulations to Mr. Khattar on the strong performance we have seen. So Tyagi, sir, my question is, does this bring us closer to the REIT offering now, considering we are done here? And the SEZ, you are also very positive on the Ministry of Commerce, you know, giving a favorable judgment here very soon.
Abhinav, what will bring us closer to a REIT is the performance of the other REITs and not the performance of Mr. Khattar. And those, and those don't seem to be, you know, doing significantly better. But to be fair, as I think we have said umpteen times in the past, we are now ready from a structuring standpoint to almost press the button within a 180-day period of whenever the two shareholders decide. I think it was, it was in some sense, you know, in a pause mode for a variety of reasons, including COVID and the aftermath of COVID, the vacancy, you know, overhang that it left, the SEZ pieces and the, and the entire interest rate scenario.
I think we are still possibly a few quarters away from the interest rate scenario turning benign, which actually is the right time for a product like that.
But clearly, I mean, you know, monetization at some stage, I'm sure will happen. It's just a question that, you know, I mean, that both the shareholders, while they are aware and cognizant of that, I don't think they are like, now, if I may use the word, in a tearing hurry to do that, you know. But at some stage, I'm sure that there will be an interesting monetization option that will be executed.
Got it, sir. Thanks and all the best to the team.
Thank you.
Thank you.
Thank you. Our next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead, sir.
So thanks for taking this follow-up. So just had a few more. So one is, you know, your staff cost is down quarter on quarter. What explains that, I mean, given the performance of the company? So that's first. The second is, you know, with Dwarka Expressway now finally completing, sir, is there, like, a lot of, you know, investor inventory, whatever gets unlocked and that kind of comes to the market, and how does it interact with your new ground supply? If you have any thoughts about what Dwarka Expressway completion does to Gurgaon. So that's the second one. And thirdly, Tyagi, sir, you have kind of your sales guidance has gone from INR 12,000 crore to INR 13,000 crore, and this call, INR 13,000 crore plus.
Would you want to kind of give a range as to where you see the number, or should it be better? Because every quarter now you're-
So Saurabh, I will answer your last question first, before I defer to Vivek and Aakash for the balance piece. We have always maintained a guidance of INR 12,000-13,000, and even in our last call, I had mentioned specifically that there's an upside risk to this number, which is what I mean, I believe that now maybe the upside risk is slightly stronger, so hence I add the plus to INR 13,000, but you won't nudge us into giving a sharper number than that.
Great. Okay.
Yeah. Staff cost, Saurabh, staff cost for the full year is expected to be somewhere close to INR 560 crore-INR 570 crore. So I think you are referring to Q1 and Q2 staff costs, where Q2 staff cost has dipped, right? Is that-
Yeah.
Yeah.
Yeah, yeah.
I think that's more to do with phasing of spends. I think Q1 has a larger incentive provision for sales incentive, right?
Which, see, the sales incentive, normally we book with a lag of one quarter. So Q1 had impact coming from Q4 sales, which was the highest quarter in the last financial year. And Q2 has sales incentive booked for INR 2,000 crore of sales, which happened in Q1 . I think that's the only reason why there is a, a difference. But on a full year basis, you can take a INR 560-INR 570 crore kind of a number.
Vivek, shouldn't your gross margins be higher because Camellias was booked into revenues, like, highly? Wouldn't have the gross margins been higher than the 57% you're reporting?
No. So, you, you're talking about second half? I didn't get your question.
No, no. So this quarter, we would have booked these Camellias sales, right, into revenues.
Yeah.
49 apartments, and that's at a higher price. So the gross margins on those sales will be like, you know, north of 70%, I'm guessing. So your gross margins, which you're reporting is 55, or sorry, 57.
Saurabh, what we have, what I've sold today is at a higher price and therefore at a higher margin. That margin will get recognized when we'll issue the possession letters which will happen some time away. Now, this 57% margin is for the possessions I have given during the quarter and something which was sold one year or two years back.
Got it. Got it. Thank you, sir. Got it.
Thanks.
Lastly, on the Dwarka Expressway.
Yeah. With reference to Dwarka Expressway, as you know, Saurabh, for over five years of whatever inventory that was there, that is, you know, it's been still hanging around there. And that is more of a investor market than anything else, so it kind of sometimes worries me. Next, you know, visit there, you should go visit also. Because it's more of, I don't know, you know, who's finishing off what payment's there, but everybody you know is lured to make that initial transaction. Post that, what's happening is, whether it's habitation or whether it's anything else, that I feel right now is contrary to what the other developments are seeing, and especially in terms of movements and all, you know?
I mean, at this point in time, too early to comment, but whether it's conflicting or not, each markets are different. We are completely, as you know, sold out in ROG. I will only know post that. But each one of our projects kind of work on a different parameter and requirement. And basically, as far as DLF is concerned, it is an end user's product, you know? So speculators and that particular thing, I feel at this point in time, I don't think we've gone after that for a long time. At least with my tenure, I can say that very clearly to you. So I think there are two very different markets here, Saurabh.
Okay. And just on your phase V, Aakash, so your Camellias has gone to, you know, nearly INR 1 lakh, and now you're launching this mini Camellias, if I can call it, you know, in Q4 or Q1. So now is it like phase V breaks the bank from Gurugram and now trades in line with Central Delhi, you know, South Delhi types, or? Is that something you think is structurally now that the rate convergence between phase V and South Delhi has finally happened, or?
Yeah . DLF 5, now you should be worried to compare it with Bombay, yeah, Mumbai. What you say, Central Delhi. So, definitely, Saurabh, I mean, about time, the kind of work that we've done, and it's got accolades. And I say it with pride as an Indian, I mean, first DLF, and then, of course, you know, the kind of product that has been done and the, and the ecosystem that has been kind of created. It is, you know, today, you know, when, when people, when foreigners come or people from outside NRIs and all, you know, they- the first thing, it's like the Beverly of India, Beverly Hills of India, you know? So yes, DLF 5 will see that, because also a hell of a lot of infrastructure, as you've seen, the social fabric is very strong.
The kind of community that lives in DLF 5, I can safely say, you know, half of India's GDP is kind of contributed from the kind of people who are part of the community there. And the good part is people love, you know, staying there. So as far as that is concerned, Saurav, I see a lot of, you know, going forward also, it's become the choice. I mean, today, if I can share this data also quickly with you, any expat who's coming into the country, and you know when they come in, the six months before that, their first choice, when they come for these recce visits is to see where they're gonna live.
While Delhi is an option, Vasant Vihar and other colonies, you know, DLF 5, the golf links, DLF Golf Links, is the most preferred choice. This, I'm saying, you can pick up from any data, any relocator companies and all. So today, I see that going up and with the entire ecosystem that is being built, and especially the social infrastructure, I think it is now becoming the go-to place for by choice to live there. So once, you know, first it was something that we were pushing, now it is more of a pull product. So I think, again, with the demand and supply syndrome, what's going to happen is that you will see this definitely going up.
As you see, Magnolias today is trading at about almost INR 55,000 to INR 60,000 a sq ft. That's about INR 35 crore-INR 38 crore and where it was earlier. So these are, these are all very latent demands. This is nothing, I don't see this as a, you know, volatile kind of a thing. I'm seeing this as people who are have very few options of communities like this. It's like akin to a central park, where you have 500 acres of a green lung right in front of you, and then, of course, a security system and everything else. So I think that's where the demand will be. And second, you've been, you know, hounding me for five years on launch pipelines and all.
So what Mr. Tyagi must have just told you must be music to all of your ears, hopefully, that now DLF pipelines are ready and things are happening. So, I think that's something that we are concentrating on. And, as Vivek said, margins are something which is extremely dear to us. Our projects will be launched only subject to what conditions are, and, you know, margins will prevail over any gross numbers that we ever want to quote. So that's where we are, Saurav. We're getting there.
Okay. Thank you, and Happy Diwali! Thank you.
Happy Diwali.
Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I now hand the conference over to Mr. Ashok Tyagi for closing comments.
Thank you. There's not much that I can say after that, Aakash's rousing speech just now, you know, frankly. But you know, honestly, I think this hitting net zero debt was a very important sort of, you know, it was almost an emotional target for many of us over the last eight, nine years, as you know, and we've taken a lot of steps in the last few years on this. So it's great that we finally hit there. I think this, I mean, you know, the future does portend, I mean, foretell a series of strong cash flows and strong launches, hopefully. The RentCo, I mean, is doing an exceptional, exceptional job in terms of its leading pipeline. It's built a lot of new CapExes. It's certifications in all of these ESG and LEED certifications.
So I think all in all, I think we are in hopefully a good place, and, I just hope that the markets continue to be, to be positive and, and hopefully, you know, look forward to the next quarterly interaction. Thank you.
Yeah, thank you.
Thank you.
Thanks.
Thank you. On behalf of DLF Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.