INDIA BUSINESS WORLD - AUGUST (16th - 31st) 2007
The Month that was ...
DLF BUYS DCM'S DELHI LAND FOR RS 1,675 CRORE AND SEALS LARGEST PRIVATE SECTOR REALTY DEAL
REAL estate major DLF has announced the largest real estate deal in India: The acquisition of 38 acres of land from DCM Shriram Consolidated (DSCL) and the Lohia group for Rs 1,675 crore. The land belongs to Swatantra Bharat Mills and DCM Silk Mills, both of whom are defunct. DSCL and the Lohia group will each get Rs 837.50 crore from the sale.
The last record for the biggest land deal in the country was held by Unitech, which had bought about 340 acres of land in an auction from the Noida Authority for Rs 1,582 crore. However, when converted on a per acre basis, DLF's deal is significantly higher. While the Unitech deal translates to about Rs 4.65 crore per acre, in case of DLF it is almost 10 times higher, at Rs 44 crore per acre.
The land is strategically located on the Shivaji Marg-Zakhira Bridge intersection and is just 5 km away from Connaught Place, the capital's central business district (CBD). At present, office space in the CBD costs more than even Rs 50,000 per sq ft in certain cases. Some residential areas in a close proximity to DLF's site include Rajouri Garden and Punjabi Bagh. Property price in these areas varies from Rs 3,500-4,000 per sq ft.
Real estate analysts say it is difficult to estimate exact land price in the area. "At the face of it, it appears that at Rs 44 crore per acre, DLF had to pay a significant premium to buy the land. However, an exact estimate cannot be worked out as no big land deal has taken place in the area for more than two years," says a Delhi based property analyst.
The DSCL board of directors met and formally approved the deal. The company now plans to use proceeds from the deal, amounting to Rs 837.50 crore, to part finance its expansion plans. DSCL chairman Ajay Shriram said, "We have our hands full with multiple initiatives that we are implementing to augment our long-term growth and performance. It has been on our mind for sometime to monetise this asset to support our growth plans. The sale of this project represents a well considered exit option at a satisfactory price to a reputed company. We intend using the cash realised from this transaction to part fund our expansion plans and new initiatives while simultaneously enhancing the quality of our balance sheet."
As per internal estimates of DLF, this acquisition, in addition to the previous acquisition of two other contiguous plots, will add Rs 4,000 crore to its net asset value. Earlier this year, DLF had bought about 2 acres adjoining land. Two years ago, it had acquired another 25 acre in the locality, and the company already has an in-principle approval to develop an IT SEZ on the site. DLF now owns about 65 acres contiguous land and plans to develop an integrated township, with an investment of about Rs 12,000 crore. Interestingly, the entire area is surrounded by DDA's 120-acres green area (city park).
DLF's proposed integrated township project will be spread over 10 million sq ft of saleable area, comprising 3 mn sq ft of IT SEZ offices, 2 mn sq ft of shopping mall and 5 mn sq ft of residential units.
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