DLF Looks to Conquer Bangalore and Global Airports

Dhruva Jyoti Chowdhury, Kolkata, India

With the DLF venturing into the Real Estate sector in Bangalore, the metropolitan’s realty market is set to get ‘red’ within the next few months. According to the DLF plans more than 10,000 residential apartment units in the city can be expected to come up within the next few quarters of the year. The real estate major is also focusing on coming up with a mall on a huge 2 million sq ft in the state capital.

DLF has dashed into Bangalore with a planned investment of about 3,000 crore rupees in developing the apartments stretched over 100 acres and has also possessed 80 acres of land on Bannerghatta Road and 20 acres in Electronics City. The project is proposed to get set go in the next three to four months, while the first set of apartments would be ready by two years.

Work on the mall, which is coming up in Whitefield, has already begun and will be open for commercial use in about 18 months from now. The mall is likely to be one of the biggest in the country.

Internal sources within the DLF has also informed the India Street that the company is also attempting a fresh foray into airport modernization and has associated itself with Germany’s Fraport AG Frankfurt Airport Services Worldwide, the owner and manager of Frankfurt Airport, as its partner.

A special purpose vehicle, ‘DLF Fraport SPV’, has been set up to focus on the development and management of airports in India. The shareholding of DLF and Fraport in the special purpose vehicle (SPV) will at least be 26% each.

Fraport is already present in India through the consortium it formed with infrastructure conglomerate GMR Group and the India Development Fund to bid for the modernization of the Mumbai and Delhi airports. GMR-Fraport eventually won the modernization bid for the Delhi airport in early 2006.

The SPV it has formed has agreed to jointly bid for the Chennai airport. The combined entity also plans to bid for developing and managing Greenfield airport projects including one in south Gujarat and the dedicated general aviation airport in Delhi (a general aviation airport handles private aircraft, helicopters and charter flights, apart from small cargo planes).

The two companies will also look at the upgrading and modernization of non-metro airports. There are around 35 non-metro airports in India.

DLF has been eyeing, without concrete results, airport re-development for some years. In July 2004, it tied up with the Malaysian Airport Holding Bid to bid for the privatization of the Delhi airport.

This joint venture was, however, terminated in April 2005. Later, in the year, DLF joined the consortium led by Bharti Group and Changi Airport of Singapore for the modernization and upgrading of the Mumbai and Delhi airports.

DLF also has a 50-50 joint venture with UK’s infrastructure and construction group Laing O’Rourke to execute DLF’s mega infrastructure projects. The joint venture with Laing O’Rourke will, however, not overlap with the company’s SPV with Fraport, said a DLF spokesperson.

The company which is set to raise as much as Rs9,650 crore in what will be India’s single-largest initial public offering, said it plans to sharply curb expenditure on land acquisition, down 54% to Rs3,000 crore from a previously proposed Rs 6,500 crore.

DLF owns or holds development rights for 10,255 acres, unchanged from January. Profit in the year ended 31 March rose tenfold.

DLF and its subsidiaries own 11.3% of the land reserves, they have sole development rights for 44.6% of the total. They have agreements to purchase or letters of acceptance for 35.9% of the land while the rest are joint developments with partners.

DLF owns 3.5 million sq. ft of space in completed buildings in New Delhi and its suburbs, including Gurgaon and Noida. It also holds plots of about 7.2 million sq.ft that do not form part of its land reserves, DLF said.

The National Capital Region, which comprises New Delhi and adjoining areas, accounts for 51 % of DLF's land reserves.

The real estate major has also entered into an agreement for floating a joint venture with Ranbaxy group company, ‘Fortis Healthcare’ to set up hospitals across the country with about Rs 6,200 core of investment.

Fortis will have a majority holding with 74% stake and the rest will be with DLF in the proposed joint venture.

The Joint Venture plans to set up a chain of 200-450 bed hospitals in 31 cities in India within three to five years. While the joint venture will mark DLF’s foray into the healthcare segment, for Fortis the move is a part of its strategy to become a Pan-India player in the healthcare segment and resolve real estate problems for setting up new hospitals. The planned investment of Rs 6,200 crore would go toward meeting cost of land, construction and medical equipment. The JV plans to build hospitals in cities where DLF has a presence. Already DLF has a land reserve of 10,255 acres in 31 cities.

Earlier, DLF had forayed into hotel business by tying up with US-based hospitality giant Hilton Group to set up a chain of 50-75 hotels and service apartments in India under the certain brands of the international major. The company had also entered into an agreement with US-based Prudential Insurance to set up a joint venture company to sell life insurance products in India.