The key to progress is change. The past year has witnessed significant structural changes in the Indian economy that have altered the business paradigm in every sector, including the real estate and construction industry.
Due to several bold initiatives of the Government, the nation is on the cusp of a new era of economic activity and opportunity in which the key to success will be the ability to respond to change and overcome the challenges that inevitably arise during the period of transition.
As I have been frequently indicating to our stakeholders and patrons, during the past few years DLF has been strategically preparing for and indeed actively pressing for reformatory legislation and visionary policies pertaining to housing, construction and real estate development.
I am glad to share with you that your Company is now better equipped than many of our peers to navigate through the critical period of adaptation and course corrections that lie ahead. This has primarily been due to the foresight of your management team which has already put into place many of the internal structural changes and core business portfolio roadmaps that are best suited for survival and success in the changing scenario.
As you will recall, I have been persistently advocating for streamlining laws to bring about greater transparency, accountability and compliance in the real estate industry and to eliminate fly-by-night operators who have for decades been not only tarnishing the image of genuine developers but also seriously disrupting the housing market by defrauding home-buyers and end-users.
Your Company’s aspirations are in step with the new landmark legislation that has been enacted - the Real Estate (Regulation & Development) Act (RERA). Ideally, this would boost consumer confidence, pave the way for accelerated demand for housing products and also facilitate the flow of investments into the realty sector, from both global and Indian investors.
Similarly, other major reforms like GST and the law regarding Benami Transactions would make it incumbent upon hitherto non-compliant players to either comply or perish.
Moreover, although the shock decision to demonetize high value currency notes has evidently led to an initial slowdown in overall economic growth for a short-term, it will hopefully lead to more transparent housing sector growth in the long run.
While the various reform measures that have been introduced are salutary and indeed long overdue, the Government must be mindful of the necessity to ease the travails of transition, especially in a competitive market economy, by acting as an enabler and facilitator even while exercising strict regulatory control.
During the process of adjustment and adaptation, it is also essential to be open to refining some of the provisions of the new regulations and, in certain cases, rectifying some of the procedures and stipulations, in response to practical difficulties and industry feedback.
The truth is that the real estate sector has perennially been plagued by a plethora of archaic rules and burdensome bureaucratic formalities that hinder healthy growth. The ground reality of different States having complex and cumbersome regulations further hampers execution of projects in time and within the envisaged budget.
In my view, although the new legislation has many positive and necessary features that have been welcomed by builders and buyers alike, RERA regrettably does not adequately address certain crucial concerns faced by developers.
From the developers’ point of view, I would very briefly outline the aspects as - absence of a single window clearance mechanism; imposition of additional layers of approvals; and increased reliance on external capital to achieve high growth.
For allottees, too, there would be some grey areas including the likelihood of delays in delivery of apartments and consequent price escalation.
Legislative reforms, in my view, should be primarily aimed at bringing about a happy balance between supply and demand of real estate products. Along with ensuring transparency, the emphasis of any radical changes in policies and procedures should be on allowing market forces to create a mutually beneficial environment for developers, buyers and all stakeholders.
It is but natural that arriving at such a harmonious outcome will take awhile. It needs to be kept in mind that the real estate development sector in India has been passing through a variety of challenges compounded by continuing sluggish demand, lack of liquidity, regulatory pressure and piling up of inventory which have collectively created uncertainty about future growth.
I am confident that the Government, under the dynamic and far-sighted leadership of the Hon’ble Prime Minister, Shri Narendra Modi, will accord utmost priority to addressing the concerns and removing the shackles to enable rapid growth in real estate development, which I have always strongly believed will emerge as the next Sunrise Sector of the Indian economy.
For this to happen, the Government must act as an Enabler and Facilitator, not merely as a Regulator. The housing and construction industry, which supports over 250 ancillary industries, is the second-largest provider of jobs in the country after agriculture and is recognized as a powerful engine of growth -already contributing 7%-8% of India’s GDP, with the potential to grow to over 13% by 2028.
I am confident that DLF is eminently well-equipped to not only tide over the travails of transition but also be at the forefront of revival. Our unique business model cushions the impact of market down-cycles, with each division in product-mix - comprising homes, offices and retail, including malls and commercial complexes - functioning as a strategic business unit. Moreover, the sizable land resources your Company has accumulated over several decades would facilitate new project launches in prime locations at the appropriate time.
Shareholders will also be happy to know that the Company has successfully accomplished a major restructuring of its rental business with a game changing decision to sell Promoters’ stake in DLF Cyber City Developers Limited (DCCDL) to Singapore’s sovereign wealth fund GIC. The bulk of the sale proceeds would be reinvested in the Company to enable substantial reduction in pending debts without recourse to heavy external borrowings. The Company looks forward to partnering with GIC in taking the rental business to unprecedented heights.
As a responsible and ethical corporate entity, sustainable growth is high on our list of CSR programmes for the benefit of the community. The major CSR programmes implemented during the year aimed at contributing to national priorities like skill development, education, rural healthcare and community development. The Company has fully utilized 2% of its three year’s average profits for this purpose. DLF’s social outreach initiatives have won recognition at various National & International forums.
It is heartening to note that DLF’s sterling products have been awarded Platinum Certification (highest certification) and IGBC’s LEED India Platinum rating by the US Green Building Council and Indian Green Building Council, respectively.
I look forward to your continued support over the next few quarters as we face the challenges ahead with renewed confidence and determination to maintain our stellar role as the country’s foremost creators of high quality real estate products.
I take this opportunity to thank all our shareholders, business partners and valued customers for their unstinted support and trust over the last seven decades. On behalf of my fellow-directors and the entire DLF corporate family, I renew our pledge to remain committed towards building a New India.
With best wishes,
New Delhi (Dr. K.P. Singh)
25 August 2017 Chairman