As a part of its new business model, DLF will sell apartments only when it gets occupancy certificate after completing the project so as to remove any uncertainty regarding costs and delivery timelines, a senior official of the realty major said.
The decision assumes significance as the Indian real estate market, especially Delhi-NCR, has been facing huge delays in the project executions, forcing homebuyers to protest and move courts.
Lakhs of homebuyers are stuck in the various projects of the developers such as Jaypee group, Amrapali, Unitech and The 3C Company.
Highlighting the company’s new business model, DLF’s group CFO Saurabh Chawla said the company would sell only completed products from now onwards.
“Customers are now averse to taking risk and they prefer to buy ready-to-move-in apartments,” he added.
Chawla said DLF will apply for occupancy certificates once the structure of the building is complete along with other infrastructure.
The additional cost on increased working capital requirement would be marginal, he added.
DLF currently has completed inventory worth about Rs 13,500 crore, which would be sold over the next 5-6 years. The company would continue to build fresh inventory of the completed product.
DLF, along with its partner GIC, has started construction on the first phase of its 7 million sq ft housing projects in central Delhi.
“We will open sale in this project after structure is complete and we get occupancy certificate,” Chawla said.
In a presentation, DLF observed that, “Incidentally, both RERA (new real estate law) and Ind AS 115 (new accounting standard) support evolution of this business model”.
From a taxation point of view, there is no GST on completed units while the effective GST rate is 12 per cent for the under-construction flats.
As a part of new business model, DLF would sell residential products to retail customers.
The commercial properties would be sold either to retail customers (B2C) or to DLF Cyber City Developers Ltd (DCCDL) — JV firm with global investment firm GIC — as investment properties (B2B). It might hold commercial properties to earn lease rentals.