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A very good evening to all of you, and welcome to DLF Limited Quarter 1 Financial Year '21 Earnings Call. Thank you for joining us for the earnings call. We hope all of you are keeping good health.Our business continues to exhibit resilience amidst these uncertain times. We remain confident to achieving our goals. Let me start with the key highlights of the quarter.Financial highlights for quarter 1. This is for DLF Limited consolidated results. As per the accounting standard and our revenue recognition policy, revenue is recognized at the time of handing over possession to the customers. Issuance of the possession letters got adversely affected during the lockdown. Consequently, the financial performance was impacted during the quarter, quarter 1 financial year '21.In summary, the financial results were, starting with consolidated revenue, it stood at INR 646 crores. EBITDA stood at INR 99 crores. Net loss stood at INR 72 crores. This was also impacted due to lower share of profit from DCCDL.I'll move on to the financial highlights for quarter 1 for DLF Cyber City Developers Limited. This is again consolidated results. The performance in the rental business was impacted owing to the retail malls remaining shut down during the lockdown period and consequent rental waivers. So in summary, consolidated revenue stands at INR 929 crores, EBITDA stood at INR 729 crores and net profit at INR 160 crores.I'll now move on to the business outlook. As the world slowly finds its feet during the uncertain times of COVID-19, the company remains optimistic about the business and its growth returning to levels of normalcy. The company has attempted to leverage this crisis into an opportunity to transform itself into an agile, leaner and far more efficient organization. We have made significant progress in cost optimization, which has, consequently, resulted in significant reduction of overheads, enabling improvement of margin in times ahead. Tight cash management led to a reduction in net debt by INR 42 crores despite such challenging times. We ensured business continuity for our office tenants, and our office business continues to hold on with robust collection of more than 95% for the quarter. We continue to be optimistic about our office business. However, retail business was impacted owing to retail malls remaining shut during the lockdown period. The retail malls have begun opening up, but with restrictions for multiplexes, limited operational timings and social-distancing measures. We are witnessing continued but gradual recovery in the retail business.Due to lockdown, residential segment was muted and accordingly witnessed new sales booking of only INR 165 crores during the quarter. Post unlocking, company is witnessing a pickup in inquiries and some early green shoots of demand. We expect that demand to improve gradually and believe that its strong brand image, healthy balance sheet and commitment to quality will act as a catalyst for future growth.The company continues to develop new products and projects with an increased focus on diversifying its product mix to include significant future volumes of mid-income housing. New products under planning and execution currently stands at 29 million square feet, offering a distinct value proposition across different segments.Construction has recommenced at all our sites, and we are operating at 65% of pre-COVID level presently. Execution of new products across both new development and rental business remains on track. The projects under development in DCCDL portfolio stands at 4 million square feet.The company remains focused on maintaining sufficient liquidity, tight cash management and gearing up for the future. The company did not avail any moratorium on its debt facilities and continues to honor all its financial obligations on time.The company expects that as REITs grow in number and scale, the rental business will have higher access to liquidity and more transparent valuation benchmarks.With this, I would like to end the brief update, and we now open the floor for questions. Thank you.
[Operator Instructions] First question is from the line of Saurabh Kumar from JPMorgan.
Sir, I've 3 questions. One is, how sticky do you think this cost performance will be in the forward quarters? So you have kind of decreased it. But I just want to know is -- are there any one-offs out there?The second is in DCCDL, I guess Cyber Park is not contributing. So one is, when does that contribute? And can you also explain the structure of the retail rent papers you've given to your tenants?And the third is actually just on this comment by Vivek that you're seeing sales improve, and there's a note in your presentation, which says Camellias are showing traction. Can you just elaborate on -- I mean what kind of bookings you would have done in July or in end June?
Okay. Thanks, Saurabh. A lot of questions, right, to begin with. So let me start with the cost performance first. So I think this is the guidance we've given you in the last analyst call. I had talked about that we've embarked on this journey of really bringing down our -- or cutting down our overheads -- fixed overheads cost by almost close to 1/3, right? So -- and you can see in the numbers. And as I said, you will start to see this starting April, and that's very well demonstrated in quarter 1.Now is this something which is really sustainable? Yes, we believe strongly because the kind of plans we have, we strongly believe that this is something sustainable.Now let me give you some numbers so that you are very, very clear in terms of what do I mean when I say 1/3. So last year, our total other expenses are INR 1,250 crores. Of INR 1,250 crores, if I take the cash component, that's close to INR 850 crores. Out of that INR 850 crores, INR 600 crores is my fixed cost. And that's what we are confident of really sharing of close to INR 200 crores out of that INR 600 crores. So I think that's the guidance. And I think in quarter 1, we are on track. And we are committed to not only meeting it, but beating it, right? So that's on cost performance.On DCCDL, Cyber Park, at this point in time, we expect the rentals to start from...
1st October.
1st of October, right? But let me also give you some more facts about it. In terms of our -- so we are currently at -- close to 95% is leased out, for which handout -- handing over is also completed. More than 80% of our -- of the handing over the fit-outs have already started. And so as of now October looks good in terms of the commencement of rental business. Anything you want to add?
No. So I think Cyber Park, obviously, sort of did get deferred by about 4-odd months on account of the lockdown. But virtually, everybody who is a lessee there has now moved in for aggressive finishing of the interiors. And 1st October, I think, is when most of it should come on-stream from a rent commencement standpoint.
So moving on to Camellias. You asked about the traction of Camellias. So I think last quarter, while the most part of the quarter was under lockdown, we were able to sell a couple of units in Camellias. And thereafter, July onwards, we've seen the inquiries have significantly picked up, right? And I think at this point in time, I think the -- if you -- last time, you remember, we said that this segment, we are seeing a slow pickup. But I think we expect that the sales are likely to pick up once the habitation actually improves, and that's likely to improve by end of this year once the club is fully operational.
Sir, the structure of the retail rent papers, how does that work? That's the last one, sir.
Okay. Yes, yes, just a minute. So our retail business, as you know, we've offered support to our tenant partners, and that has been well received by our partners. So the quarter 1, almost 100% waivers have been given to all our tenants across all our retail partners, right? So -- and the idea is to really make sure that we help them, bring them back to their business pre-COVID levels with speed. And this quarter, as we speak, we are committed to giving them almost 50% waivers, not 100% unlike what we've done in the last quarter.And likewise, we've also announced waivers for quarter 3 and quarter 4. The idea is to help the retailer exactly know what is the kind of support which he can expect from us during the year, and that will help him plan his business better.
The next question is from the line of Puneet Gulati from HSBC.
Just continuing a bit on the rental side. How much was the rent from retail last year if you were to adjust for all the transactions? And what do you expect will it be for this year, considering all these waivers?
So last year, our rent was close to...
So last year, our rental revenues were in the range of INR 650-odd crores. Now if you were to factor in the COVID impact in this year and so our expectation of the rental revenues from retail is in the range of INR 230-odd crores to INR 250-odd crores in this year.
So we believe Puneet that subsequent to the lockdown and the rental waiver package that has been advanced to our retailers, ballpark about INR 400 crores delta between the rentals that we had last year versus rental that we received this year on account of retail.
The next question is from the line of Abhinav Sinha from Jefferies.
Sir, on the development pipeline that you have now scaled up to around 29 million square feet. Other than the first phase of Midtown, what can we expect to be launched in, say, the next 4-odd quarters. So that's the first question.And secondly, on the DCCDL portfolio, we have seen that the vacancy levels have sort of gone up by around 1 percentage point Q-o-Q. So is this a trend looking out for and where this can settle?
So on the new launches, basically, there have been 2 fundamental differences that you must have noticed from last quarter onwards in our philosophy of new sales. One is that we clearly have moved away from our ideology of only launching post completion. And given the circumstances of demand markets, we are completely open now to the idea of launching at an early stage of the cycle. We'll still launch after all approvals are in place and construction has commenced, but we obviously, won't wait for any structural completion, et cetera.The second piece is that despite the fact that for a number of years, we stayed away from the mid-income housing. We have sort of reassessed that market best in the lines of -- I mean in the light of some of the very progressive licensing policies the Haryana Government has introduced, and we are more than willing to now move into mid-income housing as well.Now the launches in the next 3 to 4 quarters, I think -- while obviously, it will be a function of the pace at which the market absorbs them, but clearly, the first phase of the GIC joint venture will definitely come on stream. We should definitely have at least 1 commercial-plotted colony and 1 residential-plotted Colony in Gurgaon to be launched and at least 1 low- to mid-rise -- mid-income housing project to be launched in Gurgaon. And most possibly in a 3- to 4-quarter period, we should also be launching 1 commercial, low-rise commercial complex in DLF 5 as well as possibly some independent floors in the DLF City area. I mean, the exact quantification, et cetera, I think it is still something that I'd say maybe by the same time, next quarter, we should be far more sort of detailed enough to be able to give it you. The good news is that most of these projects do not have a long approval pipeline. So we do believe that in about the next 3 to 4 months, we should be approval-ready for the launch of many of these projects.
Okay. Sir, on the vacancy rate, sir?
So the vacancy have moved up by only 1%. And that too if you see -- I mean if you are adding, there's a detailed sheet out there, which -- so actually, our vacancy has been a problem in only one of our projects, which is Silokhera in Gurgaon because of the Supreme Court litigation, which sort of impedes the leasing out to a lot of MNCs who are very particular.Otherwise our vacancies have been running at a 98% plus rate. You are right. It has gone up by about a couple of hundred thousand square feet in this quarter. And that is predominantly because a couple of clients on account of COVID have sort of prematurely canceled their stuff. We expect what the Cyber City team briefed us was that typically, in any year, we have about 1.5-odd million square feet midterm cancelations, which get leased out. Obviously, given the entire circumstances, we expect that 1.5 million square feet number to go up to maybe a 2 million-plus number this year. And I think, hopefully, by Q3, Q4, the re-leasing of that should commence. Again, only for this year onwards, the impact on renters of these vacancies would be minimal because, typically, people give us 6 months' notice before they exit. But yes, there could be an increase in vacancy levels by about 1-odd percent by the time we end this year. I mean this, again, like everything in this presentation and in life, this is subject to the -- dependent that the COVID situation in the next quarter or so does come under control.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Sir, what's the outlook for net debt for this year, keeping in mind collections as well as outgrowth? And second, any update on your plans to monetize the commercial land and TDR?
First of all, so on the net debt, as I had given the guidance in the last analyst call that it's going to operate in a narrow range. So I think we are holding on to the guidance what we've given. And as you can see, this quarter, right, so the net debt dropped by INR 40-odd crores. So I think that's likely to stay for the subsequent quarters.
On the -- Sameerji, on the commercial monetization, obviously, a couple of those original sites which we had thought we'll monetize commercially, we are now proposing to develop ourselves, including the commercial site in DLF 5, which I mentioned to the earlier question. But yes, there are 2 or 3 sites, which we know are -- will be more than open to monetize them commercially with the right partner. And I think as the market -- as sort of the access and movement slightly begins easing up, I think we will resume some dialogues. We haven't baked any of it in the next couple of quarters, for sure, given the fact that people can't travel to sea sites and all of those things that are there. But clearly, there are a couple of sites which still makes sense to monetize versus developed. And let's see how that pans out, frankly, Sameer. Because honestly, our best problem is that a lot of these things, people do want to also look at it physical, say, verification and due diligences, which, again, unfortunately, is all sealed off right now.
Sir, which is fine. The only thing is that you had said a couple of quarters back, that the net debt, your intention is to bring it down to INR 2,000 crore or below. And monetization of commercial land and TDR was an integral part of that. So now is that off the table and that would not happen?
So our target stays INR 2,000 crores. That's fair. The only thing is given the COVID and all the disruptions, whether that INR 2,000 crores happened by March 31 or gets deferred by a couple of quarters, my view, I think the COVID-linked disruption on the entire cycle could mean that the deferment of the target by a couple of quarters, but the end game target of INR 2,000 crores is still the same, and it's not like it's going to FY '24. It is still going to happen in the next 3 or 4 quarters. The only thing is it may not happen by March. Because frankly, by that time, life resumes fully normal, I think we'll be well into Q3.
Sorry, sir, to persist on this. The final point on this is what will get you down to this level? I mean, how will you pay down INR 3,200 crore net debt?
So it will be a combination of some of these new launches, especially the mid-income launches, which would be relatively faster to monetize. And we still haven't completely walked off the thought of trying to at least do 1 monetization transaction in the next 6 to 9 months. So we still haven't walked away from that. It's just that, right now, it's in a suspension mode given what's happening.
The next question is from the line of Nikunj Mehta from HSBC.
Two questions from my side. One is on the development business of ours. So regarding -- so when I look at the past slides and this time around, so we have increased our project size in the mid-income housing, and there are additional 2 commercial parks -- commercial lands as well. So just wanted to get sense in terms of how are we looking at it? I mean, so what exactly has increased from 7 million-odd square feet to 10 million-odd square feet in mid-income housing? I mean, which part of the land parcel this belongs to?And the second one is this Noida IT park, which you have mentioned of 3.5 million-odd square feet. Are you looking at a strata sale here because you have mentioned that around 0.3 million square feet of this is pre-leased? So is it a leasing one or it's going to be a strata sale here? How are you looking at it? That's the first part of the question.
Okay. So on the Noida piece, clearly, the strategy right now is that -- to, obviously, begin the pre-leasing, and this is a data center transaction that we have right now, and then hopefully, have a strata sale based on that. So not a blind strata sale, but strata sale of leased products. That is the philosophy that we want to do -- want to sort of assume on Noida.On the first part, the 10 million mid-income housing is a combination of plotted colony, independent floors and the mid-rise house -- low- and mid-rise housing all in the so-called New Gurgaon sectors, which is Sector 70-plus of Gurgaon. And the difference being that in the last few months, there have been certain policy interventions by the Haryana Government, which have made some of the sort of the monetization of these pieces slightly more friendly. And that's what we are trying to leverage. Obviously, a lot of these are still approvals as WIP, which we hope to conclude in the next 3 or 4 months. And I mean if you see there are a number of such launches happening in that geography, obviously, by other developers. And we believe we have the right land bank to be able to launch these projects. I mean, as you can see from that sheet, from an overall revenue standpoint, this is not a humongous component, but we do believe that this is a market where the demand exists, and we have the wherewithal to be able to do it. So I think we want to be now beginning to commence this in the next few months. I mean definitely, as we said before the end of this fiscal, we do want to get at least 1 plotted and 1 sort of low-rise -- the low- to mid-rise development into the market.
Okay. So just a follow-up on that. So when you say Haryana Government has kind of given some friendly measures. So if you could just briefly talk about that? Is it in the form of tax benefits or?
No, no, no. So the local governments cannot give tax benefits, frankly. So these are -- in terms of licensing policies, a new Nil policy a few quarters back was announced. There's a DDJAY policy that's been announced. There are policy frameworks for selling smaller shop-cum-office plots. So it's a series of those measures across the last few quarters. It's just that now when you look at all of them combined, you feel that actually, that's a market which so far we have not been actively engaged with. And now we believe that I think we can. We also, since then, as you may or may not know, we have revamped our entire construction engine. Because in most of these low-priced products, it's very important to be able to construct and develop in an extremely cost-opportune way. And hence, we believe that now we have the confidence to be able to construct these things fast, quick and cheap and bring them to the market without, obviously, compromising any quality anywhere.
Okay. That's helpful. My second question is on DCCDL. So we -- you've mentioned that we would have around 1.5 million to 2 million-odd square feet of re-leasing, which would come up for us this year. So just wanted to get your sense between our achievement of current rental versus -- replaced rental versus market rental? Do you see a risk to the market rentals being lower because of the current situation? And so how are you looking at it? I mean will you be able to -- how are the negotiations going on? Because I'm pretty much assuming that this would be on with our new tenants. So how is that shaping up versus market rentals?
Okay. So on the market rental -- the rental rates, so we'll be holding on to our rental rates, and our current negotiations with our prospective tenants is also progressing on that basis, and it's going good. Every year, we used to escalate our rental rates by, say, 5%, 7% on a year-on-year basis, which probably may not happen for this year. So we'll still hold on to our rental rate for the previous year. And we'll start picking up on the increases from going forward.
Again, in some of the cases.
In some of the cases.
In some of the cases. So if at all, the average escalation of 4.5%, 5% a year of rental rate may be slightly moderated for this year. But otherwise, we aren't looking -- I mean so far, we haven't even received any request or a fundamental renegotiation of rates. Obviously, there will be a couple of people who find the new rates "unaffordable" given their revised business cycle. And they obviously are amicably moving away.
Okay. Okay. So you're saying that -- so I was talking more about the re-leasing part. So in the re-leasing part, when we try to ask for the market rental, is there any reduction in the overall market rentals which can impact our net -- replaced rental is what my question was.
So on the contrary, in this midterm or the year completion of the term -- like, the term competitions, we're still hoping to get the mark-to-market of what we were expecting earlier. So on all these leases, the terminations will happen at a lower rate, and we'll still be able to like get some sort of mark-to-market opportunity.
So you're saying the market rentals are holding up. I mean whatever is there...
The market rentals are holding up, absolutely. And again, fundamentally speaking, the way we look at the office business and now it's been about 4 months since the pandemic struck, is that, yes, there could be a marginal moderation of growth this year, for sure. But right now, it appears that for all the rhetoric one reads, the fundamental trajectory of the office business does not appear to coming -- to sort of be veering off course.
Yes. Yes. And I think just to add, if you see the year-on-year growth of office rentals, that's grown by 4%, right? So I think clearly, we are confident that we'll be holding on to the -- at least the existing levels, if not really grow it moderately single digit. And as Ashokji said, we don't expect any significant impact on the rental business. In fact, any impact could be just insignificant.
In fact, that is the reason we sort of used the pandemic period of 2, 3 months when there was no construction to actively brainstorm internally and with our partners. And we decided as soon as the construction cycle opened, to recommence our construction both in Chennai and in Cyber City. So we are committed to getting the next 4 million square feet to market in the next 18 to 24 months, for sure. So that even though there may be a 2 to 3 quarter lag, we come back to our trajectory of INR 4,500 crores plus rental revenue sometime in the -- towards the end of fiscal 2023.
The next question is from the line of Kunal Lakhan from CLSA.
Just if you could comment on the Standard Chartered leasing transaction, which was there in media yesterday in Chennai Downtown. And if you can also give some color on how much of open area is pre-leased now in that asset and the completion time line.
So the Chennai, we are building -- it's about a 7 million square feet total development there, of which we are building the first 2 million. We expect that 2 million to be completed sometime in the next 24-odd months.We would not wish to comment on any individual transaction before, frankly, it is in a position to be brought to the market. So I would -- with due apologies, not comment on any specific transaction. But yes, we are in some active and advanced stage discussions with 2 or 3 very big international clients in both Chennai and Gurgaon. And as soon as those discussions will reach a level, when they can be announced, we will, obviously, bring them to the market.
Sure. But barring that transaction, have you pre-leased any area in Downtown Chennai so far?
So in Downtown Gurgaon, we have pre-leased about 300,000 to 400,000. In Downtown Chennai, the discussions are underway. Right now, we haven't sort of signed on a LOI pre-lease so far. We should -- we, hopefully, are close to it. But we haven't signed as we speak right now.
Okay. Sure. My second question is on, when can we see a ramp-up in dividends from DCCDL to DLF considering it generates considerable free cash flows? And as I can understand, the future CapEx will most likely be funded by debt. So when can we see a ramp-up in dividends?
Okay. So 2 things. If you recall last year, leave alone the special dividend apart, but our normal dividend, including dividend tax from Cyber City was about INR 900 crores. I mean frankly, this year, in the light of the COVID piece, the retail waivers and everything, both GIC and us took a conscious call to reduce the dividend outflow from Cyber City to only INR 300 crores, which is the dividend that we have declared last week.Obviously, our strategy, once things come back to normal, remains what we had articulated earlier, that we would want to ideally split the free cash flow of Cyber City half and half, half of it going to the dividend to the shareholders and half of it going for CapEx buildout, which in a normal year should be about INR 1,000 crores of CapEx build up and about INR 800 crores, INR 900 crores of dividend. Obviously, these numbers will keep on tweaking. We appreciate Cyber City, unlike some of the other commercial players in the market, has a huge development pipeline. We have a development pipeline of about 18 million square feet just between the 2 downtowns, Gurgaon and Chennai. We have a development pipeline of -- in excess of 10 million square feet in the Cyber City area. So I mean, obviously, Cyber City will need to keep on investing in CapEx here. We do not wish to increase the debt number significantly from where we are today. So we hopefully want to -- wish to keep on progressively reducing the debt to NOI ratio, which really are at 5.3, 5.4. We wish to get it down to a sub-4 level in the next 2 or 3 years. So the dividends, I mean we'll be -- the dividends will be -- will stay ballpark where we are right now for the next 2 or 3 years at least, which is the INR 700 crores, INR 800 crores a year number. But obviously, once the CapEx liabilities start declining and there's an adequate free cash flow, then it's up to the management and the 2 shareholders to decide whether to use the free cash flow for dividend, for further CapEx, for inorganic growth, and those are dynamic discussions.
Sure. That's helpful. And lastly, one bookkeeping question from my side. What was the net leasing in Q1?
2 lakhs negative.
The next question is from the line of Parvez Akhtar from Edelweiss.
Sir, just one question from my side. So one of the reasons why we were able to achieve a positive cash flow in DLF despite a challenging environment, was the significant reduction in CapEx this quarter. So just wanted to get your views on what could be the CapEx trajectory in this year?
So it's around -- for DLF, it will be a total of close to INR 400 crores for the full fiscal.
We would, therefore, see a significant pickup, I think, in the next couple of quarters? Because you...
Yes. Because if you see, last quarter got impacted because of the lockdown. So of course, the construction work got significantly impacted for large part of the quarter. That impacted our construction outflow, and therefore, the CapEx. I think now the construction activity has started to pick up, so you will see the outflow starting this quarter.
Okay. And sir, the second question is that what are we witnessing now in terms of our collection efficiency? Obviously, Q1 would have seen a significant amount of disruption. But how are things now shaping up on that front?
So I think, one, very clearly, we are seeing upside. We started to see upside on our collections. And I think last quarter, we've also deferred some of our demands. We deferred some of the demands because of the lockdown. So therefore, we are hopeful that the collection should pick up starting this quarter.
The next question is from the line of Adhidev Chattopadhyay from ICIC Securities.
Two questions for DCCDL. So sir, Chennai Block 11 and 12, when do you see rentals start flowing in? And for DCCDL, now what is going to be the CapEx run rate now on a quarterly basis once the COVID situation improves?
The Chennai Block 11, the rentals will start from August itself. And for Block 12, it should start beginning next year, so 1st April.
1st April. Okay. Okay. And sir, just on the CapEx for DCCDL.
Estimate for this fiscal is INR 900 crores.
Okay. So this INR 900 crores means, is it a longer term -- should it range in the similar level for next 2, 3 years on an annual basis? Or this year number is on the lower side?
So ballpark, if you're looking at about a 2 million CapEx build out on an annual basis, you are talking of somewhere between INR 900 crores to INR 1,000 crores a year, frankly. Obviously, at some stage, as we start the Hyderabad CapEx, there could be a slight bump up. But ballpark, INR 1,000 crores looks reasonable.
Yes. Next 3 years, yes, you can.
Plus/minus 10%, you can go with this number, yes.
Okay. Sir, just second on the mall business, sir, how were the banks?
Sorry?
For the mall business, I believe that -- how are the bankers looking at the debt, which is there on the LRD? Is there any extension of tenure they're looking at or a top-up? How are they looking at it, for the mall?
So currently, the DCCDL is still able to collect rentals, which are through its own internal accruals, we are able to service all our debt. So DCCDL, till the parent company is supporting the subsidiaries who are in the retail properties are there. So we haven't sought any moratorium from the bank and all the payments have been discharged on a timely fashion. And we aren't going ahead of seeking any sort of relief from the banks. So the banks have also, like since their obligation have been serviced, they haven't approved DCCDL for any sort of, like, a doubt from their side.
Yes. So despite the relief and the waivers we have given to our tenants, we have sought no waivers or no relief from the bank. And we believe that I think we should be able to stay in that zone, especially now because the retail rentals, if any, will only begin to improve, if not from this quarter, definitely from the next quarter onwards.
And also to add -- no, I was just saying that also, just to add, if you look at the DCCDL operating cash flow, that's almost INR 200 crores for this quarter. So that's also very, very important that we have enough cash flow to service all our obligations.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
A quick question. How do you see the longer-term India outsourcing story, and therefore, the leasing demand, what India typically has done 30 million, 35 million square feet for the last 10 years? Do you think that is this getting punctured? Or this would be intact beyond COVID?
I think before I ask Ashokji to answer this, let me just give my bit on this, right? So I certainly want to really draw your attention to the Mindspace REIT, right? While we can all speculate what's going to happen, but this is something which is very rare, right? So as you know, the IPO for INR 4,500 crores just last week, the issue got subscribed 13x during these uncertain times, right? So this clearly demonstrates investors' confidence in the inherent growth prospects of the office business. So I think demand, in my view, very clearly, it's fair to stay. Yes, COVID will have some impact in the interim. But I think the long-term prospects, I think we still believe in that. And I'll just now ask Ashok to really build on your specific question.
Sameer, I mean, the upfront disclosure with opco, we are all commenting on a 5-, 7-year horizon with all of 3 months behind us, so -- with 4 months behind us. Fundamentally, India's value proposition, I think, stays if not, not only stays, I think it strengthens with all that's happening in the West. Yet there will be certain short-term disruptions. There could be some impact on work from home, some positive effect of dedensification, and those things. But we do believe that if India's office story fundamentally is a sound and a solid story and if at all, as the domestic economy and the domestic industry begins ramping up and growing, hopefully, that should just provide an additional support to this. Retail would have a more severe short-term disruption, as I think everybody knows because of the need for social distancing and all of those things. But again, I think the fact is that everybody eventually does want more organized retail in India. Yes, it will have some competition from online. So I think there would be a short-term blip for a couple of quarters on the office and maybe a slightly longer one on the retail. But I think fundamentally, the 2 stories should stay same. Yes, what could happen is that the pace of growth will definitely -- could moderate over the medium-term period. But I -- at least I'm not one of those people who believe that it will lead to an active and sustained degrowth either of vacancies or of the rentals, at least right now. One doesn't know if there's a big second coming of the virus, things go completely out of hand. Honestly, those issues we don't know.Second piece, look at all the countries in the early stage of the virus, be it China itself or be it some of the western economies. And in most of those, both the office -- the lease portfolios and the residential portfolios, they've almost had like a V-shaped recovery. I'm not saying India will necessarily go that way. But clearly, whatever trends one sees, in times of uncertainty, I think people should not be -- because the fact is people do want to work. And in India, you also know that irrespective of what the bigger companies are saying, for most of the entry-level IT people, the sort of accommodations, unfortunately, that many of them live, a sustained work from home is not really sustainable. So at some stage, companies will have to get people back into offices, at least to a significant degree. I appreciate not the complete degree. So we continue to be optimistic. Yes, I mean, obviously, one needs to be more calibrated about the growth expectations. But fundamentally, we do believe that this does not need -- I mean, warrant a fundamental downward rerating of India as a destination.
And how should we think about 5% or so overdue rentals, which you have not collected in Q1? And second, any REIT plans for DCCDL in the foreseeable future?
So I'll take on the 5% [Foreign Language] piece, frankly, in the healthier days, we never used to measure them with as much micro [indiscernible]. I'm sure 2%, 3% overdue rental [Foreign Language] frankly. So maybe they're slightly centered to a couple of percent. And we are seeing it. So like if you were to look at April rental in May, the number was 87%. By June, it came to 93%. Now it's 96%. And so I think fundamentally, we don't see more than 1% or 2% shift here and there of the rental collection piece.On the REIT piece, obviously, I mean, we are very enthused by the way Embassy rate has performed and the way Mindspace REIT has been sort of lapped up by the market. It clearly is an extremely exciting opportunity. What -- I mean, what we clearly want to do is that irrespective of when a decision of going to a REIT is taken, because that will be decision taken by the 2 shareholders, us and GIC at some stage in the future, we clearly are -- do want to actively look at our structure and everything to see if there are any structuring, et cetera, that needs to be done to at least make the overall entity "REIT-ready" if you will, that, as you know, is itself a process which takes certain time. So I think we will at least initiate that exercise. But eventual lease [Foreign Language] frankly, is still I think slightly speculative, and it will depend on the 2 shareholders.
The next question is from Saurabh Kumar from JPMorgan.
Sir, on this DCCDL, I mean basis the Cyber Park development and whatever your expectation on retail, is it fair to assume that you should still come to INR 3,600 crores by Q4?
Yes. For Q4 should definitely INR 3,600 crores, for sure.
Yes. Okay. So INR 3,600 crores [Foreign Language]. Second is, sir, on this mid-income development, the NTH, whatever you have planned this 10 million square feet. So this sounds very much like 2009, '10 doing bottom cycle mid-income development where we never made any money. So why do you want to go down that route again? I mean, obviously, it gives you sales. But I mean, you don't make any margin on that. So I mean just wanted to know.
So 2 points. So I think, Saurabh, that's the reason it's taken us almost a year to be able to, if I may say so, join this bandwagon. We believe that we can comfortably construct this, frankly, at an economical price point now. [Foreign Language] the difference between NTHs and this is that we are no longer proposing to construct 30-story apartments. These -- most of these will be a variation of between plotted, ground plus 4 to max ground plus 8. So in that sense, these are obviously far more controlled environment and far more easier constructs to construct and you also are far shorter to bring to the market. That's one piece.We -- clearly, we propose to launch only once we have everything in place, including -- the construction contracts have been awarded. Obviously, all approvals are there, at least construction has commenced. And so we're not losing 1 year, 1.5 years after launch to be able to begin construction, which also at times was a problem in that generation of products.Three, clearly, the pricing points today looks that even on these products, I think we can definitely make, hopefully, I mean, between 100 to 125 -- I mean, between 1 to 1.25 multiple of the construction cost, frankly, as the contribution over construction costs clearly. And so you're right. I mean, these will not make humungous money. But I think clearly, it's an unserved market. And as long as we can make reasonable money and bring these products quickly to the market and establish that train, I think we should do. So yes, it's taken us a long time after the bad experiences of the 2009, '10 and the -- range. But now I think we do want to -- and we believe that now we have learned enough to not commit the same mistakes again.
I mean, like it's like you're going at bottom cycle again. The volume of customers is very high out there, which -- but it's fine. I mean, we can discuss that later. Sir, lastly, is on DCCDL dividend, which you said INR 300 crores. Does that get paid out to shareholders? Or would you use that to?
Yes, yes. It will get served to shareholders, if you recall.
If you recall in the fourth, June Board meeting, we announced that DLF will pay INR 0.80 dividend to the shareholder. We have paid INR 1.20 in March. And so we are paying the residual INR 0.80 now. And so the INR 0.80 dividend is INR 200 crores, which is actually our share of the INR 300 crore dividend.
Okay. [Foreign Language]. And sir, one last data keeping question. How many units are left in Camellias now? I mean absolute units.
180.
180.
184 out of 420 -- 425?
429.
[Foreign Language] Saurabh that in Q1 -- sorry, in Q4, there was about a net cancelation of about 20-plus units altogether between Q3 and Q4.
The next question is from the line of Puneet Gulati from HSBC.
I got dropped out last time. On the retail rentals, have you guys received the negotiated amount for the month of July?
Collections. Yes.
It's a bit early right now. The billings would start in the current month.
Okay. So would it be fair to assume that you have collected nothing for the year so far. First 3 months was 100%, and then the Q2 was 50%, and you have not received anything?
Yes.
Yes. That's right. It's -- that's the right assumption.
Retail, we haven't collected.
Okay. And on the office space, you said you reached back to almost 95% collection level.
Yes.
Yes.
Yes. And I think for the balance also, it's more of a timing thing. So hopefully, that should also get collected.
Okay. Okay. On the residential, what has been the collection run rate for you? Have you've seen any additional deferments from your clients?
No. So last quarter, we collected close to INR 300-plus crores. And if I really look at the run rate of last quarter versus what we've done in July, we have slightly improved, right? So as I said earlier, we expect the run rate to improve this quarter versus last quarter. And hopefully, that trend should continue.
So if you can give some number of what kind of billings have you already given to your customers? And what percent have you received out of that?
So I don't have the numbers offhand, but by and large, when we raise the demands, right, we are in a reasonable time, say, in 30 days' time, we are almost able to recover, say, more than 90%, right? But since last quarter, some of the demands got postponed. The impact of this, some part will come this quarter and some will move to next quarter. But I think what the message is that it is on an increasing trend.
Right. Right. In terms of construction, is the labor availability pretty much back? Or are you still facing some challenges there?
Yes. Yes. So as we said, we are operating at a 65% pre-COVID level. So there are challenges, but we are seeing that -- the improvement of labor week-on-week, right? So currently, we are at 65% level.
Almost 5,600 people are on our construction sites, right now.
Yes. And improving. Yes.
So you're reasonably confident of spending INR 900 crores this year?
Yes, yes. That's what we believe in. Yes, you're right.
Okay. My last question is, are you taking any special steps in terms of schemes or special tie-ups to propel the demand for the residential units? And if yes, can you elucidate a bit on that?
So I think one thing very, very clearly, yes, as we talked about last time also, we are working on improving the value proposition of our products to increase the monetization space, right? So that's for our existing inventory. So we are really looking at wherever there is an opportunity for us to really price our products in select markets, we are progressively doing that. So I think that certainly we are really doing, and we are seeing traction as a result of that.
So any payment schemes?
So payment scheme, currently, we are operating anything 4 to 6 months. So I think that's something which we are currently in the market. And I think we are also really looking at -- because currently, the markets are really offering very lenient payment terms, I will say, right? So we are also really looking at in case we need to really do something in that space. But as of now, we've not announced anything. But that's certainly something on the cards. And on the pricing...
Sorry, one more intervention. I think in all fairness, despite temptations, obviously, to show better numbers, we have, by and large, tried to desist ourselves from doing stuff like pay 1% and book and then pay 99% when able sort of schemes, if I may be allowed to be slightly take the liberty with the fact. Yes, you're right [indiscernible] now since most of our projects are post completion, the [indiscernible] product no longer works, unfortunately, there as well.
Okay. And any discounts, material discounts that you're now considering?
I just talked about in selective markets, in some select projects, wherever we see there is an opportunity for us to increase the pace of monetization, we are certainly doing that.
The next question is from the line of Abhinav Sinha from Jefferies.
Just a couple of questions. One, are we still expecting Camellias' revenue to come later this year? And secondly, any change in trend or any significant trend in residential pricing in Gurgaon in secondary markets?
So Camellias' revenue, I think, as we said, that it's going to -- it's happening at its own pace. Even during the lockdown quarter, we sold a couple of Camellias. This quarter, I talked about the inquiries have picked up.
Revenues question.
Right. Okay. Sorry, sorry. I stand corrected. I thought the question was on the sales. But if your question is on revenue recognition, that's likely to start from this quarter, which is September quarter, right? So we expect that we will start handing over possessions most likely starting this quarter. And then slowly, it will build up.
Okay. And you will do it tower-wise? Or how should we assume the pace?
No, it's not tower-wise. It depends on, of course, project progress, right? So in terms of the customer paying us the full use, that's the first thing. And secondly, there are certain project conditions which the customer has to meet in terms of -- because when we have given the possession, we had given them bare shell. They are certain to -- they are supposed to complete a certain stage before which we can actually hand over the possession. So that's what is expected to start from this quarter.
Okay. And sir, second question on the pricing in Gurgaon residential secondary market.
There hasn't been much change on this right now. And during the COVID times, it was a complete lockdown and not much transactions were taking place. Now we shall see in the secondary market, yes.
We'll be able to take one last question. We take the last question from the line of Mr. V.P. Rajesh from Banyan Capital.
You mentioned about selling plotted colony and starting another project in Gurgaon. So if you can just elaborate what are the price points? And what makes you -- what gives you the confidence that there will be demand for these type of residential colonies?
So these will be in the, what is, classically known as the mid-income housing. It will not be luxury or premium housing. We obviously -- we are testing out a few price points internally. Right now, I don't think -- I think it will be inappropriate to sort of disclose them on a public forum. Hopefully, closer to our launch, I mean, by that time, we are at the same time next quarter, we should be able to give you more specifics on some of these.
Okay. And then in Camellias, you said there's about 184 apartments remaining. So what is the price point there? And have you seen the price point increasing or decreasing over the last, let's say, 2 years?
INR 30,000 net of all discounts. INR 30,000 per square feet.
So our current selling price is INR 30,000 a square feet net of all discounts, right.
Okay. And has that moved up or down over the last 2 years?
So it's almost at the same level. It's not changed much. Yes.
We'll take that as the last question. I would now like to hand the conference back to Mr. Tyagi for closing comments.
Okay. So thank you once again. This -- obviously, nobody had foreseen the entire COVID piece. And frankly, your drivers in a quarter like this are very different than the drivers in a normal piece. But hopefully, as we are today, life is gradually sort of beginning to return to some degree of normalcy. And we hope that by the time we meet next quarter, things should be more normal. On the -- both the residential and the commercial side, yes, there have been some bumps on account of COVID. We have tried to negotiate it to some degree. And I think, hopefully, we should be coming off better from those things. I mean, we put out a road map of the launch ship and the sales pipeline on the residential and our broad commercial growth plans. And again, I mean, frankly, we are still, in some sense, navigating with some degree of uncertainty still. And it is our fervent hope that, I mean, both for the company, the industry, the country, within the next 2 or 3 months, we should be able to come out of these clouds of uncertainty. Thank you.
Thank you very much.