DLF needs a wow factor even after a solid start to FY26

Mint

06-08-2025

DLF Ltd saw a significant boost in its pre-sales, or bookings, in the June quarter (Q1FY26), driven primarily by the robust response to its luxury residential launch, Privana North (Phase 3). Pre-sales jumped 78% year-on-year to ₹11,425 crore, with Privana North accounting for a staggering 96% of bookings. The remainder came from ongoing sales at The Dahlias project.
DLF had no new launches in Q4FY25, so a rebound in Q1FY26, powered by fresh inventory, was expected. The company, which has a dominant presence in the National Capital Region (NCR), reiterated its FY26 pre-sales guidance of ₹20,000–22,000 crore, despite having achieved around 50% of the target last quarter.
With Gurugram lacking quality supply from reputed real estate developers, DLF is likely to meet its FY26 pre-sales guidance, but no significant positive surprise is expected, said a 6 August report by Antique Stock Broking.
In July, DLF marked its entry into the Mumbai Metropolitan Region (MMR) with the much-anticipated launch of The West Park in Andheri West, a joint venture slum rehabilitation authority (SRA) project with the Trident group. The 0.55 million sq ft. project saw rapid absorption, generating ₹2,300 crore in pre-sales and selling out the launched inventory. This takes DLF closer to its full-year pre-sales target.
Encouraged by initial traction, DLF is evaluating a gradual scale-up in MMR, with Phase 2 of the Mumbai project likely in FY27. The company's medium-term launch pipeline now stands at ₹62,900 crore. Its Goa project is in the final approval stages and is expected to launch in the second half of FY26, while the next phase of The Dahlias is slated for March-April 2026.
Cash collections in Q1FY26 were subdued, falling 6% year-on-year due to construction delays amid unfavourable weather conditions. However, DLF forecasts an improvement. Further, higher contribution from lower-margin projects such as One Midtown and Garden City played spoilsport, taking Q1 Ebitda margin to a multi-year low of 13.4%, far below Street estimates.
On the business development front, DLF is focusing only on NCR, Tri-City, MMR, and Goa (existing land bank) and sees little scope for near-term acquisitions. This could be another sore point.
According to Nomura Global Market Research, the DLF management needs to be more aggressive toward pre-sales growth on existing land banks or execute stronger-than-expected business development, driven by its strong cash position.
By contrast, rival Lodha Developers Ltd has guided for 20% pre-sales growth in FY26 (on a low base) and has already achieved 90% of its business development guidance in Q1.
So, for now, DLF's long-term growth potential seems to be already priced into its valuation. 'Our current valuation at about 20% premium to net-asset-value prices in an about 8% pre-sales CAGR over the next 13 years, which we believe is adequate (versus FY26 flat growth guidance)," added the Nomura report dated 5 August.
DLF's stock has declined 8% so far in 2025, less severe than the 16% fall in the Nifty Realty index. But with limited inventory beyond the premium Dahlias project, timely new launches will be key to sustaining its pre-sales momentum. Total unsold inventory declined sequentially to ₹23,310 crore in Q1FY26.
On the commercial side, occupancy remained flat at 94% overall: 98% for non-SEZ properties, 87% for SEZ, and 98% for retail. DLF is targeting exit rentals of ₹6,700 crore in FY26, up from ₹1,326 crore currently. Key contributors in the second half include Downtown Chennai, Downtown Gurugram, Midtown Plaza, and Summit Plaza.