Debt-ridden DLF to put some office properties under REITS

DLF Ltd, the country's largest property developer, is looking to bring some office assets under real estate investment trusts (REITS), an official said in a conference call on Friday.

Pooled investment vehicles for the realty sector, REITS are tax-efficient, distributing 90 per cent of income as dividend.

DLF has been selling non-core assets for quite a while to cut its net debt, which rose from Rs18,526 crore in the fourth quarter of 2013-14 to Rs19,064 crore in the first quarter of 2014-15.

The company said this was mainly due to the Rs240 crore spent on capital expenditure and government charges, and a negative operating cash flow of Rs320 crore.

''When sales pick up, the debt will decline,'' said Saurabh Chawla, executive director. The company expects sales bookings of Rs3,000-3,500 crore this financial year.

In his recent annual budget, finance minister Arun Jaitley gave a tax ''pass-through'' status to the industry. This means the income will be taxed through retail investors and not from the fund.

The Securities & Exchange Board of India is yet to issue the final rules on this.

''We are studying the proposals. We will not be the first off the block but it is high on our agenda to take certain assets under REITS,'' said Chawla.

DLF is looking to issue a number of commercial mortgage-backed securities (CMBS) for its special economic zones (SEZs), which would reduce its interest costs. In CMBS, the principal payment is to be made at the end of the tenure of the loan and they carry lower interest rates.

DLF plans to raise Rs3,500 crore through CMBS in one of the large SEZs and to issue CMBS in a few other projects of smaller size, said Chawla.

It had completed the country's first CMBS issue in the last quarter of 2013-14, raising Rs900 crore through the issuance on DLF Emporio and DLF Promenade, two of its malls in Delhi. The Emporio CMBS carried an interest rate of 10.9 per cent.