DLF Ltd (DLF) Q3 FY22 Earnings Concall Transcript

DLF Ltd  (NSE: DLF) Q3 FY22 Earnings Concall dated Feb. 02, 2022

Corporate Participants:

Ashok Kumar Tyagi — Whole Time Director

Aakash Ohri — Executive Director

Analysts:

Biplab Debbarma — Antique Stock Broking — Analyst

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

Abhinav Sinha — Jefferies — Analyst

Puneet Gulati — HSBC Securities — Analyst

Amit Goela — Rare Enterprises — Analyst

Kunal Lakhan — CLSA — Analyst

Presentation:

Unidentified Speaker —

[Starts Abruptly] Given this positive outlook and strong demand drivers, we continue to leverage this cycle by scaling up our new product offerings across segments and geographies. Price growth coupled with increasing volumes will lead to further margin expansion in the portfolio. We have revised potential sales value of 35 million square feet product pipeline upwards by 17% to INR47,000 crores, largely driven by price. Our business is now well-positioned to generate consistent free cash flows. In line with our performance in the past quarters, we generated will be INR764 surplus cash during the quarter — current quarter. The surplus cash was utilized to further deleverage our balance sheet. And consequently, the net debt at the end of the quarter stood at INR3,220 crores.

Strong business fundamentals backed by a healthy balance sheet resulted in another credit rating upgrade for the Company. ICRA and CRISIL have both revised the rating upwards. ICRA AA minus Stable and CRISIL AA minus Stable. Further to our journey towards digital transformation, we have upgraded our ERP platform. We believe this upgrade will help us in scaling up our business and driving operational excellence across the organization.

I’ll now be moving to the financial highlights for quarter three financial year ’22 DLF Cybercity Developers Limited consolidated results. We continue to witness sustained performance in the rental business. Consolidated revenue of INR1176 crores, a year-on-year growth of 5% driven by a rebound in the retail business, which reflected a year-on-year growth of 66%. EBITDA stood at INR913 crores reflecting a year-on-year growth of 2%. Net profit at INR282 crores reflecting year-on-year growth of 13%.

The Office business continues to be on recovery trajectory. However, the COVID resurgence might push out the recovery temporarily. The growth in digitization, digital transformation along with robust hiring plans for IT/ITeS companies is expected to lead the recovery across the segment. Long-term fundamentals for the business and attractiveness of India as a service market continues to remain intact. The retail business continues to exhibit improving consumption trends. All our malls continue to be operational though with certain restrictions.

New development remains on track. We continue to further grow our portfolio by bringing more quality assets. DCCDL REIT readiness continues to be on track. We remain committed towards building resilient, and sustainable ecosystem across our business. As a further testament to our sustainable commitments, DLF Limited was included in the DJSI index in the Emerging Market category consecutively for the second year. We are the only real estate company in the country to be included in this prestigious index.

Strong housing demand and a gradual recovery across the rental business will drive growth. We continue to be enthusiastic by these developments and tread towards scaling up both our business across our Residential and Rental segments. Our quality offerings, strategic landbank backed by a strong balance sheet allows us a competitive advantage to leverage this growth cycle and scale up our business.

With this, I will end. Thank you for listening to me and we can now open the floor for the Q&A session. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from the line of Biplab Debbarma from Antique Stock Broking.

Biplab Debbarma — Antique Stock Broking — Analyst

Hello? Am I audible?

Unidentified Speaker —

Yeah. Hi, Biplab.

Biplab Debbarma — Antique Stock Broking — Analyst

Hello, sir. Good afternoon, everyone. So, sir, my first question is on your — congratulations on the excellent results on your tremendous sales booking that you achieved this quarter. And my question is on that you have given us the guidance of, you know, even last quarter than before that of around thousand crores quarter so that translates into around 4,000 plus-minus crore per year. So, so far we what in the nine month, we have seen that easily it’ll surpass this guidance and it may reach 6,000 or so. 5,000 to 6,000 crore. So my question, first question is on that is that what’s happening in NCR, and did you kind of sense that this kind of sales booking would be achieved or this is like out of the blue sales booking that — could you anticipated this kind of a sales booking? I mean the market is not okay, but you achieved great sales booking or the market is good, but you just to be on the conservative side, that’s why you gave was that kind of 4,000 crore kind of bookings.

Unidentified Speaker —

Yeah. So, Biplab, so the 4000 crores sales guidance was given at the beginning of the quarter — of the year and if you recall in the first two quarters, we were about 25,000 with the uncertainty around COVID and as it turned out there was a Omicron variant also, luckily not as serious as the previous one, but there was a hint of sort of a suspension. The reason we had not revised the sale guidance upwards was because we were unsure of the final approval timings for the one on projects and luckily it came to us in early December, and our and his team were completely geared up. So really of the 6,000 crores plus sales that now Vivek is referring to for the full year. About 1500 odd crores plus is one Midtown already recorded plus obviously some more to be recorded from now to the part lane. So hence the 4,000 was a cautious estimate, given the uncertainty around a, the COVID third wave in B, the One Midtown approval. Luckily, both of them — they were sort of — have happened and hence we are not number between 6,000 to 6,500.

Unidentified Speaker —

No, I think you’ve said it right and in nine months, we’ve already done 4,500. Last quarter we did 2000 crore. And we expect, as I said, repeat performance during the quarter. So we’ll hopefully end the year anything between 6,000 to 6,500. Hopefully, close to at 6,500 number.

Biplab Debbarma — Antique Stock Broking — Analyst

That’s great, sir. So we can — I think we can safely infer that the NCR is also seeing heightened traction and you will continue to see. My second question is on that only, overall, looks like you have a significant pipeline in NCR, not only in Gurgaon, in other part of NCR. Maybe in Chennai you have smartphones in Chennai. Sir, can you give us some kind of — from here how these markets in terms of continued demand and the next one to all this Delhi, NCR, and Gurgaon, and other Delhi, and Chandigarh, and Chennai how do these markets look like from here? Do you expect this momentum to continue assuming that the interest rates or doesn’t increase significantly or there is no big disruption in the market, as it is (Foreign Speech). Thank you, sir.

Unidentified Speaker —

Yeah, thanks Biplab. I think very clearly, we don’t see much of change in the demand drivers, right? So we continue to see this momentum continuing in medium to long term. However, I’ll request Aakash, if he can just also build on this.

Unidentified Speaker —

Aakash, are you around?

Operator

Yes. Mr. Ohri, request you to please unmute your line.

Aakash Ohri — Executive Director

Can you hear me?

Unidentified Speaker —

Yes, we can hear you now.

Aakash Ohri — Executive Director

Okay. So, yeah. Thanks, Biplab. So what is happening is I’ll answer both your questions. See, over the years and especially around the COVID, there has been huge demand for the Residential business and people have constantly looked at better homes and one thing that they realized is they need larger homes. So — and this is not only an NCR phenomenon. This is a pan-India phenomenon, whether you’re looking at Chennai, you’re looking at anything. I was speaking to some other people yesterday and they were telling me that in Bangalore also they have the majority of the of the apartments that have got sold in the last one year have been the four-bedroom and the larger sizes. So this is something that I am seeing across the board. And also what I feel is, it is also demonstrated in every — each one of our products, not only in super luxury but luxury as well as premium. So people today are are wanting to invest in larger and more species. So I think that is something which is working for us. With regard to the other point that you said about demand, I also feel that yes, in the Resi business, there’s always been this latent demand. Right now, I think it is kind of more propagated. It is more accepted. I think people are now ready to spend more money and are punting more. So I think that is something which is also leading to this demand. Right now, I feel we’ve just about started to cater to the demand. So, not only in NCR, I see this in Chennai, I see this in other projects in Panchkula, and wherever we are. So we are pretty buoyant by this kind of feedback and we will continue to make sure that we keep doing our ground work, which we did just when the first COVID hit. I think all we did was we continued to be there. We created our products. We were cleaning up our stock where we were and as soon as we get — got an opportunity to present ourselves, we were right in front of the queue. So, that’s how we’ve been able to do that and of course price points have enabled this as well. So if you see across the board, all our products have been not only been bought, accepted, but I think we’ve — Vivek just mentioned about collections that also demonstrates that people are not only buying, but are also wanting to pay much in advance today, Biplab.

Biplab Debbarma — Antique Stock Broking — Analyst

Thank you, sir. Thank you, sir. I’ll come back in the queue.

Operator

Thank you. [Operator Instructions] Our first question is from Parikshit Kandpal from HDFC Securities. He has three questions. One, any upgrade on the pre-sale guidance on quarterly run-rate basis? Second, how is the lease prospect pipeline looking and when do you see, occupancies ramping up? And the third, what is the exceptional item, if you can give more granularity and its impact on the company credit rating?

Unidentified Speaker —

Sales guidance — the first question is on the sales guidance. This is for the residential business. I think I just answered that that the last quarter we had 2000 crores of new sales booking and we expect this quarter be to somewhere in the same range, and we expect to end the year anything between 6,000 to 6,500 hopefully closer to 6,500. On the leasing pipeline, let me start with offices. Offices, the leasing pipeline is definitely thicker than what it has been in the first two quarters and the two months of the third quarter. Well, pipeline started thickening, unfortunately we had the third wave, which has dampened it to some extent but fortunately, now the third wave appears to be behind us. And I see it again becoming stronger. In the numbers that we have the leasing in the third quarter was higher than what it was in the second quarter. The vacancy in the third quarter is lower than what it was in the second quarter, and we the strength. We also believe that by the first quarter of the next financial year, our vacancy will come down single-digits — high single digits. Can you please repeat the third question?

Operator

Sure sir. Third question is, what is the exceptional item, if you can give more granularity and its impact on the company credit rating?

Unidentified Speaker —

So the exceptional item was covered by Vivek in his opening remarks, but just to slightly elaborate on that, Joyous is a joint venture that we have with two Mumbai-based developers and it’s been on the last 12 odd years. It’s a slum and MC — municipal corporation housing rehab project. And in fact, it’s about a couple of thousand crore rehab families have already shifted to the slum towers. Unfortunately because of the COVID related stuff, the progress in the project had slowed down. There was a line for particular housing finance company, which for a long time, we were putting in the money to service the quarterly interest payments without a proportionate contribution from the other two shareholders. So finally, in September we were left with no option, but to sort of connect with the other shareholders to — for either for them to contribute proportionately or for us to come to a mutually agreeable go forward shareholder agreement and shareholding. And unfortunately in the last three odd months, while we have been in active discussions, we haven’t necessarily hit a conclusive and by which time in by early January this just launched it become an NPA for that HFC. And so really there is no pressure on us because we do believe that I think we should be able to resolve between the three shareholders correctly and hopefully it should result in a conclusion which gives DLF a significant stake in that JV, and the bank is regularized. But by abundant caution, since it’s becoming NPA with the particular HFC, we and our Audit Committee advised us that we must make a suitable provision, which is when Vivek and his team have and we have made a provision of about this 224 odd crores. Now I think by May end, which is by May, when we come back for the annual results, I think we’ll have a finality on this as through the future of this project. The project fundamentally is extremely sound. This is about 2 odd million square feet plus of salable area, 1.4 million square feet of carpet area in the heart of Mumbai, and I think it’s just falling into some degree of trouble because two of the three shareholders have been passing through their own sets of crisis, and we are continuously engaged with them and we do hope that we’ll be able to come to a workable solution in the next few weeks.

Operator

Thank you. Our next text question is from Adhidev Chattopadhyay from ICICI Securities. What is the total amount of inventory launched in Phase 1 out of the 2.1 MSF in One Midtown? Have we taken price hikes after the strong responses to the initial sales? What is the expected timeline for balance area of 6 MSF to be launched in this project?

Unidentified Speaker —

Mr. Ohri?

Aakash Ohri — Executive Director

Yeah. So in the A and B towers we did about — sold about seven point seven odd lakh square feet, and we have done about close to — we have averaged about 19,000 in the first launch and we have also seen, I mean, immediately after this, we have also now going to be launching Tower C where there is a substantial increase in the price by almost about 2,500 to 3,000 rupees a square foot. So out of out of the 2 million, we’ve done what I just said, in two towers A and B and C will be launched very soon this month. We had to — we kind of got pushed back a little bit because of this Omicron wave in Delhi and respecting all sentiments and safety for everybody, we didn’t want to do something, which further jeopardizes the situation there. But we are — there is a pretty good demand there in the new tower and therefore what we have done is that it’s a sustained kind of a price increase and the new price will be about between 2,000 to 3,000 rupees higher than the previous launch in Tower C.

Unidentified Speaker —

To your last question on, when on the launch pipeline for the balance 6 million square feet. So really, I mean, it will be obviously launched in multiple phases because 6 million is a huge thing and I mean if all bodes well, I think we should begin the first phase of that launch may be later part of next year. Is that correct?

Unidentified Speaker —

Yes.

Unidentified Speaker —

And then, let’s see how the market demand is. 6 million is obviously a long pipeline from absorption standpoint.

Operator

Thank you. We have the next question from the line of Pritesh Sheth from Motilal Oswal.

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

Hi, sir. Am I audible?

Unidentified Speaker —

Yeah, Pritesh.

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

All right. Thanks for the opportunity, and congrats on the great set of all round results. My question is on since last couple of quarters in the residential business, you’re generating around 750 crores of surplus cash flow which you are utilizing for debt repayment. And I think you’ve highlighted in your slide 5 that on the optimal capital allocation, you will be using to deleverage as well as fund the growth potential. So what is the growth potential that you are looking at? Is it on the residential front or on the commercial that you have been highlighting on adding retail malls or something? So just on — comment on that.

Unidentified Speaker —

Yeah. So I think clearly — very clearly I think our first priority as we’ve been saying is of course to deleverage the balance sheet at the same time to fund the growth. Now the growth — future growth could be from residential or could be drawn from commercial. So it — I think I will draw your attention to the slide where we have given launch calendar of 35 million square feet. And why 35 million? We have only launched close to at this point in time, around 8 million. I think there is a long way for us to relly cover. So hopefully this cash will be utilized in terms of first meeting this commitment.

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

Great, thanks. And on the cash flow again, so your construction outflows had been minimal, around 100 crores on an average in this year in the last three quarters with newer projects that you are taking up, what should be the run rate that we’ll be looking forward to in FY’23?

Unidentified Speaker —

Of?

Unidentified Speaker —

Construction outflows.

Unidentified Speaker —

Construction outflows, right?

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

Yeah.

Unidentified Speaker —

So this year I think we will be closing — our outflow this year will be close to 1000 crores. And I think I’ll say 800 to 900 crores and next year, hopefully, we should be looking at number right work it a close to 1,300, 1,400 crores which is what possibly we could be looking at outflow for next year because as the activity will pick up the outflows will increase.

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

This includes land payments as well? I mean both the land item.

Unidentified Speaker —

These are only —

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

[Foreign Speech] okay.

Unidentified Speaker —

Yeah, this is only the construction outflow.

Unidentified Speaker —

From a land point, we are not looking at buying any big ticket land, but if there is an interesting proposal which is very tempting, which comes in in any of the geographies where we are not present and we want to be, like Noida up or something very contiguous to our existing monetization potential. That’s the only way we will be looking at something but mainly, we are not looking at big ticket land spending for now.

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

No, I understood that. So I think I was talking about government approval fee, that 800 crore, 900 crore include that fee? I mean 1,300 crore, 1,400 crore fee which you highlighted for FY’23 that includes that outflow as well or it’s only construction pure play?

Unidentified Speaker —

No, this will be construction. This is purely construction.

Pritesh Sheth — Motilal Oswal Financial Services — Analyst

Okay, thanks. Thanks, and all the best. That’s it from my side.

Unidentified Speaker —

Thank you.

Unidentified Speaker —

Thank you.

Operator

Thank you. The next question is from the line of Abhinav Sinha from Jefferies. Please go ahead.

Abhinav Sinha — Jefferies — Analyst

Hi. Sir, first of all congratulations on very strong numbers throughout. On the cash flow, just following up on the previous one. The 900 and 1,300 audio mentioning is this inclusive of the construction in JVs — no, One Midtown and the other one? Yeah?

Unidentified Speaker —

No, they are separate. This is purely the construction activity in DLF.

Abhinav Sinha — Jefferies — Analyst

Okay, and the JVs are self-funded now, right?

Unidentified Speaker —

Self-funded, yes.

Abhinav Sinha — Jefferies — Analyst

Okay. And so broadly speaking, I mean, this 3,000 odd that we are left with, I mean, do we see a 500 crore net FCF in the next few quarters? Is that a reasonable number to expect on average?

Unidentified Speaker —

So, if I may but in here, obviously the FCF base should be that, if not higher. But I do believe there are 3,000 crores debt, with due respect your models. I think finally the analyst community needs to come off the debt target now. The debt for DLF is done and dusted, frankly, whether the debt is three thousand or zero, it’s actually irrelevant really.

Abhinav Sinha — Jefferies — Analyst

Sir that’s not my — but I completely agree with that.

Unidentified Speaker —

Obviously FCF is — Vivek has been generating FCF now off 700 crores plus on a quarterly basis. With this bouyant sales, we see no reason — Vivek, correct me if I’m wrong. If it should have dip, this will continue in this pace.

Unidentified Speaker —

So as I said, our priority is very clearly to continue to be leverage. So I think that will continue to happen. And in terms of FCF of what you are saying 500 crores. I think that’s a number we’ll continue to generate.

Abhinav Sinha — Jefferies — Analyst

Sure. I just wanted to check, I mean with the — say FCF being generated here and DC CDL hopefully with new towers opening next year we should have substantial dividends. I mean, what is the direction DLF wants to take? Do we want to pay higher dividends? Do we want to do some incremental large capex or something like that within DLF?

Unidentified Speaker —

So we have earlier given an approximate guidance that we’d like to split the FCF year between growth and dividend, you know in that sense, but does this means the dividend. Obviously, the dividend will surely increase once the lead comes into play because that’s the nature of the animal as you know, but whether there will be a dividend hike next year or not, I think I’ll leave it for the Board to deliberate and decide on that. But clearly, the underlying cash flows today both from DLF and Cybercity clearly will be supportive of a dividend increase. But whether it comes in next year or the year after, honestly, I think I will defer to the Board for that.

Abhinav Sinha — Jefferies — Analyst

Thanks for that. One more question if I may, on the One Midtown where you are doing a fantastic job, again, you said you will launch another phase in February. So are we looking at what another, say 1,200, 1,300 crores of sales from Midtown this quarter, because 800 is already done right, which is not reported. And then we will have another tower come through. So is that right?

Unidentified Speaker —

Yeah. So I’ll come in here. So this is about another 1100 crores of sales but see what we will do is depending on because it’s too close to the quarter also and we will see how the market conditions are, we will come in with this start and launch maybe 50% of those units. I also feel that there’ll be about — definitely out of that 1100 you can easily expect about 500 crores, 600 crores that we will bring in this quarter in that tower.

Abhinav Sinha — Jefferies — Analyst

Okay. Thank, I have more. I will get back in the queue. Thank you.

Unidentified Speaker —

Thank you.

Operator

Thank you. We have the next question as a text question from the line of Tayal Kunal from Bank of America. The value of launch pipeline of 35 MSF has been revised upward to about 47 KCR from 35 KCR to 40 KCR earlier. Is that a function of pricing or some other changes to the mix of products?

Unidentified Speaker —

Yeah, so there is no change in the mix. The mix remains the same. It is coming from the impact of price increase, what we have already demonstrated on ground. So just to give an example, One Midtown, we had earlier estimated a price of 15, but what we have demonstrated is 19,000 rupees square feet. On floors, we had underestimated a price of 11,000 of last one, you’ve actually taken our price increase to 16,000. And even in commercial, our actual price realization is significantly higher than our original estimates. And that’s what we’ve actually quantified and increased the sales potential value by 5,000 crores. That’s almost at 12% increase on our earlier estimate.

Unidentified Speaker —

Also Vivek, 5,000 rupees a square foot in familiar.

Unidentified Speaker —

Yeah, That’s right.

Operator

Thank you. We have a text question from the line of Girish Choudhary from Spark Capital. If you could share the launch timelines for the remaining phases in the One Midtown project as per presentation around 3.5 million square feet is planned to be launched in the fourth quarter. How confident are you to launch these within the 2 months remaining this quarter?

Unidentified Speaker —

35 million square feet.

Unidentified Speaker —

So this is on Midtown?

Unidentified Speaker —

Two parts to the question. So out of the total 8 million square feet Midtown, 2.1 million is launched and the next phase of 2 million as we’ve given the guidance in our launch calendar will happen in financial year ’23, ’24. Phase 2 of — okay, so if your question is about the Phase 2 of the launch what we planned in quarter four financial year ’22, that’s 3.5 million square feet, how confident we are. I think we are reasonably confident of launching this within the quarter. Yeah.

Operator

Thank you.

Unidentified Speaker —

And we have most of the approval for this launch.

Operator

Our next question is from the line of Puneet Gulati from HSBC. Please go ahead.

Puneet Gulati — HSBC Securities — Analyst

Yeah, thank you so much for the opportunities. Congratulations on great numbers. My first question is if you can give more color on how much have you spent on Midtown and how much do you need to spend for the planned phase and also the on this and when do you think you’ll first time see money start flowing from that?

Unidentified Speaker —

So, Puneet, I think what we can do is in terms of sharing details of our expenditure on Midtown, we can separate the details, yeah?

Puneet Gulati — HSBC Securities — Analyst

And the second question is you know you pointed to 3.5 million square feet pipeline, which is where you have a launch and in this, how much or land do you think you can on in the next five years bond — this number?

Unidentified Speaker —

So Puneet I think I’ll take it step by step. Something which we’ve already demonstrated, right? We have reflected in our numbers, and I think our journey is still, we have another four years to go. So I think up I think looking at the response and looking at the product segments we are in, I’m hoping that we will continue to build on this and improved year-on-year but difficult to give a number on this.

Puneet Gulati — HSBC Securities — Analyst

See I want to understand on quality of this bank. How much do you — can be monetizable and how much you think will be about 10 years to [Technical Issues] maybe instead of locations and things like that.

Unidentified Speaker —

His voice is cracking.

Unidentified Speaker —

Yeah. Puneet, we are not able to hear you clearly. You will have to question repeat.

Puneet Gulati — HSBC Securities — Analyst

Okay [Technical Issues].

Operator

Mr. Gulati, your voice is still breaking. We request you to please check the connection.

Puneet Gulati — HSBC Securities — Analyst

Yeah. Is it [Technical Issues] can you [Technical Issues] me now? Hear me?

Operator

Slightly, but you’re still breaking in parts here.

Puneet Gulati — HSBC Securities — Analyst

Okay. Let’s [Technical Issues] back. So what we understand is that in your land bank much of land [Technical Issues] can be monetized in the future —

Unidentified Speaker —

Time here for land bank.

Puneet Gulati — HSBC Securities — Analyst

Yes. How much [Technical Issues] what part of the land bank you think will take maybe 10 years to mature? And what it can be — is monetizable?

Unidentified Speaker —

Okay. So Puneet, almost all of our land bank, barring one-off portions like [Indecipherable] etc. are sets which are monetizable today.

Puneet Gulati — HSBC Securities — Analyst

Okay.

Unidentified Speaker —

In some cases, if you take six months to get the approvals and all but — so like in DLF 5, which is Aakash’s favorite area we have I think almost 18 million square feet to 20 million squre feet of further development potential that exists today. I mean, obviously, everything can be monitized today, but is there a demand for the entire adoption to happen today? So I think the pace of monetization will obviously be driven by the demand absorption, frankly. Luckily, we’ve been on it for the last four to six quarters. Every quarter has been better, but at some stage we are also know that the cycle may begin flattening. So I think we have enough monetization pipeline for at least the next 10 years plus for sure, and most of it is actually in places where enough development has happened in the earlier phases. So none of them is truly a vergin location really in that sense.

Puneet Gulati — HSBC Securities — Analyst

Okay, understood. And since talked about cycling maturing, do you see any signs of it in next one year or do you think there are many legs to go?

Unidentified Speaker —

Hopefully not in the next one year.

Puneet Gulati — HSBC Securities — Analyst

Right, okay. That’s all from my side. Thank you so much, and all the best.

Unidentified Speaker —

Thank you, Puneet.

Operator

Thank you. We have the next question as a text question from the line of Parvez Qazi from Edelweiss Securities. Status of downtown Chennai and Downtown Gurugram projects exit rental run rate at the end of FY’23. What was the contribution of new launches to pre-sales in Q3?

Unidentified Speaker —

So let me start with DLF Downtown Gurgaon. DLF Gurgaon — Downtown Gurgaon has total development potential between retail and offices of 10 million and 11 million. We have completed 1.5 million, which is substantially leased. When I say substantially leased, about [Technical Issues] leased and that has given us the encouragement to start one more tower there and this tower is now 2 million square feet. The groundwork in terms of design and approval is in the final stages. And I think the further estimation will start later this month. With that, out of 10.5 million, we would have completed — we would have either leased or completed or launched about 3.5 million. We are also working now on a very large wall on the lines of Wall of India in Noida. The preparatory work of that it is going on. It is difficult to say at this stage when we will launch but I think we should be in the first half of the next financial year. Besides, DLF downtown Chennai is concerned, it has a development potential of between 6.5 million and 7 million. We have started construction of 3 million square feet. 1 million square feet is an independent tower which was — which has been leased to a multinational bank. The other [Technical Issues] for which the construction has just commenced last month. The other two towers need construction, which is a — which are about two million square feet. The construction is moving as per our schedules and we hope to apply for the OCs for this in the month of October 23 — 22. Now depending on the demand that keeps arising and the ability to lease these places we will keep launching more and more towers. I may say with all modesty that in the last few years, we have demonstrated that all the new buildings and the towers that have come up, be it Cyber Park, be it the new blocks in Chennai, be it in the new blocks in Chennai, existing Cyber Park, and one of our — be it DLF downtown in Gurgaon, all these blocks have been more or less substantially pre-leased before they come to completion and we plan to continue with this trend going forward.

Operator

Thank you.

Unidentified Speaker —

And there was a question on, in terms of contribution of new launches in quarter three pre sales. So new products are 1400 crores of a total sale of 2018 crores, almost 70%.

Operator

Thank you. Next question is from the line of Amit Goela from Rare Enterprises. Please go ahead.

Amit Goela — Rare Enterprises — Analyst

Yeah, hi. Hi, Mr. Anand. Congratulations on a very good set of numbers. I’ve got just one question, going back to the cash flow, sir, you indicated that free cash flow of about 500 crores, but as you deploy — as you sell more of inventory of Camellia and some of the shorter duration floors, shouldn’t the level go up over here in terms of free cash flow?

Unidentified Speaker —

First of all thanks, Amit Ji, right for being with us today, and thanks, yes, sir. You are right, absolutely. 500 crores is certainly the benchmark number we are looking at. But as — I think if you really look at our cash flows in the last seven quarters, we’ve been improving quarter-on-quarter.

Amit Goela — Rare Enterprises — Analyst

Yes.

Unidentified Speaker —

So I think if we continue to sell well, if we continue to collect well, I’m reasonably sure will continue to improve as we get into the next financial year.

Amit Goela — Rare Enterprises — Analyst

And one more question, you’ve guided very nicely like there is about 2000 crores of quarterly sales for the next quarter. Can we assume now that that is the base level of sales, like quarterly sales 2000 crores, 2,500 crores going forward?

Unidentified Speaker —

Sir, that’s a very easy estimate to take, but please allow us a couple of more months. We will come back to you after the year close, and possibly we’ll give you a guidance. But yes, internally, we are really gearing up for that —

Amit Goela — Rare Enterprises — Analyst

— Very strong lot launch pipeline now of 35 million square feet, which was not there earlier.

Unidentified Speaker —

Yeah. That’s correct, sir. I mean, traditionally sir, we come in the fourth quarter meeting is the analyst call we typically give the launch pipeline for the next year. And after the — frankly all this COVID-related uncertainty, life’s just become slightly more uncertain. But I think as Vivek said that hopefully, there’s no reason why we should dip from where we are.

Amit Goela — Rare Enterprises — Analyst

Thank you so much, and all the very best.

Unidentified Speaker —

Thank you, Amit. Thank you.

Operator

Thank you. Our next question is the text question from the line of Sameer Baisiwala from Morgan Stanley. What are your plans for the new Phase 5 launch since Camellias is selling down well? You have 1820 MSF land there. Second in rental business, how much is physical occupancy? What’s the outlook for return to offices for occupiers? Are there any large RFPs in the market?

Unidentified Speaker —

Okay. So on the first one on the DLF 5 piece, so clearly, we have a couple of the group housing projects in the golf course and adjoining areas which are currently under design and hopefully I think in the next few quarters once the entire design process is complete, we’ll be in a better position to you know advise the market on its launch. But clearly, I mean we are actively now working on the design of the next product launch as Crest has sold out completely. So we are clearly looking at the next product launch in that micro geography of — and I think the design process has been initiated on that one.

Unidentified Speaker —

On the second piece. There are three parts to the question you asked. One is, we can see is the other is return to offices and the third is there are RFPs, which are currently floating. On the vacancies, as I mentioned earlier, the vacancy has gone down last quarter and again gone in Q2 and has again gone down further in Q3. In fact, the gross leasing in Q3 has been higher than Q2, which was higher than Q1. At the moment, if you take out the retail portion, the vcancy is around 13%, which was 14% in the previous quarter. And as I said sometime earlier, we are working towards having a vacancy between 9% to 10% by Q1 of the next financial year. This may get slightly delayed because of the impact of the third wave of the COVID-19. We hope to catch up, but it may get delayed by a month or two. In terms of return to offices, we were seeing a very robust return to offices. Just to example, in Cybercity in Gurgaon, the return to office it had come up about 30%, 32%. Unfortunately, the third wave had an impact. And it went down, it is again back to about 15% odd and we see it going up virtually every week now for the last about two weeks. In Chennai, for example, the occupancy had come to 22%, 23%. [Technical Issues] and it is again picking up. In terms of RFP, RFPs, yes, we keep participating in the RFPs, which are there but I must add that, and there are a few that are in the market at the moment. They are in Gurgaon, Chennai, and Hyderabad. But I must say that we have now deep relationships with our tenants and we have been able to demonstrate the quality of our assets and then upkeep. And now, tenants come back to us for large spaces directly instead of going to a RFP process and there are two, three such leads that we are working on with large multinationals.

Operator

Thank you. We have our next question from the line of Kunal Lakhan from CLSA. Please go ahead.

Kunal Lakhan — CLSA — Analyst

Hi, good evening. My first question is on the Mumbai project. So what is the timeline for the start of sales in that project? I believe the free sale you’re not yet started. So when do we plan to launch it?

Unidentified Speaker —

Kunal, with due respect to you obviously haven’t been formally giving my comments on the analyst call. We have taken a provision on our investment in that project in this quarter. And that does not mean that it’s the end of the project. We are obviously, we are actively engaged with the other two shareholders in terms of finding resolution and a go-forward plan, which takes into account the interest all shareholders and the lending house, which is HFC. Our anticipation, Kunal, is that hopefully by the end of — by the time we come back for the Q4 results, Vivek, and I will be able to share with the analyst community what our final resolution is. But by the abundant caution, given the fact that that JV had defaulted on the loan, we have taken a provision of the option — of part of those option investment that we had made there.

Kunal Lakhan — CLSA — Analyst

No, I know about the impairment that — the reason for asking that question is precisely that. There is obviously a cash flow stress in that project. So I think, which can be eased by launching —

Unidentified Speaker —

No actually the issue is not the cash flow stress, the issue is that the — that we need to arrive at a complete understanding between the three shareholders and I think once that is arrived at then hopefully the project can take off. You are right that the project is at a stage where hopefully in six months’ time, the sales area approvals can be obtained. And that is what we are trying to work on.

Kunal Lakhan — CLSA — Analyst

Okay, fair point. My second question was on mall rentals. Have we — have the mall rentals stabilized to the pre-COVID levels? I mean are they expected to stabilize from Q4 onwards without any rebates, or discounts?

Unidentified Speaker —

Rentals had stabilized in Q3. In fact, the sales in the luxury segments were better than even the pre-COVID levels more so because of the limited travel — international travel that was happening and the whole retail business is looking quite buoyant except to some extent [Technical Issues] statement which had [Technical Issues] 50% occupancy. Again, the wave three that came in, there were different degrees of shutdown in the malls that took place. The most severe was in Delhi where there was shops to be opened every alternate days and so if you want weekends and F&B to be shut down, cinemas to be shut down. So January has been adversely impacted but last about a week, 10 days, we see that last week the government has also moved these restrictions and we are slowly seeing the footfalls coming back to the malls. I believe another two to three weeks they will come back and if the — god forbid, the new wave — any new wave does not come, I see the retail business getting back to its normal footfalls and sales and incomes from the month of March onwards and hopefully for the full year next year.

Kunal Lakhan — CLSA — Analyst

Sure, thanks, and jus again a follow-up on the previous question again. So what’s the total investment in Joyous housing till date?

Unidentified Speaker —

INR403 crores.

Kunal Lakhan — CLSA — Analyst

All right, sir. Thank you so much, and all the best.

Unidentified Speaker —

Thank you, Kunal. Thanks.

Operator

Thank you. Our next question is a text question is from the line of Hemang Kotadia from Anvil Share and Stock Broking. Sir, where you will see quarterly Camellia sales in coming quarters? 1920 units is easily doable for coming quarters.

Unidentified Speaker —

I — can you repeat that?

Operator

Sure, sir. Where you will see quarterly Camellia sales in coming quarters? 1920 units is easily doable numbers for coming quarters.

Unidentified Speaker —

Okay. So you’ve seen the Camellia progress over the last, I think four or five quarters. We have been doing a certain number, but also if you’ve been seeing that there has been a certain steep price increase in Camellia’s as well over the last two quarters. In spite of a INR2000 price increase in between Q3 and Q4, Q4 did about almost — sorry, Q2 and Q3, Q3 did about almost about 21 one 22 odd gross Camellia sales. And I see that trend going forward, but right now, we’ve taken the price up by about INR5,000 a square foot. This was a planned increase, we’ve got right now about close to 80 odd Camellias to go or to which 50 were part of the rental plan. So we have about 30-odd Camellias to sell right now. And as we are going, you’re right, I would also like that the same run rate to follow, but with this particular increase in price, I hope we can do 19 and 20, but I feel it will slow down a little bit because of this increase. It’s only a matter of time, and then we turn it around in the next quarter. But yes it’s got a good now — the demand for the Camellias is kind of matured, people are taking a very, very conscious call. It’s become the number one property to invest, especially in North India. Anybody who has capital gains or anything else, it is on top recall. So all the work that we did over the last four years to establish Camellia as to where it is today, not only in terms of the most preferred residential super-luxury property to invest in, but also to live in, as you know, almost over 50 to 60 families have moved in, the clubhouse is quite spectacular. It’s almost like you’re into a hotel and the services are like well any — I mean it’s a 5-star hotel service, but you still are in — living in your own home. So with all of that and a continued demand across all geographies for the Camellias, I feel that there is now the rest will be able to clean up very fast. And not only that, we will also assist in the retrade in the Camellias for our existing customers where the price points have gone up substantially. So I’m pretty buoyant about that. Thank you.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Ashok Kumar Tyagi for closing comments. Thank you, and over to you, sir.

Ashok Kumar Tyagi — Whole Time Director

Okay, so thank you once again for all of you for taking time out this afternoon and attending our call. As you know, you guys have seen and have explained [Indecipherable] explained. Obviously, this has been a strong and buoyant quarter. The sales cycle seems to have strengthened and is strengthening almost quarter-on-quarter, and hopefully that should sustain going forward, so is the FCF, the free cash flow, there is a launch pipeline, the rental business you know with the two Downtowns coming up is well and fully working on it’s capex plans and hope is that the vacancy levels will begin dipping down frankly and look forward to seeing you in our next annual results call. Thank you.

Unidentified Speaker —

Thank you.

Unidentified Speaker —

Thank you.

Unidentified Speaker —

Thank you.

Operator

[Operator Closing Remarks]