DLF Ltd (NSE: DLF) Q3 FY23 Earnings Concall dated Jan. 27, 2023
Corporate Participants:
Vivek Anand — Chief Financial Officer
Sriram Khattar — Managing Director – Rental Business
Ashok Kumar Tyagi — Chief Executive Officer and Whole-time Director
Analysts:
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Kunal Lakhan — CLSA — Analyst
Mohit Agarwal — IIFL Institutional Equities — Analyst
Sameer Baisiwala — Morgan Stanley — Analyst
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Puneet Gulati — HSBC — Analyst
Abhinav Sinha — Jefferies — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to DLF Limited Q3 FY23 Earnings Conference Call.
We have with us on the call, Mr. Ashok Kumar Tyagi, CEO – DLF Limited; Mr. Vivek Anand – Group CFO; Sriram Khattar – MD, Rental Business.
As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded.
I will now hand the conference over to Mr. Vivek Anand. Thank you, and over to you, sir.
Vivek Anand — Chief Financial Officer
Thank you very much. Good afternoon to all of you and welcome to DLF Limited quarter three financial year 2023 earnings webcast. Let me start by wishing you all and your families a very happy new year and thank you for joining us today.
We continued to witness strong business momentum across all business parameters. I will start with financial highlights for quarter three financial year 2023 DLF Limited consolidated results.
Consolidated revenue stood at INR1,560 crores. Gross margins improved at 59%, supported by a higher contribution of Camellias. EBITDA stood at INR542 crores [Technical Issues] margins at 35%. Net profit at INR515 crores, reflecting year-on-year increase of 35%. This was primarily due to higher JV profit and a continued reduction in the finance cost.
Our Residential business delivered a strong performance and clocked one of the highest quarterly new sales booking of INR2,507 crores, reflecting year-on-year growth of 24%. Cumulative new sales for nine months financial year ’23 stands at INR6,599 crores, reflecting a year-on-year growth of 45%.
We continue to see a well-diversified sales mix. Happy to share that 89% of our quarterly sales was contributed by new products. We expect this trend to continue as we scale-up our new launches. Our luxury offerings, the growth at DLF 5, Gurugram stands completely sold out, re-affirming demand for quality offerings at established locations. Sales booking during the quarter for the product stood at INR1,570 crores. The second phase of our recently launched product, The Valley Gardens in Panchkula record customers’ confidence towards our product offerings in that geography, clocking in sales booking of INR540 crores during the quarter.
We remain enthusiastic about the housing industry intrinsic growth potential, which continues to be supported by a resilient economy. Our focus remains on creating customer-centric products that provide a distinctive living experience with best-in-class amenities across our established ecosystems.
I’ll move to cash now. Operating cash flow for the quarter stood at INR633 crores. In light of the Hyderabad asset development being pushed back, we have repaid the outstanding capex advance of INR582 crores to DCCDL Group out of the surplus cash flows during the quarter. The transaction was largely cash neutral at the group level. Consequently, our net debt decreased to INR2,091 crores at the end of the quarter, a reduction of INR51 crores from the previous quarter.
I’ll now move to the financial highlights for quarter three financial year ’23, DLF Cyber City Developers Limited consolidated results. The office portfolio continued its gradual part to recovery. Strong momentum across the retail business continues. Rental income grew to INR1,003 crores, year-on-year growth of 15%. Consolidated revenue at INR1,363 crores as compared to INR1,176 crores last year, reflecting a 16% year-on-year growth. EBITDA stood at INR1,061 crores, year-on-year growth of 16%. Net profit at INR358 crores, reflecting a year-on-year growth of 27%.
Occupier attendance across the portfolio continues to inch upwards with gradual recovery across the office segment. While global headwind continues to persist, leading to a challenging environment, we expect demand for quality office assets at established locations should continue to garner interest of larger occupiers.
New developments across DLF Downtown, Gurugram and Chennai remains on track, planning for our upcoming retail destination Mall of India at Gurugram is in advanced stages. The retail business continues to exhibit healthy growth. Consumption trends continue to reflect sustained momentum with sales, delivering consisting growth leading to a healthy retail business outlook.
We remain well positioned to achieve our business objectives, which are strongly supported by continued housing demand, quality offerings and a healthy balance sheet.
Thank you for listening to me and we can now open the floor for the Q&A session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Saurabh Kumar from JPMorgan. Please go ahead.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Hi, am I audible?
Vivek Anand — Chief Financial Officer
Hi Saurabh we can hear you. Little loudly.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Okay. Thanks guys and [Technical Issues] presales in the quarter. I just had a few questions, sir. First is on the DCCDL deal settlement. So is there anything left or are we now fully done on this? And as a consequence of this, should the interest cost on the P&L now further come down? So that was — I can follow them together and you respond.
Vivek Anand — Chief Financial Officer
We’ll answer all of them together, yeah.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Okay. The second one was, sir, essentially on this mortgage rates. So we are now seeing a 9% trend and probably will go to 9.25%. So have you seen any clear trends of reduction in footfalls in terms of site visits?
The third is essentially around this, the golf course extension project. I am seeing a value of INR7,500 crores for this project. So I just want to know what is the average price you are assuming through cycle for this project?
And lastly, on DCCDL, does the rental now include downtown, that INR1,060 crores EBITDA through downturn. And also, if you can talk [Technical Issues]. Thank you.
Vivek Anand — Chief Financial Officer
Saurabh, thanks for your questions. Let me take it one by one. So this DCCDL settlement of INR582 crores, which is a cash settlement during the quarter, this completes all settlements. So there is no outstanding or capex advance in our books as on 31st December 2022. I think that was the first question. That’s right. I’ll move on.
On the mortgage rates, your question was?
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
[Technical Issues] because you were paying some interest on this.
Vivek Anand — Chief Financial Officer
Yeah, we were paying some interest on that. So that interest has been — we made this settlement in October. So post October, there is no interest on that. So you will see that reduction thereafter. Yeah. Okay. On mortgage rates, yes, they are now close to 9% and in some cases, upwards of 9%. So your question is, are we seeing an impact on the footfalls, right? So at this point in time, if you really look at our sales numbers, I think the kind of response we’ve got in the last quarter, especially the two launches we had, right, we are not seeing any significant impact of that as of now. The third one was the sectors, 63 group housing. So what we had indicated to you will be the launch value of INR8,000 crores during this quarter, right? So that’s coming largely from two projects. One is sector 93 and 63. And at this point in time, I think we are still in the process of finalizing the launch, including the pricing. But the total square feet I can give you, right, which is the launch is around 4.4 million square feet for Sector 63. Yeah?
And last part was DCCDL rental of INR1,003 crores. Does it include downtown 2 and 3 rental? The answer is yes.
Sriram Khattar — Managing Director – Rental Business
So we received the occupation certificate for downtown 2 and 3 end of June 2022. And thereafter, the tenants took possession and started the fit-outs. So the first rental started trickling in from November. So what we had in the December quarter is a very small portion. This will be much higher in the March ’23 quarter and will then sort of stabilize in Q1 of next year to its completeness. For your information, building 2 and 3 are completely leased and the rental will be for the entire 1.65 million, except to the extent of one or two floors, which are on hard options with a multinational company.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Okay. So we are — I mean, you’ve already achieved your INR4,200 crores exit NOI this year, pretty much.
Sriram Khattar — Managing Director – Rental Business
So I’m going to explain that by asking that we should be able to meet INR4,200 crores this quarter.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
But next year we should then hit that 45, 46 mark pretty easily I am guessing.
Sriram Khattar — Managing Director – Rental Business
Yes. I would tend to think.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Okay, thank you sir.
Operator
Thank you.
Vivek Anand — Chief Financial Officer
Saurabh, sorry, only one more clarification. On the DCCDL advance, you are correct. The advances as of today are completely settled. However, as you are aware, the basic, the genesis of this advance was that Dell [Phonetic] has an ongoing arrangement for over 15 years with DLF, where DLF constructs the SCF buildings and transfers to Dell. However, to ensure that DLF is not out of pocket, Dell traditionally advances that money to DLF. So right now since Hyderabad was delayed, this outstanding advance has been refunded back completely. And then when a new building comes back on the anvil, maybe a fresh advance would be taken from DCCDL.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
And thank you sir. Just one thing, 6 million square feet of dial is still left to be delivered by DLF to Dell.
Vivek Anand — Chief Financial Officer
Yeah, I don’t have the exact number, but yes, between Silokhera, between Hyderabad I guess, you’re right, approximately.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Okay, thank you.
Operator
Thank you. We have a next question from the line of Kunal from CLSA. Please go ahead.
Kunal Lakhan — CLSA — Analyst
Yeah, hi, good evening. Thanks for taking my question. So firstly on the —
Operator
Sir, your voice is breaking. Mr. Kunal?
Kunal Lakhan — CLSA — Analyst
Am I audible?
Operator
Yes, please go ahead.
Kunal Lakhan — CLSA — Analyst
Yeah. My first question was on the pre-leasing that we’ve done in Phase II Gurgaon, first downtown Gurgaon of 0.7 million square feet. Can you give us some color on the nature of the tenant and the demand here.
Vivek Anand — Chief Financial Officer
Yeah. So this is what we call Block 4 in Downtown Gurgaon. This is a building of about a little in excess of 2 million square feet. 700,000 has been leased to — I can give you a flavor to two large global capability centers in the banking financial services insurance. They are two the bigger ones, and then there are two, three smaller deals.
Kunal Lakhan — CLSA — Analyst
Sure. In the same breadth, just wanted to check with you, Mr. Khattar on how is the demand situation considering the global layoffs and the bad news that is happening globally. What’s the indication that your existing occupiers as well as the new occupiers that you would be in touch with? And what’s the indication that you’re getting there?
Sriram Khattar — Managing Director – Rental Business
So I can give you the indications. The indications we’re getting to be quite strong in the month of October. But thereafter with this US recession and continuous hardening of interest rates has dampened the sentiment marginally. And it has dampened the sentiment in terms of the decision makers wanting to defer their decision by a few weeks or months before the situation in the US becomes clearer. However, India is cost competitiveness in terms of its highly qualified English-speaking ingenious on one side, and global quality real estate at very competitive price will always be a compelling reason for international companies to keep coming to India. And that trend continues. We also see that the movement is to developers who are able to provide Grade A+ plus places not only green spaces. And provide spaces which are scalable for the potential tenants in the future. In addition, the international tenants, when they first come, they don’t start with the physical structure of the place or the financials, the commercials, they start with the areas of safety, sustainability, wellness, infrastructure and what we have done to ensure that their employees are much more comfortable. The fifth and the last trend, which I personally find quite heartening is this, whole work from home is slowly coming to an end. Now whilst hybrid will happen, but this leverage, which at least in the IT, ITA sector, the employees had on working from home, it’s now being looked upon rather unfavorably by the large tenants who are asking their employees to come back, albeit in the hybrid mode. Now this augurs well for our offices business going forward.
Kunal Lakhan — CLSA — Analyst
How about the physical attendance in this quarter?
Sriram Khattar — Managing Director – Rental Business
Between various IT parts, but just to give you a flavor, we are at about 60% attendance in Cyber City Gurgaon, 60%, 62%, 65%. And in Chennai, we are at about 90% and Hyderabad is around 30%-odd.
Kunal Lakhan — CLSA — Analyst
Sure. Okay. And my second question was on this quarter’s sales about INR2,200 crores, get some new products. If you can break it down between projects, I understand INR1,500 crores would have come from the growth? And what would be the contribution from Panchkula and what came from the rest?
Vivek Anand — Chief Financial Officer
Yeah. So hi, Kunal, so you right. So Grove is INR1570 crores. Valley Gardens, Panchkula is INR540 crores and there are others, which are independent floors, which is INR120 crores, that’s broadly the construct.
Kunal Lakhan — CLSA — Analyst
Sure. That’s helpful. Thank you so much.
Operator
Thank you. We have our next question from the line of Mohit Agarwal from IIFL. Please go ahead.
Mohit Agarwal — IIFL Institutional Equities — Analyst
Hey, thanks. So a couple of questions. So first is on the cash flows. Your current construction spend annually is about INR1,200 crores against a correction of above INR5,000 crores run rate. So I’m assuming next year, we move up on the collections run rate, considering over the last two years, we’ve been doing more than INR5,000 crores. So what kind of increase in construction cost do you see? Is it going to be proportionate. So broadly your operating cash flow margins are going to be similar in the range of around 45%?
Vivek Anand — Chief Financial Officer
Okay. Yeah. Thanks, Mohit. So you’re right. Let me just start with the collections first. So in the first nine months, we’ve collected INR3,722 crore. So on a full year basis, you are right, we’ll be collecting upwards of INR5,000 crores, right? And that’s almost an increase of 20% versus last year. Now moving on to the construction. So first nine months, we’ve spent INR974 crores to be precise, including capex. And on a full year basis, we expect that this number will be close to INR1,400 crores this year, right?
The other part of your question was what is our estimate for next year. So our collections — hopefully, I think by the time we exit this year, our collections will be close to INR1,500 crores a quarter. So we should be able to sustain that next year. And our construction outflow for next year as we are scaling up will be somewhere close to INR1,800 crores.
Mohit Agarwal — IIFL Institutional Equities — Analyst
Okay, this concludes the capex as well?
Vivek Anand — Chief Financial Officer
That’s right. Going up to INR1800 crores to INR1900 crores next year.
Mohit Agarwal — IIFL Institutional Equities — Analyst
Okay. Sure. My second question is on getting a little bit clarity on the launches based on the data shared in the presentation. So you’re supposed to launch about 3 million square feet in the fourth quarter ’23, which includes sector 63, 2 million square feet. And could you clarify what is the 0.8 million square feet of premium value homes? And also, if you could elaborate a bit on next year launches of premium value homes of about 4.4 million square feet and also the luxury housing of $3 million? And does it include any of Phase 5 launches?
Vivek Anand — Chief Financial Officer
Okay. So let me start with quarter four. So quarter four, your first question was on 0.8 million, what we are planning to launch. This is Sector 93 Garden City independent lots. So that’s something which we are planning to launch during this quarter. So we have we are in advanced stage of getting the approvals. Then what is there as 2 million in luxury housing, that’s group housing, the 63 and that’s a total of 4.4 million square feet, of which, we are considering 2 million to be launched this quarter and the balance, hopefully, next financial year, right? So that completes quarter four. The next year, yes, there are lot of launches which we have planned across geographies and across segments. So at this point in time, I will say that the number is 9 million, but I can broadly indicate to you that, yes, we are looking at launch in one group housing in South, one in DLF5 but more details, we will be able to share when we come back to you in May after the annual results.
Mohit Agarwal — IIFL Institutional Equities — Analyst
Okay. And is there a Phase 5 launch in 2024 plan?
Vivek Anand — Chief Financial Officer
That’s what I said. All the details, we’ll be able to share, right, sometime in May. So we are working on it. At this point in time, I think I can only say these are indicative numbers, but we’ll be able to confirm you in May.
Mohit Agarwal — IIFL Institutional Equities — Analyst
Okay, sure. I just have one more question. On the Midtown project, what is the plan there? We’ve not seen you releasing inventory for the last two quarters. So if you could share the thoughts there.
Vivek Anand — Chief Financial Officer
That’s as per plan. So as of now, what I can say is that structure is ready. So out of the total potential sales value of INR4,500 crores, INR2,600 crores has been sold. So the structure is ready as we speak. So now we are in the stage of really, giving the finishing to the building, and that’s expected, that’s going to take some time. So possibly at this point in time, the way we see it is that we will be bringing that remaining inventory of close to INR1,900 crores sometime in the market middle of next year.
Mohit Agarwal — IIFL Institutional Equities — Analyst
Okay, done. Thanks a lot, that’s all from my side.
Vivek Anand — Chief Financial Officer
Thank you Mohit.
Operator
Thank you. We have a next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala — Morgan Stanley — Analyst
All right, thank you very much and good evening everyone. Sir, what’s holding back pre-leasing of 1 million square feet at Cyber City and roughly 1.5 million square feet of SEZ excluding Silokhera.
Sriram Khattar — Managing Director – Rental Business
Sorry, pre-releasing. I don’t think we are doing any new projects in —
Sameer Baisiwala — Morgan Stanley — Analyst
No. I meant leasing, sir. It’s a vacant area that I’m talking about. 1 million Cyber City and 1.5 SEZ.
Vivek Anand — Chief Financial Officer
Yeah. If you see the vacancy numbers have been consistently coming down since April and what I have been given to understand that our vacancies are much lower than that of our competitors in peer group. The vacancies are a little higher in the SEZ for a reason which you are well aware of, which is the baseband or the amendment to the SEZ, which is taking a little more time than we had anticipated. But I don’t think we’ve now come down to single digits roughly in Cyber City. And Silokhera, there is a premium problem, which you are aware of in terms of a Supreme Court case where the vacancy is about 32%, 33%, giving an overall portfolio vacancy of about 10.2%. So if you recall some, the vacancy levels have risen to 15% plus at the peak of COVID and they are declining gradually quarter-on-quarter and now they are at about 10% as Sriram said, and hopefully, we’ll continue seeing decline in the future quarters here.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. Thanks I guess what I’m also asking is, what’s the walk-through versus this year’s exit rental and exit rental in fiscal ’24. I can see downtown Chennai is one driver. Are there any other important items that will drive this growth?
Sriram Khattar — Managing Director – Rental Business
So the rentals of FY ’24, the growth in rentals will be one based on the growth of the existing rentals, which is traditionally what it is for the existing portfolio plus a full income for the 1.7 million in downtown 2 and 3 million in Gurgaon and a marginal inflow of the rentals of downtown 1 and 2 in Chennai because please recall by the time we get the OC, which is likely to be later middle of this calendar year and then the larger tenants who come and do their fit-outs and by the time they start paying rents, I don’t think they will be before the first quarter of the next calendar year, which will be the last quarter. But then in the following year, the rental for Chennai will come in full blow. And year after that, the rental for the 2 million Downtown 4 will also commence.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. Very clear, sir. And just on the borrowing cost for DCCDL, how much increase have you seen so far? And how much is left, if you can just talk about that?
Sriram Khattar — Managing Director – Rental Business
Yeah. So I was also quite intrigued to see in this quarter that our interest cost has been constant compared to Q3 of last year, and the borrowings have been constant. And when we went into a little bit of a deep dive, I realize that the interest cost was pretty high in the first two quarters of the last year, and then it started dipping and then it started picking up. Our exit interest cost as of this quarter is 7.85%, 7.86% and I personally don’t see the interest rates going up beyond maybe 25 basis points further with the current control over inflation that we have and thereafter, stabilize and start probably looking at coming down later part of this year. So in my view, interest rates other than 25 basis points would have peak. And I also say that we’ve done a reasonably good job in ensuring that we are very competitive when we borrow. And therefore, the interest rates, the hikes that have been taken in the reports, etc., the rate of increase of our interest rates is far lower than that.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. No, that’s good to hear. So if there’s only 25 bps left, so that would be a pretty good outcome. And one final question. DLF has roughly 2.2 million square feet of rental assets like Kolkata SEZ and Chennai Emporio mall, etc. So what’s the thinking over here? You want to keep all of this or you want to monetize some point in time in future?
Ashok Kumar Tyagi — Chief Executive Officer and Whole-time Director
So Sameer, obviously, I mean, there’s no intent to monetize it on a stand-alone basis. At some stage, as and when there is an eventual capital solution around the entire Cyber City piece, if it makes sense, some of these assets could flow into that. But that’s again something for the future. Right now, we are focusing on sort of — while its been managed by a common platform, which is Mr. Khattar’s platform, the ownership is still separate between Cyber City and DLF. [Speech Overlap] but I think it’s still speculative right now.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay, got it. Thank you.
Operator
Thank you. We have our next question from the line of Pritesh Sheth from Motilal Oswal. Please go ahead.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Hi sir, thanks for taking my question. First is again on Midtown, just to follow up from previous participants. So the release of, I think the Tower D will happen sometime in first half of this year, as you said. In that sense, do we think that the second phase of 1 Midtown probably might not get launched in FY ’24.
Ashok Kumar Tyagi — Chief Executive Officer and Whole-time Director
Yeah. FY24 I don’t think it will be launched. In all fairness also, frankly we have fairly rich launch pipeline. So I don’t think we want to count any further by having the next phase of the Midtown projects being launched, but as was as mentioned by Vivek that sometime in the middle of this year, we should hopefully have the ret inventory of Midtown released for launching.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Sure. Got it. I mean the launch was still reflected in our presentation as FY24. Just wanted to clarify this, but thanks for the clarification.
Vivek Anand — Chief Financial Officer
Yeah. So Pritesh, you are right. And that’s the reason I didn’t comment on the launches for ’23, ’24. What I clarified is when we compare it with annual results, we will give you more details for our launches for next financial year. And you are right, this 2 million of residential JV central levy, this will undergo a change.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Sure. Got it. And one on Downtown Gurgaon, our occupancy has dropped from previous quarter to this one, from 98%, 99% to 93% right now. And even in case rent that is reflected in our presentation, it was last quarter around INR136-odd per square feet. Now it’s showing 120. So just wanted a clarification on that. I mean why we saw a drop in occupancy and drop in rentals as well.
Sriram Khattar — Managing Director – Rental Business
I don’t think there is a drop, but we will come back to you with this. We will answer it on Monday for you.
Vivek Anand — Chief Financial Officer
Yeah, we’ve noted this, Pritesh.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Sure, no problem. Thanks. That’s it from my side. All the best.
Operator
Thank you. [Operator Instructions] We have our next question from the line of Puneet Gulati from HSBC. Please go ahead.
Puneet Gulati — HSBC — Analyst
Yeah, thank you for the opportunity. My first question is on Panchkula. That seems to be doing quite well. You are selling INR500 crores each quarter now for the last two quarters. What kind of potential do you see there and how deep is that market?
Ashok Kumar Tyagi — Chief Executive Officer and Whole-time Director
So Puneet, it is an intriguing question, in a sense that we ourselves have been very pleasantly surprised by the depth that Panchkula has demonstrated. As you may or may not be aware, some of this inventory was actually a slow moving, I mean bottled inventory with us for a very long time and bounce back has been fairly spectacular. We obviously have some further inventory, am I right? In particular, which we’ll hopefully continue selling. Eventual market size, I think it will take some time for us to fully fathom that.
Vivek Anand — Chief Financial Officer
But just to give you, Puneet, right, the total project size is 2.2 million square feet in Panchkula [Technical Issues] of which the inventory what we released in Phase I and Phase II is 1.4 million square feet. And I can share [Technical Issues] got a very good response of which, out of 1.4, 1.3 million square feet has been sold and at our sales [Technical Issues] almost close to INR1,100 crores, and we realized INR8,400 a square feet. And the balance inventory, right, hopefully, should get released in early part of next financial year and hopefully, should get sold.
Puneet Gulati — HSBC — Analyst
Yeah. So can you give some color on who or what kind of buyers are these? Are they investors, end users? And the realization also seems to be quite good and surprisingly [Speech Overlap] as well.
Vivek Anand — Chief Financial Officer
The relation is good, it’s about INR8,000 plus per square feet in that sense. The ticket size is also almost [Indecipherable] INR3 crores plus. So a lot of them are affected, who belong to that place. I mean this question about invested end users is a very confusing one always because obviously, for many of them who are buying, it may be a second house that they are buying, not necessarily their first house. But they’re not — I’m sure they’re not buying it only for speculative purposes. There are a lot of retired government officers, retired military officers who belong to that area who are looking at a nice sort of enclave to eventually settle down. I think it’s a mix of all of those. But to your point, the depth [Phonetic] has surprised us on the positive.
Puneet Gulati — HSBC — Analyst
It’s also not main Panchkula, as I understand, it’s slightly off Panchkula as well in some sense, isn’t it?
Sriram Khattar — Managing Director – Rental Business
Panchkula is a city of small distances. I mean [Speech Overlap] location, this is actually better than the main Panchkula [Speech Overlap] is a great view of the Kasauli Hills. So, it’s actually very nice.
Puneet Gulati — HSBC — Analyst
Understood. Got it. Got it. My second is, if you can give some comment on — when should we see the time line of completion for Phase 2 balance capex lift and the downtown Chennai balance capex?
Sriram Khattar — Managing Director – Rental Business
So Downtown Gurugram is a huge development. It’s about 12 million square feet, out of which, 1.7 square feet, which is downtown 2 and 3 is already completed, leased out and it is now behind us capitalized in the books. Downtown 4 of 2 million square feet is under construction. So that takes it to 3.7 million square feet, leaving about 8-odd million square feet, of which, 3 million square feet is most likely the retail destination mall and the balance about 5-odd million square feet will be offices. Our planning for [Speech Overlap].
Puneet Gulati — HSBC — Analyst
The 2 million square feet, yeah, sorry.
Vivek Anand — Chief Financial Officer
So our planning for the mall is at a very advanced stage. Now whether it ultimately comes out to be 2.7 million, 2.5 million, 3 million is really what the architects come out with. And since this is a multiuse integrated development, the planning is much more integrated and has taken a little longer than what we anticipated, but we are coming to the end of the cycle for the planning of this.
Puneet Gulati — HSBC — Analyst
Okay. So for the 2 million square feet Phase II for downtown, the fourth block, what is the balance capex and time line for completion?
Sriram Khattar — Managing Director – Rental Business
So there, we are planning to be — have the OC readiness by the quarter two of FY ’24 — FY ’25.
Puneet Gulati — HSBC — Analyst
FY ’25. Okay. And capex to complete?
Sriram Khattar — Managing Director – Rental Business
Capex is a standard. It’s about, I think, about INR700 crores, INR750-odd crores [Phonetic] balance capex.
Puneet Gulati — HSBC — Analyst
Right. [Speech Overlap]
Sriram Khattar — Managing Director – Rental Business
I mean in the [Technical Issues] business, unlike DLF business, capex is a continuous learning stream in that sense, actually, the day capex stops, it’s really [Technical Issues] downtown will end by that time, hopefully, the malls would have begun, by that time the first [Technical Issues] the next 5 million square feet will begin. So downturn will continue to be hopefully a significant consumer of capex for the next five to six years.
Puneet Gulati — HSBC — Analyst
I understand. But for the Chennai Downtown, 3.3 [Phonetic], which is under development, what is the time line there? And the [Speech Overlap].
Sriram Khattar — Managing Director – Rental Business
So, there we should be ready for the OC in the next quarter.
Puneet Gulati — HSBC — Analyst
Okay. And substantial money is spent already, I presume. Right?
Sriram Khattar — Managing Director – Rental Business
Yes, I would tend to think that typically, in a project like this, what happens is that the last six months, you’ve spent about 40%, 45% of the funds. So about 60%, 65% would have been spent and the balance 35% would be there in terms of the cash flow.
Puneet Gulati — HSBC — Analyst
Sir, if you can quantify the balance amount as well, the 40%, which is left?
Sriram Khattar — Managing Director – Rental Business
[Indecipherable] so about INR300crores, INR350 crores.
Puneet Gulati — HSBC — Analyst
Okay. That’s very helpful. Thank you so much. And lastly, if you can comment on the competitive intensity in the Gurugram market, the commentary seems to be a lot of new players arising, the old ones who once we thought were dead are also rising back. What do you see there in the market?
Sriram Khattar — Managing Director – Rental Business
See, this is a typical market cycle where when the rentals tend to stabilize and move, you will find a few more entrants coming into the market, but the people who are coming into the market are putting up buildings which are less than 1 million square feet each. And these buildings are unlikely to give scale to the larger tenants who want to take up spaces. So yes, they will have a market, but the market will be for smaller corporate offices and not for the larger global companies and the group capability centers who will still look at much larger development for their needs, which are in terms of size much bigger than these smaller ones. So while this competition will be there, I think we are quite confident of sort of facing them and continuing our journey of growth as we have given the guidance or as what we planned.
Puneet Gulati — HSBC — Analyst
And similarly, if you can comment on the competitiveness on the residential side?
Sriram Khattar — Managing Director – Rental Business
[Technical Issues] on the residential side, the market actually is right down in expansion, I mean expanding more, I mean from a scale standpoint, the fact is that — I mean, there’s possibly one major player in Gurugram apart from us who is sort of growing at a strong pace. And it is — we don’t force — we are not seeing an influx of any bigger players of size and scale coming in. There are obviously one-off projects by a number of players, both original Gurugram players as well as payers coming into Mumbai and other places. But I mean that’s the right now the market is clearly in a zone where it can expand and can sort of absorb more supply.
Vivek Anand — Chief Financial Officer
And if I were to add, I think demand continues to grow in Gurugram market. I think the supply is all time low, right? So at this point in time, in fact, NCR continued to be the highest holding inventory almost five years back. Today, if you look at the supply in Gurugram, in particular, it’s close to 12 to 15 months. So I think that’s one shift which has happened. And if you look at DLF market share by value in Gurugram, amongst the top 10 players, we’ve actually grown our share to almost double, and the last reported share is 30%. On the pricing, we are seeing, especially again in NCR market, in the last one year, we have seen a healthy pricing growth of upwards of 20% versus a national average of close to 10%.
Sriram Khattar — Managing Director – Rental Business
Yeah. If I may please add to that. See, in the rental business, we don’t look at a market, we always study our competition in the micro market. Honestly, the market in which we operate, say, new Gurgaon-Sohna Road [Phonetic] doesn’t fall into this market segment at all.
Puneet Gulati — HSBC — Analyst
Okay. That’s helpful. Thank you so much. And all the best.
Vivek Anand — Chief Financial Officer
Yeah. Thanks.
Operator
Thank you. We have a next question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala — Morgan Stanley — Analyst
Thanks for the follow-up, but my question has been asked. Just a quick one. Any thoughts on Camellias? And also broadly INR3,000 crores of finished good inventory. What’s the visibility of selling this now? Thank you.
Vivek Anand — Chief Financial Officer
So Camellias inventory out of INR3,000 crores, as of now, as of December is INR1,700 crores, and that’s almost — to be precise, these are 46 units. And during the December quarter, we have sold four units. And if I look at the average run rate of last one year, it’s close to 8 to 10 units every quarter. So we expect with the price increase we’ve taken, right, the pace at which we’ve been selling will certainly now stabilize at 5 to 6. So this will take at least two years for us to really liquidate. So that’s one. In terms of the other inventory, which is around INR1,200 crores to INR1,300 crores, I think a large part of it is in National Devco, which is sitting across almost 20 projects in Tri-City, in Delhi, in South, and this is residual inventory. And just to give you some numbers, three years back, this inventory was close to INR2,500 crores, which now has been in the last three years, through our focused efforts, we will be able to bring it down to close to INR1,200 crores as of end December. So our estimate is that this will take another two to three years before we will be able to liquidate this.
Sameer Baisiwala — Morgan Stanley — Analyst
Yeah. Very clear. Thank you.
Vivek Anand — Chief Financial Officer
Welcome.
Operator
Thank you. We have our next question from the line of Saurabh Kumar from J.P. Morgan. Please go ahead.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Yeah. Thank you for this follow-up, sir. Sir, the first question is specific to your asset, Saket, so I noticed that your rental is close to that 160-odd [Phonetic] mark. What will be the real reason why that differential versus select would exist in your view, selective like 500 [Phonetic]. So that’s the first one. And that’s important. So you know why. The second, sir, is essentially on Gurgaon, your pricing has gone up quite a lot. But when I look at your disclosures, the gross margin is coming to about 45% odd. So I was — because we always targeted a gross margin of about 50%. So I was wondering why is there some like low-value sales you’ve done to kind of liquidate a full [Technical Issues]. So that’s the second one. And the third is on DCCDL again. Accounting would have allowed you to straight line the rentals in this quarter, right? So was it a straight-lining impact, which would have flown through in this quarter? Maybe not from a cash perspective, but from a reported EBITDA perspective, it would have happened?
Sriram Khattar — Managing Director – Rental Business
Yeah. So I’ll start with the Saket mall versus this. So I think what you may be referring to is the — you’re comparing the figures that have come in the [Technical Issues] first of all, in my reckoning, those figures are for FY ’24 or FY ’25, their projections whereas what you’re comparing it with is what you have for the current quarter for FY ’23. So that’s one sort of gap that you would have. Secondly, as you know, that as a commercial loading, we have 100% loading. I’m given to understand that select loading is much, much less. That’s number two. Number three is that for us, it includes the back block, which is basically the cinema and a few restaurants whereas to my understanding, select city sold its back block completely, and therefore, the lower rentals that you get for the back block do not come here. There would be other reasons, but I think these three should suffice for the time being. As we — we’ve not had a year to stabilize in Saket because the moment we rejuvenated the mall and enhanced it and opened it, COVID hit us. And I think it’s been a rather how would I say, a challenging journey on this till now. In the coming year, we’ve already seen an uptick in the last quarter in the earnings and the footfalls and the trading densities, etc. And I believe that we’ll continuously witness it. It is our experience that a mall comes to full glory of proper sustainable income after one or two proper seasons that it has seen through.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
All right, sir. Okay. But your incremental renters will be similar, right, like from incremental leasing [Technical Issues]?
Sriram Khattar — Managing Director – Rental Business
Yeah. Our incremental rentals in Saket would be quite decent. I don’t know whether they will be similar to the select because I do not know what their incremental rentals would be.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
[Speech Overlap]. Second is, sir, basically on this on the DCCDL accounting. So was it a straight line impact [Speech Overlap]?
Sriram Khattar — Managing Director – Rental Business
[Speech Overlap] straight line, Saurabh, as usual, your questions are quite incisive. So on a pure cash rental basis to an accrual in the [Technical Issues] the difference is about INR100 crores to INR150 crores in the year, which is basically because of the straight lining.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
No, no, I’m saying for this quarter, your downtown would have got straight line into the EBITDA.
Sriram Khattar — Managing Director – Rental Business
INR40 crores is what it is for this quarter.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Okay. Got it. And sir, lastly on this, Vivek [Phonetic], on this gross margin.
Vivek Anand — Chief Financial Officer
Yeah. Yeah. I’ll take that. So gross margin, yeah, you’re right. So it’s — of the 12.5 million products, what we’ve launched in the last two years, yeah, our margins are somewhere close to 45%. Now it is because of, of course, the mix right? So let me start with the 2.8 million square feet, which we’ve launched in DLF City and Phase V [Phonetic], right? So that is 2.8 million, where our average price realization is upwards of INR17,000 [Phonetic] per square feet, and our margins are close to 50%, right? That’s one. Now, we’ve launched, again, low-rise floors, which is close to 5.7 million square feet, we’ve launched in New Gurgaon and Panchkula put together. And there, our average realization relatively is low at INR8,300 per square feet and our margins are down 35%. And ONE Midtown Phase I, what we launch is 2 million square feet, where our margins are around 42%. If you take a weighted average of this, right, you will get close to the number, what you have [Technical Issues] that’s what the construct is. So to answer your question, it’s a mix of the different products we’ve launched across segments and across geographies.
Operator
Mr. Saurabh Kumar?
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
[Speech Overlap] just to continue [Technical Issues]. As your presales stabilize on your P&L in terms of revenues, your — in terms of the operating leverage, because I’m guessing you’re spending a lot of overheads on your brokerage marketing, which is getting P&L today, which will probably not happen as these sales stabilize. So we should expect margins to kind of move to that 35% plus mark over next two years as your revenues catch to up to presales?
Vivek Anand — Chief Financial Officer
Yes, that’s right. Once I — see, today, if you really look at my revenues, what I’m looking is 1,400 to 1,500 [Phonetic] a quarter and what I’m selling is INR2,000 crores a quarter. So there is a gap of almost 25%. I think this will take some time before what I’m looking and what I’m reporting as my revenue catches up, right? [Speech Overlap] right, you will see the EBITDA margins really inching upwards to 35-plus levels.
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Yeah. So the incremental revenue will come at 45% margin, but the fixed costs don’t go up because [Speech Overlap].
Vivek Anand — Chief Financial Officer
Yeah. [Speech Overlap].
Saurabh Kumar — JPMorgan Chase & Co. — Analyst
Understood. Understood. Thank you all.
Vivek Anand — Chief Financial Officer
Thanks, Saurabh.
Operator
Thank you. We have a next question from the line of Abhinav Sinha from Jefferies. Please go ahead.
Abhinav Sinha — Jefferies — Analyst
Sir, thanks. My margin question has been answered. The second question which I had was on the independent value [Technical Issues], which has been [Technical Issues] this seems to have moved up by 10% Q-o-Q both for offices as well as retail and [Technical Issues] the rental seems to be roughly stable. So any comment on where this could have come from, the increase in valuation?
Vivek Anand — Chief Financial Officer
Well. These are numbers which are given by independent valuers, and they are taken from the report and then mentioned. And I don’t think I would like to comment on what valuation has come from credible third parties. But to some degree, I think the reduction in the inventory levels and the vacancy levels, and I mean the gradual completion cycle of the downtown, etc., starts having [Technical Issues] not factored in in this quarter, now they have taken that. So gradually, the values have now begun sort of reducing the overhang of the COVID that was there for the last two or three years.
Abhinav Sinha — Jefferies — Analyst
Okay. Okay. Thanks. Sir, secondly, any thoughts and I guess that you can provide us on the plans on entering the Noida or Mumbai market, which we may have made some progress during the last few months?
Sriram Khattar — Managing Director – Rental Business
So on Noida, [Technical Issues] I mean no — I mean zero progress as since we spoke last. On Mumbai, clearly, we continue to try to work with the concerned bank and our joint venture partners in trying to find a solution to the Mahalaxmi Project [Technical Issues] Tulsiwadi, we still are struggling to get everybody on board in a manner that the project can take off. We are in conversations on potentially one more project in Mumbai. But as and when [Technical Issues] nearer closure, we will hopefully make an announcement on that. But as we speak right now, nothing further to report than what we had last quarter.
Abhinav Sinha — Jefferies — Analyst
Thank you, sir. And all the best.
Sriram Khattar — Managing Director – Rental Business
Thank you.
Operator
Thank you. We have a next question from Mr. Pritesh Sheth from Motilal Oswal. Please go ahead.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Thanks for the follow-up. Even I have a question on Noida, but just very specific. Recently, I think we have had a few auctions happening in Noida, where we didn’t participate. So just wanted to understand your [Technical Issues] we are looking at, is it lower than what we are getting for or what’s the thought process there?
Vivek Anand — Chief Financial Officer
So two issues. One is obviously, the price points at which those biddings have all started. While obviously, if one is desperate, one can obviously participate in those, but I don’t think that we need it to be imposed with those price points, [Technical Issues] Noida comes with its own set of [Speech Overlap] in these public auctions, including potentially future unquantifiable liabilities around compensation and those sorts of things, which frankly make participating in [Indecipherable] public auctions a slightly dicey process. So we want to be very careful before we participate in one. None of the auctions in the recent past were tempting enough for us to participate.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Got it. Got it. And just last [Technical Issues] your deliveries for the floors that we have been launching since last year, I mean, FY ’22 onwards, will we see that start happening in Q4 of FY ’23 or that [Technical Issues] FY ’24?
Vivek Anand — Chief Financial Officer
Yeah. So we are trying our best that we make a beginning this quarter, but for sure, it will start from quarter one of next financial year.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
Okay. And on [Technical Issues] ’25?
Vivek Anand — Chief Financial Officer
Yeah, that’s right.
Pritesh Sheth — Motilal Oswal Financial Services Ltd — Analyst
’25 [Phonetic]. Okay. Okay. That’s it from my side. Thank you.
Operator
Thank you. We have our next question from Mr. Kunal Lakhan from CLSA. Please go ahead.
Kunal Lakhan — CLSA — Analyst
Hi, thanks for the follow-up again. So just wanted to understand with the Sector 63 launch and the kind of run rate we have clocked in the nine months. Are we are rising our sales guidance? Or how should we look at full year now?
Vivek Anand — Chief Financial Officer
Kunal, we still have, I don’t know, 65-odd days of the quarter to clock in. I mean, I think we are very confident that we should hopefully be able to meet and slightly exceed the guidance we have given, but we will not like to substitute the earlier number with a new number.
Kunal Lakhan — CLSA — Analyst
Okay. Sure. And secondly, with the [Indecipherable] we expect like another 25% [Phonetic] increasing the rates and then it should peak out. With the peaking out of rates in site now, like if you can give any update on [Indecipherable] or any of that sort?
Sriram Khattar — Managing Director – Rental Business
Sorry, your question is not clear [Technical Issues].
Kunal Lakhan — CLSA — Analyst
[Technical Issues], yeah. So you’re expecting the rates to peak out. [Speech Overlap].
Vivek Anand — Chief Financial Officer
Hopefully, as the rates start peaking out and then hopefully begin declining, at least the macroeconomic rate-linked uncertainty around the REITs should start gradually melting away. I mean you’ve seen that at least some of the bigger REITs have had to take the hits [Indecipherable] because of the interest rate cycle, the way it’s panned out and obviously, that’s just the nature of the animal, frankly. So hopefully, as things stabilize, we will come back to you with what the plan is. I mean, as you always mentioned, that our — downstreaming wise, we are more or less ready now. I think the last set of mergers should be filed in the next further couple of weeks [Technical Issues]. And then let’s just wait for the macro and be what both the players, specifically GIC feel about the entire process and then we’ll take a call.
Kunal Lakhan — CLSA — Analyst
Sure. Thank you so much. And all the best.
Vivek Anand — Chief Financial Officer
Thank you.
Operator
Thank you. I now hand the conference over to Mr. Ashok Tyagi for closing comments. Over to you, sir.
Ashok Kumar Tyagi — Chief Executive Officer and Whole-time Director
Thank you so much. So I mean, this has been a good quarter both on the development and on the rental business. Clearly, the development pipeline and the residential sales continues to grow at a strong clip. I mean the home mortgage rates have now gone up in excess of 200 basis points since we began this cycle. But hopefully, it has a very, very limited impact on the entire sales cycle and the sales of [Technical Issues]. And as we begin hopefully reaching the peak of the interest rate cycle, we do look forward to a good few more years of the entire strength in the residential business. And we, because of our locations and our products that we have, are hopefully well placed to be able to take advantage of it. The rental side, I think also, I think the after effects of COVID are now gradually behind us in the retail sector completely, in the offices largely. And the new capex buildout is now accelerating. And hopefully, as we hit fiscal 2024, we hit it with a confidence stride in both the residential and the commercial side. Our free cash flows on both sides of the equation, Cybercity and DLF are reasonably strong and which will continue to be deployed gainfully in terms of strategic capex’s and obviously returned to the shareholders. And hopefully, look back to reconnecting back with you [Technical Issues] in Q4. Thank you.
Vivek Anand — Chief Financial Officer
Thank you.
Sriram Khattar — Managing Director – Rental Business
Thanks.
Operator
[Operator Closing Remarks]