"The past two quarters that ended in March were bad for us, but the situation is relatively better now," a DLF spokesman said, requesting anonymity.

DLF's objectives for 2009 are clear. It will focus on residential projects, primarily mid-segment, and not launch any commercial or retail venture, the spokesman said. DLF has already suspended the development of capital intensive projects, including 20 million sq. ft of office space and 7 million sq. ft of retail space.

The firm has also decided to build and sell its commercial projects rather than lease them out, monetize assets such as hotels, and focus on city-centric land parcels which can attract customer attention. Its target is to launch 17-18 million sq. ft of space by the year-end, most of it residential.

DLF's strategy to beat the slump has been manifold, according to a 15 June report by IDFC-SSKI Securities Ltd: higher volumes at lower prices, asset monetization, debt restructuring and land sale.

Besides the stake sale in May, the firm also got Rs400 crore as refund after it exited the Bidadi township project in Karnataka.

"We may go for another round of fund-raising, but not via the equity route," the DLF spokesman said, adding that construction finance for new projects isn't a concern any more.

Of the Rs1,620 crore raised through QIP, Unitech used Rs700 crore to repay debt, and the balance for financing its ongoing projects, said a Unitech spokesman.

"Demand had vanished and sales dried up leading to cash flow problems alongside debt obligations. Then we decided to relook at our business strategy," he said. "Unitech will singularly focus on repaying debt and ensuring cash flow through sales this year."

Unitech, known for its high-end projects, will join many of its peers in focusing on affordable housing. Its new agenda is to expand buyer base, sell assets such as land and ready properties, and switch from leasing out office properties to constructing and selling them.

The developer will launch 40 projects this financial year and aims to sell 20 million sq. ft of space. Between April and June, Unitech sold nearly 4,000 apartments, or 4 million sq. ft of space. It has also sold an office building in Saket, and school plots and a hotel property in Gurgaon.

The real test
Almost all the top real estate players, such as Indiabulls Real Estate Ltd, Housing Development and Infrastructure Ltd (HDIL), Sobha Developers Ltd and Puravankara Projects Ltd, committed the same mistakes, said an analyst with a Mumbai-based brokerage, who didn't want to be identified. The corrective measures, too, are similar, he said.

IDFC-SSKI in its report points to past excesses such as buying huge land banks at high prices, raising short-term debt at steep interest rates, focusing on luxury housing and shopping malls, and diversifying into non-core businesses such as power, telecom and warehousing.

These six firms, including DLF and Unitech, had run up a combined debt of Rs29,529 crore. The turning point was the change in mindset, the realization that they had crossed the limit, said Ramnath S., an analyst with IDFC-SSKI.

After DLF and Unitech, both Indiabulls and HDIL, the country's third and fourth largest developers by market value, also opted to raise money through QIPs, mainly to retire part of their debt.
Indiabulls raised Rs2,656 crore and HDIL has won shareholders' approval to raise Rs1,416 crore. Bangalore-based Puravankara Projects has ventured into affordable housing and Sobha is aggressively looking for joint development partners and to sell its surplus land.

But raising funds may not be enough.
"In all the exuberance of liquidity, one needs to remember that QIPs are a temporary solution that has improved their balance sheets," said Hitesh Kuvelkar, associate director, research, at brokerage First Global Securities Ltd. "The real test will depend on whether sales happen because that will ensure cash flow."

Key concerns
A few developers such as DLF and Unitech have only sailed through the first round of the crisis and much remains to be done, said Ramnath.

The demand for realty projects may not pick up even at lower prices, and asset monetization may not happen as scheduled, IDFC-SSKI said in its report. "...If asset monetization doesn't happen as planned or at the desired valuation, DLF would fall short of the targeted cash flow generation to repay long-term debt...leading to further restructuring/dilution of equity," it said. The report said steep rise in DLF's receivables over the last two years to Rs9,600 crore has been a concern.