Realty major DLF on Thursday said it may withdraw from the much-hyped affordable houses project, stating low margins under the scheme are unattractive as the firm grapples with 25 per cent rise in net debt to Rs.18,463 crore.

Talking to analysts, DLF Executive Director Saurabh Chawla said along with other realty firms and associations, the company has approached the government for possible tax incentives to develop affordable houses, but have not got any.

“We are very focused on margins... If it doesn’t make sense, we will not be launching the projects,” he added.

Entering the race for low-cost housing, the company had planned to build 1,00,000 affordable homes at a price below Rs. 20 lakh at major cities across the country and the first such project was to come up in Gurgaon.

“Today, the whole real estate industry has same tax rates and there is no difference (of taxes) between luxury houses and development of slums,” Mr. Chawla said.

In other industries, such as automobiles, there are different tax structures between mass and premium products, he pointed out.

The company had planned to come out with an affordable housing project in Gurgaon, but it is getting delayed because of regulatory issues, Mr. Chawla said. “We may still come out with one or two projects depending on the markets. Also there may be some cases, where we will change the project into a luxury one,” he added.

Meanwhile, the company’s net debt increased to Rs. 18,463 crore as on June 30 from Rs. 14,820 crore at the end of March quarter this year. Although DLF repaid Rs. 732 crore during the April-June period, it had further taken loans of Rs. 2,330 crore.

Mr. Chawla, however, said the average cost of debt has come down to 10.5 per cent in June this year from 11.9 per cent in December 2008.

DLF had on Wednesday reported a 3.80 per cent jump in its consolidated net profit for the quarter ended June 30 at Rs. 411.03 crore on account of robust sales and divestment of non-core assets.

Mr. Chawla said the company will continue to sell its non-core assets such as land to focus only on realty projects.

On its future projects, he said: “Going forward, we will be launching projects if we get all regulatory approvals and it will depend on absorption capacity of the markets... We are also concerned about inflation and we want to doubly sure that we make money.”

Speaking about its hotel venture, Aman Resorts, Mr. Chawla said DLF will not exit the business and is currently exploring “possibilities for strategic partnerships to further strengthen the business model”.

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