DLF Ltd.

SUBMITTED TO:

Dr. TRILOCHAN TRIPATHY, Faculty, IBS, Hyderabad

SUBMITTED BY:

(SECTION-E)

RICHA SINGH S PUJA MURTHY SAUMYA SAXENA SHAKTI SAHAY

(09BSHYD0658) (09BSHYD0705) (09BSHYD0748) (09BSHYD0763)

1| Page

ACKNOWLEDGEMENT

An effort is not complete and successful till the people who make it possible are given due credit for making it possible. We take this opportunity to thank all those who have made the endeavor of ours successful. The entire journey from the very idea of this project to reality would not have been possible without the guidance of many experienced people. We would like to thank our mentor Dr. Trilochan Tripathy. We thank you for being supportive. This project would not have completed without your support.

Richa Singh S Puja Murthy Saumya Saxena Shakti Sahay

2| Page

TABLE OF CONTENT

1) Real estate and DLF4 2) Key driver factors for the growth of DLF..5 3) Analysis of demand and supply function...7 4) Demand forecasting of raw materials.....9 5) Analysis of cost..12 a) Cost function for variable labor and constant input cost.13 b) Cost function for variable cost of capital and constant labor cost...........13 c) Marginal cost of labor..14 d) Marginal cost of capital....15 e) Average of cost of labor...16 f) Average of cost of labor....17 g) Relation between total cost, average cost and marginal cost....18 1) Market structure in which DLF operates.21 2) Porters Five Forces Model....22 3) Nash Equilibrium.24 4) Conclusion ..25 5) References ...26

3| Page

REAL ESTATE SECTOR AND DLF

India is the 4th largest economy in terms of purchasing power parity. With a growth rate of 9%, it is found to be in a good shape to expand and grow further. The major factors that induced the growth rate were the performance of Information technology, Real Estate segment, and healthy financial conditions apart from the very conducive market initiatives taken up by the Government of India. The real estate industry is one of the fastest growing industries in our economy. Growing at a scorching CAGR of 35% the realty sector is estimated to be worth US$ 90 Billion. It is anticipated to grow at a rate of 30% annually over the next decade, attracting foreign investment worth US $ 30 Billion .This substantial growth has been the result of increasing demand from off shoring consulting houses and call centers. Every year 78% of the money spent on real estate goes to the GDP. About 80% of the real estate development in India has been in the field of residential housing. The remaining 20% of the real estate includes office, shopping malls, entertainment centers, hotels, multiplexes and hospitals. Large investments are underway in areas of: Highway development, Air connectivity (domestic and international), up gradation of ports with their privatization, power sector. Real estate developers have been at the forefront of the real estate boom sweeping across the length and breadth of India. Armed with efficient units of architects, engineers and managers, builders like DLF have managed to change the skyline of many Indian cities.

4| Page

Key Drivers for the Growth of DLF:

Commercial:

Industry Growth: Real estate sector is growing at a rate of 35%.Credit to the housing sector has continued to be strong and benefited from low interest rates and incentives. In real estate sector in India, there are high returns up to 12-15% as compared to returns in advanced countries i.e. 3-5%.Estimated growth up to 90 US$ by 2015.

Special Economic Zones: SEZs likely to be preferred for IT commercial office space development. Growth in retail sector, hotels and townships: Spiraling demands for hotel rooms has brought boom in hotel industry, and the demand-supply mismatch remain over 50% beyond 09, generating substantial business for DLF. Integrated townships, Spurt in extremely large retail spaces results in high growth opportunities. Retail: Growth in organized retail Rising consumerism Entry of international retailers Concept of specialized malls gaining popularity Tourism: Increase in International tourist arrivals Growth in domestic tourism Low cost airlines and improvement of airports

5| Page

 Medical tourism Tremendous potential for budget hotels

Growing Knowledge and technology driven sector: Demand for higher level education, professional trainings, better infrastructural facilities have given a boost to DLFs business. The robust growth in IT sector has pumped up the growth in real estate sector, approx 60% of new construction is for IT sector resulting in major projects for DLF.

Growing FDI: FDI regulations are liberalized, and 100% FDI is allowed under automatic route in townships, housing, built up infrastructure and construction development projects. Venture capitalists are also allowed investing in India, giving a boost to its operations. The Reserve Bank of India announced a special stimulus package, to allow banks to provide special treatment to real estate sector. It has decided to extend exceptional concessional treatment from June 30th, 2009. Area for integrated townships increased. Minimum capital investment decreased. Full repatriation of original investment after 3 years.

Residential:

Urbanization: According to the United Nations Population Fund (UNFPA) By 2030 more than 40.7% of Indian population would be urbanized. Presently, more than 28.7 per cent of Indias area is urban as against the global average of 48.7 per cent. Indias Mega-Cities of Mumbai and Delhi would be the worlds 2nd and 3rd largest cities by 2015, which is a big time demand driver for DLF.

Growth in per capita income: Indias per capita income is expected to be US$ 693 this year and is further expected to grow by 8-13 per cent in the next five years, particularly due to growth in the services sector, which thereby results in increase in demand for the residential sector.

Rising first time buyers and increasing household: With an increase in per capita income, the number of first time buyers also increases resulting in up thrust in the demand.

6| Page

Analysis of Demand and supply function for DLF

Demand side analysis: There are various other factors which affect the demand. Based on these factors we can derive the demand function for DLF. D=F (I, P, Cb, Cr, T, Ps) D=demand for DLF; I= Income of consumers; P=price of housing; Cb= cost of borrowing; Cr= availability of credit; T= Consumer preferences; Ps= price of substitute and complement. Rising income levels of a growing middle class along with increase in nuclear families, low interest rates, modern attitudes to home ownership (average age of a new home owner in 2006 was 32yrs compared with 45yrs a decade ago) and a change of attitude among the young working population from that of save and buy to buy and repay have all combined to boost housing demand. Growth in commercial office space requirement is led by the joining outsourcing and information technology industry and organized retail. Rising middle class and its consumer demand is driving the retail boom- around 11malls is under development by DLF. SUPPLY SIDE ANALYSIS: The factors determining supply of real estate can be stated in the form of a supply function. S= F (P, A, B, Cr, L) S= supply of real estate property; P= Price of the property; A= Availability of land; B= efficient builders; Cr= easy accessibility of credit; L= Skilled labor The residential sector which accounts for 75-80% of the turnover has been on a high growth path. According to the ministry of housing and urban poverty alleviation there is a shortage of 24.7 million houses in the country. So far, the situation in both the office and residential market has been that whatever is billed gets sold or rented. In future, as supply increases, DLF has to be more careful about factors like location and target those segments for which they are developing
7| Page

the products. In this supply rich environment, accurate demand estimates will become very important. DEMAND FACTORS Robust Upsurge Favorable demographic parameters Rise consumerism Rapid urbanization in and in Increasing occupier base Rise in demand for space Demand for new avenues Creation demand for new housing industrial PULL IMPACT SUPPLY FACTORS Policy regulatory reforms Positive outlook of investors Infrastructure support government and development by global and Entry of domestic and foreign players Improved quality of real estate assets Large development scale PUSH IMPACT

sustained growth industrial activities

Demand forecasting of raw material

A method to estimate future value on the basis of past information is called demand forecasting. Generally demand forecasting is done for either estimating the future sales or estimating future requirement of inventory or raw material.

8| Page

Here demand forecasting for raw material for the quarter 30-Jun-09 has been done on the basis of last four quarters. First, a relation has been established by using regression tool, where the coefficient of intercept and the coefficient of sales (which is the independent variable) were found. Data:

Qua rter E nded 31-Mar-09 31-Mar-09 30-Sep-08 30-Jun-08

Net S a les /Inc om e fromO pera tions 5553 42441 107495 127861

C ons um ptionof R a wMa teria ls -9276 21020 31102 35953

Based upon above data, the coefficient of determination, the coefficient of intercept and the coefficient of sales is given below:

R e gre ssion S tatistic s Multiple R 0 .9 2 5 7 8 5 5 8 3 RS qua re 0 .8 5 7 0 7 8 9 4 6 S ta nda rdE rror 9 3 9 6 .3 1 1 3 2 2 Observa tions 4

Intercept sa les

C oeffic ie nts -3 7 4 9 .1 3 4 5 0 2 0 .3 3 1 0 2 3 6 0 3

From the above figures demand of raw materials for the quarter 30-Jun-09 has been calculated by the formula: Forecasted raw materials= -3749.134+ 0.3310* 41797 [Where: 41797= sales of quarter 30-Jun-09]
N e tS a le s 4 1 7 9 7 F o r ec a s te dV a lu e 1 0 0 8 6 .6 5 9 0 5 A c tu a lV a lu e 1 2 7 5 6

3 0 -Jun-0 9

It can be seen that the forecasted value is very near to the actual value. It can therefore be
9| Page

concluded that consumption of raw material is dependent upon the sales and can therefore be forecasted for proper utilization.

PRICE ELASTICITY OF DEMAND Price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good. It is defined as the percentage change in quantity demanded divided by the percentage change in price. Assumption: As the demand figure is not available so the sales figure can be used. As the individual cost of raw materials is not available therefore total cost of production is used. Data:

S l. N o. 1 2 3 4 5 6 7 8 9

Y ea r Mar '00 Mar '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

tota lc os t 105 .0 1 161 .6 8 293 .5 9 254 .1 9 4 3 5.5 342 .0 4 644 .2 8 4 3 4.5 2,4 18 .8 5

s a les(C r.) 1 84 .39 1 79 .98 2 80 .03 2 44 .96 4 95 .8 4 12 .23 9 53 .46 1,10 1.66 5,49 6.96

p rojec ted -52.95 54 6 2 8 1.40 00 9 91 3 94.1 37 7 38 3 00.7 26 6 02 7 30.5 83 7 88 5 09.0 04 9 86 1 225.56 7 98 7 28.2 12 9 46 5 432.79 1 33

Here it can be seen that projected sales has been calculated using total cost and actual sales to establish price elasticity of demand by using regression tool.

10 | P a g e

Regression Statistics Multiple R 0.992133911 R Square 0.984329698 Adjusted R Square 0.982091083 Standard Error 228.1269228 Observations 9
It can be seen that the coefficient of determination is very high.

Mar '00 Mar '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08 Also from the figure it can be concluded that demand varies with change in price that is demand

6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 -500

projected sales (Cr.)

is relatively price inelastic. Demand is relatively inelastic because of the following reasons:

Large number of close substitutes (like Indiabulls Real, GMR infra, Parsavnath, and other local construction companies). Real estate comes under both necessity and luxury. Time period is very long and therefore demand becomes elastic.

11 | P a g e

ANALYSIS OF COST Cost curve shows the relationship between the quantity of output produced and the total cost of production. The total cost curve gets steeper as the quantity of output increases because of diminishing marginal product. Assumption:

We have not considered the Depreciation, financial services, net fixed assets, interest paid and employee compensation costs, as they do not directly affect the cost of production.

Since we are considering the short run cost process, we have shown the AC, MC and TC analysis keeping one of the variables fixed at a time. The sales value of the unit product is constant through out the period. All the employees are considered to contribute to the cost of the product. The input cost is constant and is considered to be the same through out the period.

Data:

12 | P a g e

S l. No. 1 2 3 4 5 6 7 8 9

Yea r Mar '00 Mar '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

em ployee cost (Cr.) T ota l input cost (Cr.) 10.33 94.68 15.46 146.22 14.19 279.40 15.49 238.70 21.4 414.10 33.32 308.72 16.76 627.52 44.82 389.68 103.78 2,315.07

sales(Cr.) 184.39 179.98 280.03 244.96 495.8 412.23 953.46 1,101.66 5,496.96

Cost function for variable labor and constant input cost (K constant):

1 2 0 0 1 0 0 0 8 0 0 6 0 0 4 0 0 2 0 0 0 M a r'0 0 M a r'0 1 M a r'0 2 M a r'0 3 M a r'0 4 M a r'0 5 M a r'0 6 M a r'0 7 S a le s( R s .C r)

In short run some inputs cannot be varied for a certain period of time. This period varies from one firm to the other. As seen from the graph that as the no of employees in a firm increases the output or the sales of the firm also increases. Due to huge difference in scale it is not clearly visible.

Cost function for variable cost of capital and constant labor cost (Labor constant)

13 | P a g e

1200 1000 800 600 400 200 0 Ma r '00 Ma r '01 Ma r '02 Ma r '03 Ma r '04 Ma r '05 Ma r '06 Ma r '07 S a les(R s. C r)

As seen from the graph that as the cost of capital employed in a firm increases the output or the sales of the firm also increases.

Marginal Cost of Labor (MC of labor):

14 | P a g e

S l. No. 2 3 4 5 6 7 8 9

In the table above, marginal cost of employee has been calculated.

Year Mar '00 Mar '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

em ployee cost (Cr.) 10.33 15.46 14.19 15.49 21.4 33.32 16.76 44.82 103.78

S ales(R s. Cr) 184.39 179.98 280.03 244.96 495.8 412.23 953.46 1,101.66 5,496.96

Chang e in L abor 0 5.13 -1.27 1.3 5.91 11.92 -16.56 28.06 58.96

Marg inal Chang e Cost of in S ales em ploye (R s. Cr) e(R s. Cr) 0 -4.41 -0.85965 100.05 -78.7795 -35.07 -26.9769 250.84 42.44332 -83.57 -7.01091 541.23 -32.683 148.2 5.28154 4395.3 74.54715

M a r g i n a lC o s to fe m p l o y e e ( R s .C r )
1 0 0 8 0 6 0 4 0 2 0 0 -2 0 -4 0 -6 0 -8 0 -1 0 0 M a r'0 0 M a r'0 1 M a r'0 2 M a r'0 3 M a r'0 4 M a r'0 5 M a r'0 6 M a r'0 7 M a r'0 8 M a rg in a lC o s to f e m p lo y e e ( R s .C r)

Marginal cost is specified as the change in total cost divided by the change in the quantity of output produced.

15 | P a g e

Graph is drawn based upon the calculation above. It can bee seen that there is an upward trend in the graph. However the upward trend is not smooth. This could be because of the nature of business where there is no need of too many employees and the labor working at the construction site are employed on daily wage basis.

Marginal Cost of capital (MC of capital):

T ota l Input C ost S l. No. Y ea r (R s .C r) S a les(R s .C r) Mar '00 94.68 184.39 2 Mar '01 146.22 179.98 3 Mar '02 279.40 280.03 4 Mar '03 238.70 244.96 5 Mar '04 414.10 495.8 6 Mar '05 308.72 412.23 7 Mar '06 627.52 953.46 8 Mar '07 389.68 1,101.66 9 Mar '08 2,315.07 5,496.96 The table above gives marginal cost of capital employed figure.

C ha ng e inS a les C ha ng e inC os t (R s .C r) 0 0 51.54 -4.41 133.18 100.05 -40.7 -35.07 175.4 250.84 -105.38 -83.57 318.8 541.23 -237.84 148.2 1925.39 4395.3

MCof C a pita l -0.08556 0.751239 0.861671 1.430103 0.793035 1.69771 -0.62311 2.28281

The U-shape of the marginal cost curve is a direct reflection of first increasing marginal returns, as marginal cost falls to a minimum, then decreasing marginal returns and the onset of the law of diminishing marginal returns as marginal cost rises. As it can be seen that there is steady rise in the marginal cost curve. However during the period 2006-07 due to a sudden surge in the demand of real estate the cost of production decreased drastically because of economies of scale. Again from the end of 2007 there is a sharp increase in marginal cost. This was because of recession and inflation, in turn due to which raw materials became expensive thus increasing the cost of capital. Average Cost of Labor (AC of labor):
16 | P a g e

The table gives the average cost of employed.

S l. No. 1 2 3 4 5 6 7 8 9

Y ea r Mar '00 Mar '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

em p loy ee c os t (C r.) 10.33 15.46 14.19 15.49 21.4 33.32 16.76 44.82 103.78

S a les(R s .C r) 184.39 179.98 280.03 244.96 495.8 412.23 953.46 1,101.66 5,496.96

Av era g eC os t of em p loy ee 17.8499516 11.64165589 19.73431994 15.8140736 23.1682243 12.37184874 56.88902148 24.57965194 52.9674311

In general, average cost is simply the cost per unit of output. It is the total cost divided by the total quantity produced. It can be seen that till 2005 average cost was steady but it suddenly started showing irregular trend. However nothing much can be inferred from the graph as there is no particular relation fitting.

Average Cost of Capital (AC of capital):

17 | P a g e

Sl. No. 1 2 3 4 5 6 7 8 9

Year Mar '00 Mar '01 Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08

Total Input Cost (Rs. Cr) 94.68 146.22 279.40 238.70 414.10 308.72 627.52 389.68 2,315.07

Sales (Rs. Cr) 184.39 179.98 280.03 244.96 495.8 412.23 953.46 1,101.66 5,496.96

AC of Capital 1.947507393 1.230884968 1.002254832 1.026225388 1.197295339 1.335287639 1.51940974 2.827088893 2.374424963

The curve shows a normal average cost of capital graph as it is a u shaped. In the initial years it is decreasing but in the later years it has started increasing.

Relation between Total Cost, Average Cost and Marginal Cost for constant cost of labor:

S l.N o . 1 2 3 4 5 6 7 8
18 | P a g e

Y e a r M a r'0 0 M a r'0 1 M a r'0 2 M a r'0 3 M a r'0 4 M a r'0 5 M a r'0 6 M a r'0 7

T o t a lC o s t( R s .1 0 0 C r ) 1 .8 4 3 9 1 .7 9 9 8 2 .8 0 0 3 2 .4 4 9 6 4 .9 5 8 4 .1 2 2 3 9 .5 3 4 6 1 1 .0 1 6 6

M a r g in a lC o s to f c a p it a l( R s .C r ) -0 .0 8 5 5 6 4 6 1 0 .7 5 1 2 3 8 9 2 5 0 .8 6 1 6 7 0 7 6 2 1 .4 3 0 1 0 2 6 2 3 0 .7 9 3 0 3 4 7 3 1 1 .6 9 7 7 1 0 1 6 3 -0 .6 2 3 1 0 7 9 7 2

A v e r a g eC o s t o fC a p it a l 1 .9 4 7 5 0 7 3 9 3 1 .2 3 0 8 8 4 9 6 8 1 .0 0 2 2 5 4 8 3 2 1 .0 2 6 2 2 5 3 8 8 1 .1 9 7 2 9 5 3 3 9 1 .3 3 5 2 8 7 6 3 9 1 .5 1 9 4 0 9 7 4 2 .8 2 7 0 8 8 8 9 3

A curve that graphically represents the relation between the total costs incurred by a firm in the short-run production of a good or service and the quantity produced. The total cost curve is a cornerstone upon which the analysis of short-run production is built. It combines all opportunity cost of production into a single curve, which can then be used with the total revenue curve to determine profit. The marginal cost curve, the focal point for the analysis of short-run production, is derived directly from the total cost curve. The shape of the curve reflects increasing marginal returns at small quantities of output and decreasing marginal returns at larger quantity. . It can be seen from the graph that when marginal cost exceeds average cost, average cost must be rising. When marginal cost is less than average cost, average cost must be falling. Also the position of the marginal cost relative to average total cost tells us whether average total cost is rising or falling. The short-run marginal cost curve will at first decline and then will go up at some point, and will intersect the average total cost and average variable cost curves at their minimum points. This however is not clearly visible from the figure as there are other factors also involved in changing the curve.

Relation between Total Cost, Average Cost and Marginal Cost for constant cost of capital

19 | P a g e

S l.N o . 1 2 3 4 5 6 7 8 9

Y e a r M a r'0 0 M a r'0 1 M a r'0 2 M a r'0 3 M a r'0 4 M a r'0 5 M a r'0 6 M a r'0 7 M a r'0 8

T o t a lC o s t( R s .1 0 0 C r ) 1 .8 4 3 9 1 .7 9 9 8 2 .8 0 0 3 2 .4 4 9 6 4 .9 5 8 4 .1 2 2 3 9 .5 3 4 6 1 1 .0 1 6 6 5 4 .9 6 9 6

M a r g in a lC o s to f e m p lo y e e ( R s .C r ) -0 .8 5 9 6 4 9 1 2 3 -7 8 .7 7 9 5 2 7 5 6 -2 6 .9 7 6 9 2 3 0 8 4 2 .4 4 3 3 1 6 4 1 -7 .0 1 0 9 0 6 0 4 -3 2 .6 8 2 9 7 1 0 1 5 .2 8 1 5 3 9 5 5 8 7 4 .5 4 7 1 5 0 6 1

A v e r a g eC o s t o fe m p lo y e e 1 7 .8 4 9 9 5 1 6 1 1 .6 4 1 6 5 5 8 9 1 9 .7 3 4 3 1 9 9 4 1 5 .8 1 4 0 7 3 6 2 3 .1 6 8 2 2 4 3 1 2 .3 7 1 8 4 8 7 4 5 6 .8 8 9 0 2 1 4 8 2 4 .5 7 9 6 5 1 9 4 5 2 .9 6 7 4 3 1 1

The short-run marginal cost curve will at first decline and then will go up at some point, and will intersect the average total cost and average variable cost curves at their minimum points. The average variable cost curve will go down (but will not be as steep as the marginal cost), and then go up. This will not go up as fast as marginal cost curve. The average fixed cost curve will decline as additional units are produced, and continue to decline. The average total cost curve initially will decline as fixed costs are spread over a larger number of units, but will go up as marginal costs increase due to the law of diminishing returns.

Market structure in which DLF operates

Real estate in India follows an oligopoly type market structure with the following characteristics-Real estate sector is quite fragmented with most players having presence limited to select cities or regional geographies & relatively few players having national presence. Larger regional developers increasing their footprints across the country include Ansals, DLF, Raheja group, Parsavnath developers, Unitech, Vatika group. Homogeneous but differentiated products

20 | P a g e

The real estate companies main offering is buildings to the customers. The basic product is same for all the major players in India. The differentiating factor is the package offered by these players like the location, add on facilities, premium apartments etc. So we can say the offering given by the players is homogenous but differentiated. DLFs ship-shaped Gateway Towers in Gurgaon, a 12-storey complex, has become a landmark of sorts for its unique architectural design. DLF Nestle House has been designed aesthetically together with functional efficiency. Product differentiation is very important as a developer has to cater to all classes of the society. These projects are very different from other projects in all aspects - architecture, quality and developmental mix - and are targeted towards the niche segment. High entry barriers According to the JLLM report, there is low availability of land banks due to which about use bank loans for purchasing land parcels, capital raised through private placements, foreign investments & funds are being used largely for land purchases. Also initial capital outlay for new entrants is very high and not many firms can afford it. Long gestation periods The market adjustment process is subject to time delays due to the length of time it takes to finance, design & construct new buildings and also due to the relatively slow rate of change of demand. Because of these lags there is a great potential for disequilibrium in the short run. Adjustments mechanisms tend to be slow, relative to more fluid markets. Both investment and consumption good Real estate can be purchased with the expectation of attaining a return (an investment good), or with the intention of using it (consumption good) or both. These functions can be separated (with participants concentrating on one or the other function) or can be combined (in the case of the person who lives in a house that they own). This dual nature of the good means that it is uncommon for people to over invest in real estate, that is, to invest more money in an asset than it is worth on the open market. Few dominant firms

21 | P a g e

Oligopolists are often large firms, each producing a significant portion of total market output like DLF has 24.38% of the total real estate market, and other players like unitech & ansals also hold a major share in the market. Also very few firms have a national presence in India like Ansals, Unitech, parsvnath developers and K. Raheja.

Porters five forces model

Porters competitive framework represents the relationship between profitability and efficiency faced by the firms while operating in an oligopolistic kind of market. It includes three forces from horizontal competition: threat of substitute products, threat of established rivals and the threat of new entrants and two forces from vertical competition: the bargaining power of suppliers, the bargaining power of consumers. Porters Competitive Framework

Threat of new entrants: Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. But in real estate sector entry barriers are high because the working capital requirements are high. Moreover, the existing firms have the advantage over others due to learning curve advantages. This can be seen in the case of DLF which started in 1946 and developed DLF city in 1985 and in 2008 they opened up the first luxury mall. The gestation period is very long so investors will not be induced to invest.

Threat of established rivals: 25% of the market share is held by the DLF in the real estate sector. This shows that the competition is high in this sector with DLF, Unitech, and Ansals being the major players. This may prove to be a threat to upcoming players, as the established players are deep rooted in the industry. Though this threat shall not be faced by DLF as it holds the major market share.

22 | P a g e

The bargaining power of suppliers: It is low. Due to the increase in the number of contractors or service providers, margins have been stagnant despite strong growth in volumes. The number of suppliers is large so if one will increase the cost than there will be a shift from one contractor to another.

The bargaining power of buyers: It is low. The country still lacks adequate infrastructure facilities and citizens have to pay for using public utilities. It is very difficult to predict the direction and magnitude of price movement on real estate . One can only assume that forces of demand and supply would always apply and price movement would follow accordingly.

Threat of substitute product: There are no substitutes to the basic product so there is not any threat of substitute products.

Nash Equilibrium
This is a situation where each player chooses an optimal strategy, given the strategy chosen by other players in the market. DLF also operates under the same kind of equilibrium. The ultimate value of commercial real estate emanates from its rental flow, which reflects the in price the market is willing to pay for the use of space. The developers formulate their construction/exercise strategies in a world in which the demand for space is stochastic, and where the construction strategies of their competitors impact the payoff from their own strategies. Thus, the inputs of the equilibrium are the degree of competition in the market, the impact of competitive development, and the stochastic process driving the demand for space. The outputs of the equilibrium are the processes for construction starts, short-term rents, building values and land values.
23 | P a g e

Say for e.g.: For office space the demand might be driven by job growth. For industrial space demand might be driven by changes in industrial production. For hotel space demand might be driven by changes in disposable income. At any point in time, each firm can develop new rentable units at a cost of K per unit of space. New development represents an increase in space. Thus, the path of output is continuous, and if all firms increase capacity simultaneously, the optimal development decision must be part of an endogenous, Nash equilibrium. Each firm chooses its supply process strategy so as to maximize its value, conditional on the assumed supply processes of its competitors.

CONCLUSION
Reality sector has seen an increase in competition with the emergence of some of the big players like DLF, Unitech, GMR, and Ansals. This has brought a sort of price war among them with no individual player in position of dictating the terms. Even DLF, the market leader has not been able to set a competitive price to beat its competitors. The Oligopolistic nature of market has prevented DLF to gain considerable competitive edge. The recent economic downturn saw profit of all the real estate companies go down. Real estate price bubble that was assumed to burst in the recessionary cycle did not burst. The sky high prices of real estate that should have come down did not come down. However a consolidation phase was seen in the last few quarters. But share prices and profit margins of few
24 | P a g e

of the big giants eroded considerably. Net profit of DLF declined 85.68% to Rs 100.40 crore in the quarter ended June 2009 as against Rs 700.99 crore during the previous quarter ended June 2008. Sales declined 67.31% to Rs 417.97 crore in the quarter ended June 2009 as against Rs 1278.61 crore during the previous quarter ended June 2008. DLF had to restructure about Rs2000 crore of short- and long-term loans out of its Rs16358 crore debt by selling a stake worth Rs2,200 crore. Even Unitech had to raise Rs1620 crore through a qualified institutional placement and still the firm currently has Rs7800 crore of debt. Ansals (API) revenues also fell 21% during Q3FYE09. It also reported a consolidated loss of Rs. 156m for Q309 as against profit of Rs. 522m in Q308. Their condition however is fast improving on the back of improving economy. DLF has even started looking for new investments; the recent land acquisition of 350 acres in Gurgaon is one such investment. The economic recovery is likely to reinvigorate the interest of foreign investors in
India's real estate market with an enhanced capital inflow in the real estate sector in the medium-to-longterm. We can thus expect to see competition in real estate sector heating up with a renewed price war.

REFERENCES
1. www.dlf.in 2. en.wikipedia.org/wiki/environmental scanning 3. www.allbusiness.com/glossaries/macroenvironment/4954903-1.html 4. www.valuenotes.com 5. www.moneycontrol.com 6. www.rediffmoneywiz.com
25 | P a g e

7. Prowess database
8. http://www.investopedia.com/ 9. http://www.indianrealtynews.com/ 10.http://headlinesindia.com/ 11.http://www.brint.com/ 12.http://www.allbusiness.com/ 13.http://www.emkayresearch.com/ 14.http://www.dlfindia.com/

15. http://www.livemint.com/2009/06/24005439/DLF-Unitech-show-path-to-beat.html 16. http://in.reuters.com/article/domesticNews/idINNWNA728420090224

26 | P a g e