Report Published as on 8th July 2024
| Ticker | DLF |
| Company Name | Delhi Land & Finance (DLF) |
| Shariah Compliance | Compliant |
| DP-Ratio | 3.84% |
We have conducted a comprehensive review on Amazon.com from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.
Delhi Land & Finance (DLF) is a real estate development company based in India. It was founded in 1946 by Chaudhary Raghvendra Singh. It is the largest publicly listed real estate company in India, with residential, commercial, and retail properties in 15 states and 24 cities. The company was initially involved in the development of residential and commercial properties in Delhi, but it has since expanded to other parts of India
DLF Limited is primarily engaged in the business of colonization and real estate development. The operations of the Company include all aspects of real estate development, from the identification and acquisition of land, to planning, execution, construction, and marketing of projects. The Company is also engaged in the business of leasing, generation of power, provision of maintenance services, hospitality, and recreational activities. Its homes portfolio ranges from luxury residential complexes to smart townships. Its offices portfolio is an integrated mix of office spaces with food and beverage and leisure amenities. It has developed approximately 27.96 million square meter residential area and 4.2 million square feet retail space. The Companys subsidiaries include Aaralyn Builders & Developers Private Limited, Abheek Real Estate Private Limited, Abhigyan Builders & Developers Private Limited, and Americus Real Estate Private Limited, among others.
Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Operating Revenue: (All figures in Lakhs of INR for the Year ended 31st March 2023)
| Segments | Revenue | Non-Permissible Revenue | % of Non-Permissible Revenue | Non-Permissible Segment Classification | Comments |
| Revenue from sale of land, plots, constructed properties and other development activities | 472,121.44 | – | – | – | Real Estate operation |
| Revenue from services and maintenance | 21,998.43 | – | – | – | Construction service |
| Revenue from hotel, food court and recreational facility business | 50,534.83 | – | – | – | Real Estate operation |
| Rental income | 23,542.45 | 2354.24 | 10% | Rent and leasing | Assuming 10% as Business non permissible income for Non-Permissible tenant-Malls, Hotels and Offices (Emailed) |
| Amount forfeited on properties | 1,286.15 | 643.08 | 50% | Non-Islamic finance | It includes interest from banks |
| Total | 569,483.30 | 2,997.32 | 0.52% | – | – |
Segment Breakup
Revenue from Sale of Land & Plots: This segment would include income from selling undeveloped land or plots to individual buyers or developers.
Revenue from Constructed Properties: This segment would capture income from selling completed residential or commercial buildings like apartments, villas, office spaces, or retail store.
Revenue from Other Development Activities: This is a broader category and could encompass various income streams related to their development projects. Here are some possibilities
Development Fees: Charges levied by DLF for planning, designing, and infrastructure development associated with their projects before construction begins
Construction Management Fees: Income earned if DLF manages the construction process for third-party projects
Value Added Services: Revenue generated from offering additional services to buyers, such as property management, clubhouse memberships, or interior design services.
Revenue From Services and Maintenance
While DLF’s core business lies in developing properties, they are likely to generate some revenue from services and maintenance, but it might not be a major revenue stream.
Revenue Streams from Services and Maintenance
Property Management Services: DLF might offer property management services to residents or tenants in their buildings, generating income from monthly fees. These services include:
- Security and maintenance of common areas.
- Garbage collection and housekeeping.
- Utility management and billing.
- Tenant relations and management
Facility Maintenance Services: DLF might offer maintenance services for their own properties or even for third-party clients. This Service include:
- Repair and upkeep of electrical systems, plumbing, and HVAC systems.
- Building maintenance and janitorial services.
- Parking lot maintenance.
Revenue from hotel, food court and recreational facility business
Revenue from leasing to hotel, food court, and facility operators refers to the income generated by DLF Limited through leasing out space within its commercial properties to businesses operating in the hospitality, food and beverage, and other related sectors.
Rental Income: DLF generates substantial revenue from its rental business by leasing office and retail spaces. This provides a steady stream of income and contributes to the company’s financial stability.
Amount forfeited on properties: When discussing forfeiture of properties in the context of a real estate company, the term “forfeited properties” generally refers to properties that have been surrendered or seized due to non-compliance with certain terms, such as financial obligations or legal requirements. Here are some common scenarios where property forfeiture might occur.
If a property owner fails to make the required mortgage payments, the lender may initiate foreclosure proceedings. If the property is foreclosed upon, it may be forfeited and sold to recover the outstanding loan amount.
Amount forfeited on properties, typically refers to the funds retained or withheld by DLF Limited due to the cancellation or breach of property sale agreements by buyers. When a buyer fails to fulfill the terms of a property purchase agreement, such as making timely payments or completing the transaction, DLF may retain a portion of the initial payments made by the buyer as compensation for the breach of contract, and it include the interest income from bank
Tricky Areas From a Shariah Perspective
Looking into their Revenue streams, the tricky area that can be observed from a Shariah perspective is the Forfeited-on Properties Segment, which includes interest income from banks and Rental income segment that may have non-permissible tenants, like shopping malls, hotels, and bank offices. Therefore, 10% of the rental income was assumed to be Business Non-Permissible income (Emailed for exact amount), which is Shariah Non-Permissible income for the Company.
Let’s have a look at the non-operating revenue of the company.
Non-operating revenue:
(All figures in Lakhs of INR for the Year ended 31st March 2023)
| Segments | Revenue | Non -Permissible Revenue | % of Non -Permissible Revenue | Non -Permissible Segment Classification | Comments |
| Net gain on disposal of property, plant and equipment | 57.55 | – | – | – | Other income |
| Miscellaneous income | 3,656.44 | – | – | – | Other income |
| Fair value gain on financial instruments at fair value through profit or loss | 2,188.63 | 2,188.63 | 100% | Investment income | Investment in non-convertible debenture |
| Profit on sale of investments | 1,211.13 | 1,211.13 | 100% | Investment income | Investment income |
| Dividend income from shares/ mutual funds | 58.20 | 58.20 | 100% | Derivative income | Mutual fund |
| Share of profit in associates and joint ventures (net) | 93,302.89 | – | – | Investment income | Equity income |
| Total interest income | 20,110.59 | 20,110.59 | 100% | Interest income | Non-permissible income |
| -Interest from Customer balances, | 1,931.51 | – | – | – | – |
| -Interest from Loans and deposits | 6,978.54 | – | – | – | – |
| -Interest from Income-tax refunds | 1,170.75 | – | – | – | – |
| -Interest from Debentures | 1.25 | – | – | – | – |
| -Interest from Unwinding of amortised cost instruments | 416.36 | – | – | – | – |
| -Interest from Others | 5,235.35 | – | – | – | – |
| Total Non-Operating income | 1,20,585.43 | 23,568.55 | 19.55% | – | – |
It is clear from the table above that the non-operating income of the company include interest income and Derivative income which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Total revenue | 6,90,068.73 |
| Non-permissible operating revenue | 2,997.32 |
| Interest income | 20,110.59 |
| % of non-permissible revenue | 3.34% |
| Sector compliance | Compliant |
Dividend Purification Calculation:
| Revenue Description | Non-Permissible Revenue |
| Non-permissible operating revenue | 2,997.32 |
| Non-permissible non-operating revenue | 23,568.55 |
| Total non-permissible revenue | 26,565.87 |
| Total revenue of the company | 6,90,068.73 |
| Dividend Purification Ratio | 3.84% |
Financial Ratio Screen:
(All figures in Lakhs of INR for the Year ended 31st March 2023)
| Amount | Remarks | |
| Market Cap | ||
| Total Debt | ||
| Debt Ratio |
Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31th March 2023.
https://www.bseindia.com/xml-data/corpfiling/AttachHis//80889d6c-c7d4-49c4-aa3c-17fe5cee5f38.pdf
Conclusion
Given the above information, we at Ratings Intelligence believe that Delhi Land & Finance (DLF) Ltd is Shariah Compliant company as per the Shariah screening criteria.
