Building on a dream

STRATEGY SPEAK

How illiterate farmers helped K P Singh create India's biggest real estate firm

When Kushal Pal Singh came on board his father-in-law's real estate company in the early 1970s, it was on a downward slope.

From being Delhi's leading property developer "" in the post-Partition real estate boom, Delhi Land and Finance (DLF) had developed areas such as Greater Kailash, Hauz Khas and South Extension "" the company had hit a brick wall: under the Delhi Development Act, 1957, land development became the prerogative of the Delhi Development Authority.

Restricted to projects that had been approved earlier or were already underway, DLF was sliding.

Then came Gurgaon. Almost single-handedly, Singh converted a sleepy, rural settlement of Ahirs and Jats into DLF City, which is probably Asia's largest private township "" and, in the process, built DLF into the country's leading real estate firm.

At last count, the group had developed 20 million sq ft of residential space, 3 million sq ft commercial space and 1 million sq ft retail space in the Harayana district; it's working on a million sq ft of workspace each in Chandigarh and Kolkata; is considering extending to Mumbai, Hyderabad, Pune and Bangalore; and has been declared a Superbrand.

At present, company sources value the DLF Group's assets at between Rs 15,000 and Rs 20,000 crore "" and Singh, who is also group chairman, owns 98 per cent of all this.

"I couldn't do it again," says the 73-year-old Singh. "Back then I was hungry for work and had a debacle behind me to egg me on." The "debacle" was automotive battery manufacturing company Willard India; after it failed, Singh joined DLF's real estate business. The rest, as they say, is history.

In a conversation with Meenakshi Radhakrishnan-Swami, Singh explained that while foresight and vision are important empire-building qualities, what is crit ical is the ability to take seemingly unimaginable risks. Excerpts:

In 1980, Gurgaon seemed the only direction in which Delhi could expand. After all, there's a river to the east and the cantonment on the west.

Historically, the city has grown southwards "" whether during the Mughal period or the British days. Even in south Delhi, industrial activity had moved on Mathura Road towards Faridabad, leaving only the Jaipur road. It made sense to assume that any planned development would have to be there.

But when I first started exploring the possibility of property development in Gurgaon, everybody thought I was crazy. It's not as if the Delhi government hadn't realised the need for space.

But it was going about it the wrong way. It wanted to create satellite towns such as Panipat, Sohna and Aligarh and have people move from Delhi. Not surprisingly, that didn't work.

Nobody wants to leave their home "" there are emotional bonds, after all. And most people don't like to travel more than they can commute easily.

Walk to work

DLF, too, realised that Delhi was bursting at the seams. But rather than satellite towns, we believed in the concept of "ring towns" "" areas that were within commuting distance, but far enough to lessen the burden on the city. For Delhi, that meant areas like Noida, Gurgaon, Ghaziabad and Kondli. We chose Gurgaon.

Our strategy was simple: give people compelling reasons to move. We offered them the "walk to work" and "walk to leisure" culture "" a complete township with offices, leisure facilities, schools, hospitals and shopping complexes. All the facilities, for a fraction of the cost.

Infrastructure was key, of course. We lobbied for "" and secured "" a change in the route of National Highway 8, so it passed closer to our township and made it more accessible. And in the meantime, we provided our own security and other facilities.

Been there, done that

Of course, people were hesitant initially. Distance and infrastructure were the biggest hurdles. But we've been down this route before. My father-in-law set up DLF just before Partition, anticipating the surge in demand for homes.

The government, too, at the time, was wiser: it welcomed private participation. So DLF was responsible for creating huge townships across south Delhi.

But even back then, the big task was to persuade people to move. It may now be a posh, upscale area, but in those days, we used to hunt wild boar and deer in Greater Kailash.

For Gurgaon, we fell back on our experience of the 1950s. We provided free transport to the site to potential buyers and offered various discounts and price-offs. Remember, bank finance was exorbitant "" and difficult to obtain. So we created our own finance schemes.

Buyers could pay in instalments spread over five to 10 years; we also allowed payments that were linked to the rentals they received ...anything to make them buy.

From DLF's earlier projects, we had also learnt of the importance of names. Hauz Khas was initially promoted as "Hauz Khas Enclave" "" the suffix gave the impression that the new project was just an extension of the existing areas and, therefore, quite close by.

Similarly, when we started what is now known as DLF City, we called it DLF Qutub Enclave. Linking the name with a familiar landmark (the Qutub Minar, 12 km away) encouraged potential homeowners to believe the township was not too far out of town.

Son of the soil

When I first considered Gurgaon as a possible site for development, the family owned just 25 acres of farming land there. We didn't have much money and banks were "prohibited" from lending for real estate development. All I could bank on was the goodwill DLF had created.

I set about identifying myself with each family whose land I wanted to buy. A team of 70 to 80 people were deputed to find out everything about these people: the size of their families, how many children, who was good in studies, any family disputes... every little detail.

I did everything it took to persuade these farmers to trust me. I spent weeks and months with their families "" I wore kurtas, sat on charpais, drank fly-infested milk from dirty glasses, attended weddings, visited the sick....

To understand why this was important, it's necessary to understand the landholding pattern. The average plot size in Gurgaon was 4 to 5 acres, mostly held by Hindu undivided families.

Legally, to get clear titles, I needed the consent of every adult member of these families "" that could be up to 30 people for one sale deed.

Getting the married daughters to sign was tricky "" often, the karta would refuse to share the proceeds of the sale with them. So I would travel to their homes and pay the daughters in secret.

Remarkably, Gurgaon's farmers sold me land on credit. I would pay one farmer and promptly take the money back as a loan and use that to buy more land. The firm's goodwill made them willing to act as bankers for DLF.

But it also meant I had to be extra careful about interest payments.

Come rain or shine, the interest would be hand-delivered to each farmer on the third of every month at 10 a m.

We bought 3,500 acres of land in Gurgaon "" more than half of it on credit, without one litigation against DLF.
 

The wonder years
15-Aug-31	Kushal Pal Singh is born in Bulandshahr, Uttar Pradesh
18-Sep-46	Raghvendra Singh sets up Delhi Land and Finance, ahead of Partition
6-Mar-54	KP marries Raghvendra's eldest daughter Indira
1957	The Delhi Development Act is passed, making land development a state monopoly. DLF starts to lose steam
1971	KP leaves unsuccessful DLF business Willard India to join the real estate company
1979-80	KP begins buying land from farmers in Gurgaon
1981	Haryana Urban Development Act implemented; DLF gets the first licence
1985-86	DLF sells its first plot in Gurgaon
2005	DLF City is Asia's largest private township; more planned in other cities

Strategic sales

We started off by selling residential plots. But people needed to be convinced that others were also moving into the area. So we started building row houses all over Gurgaon. The hustle and bustle of construction everywhere did more to convince potential buyers than any marketing or promotional activity.

After a few years, though, we realised what people wanted were green, open spaces, wide roads and play areas. Those were not viable with independent plots. So we built our first apartment complex, Silver Oaks.

Surprisingly, the group housing option didn't prove popular. We advertised extensively to educate buyers about the advantages of flats "" the better access to facilities and security as well as the benefits mentioned above. Now there's an apartment revolution.

Another lesson we learnt quickly was to offer buyers variety. We built one apartment block with basement parking at two levels. But costs went up prohibitively. So other buildings were made on stilts.

Similarly, some complexes have separate service lifts "" a better, but more expensive option "" while others have big lifts that handle both people and cargo.

Our experience in commercial and retail real estate, too, has offered lessons in strategy. One of them is to retain control. That's the reason we've not handed over building maintenance to a third party "" group company DLF Services operates and maintains all our commercial realty.

Control is also why we stopped selling space. Issues of usage cropped up "" it's difficult to sell premium mall space if the shop next door belongs to some property dealer, or worse. So now, we prefer to offer space on lease. Of course, we still sell to maintain our cash flow, but it's more selective now "" and with a number of conditions attaced.

Who's afraid of FDI?

I've always been a champion of foreign direct investment (FDI) in the construction industry. Opening up the sector to foreign players will raise the bar for the industry in India.

Of course, our leadership is threatened. But we're preparing for it. We're expanding our organisation substantially. We've sold off all unrelated businesses and are concentrating on real estate "" commercial, residential and retail. We are looking at property development in other states as well. This is our acid test: will we remain No. 1?