Like other developers, DLF gorged on cheap finance during the 2007-08 property boom in Asia's third-largest economy to fund ambitious expansion plans for millions of square feet of homes, offices and malls.
Now it is selling non-core assets, including the 17-acre plot in central Mumbai, hotel chain Amanresorts and its wind power business, to reduce its borrowings of Rs 227 billion by 50 billion by the end of March 2013.
"This deal was a significant part in achieving that target," Ashok Tyagi, chief finance officer for DLF told Reuters.
The Delhi-based developer said it had received an advance payment of Rs 5 billion for the plot from Lodha and would receive the remaining Rs 22 billion by October.
DLF bought the plot for about Rs 7 billion in 2005 from state-run National Textile Corporation with plans to develop homes, offices and shops in India's financial capital of Mumbai.
However, a slowing economy forced it to shelve development plans, and DLF decided to sell the land to reduce debt.
Earlier this month DLF reported an 18 per cent fall in profit for the June quarter due to the high cost of financing its debt and a slowdown in home sales across India.
Mumbai-based Lodha will build a five million square-foot mixed-use development on the plot, for which it has planning approval. It has begun construction, it said on Monday.
At a deal value of Rs 27 billion the land has cost Lodha about Rs 5,400 a square foot. Average residential prices in the area are about Rs 23,000-30,000 a square foot whereas office rents are about Rs 19,000-23,000 a square foot, according to a July report by Jones Lang LaSalle.
Lodha, which is also building the world's tallest residential tower on a site nearby, said it sold Rs 50 billion worth of homes in the fiscal year that ended in March and has 34 million square feet of projects under construction.
Shares in DLF, valued by the market at about $6.5 billion, ended up 3.5 per cent at Rs 217.70 in a stable Mumbai market ahead of the news.
Copyright @Thomson Reuters 2012