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Executive Summary

CONNECTVESTIAN QUARTERLY NEWSLETTER Q3 2014

STRATEGIC ADVISORY GROUP

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GDP growth in India was recorded at 5.7% during April-June 2014 driven by the Financing, Insurance, Real Estate and Business Services’ and Electricity, Gas & Water supply sectors. The International Monetary Fund has also raised the GDP forecast for India to 5.6% for 2014-15.

Inflation declined to a five year low of 2.38% during September 2014. The market was characterised by investor confidence and the BSE Sensex surpassed the 27,000 mark during Q3 2014.

The Union Budget 2014-15 was presented during Q3 2014. The budget proposed a number of initiatives like relaxation in FDI in real estate, allow Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts (InvITs), increased tax deduction limit for interest on home loans. Among its many initiatives, increased tax deduction limit on home loan interest and relaxation in FDI in real estate has been approved by the Union Cabinet.

Approximately, 3.4 million sqft of office space supply was recorded across the four major cities of Bangalore, Mumbai, Chennai and Hyderabad in Q3 2014. The total absorption across the said geographies was recorded at 4.6 million sqft. Bangalore registered the highest absorption among the four major cities while Hyderabad recorded the highest supply.

Two new malls became operational during the review period. Leasing was active and mostly observed across high street locations on account of limited availability in mall developments. Developers and landlords refrained from hiking mall rentals to sustain retailer interest.

Approximately 16,230 new residential units were launched in Q3 2014 across the cities of Bangalore, Chennai and Hyderabad. Fresh supply was observed primarily in apartment developments, and the launches during Q3 2014 nearly doubled in Chennai and Hyderabad compared to the previous quarter. Capital values remained stable across the three cities.

•

•

•

•

•

•

Key Rates

PLR*

Repo Rate

Reverse Repo Rate

CRR

Jul-14

14.75%

8.00%

7.00%

4.0%

Aug-14

14.75%

8.00%

7.00%

4.0%

Sep-14

14.75%

8.00%

7.00%

4.0%

2Vestian Quarterly Newsletter Q3 2014 Strategic Advisory Group

INDIA: ECONOMIC INDICATORS5.4% GDP growth during April-June 2014; inflation declines to a five year low of 2.38%

India’s Gross Domestic Product* (GDP) registered 5.7% growth during April-June 2014 driven by the Financing, Insurance, Real Estate and Business Services’ and Electricity, Gas & Water Supply sectors. Mining & Quarrying, Manufacturing & Construction also witnessed increased activity during the said quarter.

The inflation rate declined during Q3 2014, closing at a five- year low of 2.38% in September 2014. The decline was primarily due to dip in the food prices and global crude prices.

The Index of Industrial Production (IIP) on the other hand, decelerated to 0.5% and 0.4% in July and August respectively. Contraction in manufacturing output coupled with low offtake of consumer goods can be accounted for this decline.

Meanwhile, rupee value depreciated against US Dollar during Q3 2014, closing at INR 60.87 by end of September 2014. The depreciation during July 2014 was mainly on account of the Middle East crisis. Improvement in the investment condi-tions in the US economy also led to strengthening the US

Figure 2: Inflation & Index of Industrial Production

Figure 1: GDP Growth Contributors

Source: www.tradingeconomics.com, www.economictimes.com

Despite the decline in the inflation rate, the Reserve Bank of India has not effected any change in the repo and reverse repo rates or the cash reserve ratio. This move ensures further retreat in the inflation rate while the values remain unchanged since January 2014. Meanwhile banks, continue to maintain Prime Lending Rates, thereby refraining from any hike in home loan interest rates.

The BSE Sensex surpassed the 27,000 mark during Q3 2014 closing at 26,630.51 in September, 2014. The market gained momentum with the announcement of 5.7% GDP growth during April - June, 2014 and decline in the Current Account Deficit to 1.7% of the GDP. Further, Japan’s investment propo-sition of USD 34 billion in private and public domains over the next five years propelled the Sensex northwards.

Table 1: Key Policy Rates

Unaltered Policy Rates since January 2014

BSE Sensex surpasses 27,000 points in Q3 2014

Source: www.rbi.org.in, *Source: www.sbi.co.in

Source: Central Statistical Organisation, Govenment of India

*GDP at Factor Cost, Central Statistical Organization, Government of India

dollar against the Indian rupee during September 2014.

4.0

-3.9

-1.2

3.8

1.1

1.6

12.9

10.6

4.7

3.8

2.1

3.5

10.2

4.8

2.8

10.4

9.1

5.7

-5.0 0.0 5.0 10.0 15.0

Agriculture, Forestry & Fishing

Mining & Quarrying

Manufacturing

Electricity, Gas & Water Supply

Construction

Trade, Hotels, Transport & Commn.

Financing, Ins., Real Est. & Bus.Servs.

Community, Social & PersonalServs.

GDP AT FACTOR COST

Q2 2014 Q2 2013

Percentage

-4

-2

0

2

4

6

8

10

Jul-1

2Au

g-12

Sep-

12Oc

t-12

Nov-1

2De

c-12

Jan-

13Fe

b-13

Mar-1

3Ap

r-13

May-1

3Ju

n-13

Jul-1

3Au

g-13

Sep-

13Oc

t-13

Nov-1

3De

c-13

Jan-

14Fe

b-14

Mar-1

4Ap

r-14

May-1

4Ju

n-14

Jul-1

4Au

g-14

Sep-

14

Perc

enta

ge (%

)

Inflation IIP

The realty index, on the other hand, declined on account of the high construction costs. Besides RBI’s maintaining constant policy rates, Securities Exchange Board of India (SEBI) admonishing realty giant DLF’s top executives from accessing the capital markets has led to weakening and fall in the realty index.

Figure 3: Performance of BSE Sensex

Figure 4: Performance of BSE Realty Index

Figure 5: Net Employment Outlook*Source:www.bseindia.com

Source: Manpower India, Q4 2014

Source:www.bseindia.com

Dun and Bradstreet Composite Business Optimism Index stands at 137.6 for Q4 2014, projecting an increase by 2% as compared to Q4 2013. However, on a quarter-on-quarter basis, the index witnessed a marginal decline. This was primarily on account of a drop in business optimism with regard to selling prices.

As per the Manpower Outlook Survey India report, Net Employment Outlook for Q4 2014 is projected at 51%. Hiring plans remained stable, the value strengthened by ~3 percent-age points on a year-on-year basis when compared to the previous quarter. Hiring plans in South region was most optimistic, recording an improvement by about 11 percentage points at 54% as compared to Q4 2013, followed by West at 49%. The North region reported a decline by about 13 percent-age points to 39% while East region recorded an outlook of 32%.

In terms of industry sectors, Net Employment Outlook improved in six of the seven industry sectors. Hiring prospects look strong in both Services and Mining & Construction sectors with Net Employment Outlook at 49% and 47%, respectively. Both the Finance, Insurance & Real Estate sector and the Wholesale & Retail Trade sector, recorded an outlook of 45% each.

Business Optimism improves with revival in investor confidence and political stability

*According to Manpower Employment Outlook Survey “Net Employment Outlook”

figure is derived by taking the percentage of employers anticipating total employment

to increase and subtracting from this the percentage expecting to see a decrease in

employment at their locations in the next quarter.


Realty Index

0

500

1,000

1,500

2,000

2,500

1-Jan

-13

1-Feb

-131-M

ar-13

1-Apr

-13

1-May

-13

1-Jun

-13

1-Jul-

13

1-Aug

-13

1-Sep

-13

1-Oct

-13

1-Nov

-13

1-Dec

-13

1-Jan

-14

1-Feb

-141-M

ar-14

1-Apr

-14

1-May

-14

1-Jun

-14

1-Jul-

14

1-Aug

-14

Point

s Q3 2014

Sensex

0

5,000

10,000

15,000

20,000

25,000

30,0001-J

an-13

1-Feb

-131-M

ar-13

1-Apr

-131-M

ay-13

1-Jun

-131-J

ul-13

1-Aug

-131-S

ep-13

1-Oct

-131-N

ov-13

1-Dec

-131-J

an-14

1-Feb

-141-M

ar-14

1-Apr

-141-M

ay-14

1-Jun

-141-J

ul-14

1-Aug

-141-S

ep-14

Point

s

Q3 2014

0

10

20

30

40

50

60

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Perc

enta

ge

Net Employment Outlook

Table 2: Key PE Investments in Real Estate Sector, Q3 2014

PE Firm

The Xander Group

ASK Group

Xander Group

ASK Property Investment Advisors

Xander Group

Developer

Supertech

ATS

Prateek Group

Paranjape Schemes (Construction)

Shree Vardhman

Project

Residential

Residential

Residential

Residential

Residential

Location

Gurgaon

Noida

Delhi

Pune

Gurgaon

65

21

13

9

9

Amount(in USD million)

Source: VC Circle

Following measures were proposed in the Union Budget 2014-15 presented during Q3 2014:• Allow Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts (InvITs) for infrastructure projects• Develop 100 smart cities • Revival of un-operational Special Economic Zones (SEZ)• Set up mission on low cost affordable housing• Develop Bengaluru-Mumbai Economic Corridor (BMEC) & Vizag-Chennai corridor with 20 new industrial clusters • Establish industrial smart cities• Construct biotech clusters in Faridabad & Bengaluru and develop two new agri-biotech clusters in Pune & Kolkata • Relax FDI regulations in real estate by reducing the built up

Union Budget 2014-15 approved FDI in real estate & proposed to allow REITs

USD 4,778 million FDI inflows during the first two months of Q3 2014

Upwards of USD 117 million PE investments in Real Estate during Q3 2014


Figure 6: Net Employment Outlook: Sector Wise Comparison

Source: Manpower Employment Outlook Survey India, Q4 2014

area requirement from 50,000 sqm to 20,000 sqm, and reduce minimum capital investment from USD 10 million to USD 5 million with a lock in period of three years post completion. Support exemption on minimum built up area and capital requirement for those projects committing 30% of their total project cost to low cost affordable housing, with a three year lock-in provision.

• Increase tax deduction limit on interest on home loan to INR 2 lakh.

Among the proposed initiatives, the Union Cabinet has approved relaxation in FDI in real estate and increase in the tax deduction limit on home loan interest.

According to the Department of Industrial Policy & Promotion, Government of India, Foreign Direct Investment (FDI) inflows were at USD 4,778 million during the first two months of Q3 2014; a growth of 56% compared to the same period last year. However, during August 2014, FDI inflows declined to an 8-month low. Most investors adopted a wait-and-watch approach in view of the optimism and improvement in invest-ment conditions shown by the US economy. FDI inflows in the construction sector also witnessed a decline by ~ 61% to USD 165 million.

As per VC Circle, seven private equity (PE) deals were signed during Q3 2014 in the Indian real estate sector approximating to over USD 117 million. The entire PE investment made in the real estate sector was in the residential asset class.These investments were mainly confined to the cities of Gurgaon, Noida and Pune. Additionally, three entity level deals in the real estate were also recorded approximating to USD 108 million.

43

41

46

43

45

40

42

43

45

47

43

49

42

45

0 20 40 60

Transportation &Utilities

Wholesale &Retail Trade

Mining &Construction

Public Administration& Education

Services

Manufacturing

Finance, Insuranceand Real Estate

Percentage (%)

Seasonally Adjusted Outlook Net Employment Outlook

INDIA REAL ESTATE MARKET OVERVIEW4.6 million sqft office space uptake acrossthe four major cities

OFFICEApproximately 4.6 million sqft of office absorption was recorded across the four major cities of Bangalore, Mumbai, Chennai and Hyderabad during Q3 2014. Bangalore accounted for the highest absorption at 55% followed by Mumbai and Chennai at 22% and 15% respectively. Space supply for the quarter was recorded at 3.4 million sq ft across the four cities.


Source: Vestian Research

Figure 7: Supply And Absorption Of Office Space In Q3 2014

Table 3: Key Office Lease Transactions, Q3 2014

Company

SanDisk

TCS

Volvo India

Cerner Corporation

Building

Prestige Excelsior

Prestige Shantiniketan

Bagmane Tech Park

Manyata Embassy Business Park

Location

Outer Ring Road

Whitefield

CV Ramannagar

Outer Ring Road

Developer

Prestige Constructions


Bagmane Developers

Embassy Group

250,000

185,000

102,667

100,000

Area (in sqft)

Ajuba

Thirdware

Hospira

Datacert

India Land International Tech Park

DLF IT SEZ

Prestige Palladium

TRIL

Ambattur

Manapakkam

Greams Road

Taramani - OMR

India Land & Properties

DLF


TRIL

100,000

51,000

20,000

15,000

ADP

BirlaSoft

Open Text

Omics Group

Raheja Mind Space

TSI Wave Rock

Raheja Mind Space

Divyasree Orion

Hi-Tec City

Hi-Tec City

Hi-Tec City

Hi-Tec City

K.Raheja Corp

Tishman Speyer

K.Raheja Corp

Divyasree

100,000

70,000

40,000

18,000

BANGALORE

CHENNAI

HYDERABAD

Hyderabad at 1.3 million sqft registered the highest supply among the four major cities, followed by Bangalore at 0.93 million sqft. Rentals mostly remained stable in Bangalore and Hyderabad. Rentals in Chennai’s CBD and Off CBD micro-lo-cations witnessed appreciation on account of consistent demand, while in Mumbai, CBD rentals declined on account of spill over of demand to suburban markets.

0

1

2

3

4

5

Bangalore Chennai Hyderabad Mumbai

Area

(in m

illion

sqft)

Supply Q3 2014 Absorption Q3 2014

16,230 units launched in Bangalore, Chennaiand Hyderabad during Q3 2014

RESIDENTIAL

Approximately 16,230 new units were launched across Bangalore, Chennai and Hyderabad during Q3 2014 clocking a rise of about 29% compared to the previous quarter. 60% by the launches were in Bangalore while the numbers doubled in both Chennai and Hyderabad compared to the previous quarter. Real estate demand revived in Hyderabad with increase in enquiries. Chennai witnessed conservative call on account of project delays while Bangalore was characterized by healthy uptake. New launches were observed mostly in apartment developments; however, the three cities witnessed supply across various price brackets. Chennai witnessed most number of launches in the mid-segment category, Hyderabad in both affordable of mid-segment categories while Bangalore hosted premium, mid & affordable categories. Capital values, remained stable across the three cities.

Bangalore and Hyderabad witnessed one new mall each in Q3 2014

RETAIL

Two new malls became operational during Q3 2014 in Bangalore & Hyderabad. Bangalore witnessed approximately 0.35 million sqft of new mall space while 0.56 million sqft came up in Hyderabad. No new supply is expected in Q4 2014 across the four major cities. Although leasing was active across all the four major cities; however, with relatively lesser mall supply, leasing was mostly confined to the high street locations. Retail expansion was dominated by apparel, lifestyle and food & beverage retailers. Despite consistent leasing, rentals remained stable across both malls and high street locations as developers and landlords cautiously refrained from rental appreciation to facilitate closure of more number of deals.


Table 4: Key Residential Project Launches, Q3 2014

Project

Green Field

Brigade Northridge

Purva 270

Joy on the Banks

Apple Spire

Developer

Shriram Properties

Brigade Group

Puravankara

Sterling Developers

Apple Spire (India)

Location

Whitefield

Kogilu Road

CV Raman Nagar

Whitefield

Mysore Road

Type

Apartment

Apartment

Apartment

Apartment

Apartment

750

600

366

312

250

No. of Units

Aparna CyberLife

Saket Bhu Sattva P ll

Aparna Constructions

Saket Engineers

Nallagandla

Kompally

Apartments

Villa

930

250

Opaline Sequel

Adwitiya

Mantri Serene I

Navin's Septem

Olympia Group

Jain Housing & Constructions

Mantri Developers

Navin Housing

Old Mahabalipuram Road

Ambattur

Pallavaram

Adyar

Apartment

Apartment

Apartment

Apartment

650

252

143

56

BANGALORE

CHENNAI

HYDERABAD


9,000 - 25,000

5,500 - 13,000

3,000 - 6,300

3,300 - 5,500

4,500 - 8,000

4,000 - 8,000

3,800 - 11,500

2,800 - 5,000

3,200 - 4,200

3,500 - 6,300

3,000 - 4,600

Micro-location Capital Value (INR/sq ft)

Central

Off-Central

Bannerghatta Road

Hosur Road

Sarjapur Road

Whitefield

Bangalore North

Tumkur Road

Mysore Road

Kanakapura Road

Old Madras Road

BANGALORE2.5 million sqft office space absorption;0.35 million sqft of new mall space supply

OFFICE

The city witnessed approximately 0.93 million sqft of office space infusion during Q3 2014. The new supply was concentrated in PBD micro-locations of Whitefield and Electronics City.

Absorption was recorded at 2.5 million sqft during Q3 2014. Almost 53% of the absorption was concentrated in the Outer Ring Road and comprised of quite a few large size transactions in the range of 100,000 - 350,000 sqft. Majority of these transations were in the IT/ITeS sector. Despite buoyant leasing activity, rental values remained stable across all micro-markets.

RETAIL

Approximately 0.35 million sqft of new mall supply (i.e. MSR Elements Mall) with high occupancy level became operational during Q3 2014. Leasing activities remained consistent and were mostly confined to high street locations. Retailers like Puma, Levis, Hush Puppies, Vodafone, Airtel, Woodlands, Biba, among others opened new outlets in the city. Leasing was also observed in select malls with space availabilities like Phoenix Market City wherein online jewelery retailer- CaratLane.com launched its first brick and mortar outlet.

Despit low space availability in malls, rentals continued to remain stable. Marginal appreciation was recorded in Forum Mall, Koramangala on second generation space and in the case of lease renewals. High streets also recorded stable rentals; however, marginal appreciation was observed in Commercial Street (by 3%) and Indiranagar 100 ft Road (by 4%) on account of continued retailer demand.

RESIDENTIALThe city recorded launch of approximately 9,660 units during Q3 2014. The new launches were mostly spread across the peripheral locations of Whitefield, Electronics City, Hosur Road, Devanahalli, Kanakapura Road, Mysore Road and Tumkur Road. New launches were mostly apartment projects across premium, mid and affordable categories. The city witnessed healthy space uptake in under-construction as well as newly launched projects. Despite consistent demand, capital values mostly remained stable across all micro-loca-tions.

Table 5: Bangalore Office Rental Values*, Q3 2014

Table 6: Bangalore Retail Rental Values**, Q3 2014

*(INR/sqft/month)

*Office rentals mentioned are for warm shell spaces

**Retail rental values mentioned are for ground floor store of 1,000 sqft on carpet with an efficiency of 80% for high streets and 65% for malls.

CBD

SBD

ORR

PBD

Bangalore North

Grade A

90 - 110

70- 75

48 - 55

26 - 28

40 - 42

Grade B

80 - 85

60 - 65

45 - 50

20 - 24

35 - 40

Micro-locationRental Value (INR/sq ft/month)

500

340

240

255

240

290

130

150

175

100

95

105

Magrath Road

Cunningham Road

Vittal Mallya Road

Koramangala

Whitefield

Bannerghatta Road

Mysore Road

Rajarajeshwari Nagar

Rajaji Nagar

Malleswaram

350

185

440

495

180

200

120

140

325

250

High StreetRental Value*

Rental Value*

Mall Spaces

Brigade Road

Commercial Street

Church Street

MG Road

Indiranagar 100 ft Road

Jayanagar 11th Main Road

Sampige Road, Malleswaram

New BEL Road

Kamanahalli Main Road

ORR (Marathahalli - Sarjapur junction)

Bannerghatta Road

Yelahanka Main Road

Table 7: Bangalore Residential Capital Values for Apartments, Q3 2014






Central

Off - Central

OMR

GST

NH - 4

10,000 - 26,000

4,500 - 12,000

5,000 - 6,000

3,500 - 5,000

2,500 - 4,500

Micro-location Capital Value (INR/sqft)

CHENNAI0.67 million sqft of office space absorption; 4,800 new residential unit launches

OFFICE

Chennai’s office market witnessed 0.67 million sqft of office space absorption during Q3 2014. Absorption was observed across micro-locations; off-CBD accounted for 32% followed by SBD at 27%. While PBD micro-locations accounted for 22%, CBD recorded around 19% of the total uptake. Most of the deals sealed were medium sized transactions in the range of 20,000-35,000 sqft with only one 100,000 sqft transaction in the India Land International Tech Park. Supply was recorded at approximately 0.59 million sqft; comprising mostly of small standalone developments primarily concentrated in the CBD region. Rental values witnessed appreciation in CBD and Off-CBD micro-locations on account of consistent demand; while rentals in other micro-locations continued to remain stable.

RETAIL

The city’s retail market was characterized by active leasing mostly restricted to the high streets. Due to relatively low vacancy across the existing malls and no new supply expected till Q4 2015, retailers focused their expansion strategies in the high street locations. Westside, Pantaloons, INOX, Starbucks expanded their operations during the quarter in review. Despite active leasing in the high streets and absence of new mall supply, rentals across both malls and high streets remained stable to retain retailer interest and capitalize on the existing demand in the market.

RESIDENTIAL

Approximately 4,800 new units were launched during Q3 2014 spread across the city’s various micro-locations like OMR, Ambattur and Avadi among others. The new launches were mostly in the apartment category along with a few villa developments. Mid segment projects in the range of INR 40 – 60 lakhs dominated the fresh supply during the quarter. Demand however, remained conservative with relatively low uptake on account of slow project delivery. Capital values as a consequence, continued to remain stable.

Table 8: Chennai Office Rental Values*, Q3 2014

Table 10: Chennai Residential Capital Values, Q3 2014

Table 9: Chennai Retail Rental Values**, Q3 2014

*(INR/sqft/month)


**Retail rental values mentioned are for ground floor store of 1,000 sqft on carpet with

an efficiency of 80% for high streets and 65% for malls

200

150

130

125

130

150

175

135

100

80

Whites Rd

R K Salai

Mount Road

Nelsanmanickam Rd

Velachery

Vadapalani

270

175

175

200

350

230


Rental Value*

Mall Spaces

Khadar Nawaz Khan Road

Nungambakkam High Road

R K Salai

Usman Road – South

Usman Road – North

Pondy Bazaar

Adyar Main Road

Annanagar Second Avenue

Velachery

Purusuvakam High Road

CBD

Off CBD

SBD

OMR

GSTPBD

Grade A

75

65

40

28 - 40

25 - 35

Grade B

60

40

30

18 - 35

-

Micro-locationRental Value (INR/sqft/month)





HYDERABADConservative office space absorption; residential launches doubled to 1,770 units

OFFICE

Hyderabad’s office market witnessed approximately 1.3 million sqft of new supply during Q3 2014. The supply was mostly in Grade A office space (i.e. Mantri Cosmos, 0.8 million sqft and Avance Hub H2, 0.27 million sqft) and was concentrated in the PBD (West) micro-location. Absorption however, remained subdued at 0.39 million sqft during the quarter in review. Almost 94% of the absorption was recorded in the PBD (West) micro-location. With comparatively low demand and high vacancy level, developers refrained from any rental escalation. As a result, rentals across loctions continued to be the same as the previous quarter.

RETAIL

The city witnessed addition of 0.56 million sqft of new mall supply (i.e. Forum Sujana Mall) in Q3 2014. The new mall became operational and recorded high occupancy levels. Prominent retailers including Zara, Marks & Spencers, PVR, Starbucks, Bose, Hidesign and Sisley were among others to open stores in the mall. Leasing activity was dominated by apparel, lifestyle, electronics and food & beverage retailers. Retailers like Fashion @ Big Bazaar (Kondapur & Manjeera Mall), Mochi (Begumpet), E-Zone (Manjeera Mall), Hometown (Manjeera Mall) among others, expanded their operations. Demand remained consistent for high streets locations. On account of the ongoing metro rail work leading to traffic disruptions and low footfalls, retailer interest was low for Banjara Hills Road 1 & 2, Jubilee Hills Road No.36 and Panja-gutta. Rentals, as a consequence, underwent correction in these locations. Rentals across other high streets and malls however, continued to remain stable.

RESIDENTIAL

Residential market witnessed renewed momentum with approximately 1,770 new unit launches during Q3 2014. New unit launches almost doubled compared to the previous quarter and were primarily in the affordable to mid segment category in the price bracket of INR 25- 50 lakhs and INR 50-75 lakhs respectively. Most of the new launches were in apartment category and were concentrated in the PBD micro- locations. Demand witnessed revival and was mostly for apartment projects in Madhapur, Gachibowli and Kukatpally. Irrespective of demand revival, capital values remained stable across most micro-locations.

Table 11: Hyderabad Office Rental Values*, Q3 2014

Table 13: Hyderabad Residential Capital Values, Q3 2014

Table 12: Hyderabad Retail Rental Values**, Q3 2014

*(INR/sqft/month)



an efficiency of 80% for high streets and 65% for malls.

156

125

165

150

120

175

110

150

135

NTR Gardens

Banjara Hills

Madhapur

230

270

280


Rental Value*

Mall Spaces

M.G. Road

Begumpet

Banjara Hills Rd. 1

Banjara Hills Rd. 2

Panjagutta

Jubilee Hills Rd. 36

AS Rao Nagar

Madhapur

Kukatpally

CBD

SBD

PBD (West)

PBD

Grade A

45 - 55

50 - 55

41 - 46

22 - 28

Grade B

40 - 45

42 - 47

35 - 41

16 - 22

Micro-locationRental Value (INR/sqft/month)

4,000 - 8,500

4,000 - 8,000

3,000 - 4,500

3,000 - 5,000

3,000 - 5,000

3,600 - 6,000

3,200 - 4,500

Micro-location Capital Value (INR/sqft)

Banjara Hills

Jubilee Hills

Himayath Nagar

Maredpally

Begumpet, Somajiguda

Madhapur, Gachibowli

Kukatpally





*(INR/sqft/month)

MUMBAIApproximately 1 million sqft of office space absorption; active leasing in retail market

OFFICEApproximately 0.62 million sqft of office space supply became operational in Mumbai during Q3 2014. The supply was concentrated in the Western Suburbs and Off-CBD micro- location (Zillion Phase I - 0.25 million sqft & Liberty Tower -0.37 million sqft)

Absorption was recorded at approximately 1 million sqft; mostly across the micro-locations of Eastern Suburbs and Navi Mumbai. Increased demand was witnessed in these locations on account of availability of quality space at competitive rentals. Rentals have undergone corrections on account of subdued demand coupled with continued supply infusion since the last two quarters in the CBD and Off-CBD micro-lo-cations. However, rental values in other micro-locations remained stable.

RETAIL

The city’s retail market continued to witness active leasing across both malls and high streets. Retail expansion was mostly by apparel and lifestyle retailers. Fossil, Max, Fusion Beats, Wildcraft, Starbucks, Ddecor opened new outlets across various malls in the city. High streets witnessed expansion by regional retailers like Meena Bazaar (Malad Link Road), Mufti (Linking Road), Bombay High (Linking Road) among others.

No new mall became operational during Q3 2014, while rentals remained stable across most existing mall develop-

Table 14: Mumbai Office Rental Values*, Q3 2014

Table 15: Mumbai Retail Rental Values**, Q3 2014





an efficiency of 80% for high streets and 65% for malls.

210 - 220

170 - 200

250 - 285

90 - 120

60 - 95

50 - 65

Micro-locationRental Value

Grade A (INR/sqft/month)

CBD

Off CBD

BKC

Western Suburbs

Eastern Suburbs

Navi Mumbai

650

800

450

400

250

200

450

-

-

300

170

170

Micro-locationHigh Street

Rental Value(INR/sqft/month)

Mall Rental Value

South Mumbai

Linking Road, Juhu

BKC

Western Suburbs

Eastern Suburbs

Navi Mumbai

ments. High streets too witnessed stability in rental values with the exception of Linking Road, Juhu, where there was an appreciation on account of consistent demand from apparel retailers.

OUTLOOK


The International Monetary Fund has raised India’s GDP growth forecast to 5.6% for 2014-15 from its earlier estimate of 5.4%. The revision is backed by better performance of various sectors of the economy, decline in inflation rates, reduction in the Current Account Deficit and sector-specific Government initiatives directed towards strengthening the performance of the economy.

Policies cited in the Union Budget 2014-15, aspire confidence and optimism in terms of better job prospects across various sectors. While financial markets have improved, the value of rupee is also expected to strengthen. With relaxation in FDI in real estate, the sector is likely to witness increased investments. Allowing of REITs is expected to enhance the flow of investments from offshore and domestic sources towards income generating assets in the infrastructure & construction sectors.

Despite softening of the inflation rates, the RBI has maintained the lending and home loan rates. Additionally, increase in the tax deduction limit on home loan to INR 2 lakhs is likely to provide more flexibility to end-user investment enhancing the purchasers capacity to avail higher home loans. As a consequence, residential sector in general is likely to gain momentum as consumers may expedite their buying plans to take advantage of the low interest rates and stable property prices.

PE firms are likely to increase their exposure to real estate resorting to more project specific investments with easy exit terms. With more PE investments, RE developments will speed up as developers and builders will benefit from easy access to funds. This arrangement is likely to witness increased acceptance in the residential asset class.

In the residential domain, property prices are expected to remain stable in the short-to medium term across Bangalore, Chennai and Hyderabad on account of high availability of under-construction projects as well as new launches. Bangalore and Hyderabad are expected to witness consistent demand in the medium to short term. However, absorption is likely to dip in Chennai on account of the high price points and project delay. New launches, on the other hand, are likely to continue across all the three cities.

With increased incentives to the real estate sector in terms of relaxation in the FDI regulations and REITs; the commercial sector across the four cities is likely to witness increased investment, infusion of more Grade A developments and overall transparency in operations.

The cities of Bangalore, Mumbai, Hyderabad and Chennai are likely to witness strengthening in demand for commercial office space on account of the renewed confidence in the economy. Rentals in the short term are likely to remain stable to attract and capitalize on the demand, however, escalation is expected in the medium term.

In Bangalore, Outer Ring Road will continue to witness persistent demand; while in the medium term Bangalore North will gain traction. Mumbai is expected to witness spillover in demand to Eastern Suburbs and Navi Mumbai owing to comparatively affordable rentals. Off-CBD locations will continue to witness consistent demand in Chennai; while in Hyderabad, the demand will continue for PBD (West) micro-locations of Hi-Tech City & Madhapur.

Irrespective of the FDI policy relaxation, the retail industry has been adopting a wait-an-watch approach as there are quite a few ambiguities in the legislative norms. Though, the retail market in India offers an array of opportunities, retailers are cautious with regard to their expansion strategies and mode of functioning. Most retailers today are focussed on devising strategies to increase their operational aspects rather than establish extensive geographical penetration. With increased retailer cautiousness, developers & landlords are also likely to refrain from hiking the rentals in the short to medium term.

•

•

•

•

•

•

•

•

•

Bangalore

Chennai

Hyderabad

Mumbai

CBD

SBD

ORR

PBD

Bangalore North

CBD

Off CBD

SBD

CBD

SBD

PBD (West)

PBD

CBD

Off-CBD

BKC

Western Suburbs

Eastern Suburbs

Navi Mumbai

M.G. Road, Kasturba Road, Lavelle Road, V.M. Road, Ulsoor Road, Infantry Road

Indiranagar, Koramangala, Inner Ring Road, Old Airport Road, Bannerghatta Road

Stretch from Hebbal to Silk Board junction

Whitefield, Electronics City, Mysore Road, Bellary Road, Sarjapur Road

Bellary Road (Hebbal to BIAL)

Anna Salai, Cathedral Road, Dr. R. K. Salai, Nungambakkam, T. Nagar, Alwarpet & Egmore

Velachery, Guindy, Mt. Poonamallee Road, OMR (Madhya Kailash to Tharamani),

OMR (Tharamani to Perungudi Toll)

Ambattur

OMR (Perungudi Toll, Thoraipakkam, Shollinganallur, Siruseri, Padur)

Shriram, L&T Estancia, Mahindra World City

Begumpet, Somajiguda, Raj Bhavan Road & SP Road

Banjara Hills, Jubilee Hills

Madhapur, Gachibowli, Raidurgam, Manikonda, Hi-Tech City

Pocharam, Uppal, Shamshabad

Fort, Church Gate, Cuffe Parade, Colaba

Worli, Lower Parel, Prabhadevi

Bandra Kurla Complex

Andheri, Goregaon, Malad

Vikhroli, Powai, Mulund, Thane

Vashi, Belapur

OMR

GSTPBD

City Micro-location Key Locations

Office: Location Master


Segments

Affordable

Mid

Premium

Luxury

Price Range

INR 25-50 lakhs

INR 50-75 lakhs

INR 75 lakhs -1.5 crore

INR 1.5 crore and above

Residential: Segment Classification

Bangalore

Chennai

Central

Off-central

ORR (Marathahalli-Silk

Board Jn) & Sarjapur Road

Whitefield

Old Madras Road

Bangalore North

Hosur Road

Bannerghatta Road

Mysore Road

Kanakapura Road

Tumkur Road

Central

Off-Central

OMR

GST

NH-4

MG Road, Kasturba Road, Brunton Road, Lavelle Road, Richmond Road, Residency Road,

Frazer Town, Cox Town and Hannes Road

Indiranagar, Koramangala, Jayanagar, JP Nagar, Malleswaram, RMV Extension,

Sanjay Nagar, RT Nagar, Yeshwathpur, Rajajinagar

HSR Layout, ORR (Marathahalli-Silk Board Junction), Sarjapur Road, Haralur Main Road,

Kasavanahalli Main Road

Whitefield, Brookefield, Mahadevpura, ORR (K.R.Puram to Marathahalli), Varthur Road

K.R. Puram, Ramamurthy Nagar, Battarahalli, Sonnenahalli, Hirandahalli, Budigere,

Devanahalli-Hoskote Road

Banaswadi, HRBR Layout, Hennur Road, Thanisandra Main Road, Bellary Road, Yelahanka,

Kogilu, Chokkanahalli, Bagalur Road, Doddaballapur Road, New Town Yelahanka, Jakkur

Hosur Main Road, Electronics City, Neeladri, Chandapura, Anekal

Bannerghatta Road, Begur, BTM Extention

Mysore Road, Kengeri Satellite Town, Vijayanagar, Magadi Road, RR Nagar

Kanakapura Main Road, Banashankari Extension and Uttarahalli

Tumkur Road, Hessarghatta, Jalahalli, HMT Township

Boat Club Road, Poes Garden, Besant Nagar, Annanagar, T. Nagar, R.A. Puram

Vadapalani, Saligramam, KK Nagar, Porur, Ambattur, Pallavaram, Medavakkam

Madhya Kailash, Perungudi, Thoraipakkam, Sholinganallur, Navalur

Tambaram, Vandalur, Potheri, Guduvancherri, Mahindra World City

Poonamallee to Sriperumbudur

City Micro-location Key Locations

Residential: Location Master


##Images used are only for representaion purpose only

About Vestian

Vestian Global Workplace Services, is an ISO 9001:2008 certified contemporary workplace solutions firm that

specializes in providing occupier focused solutions for commercial, residential, industrial, retail and hospitality

sectors. Our service portfolio includes Strategic Advisory, Retail Business Solutions, Transaction Advisory, Integrated

Service Delivery, Project Services and Facilities Management Services.

We measure key deliverables of our business and align it to the clients’ strategic business goals. Our commitment to

achieve excellence and consistency in our service delivery models has helped us attain high standards of quality and

raised the bar for the industry.

Our experienced team has the required expertise and exposure in different sectors. Combining global best practices

and local knowledge, the team provides an integrated solution for all real estate requirements. Moreover, the belief in

our corporate philosophy - Delivering Measurable Results - helps us in providing solutions in keeping with global

delivery standard.

Strategic AdvisoryVestian Global Workplace Services’ Strategic Advisory Group is the research arm of Vestian. They align business

strategies of corporate clients with their real estate portfolio strategy. Property market intelligence, economic, urban

& space planning principles and analytical methods all come together to provide strategic insights to real estate

occupiers. This approach guarantees recommendations that are thorough and meets not only the needs of today, but

of the future as well. We primarily cater to Developers, Builders, Investors and Occupiers.

Our studies span a spectrum of sectors such as commercial, residential, industrial, educational & hospitality.

Transaction AdvisoryVestian’s competent Transaction team provides an array of services focused on optimizing workplace solutions that

enhance the client’s real estate portfolio. We handle varied workplace related transactions such as purchase, lease,

disposal, lease management, lease renegotiations and restructuring. We provide solutions that are aligned to the

business objectives of our clients.

Retail Business SolutionsVestian Retail Business Solutions is the full-service retail arm of Vestian. We work with each client to understand their

objectives and associated risks, establish achievable goals, develop and implement effective solutions. Vestian Retail

Business Solutions provides end-to-end services, which include Retailer Expansion Strategy, Real Estate Services,

Occupier Representation, Retail Concept Development & Consulting, and Retail Project Management.

Project ServicesThe Vestian Project Services team is a one-stop solution for clients opting for Project Management solutions. We

operate on 3 different models-Project Consulting, Integrated Service Delivery & Workplace Strategy to deliver

functional facilities that meet the clients’ space requirements. We deliver consistent, reliable and viable solutions for

local and international markets. Our delivery process involves preparation of design documents, co-ordination with

architects & consultants for design, finalization of vendor, supervision of the project and project closure.

Facilities Management ServicesVestian’s F acilties Management Services team helps clients focus on their core business activities. We act on behalf

of the client to preserve and prolong the life cycle of the asset, while generating income. We, effectively oversee

property performance and maintenance following international best practices, using high end technology and

precision processes. We manage the administration of residential, commercial, retail, healthcare, hospitaility and/or

industrial real estate.

Bangalore: Whitefield & Electronic City

Bangalore: Residential Market Report

Chennai: OMR & GST Road

Bangalore: Outer Ring Road

Bangalore: Retail Real Estate Market Report

Bangalore: Real Estate Market Report

Vestian Reports

For further information, please write to us at [email protected]

www.vestianglobal.com

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