Real Estate Highlights 2008 Q1

8/14/2019 Real Estate Highlights 2008 Q1

1/28

Knight Frank Real Estate Highlights Quarter 1 2008

Research

Contents

Mumbai 2

Pune 6

National Capital Region(NCR) 9

Kolkata 16

Bengaluru 19

Hyderabad 22

Chennai 25

Real Estate HighlightsIndia Quarter 1 2008

Executive summary!

!

!

!

!

Notwithstanding the global uncertainties arising out of the subprime meltdown,potential slowdown in US and weakening of the dollar, the real estate demand in Indiaacross sectors remains strong on the back of phenomenal economic performance.

Office sector, owing to increasing employment and business generation, is driving thedemand for retail, residential and hospitality segments. It emerged as the most dynamicsector of 2007, with increase in demand resulting in consistent rise in rental values.

With a number of infrastructure initiatives underway, viz. the metro rail and upgradationof airports, real estate activities in major cities are expected to strengthen further. Cityboundaries will continue to expand to accommodate growing demand and new realestate centres will emerge on the real estate map.

Consistent demand, rising capital and rental values and easy availability of capital haveled to widespread real estate development activity. Going forward, the year 2008 isexpected to see an infusion of approximately 87 mn.sq.ft. in the office sector,182 mn.sq.ft. in the residential sector and 36 mn.sq.ft. in the retail sector in the sevenmajor locations of the country.

Economic growth indicators along with demand-supply analysis point towards adecrease in marginal rate of growth of real estate values over the medium term and apossibility of reaching a plateau by end-2008 - barring a few exceptions. This will bedue to supply build-up in the next 12-15 months rather than lack of demand.

Palm Beach Galleria, Navi Mumbai


2/28

www.knightfrank.com

Knight FrankReal Estate Highlights Quarter 1 200802

MumbaiMarket Overview

Mumbai property market continued on its growth path over the last year. With demand, outstrippingsupply, the values continued to be upward bound, with consistent rise across all sectors.

The Mumbai office market remained strong with decreasing vacancy rates and high demand creatingopportunities for new construction across the city. The Suburban Business Districts (SBD) ofBandra Kurla Complex and Andheri remained the preferred choice for many corporate entrants. Othercommercial micro-markets such as Goregaon and Jogeshwari have also witnessed robust leasing activity.Consequently, rentals values have increased owing to the supply constraint in Grade-A office space and thesubsequent rise in demand. Besides, the emergence of Navi Mumbai as an important IT/ITES hub and otherupcoming developments such as the Navi Mumbai SEZ and the International Airport has drastically alteredthe socio economic and demographic profile of the region.

Not many new malls came up in Mumbai over the last 12-18 months. Despite this, the city's retail sectorcontinues to thrive, backed by strong spending power of high-income group as well as the positive wealth

effect induced by the buoyant local stock market last year. One of the most active retail market has beenthat of Navi Mumbai, where a number of large retail projects became operational in the recent times.

On the residential front, the city witnessed developments of numerous new age complexes. The gradualrise in interest rates had inevitably slowed homebuyers in the first and second quarter of 2007 but as the

year progressed, the residential market slowly gained back momentum. This was evident from risingoccupancy levels and price rise in the subsequent quarters. The suburbs and extended suburbs continue toabsorb the demand emanating from the land-strapped Island city, with residents opting to take advantageof lower costs and newer large-scale residential developments here.

Techweb Centre, Oshiwara Orchid City Centre, Mumbai Central

Office Supply and DemandDemand for office space in Mumbai continues to be driven by the IT/ITES, financial services, telecom,pharma and insurance sectors. Approximately 5.5 mn.sq.ft. of office space was taken up in Mumbai in2007, more than half of which were pre-leases. Strong demand for temporary office space was alsoobserved during the year. Suburbs and Central Mumbai locations have been the forerunner in office spaceabsorption, witnessing maximum demand from new entrants as well as corporates looking out forexpansion.

Approximately 5.24 mn.sq.ft. of office space was added to the Mumbai office stock by end 2007. Majorityof this new space (more than 60%) came up in the Suburban Business district of Bandra Kurla Complex and

Andheri Kurla road. Substantial supply totalling to approximately 3.5 mn.sq.ft. is expected in Lower Parel from redevelopment of erstwhile mill lands over the next six months. Around 22.5 mn.sq.ft of new officespace is expected to come up in Mumbai by 2010-end. However, this does not take into account the supplyexpected to come up from SEZ's of Navi Mumbai and Thane, which totals upto additional 10 mn.sq.ft.

Landmark office projects that became operational in 2007 include Silver Metropolis by Silver Group andTitanium by K Raheja on the Jogeshwari Western Express Highway, Dynasty By Kanakia Group in

Andheri (E), Kingston Tower A by Hiranandani Group at Powai, Marathon Innova by Marathon group atLower Parel, etc.Source: Knight Frank Research

Rental Values Capita l Values

Locations

N a r

i m a n

P o i n t

F o r t

/ B a l

l a r d

E s t a t e / C h u r c

h g a t e

W o r

l i -

P r a b

h a d e v

i

L o w e r

P a r e

l

B K C / C S T R o a d

A n

d h e r i

( E )

P o w a i

M a l a d -

M i n d s p a c e

T h a n e

N a v

i M u m

b a i

300

0

R s . /

s q . f

t . p e r m o n

t h

400

500

200

Figure 2

Office Values for Mumbai

100

40,000

0

50,000

60,000

30,000

20,000

10,000

Figure 1

10

0

New Office Supply in Mumbai

A r e a

( m n . s q . f

t . )

Source: Knight Frank Research

20

30

Year

Area Cumulative Area

2008 2009 2010

11.55

4.68

16.23

6.33

22.56

Total supply : 22.56 mn.sq.ft.


3/28

Knight Frank Real Estate Highlights Quarter 1 2008 03

On the other hand, projects like Commerz by Oberoi Group at Goregaon, Kingston Tower-B at Powai, officeprojects on Jupiter mill and Elphinstone Mill by India Bulls are some of the major upcoming office projectsthat are expected to be ready for fit-outs in mid 2008.

Navi Mumbai and Thane remained to be the alternative office markets especially for the IT/ITES sector.

Several built-to-suit office complexes, IT Parks and SEZs are coming up in this region, work on which havealready started. Approximately 2.09 mn.sq.ft. of new office supply is scheduled to come up in theselocations in 2008.

There has been a steady growth of rental values, across all the micro-markets of Mumbai. Over the last year,the base rentals in the CBD and Off CBD locations of Nariman Point and Fort have moved up byapproximately 35-40%. Rental Values for CBD and Off CBD locations currently range betweenRs.300-600/sq.ft. per month and Rs.200-300/sq.ft. per month respectively. SBD of Andheri Kurla andCentral Mumbai locations have also seen healthy appreciation in the range on 60-80%. The rentals inCentral Mumbai micro-market currently hover around Rs.250-450/sq.ft. per month whereas for AndheriKurla road it is in the range of Rs.125-200/sq.ft. per month. The peripheral markets of Thane and Navi

Mumbai, though exhibiting lower growth rate than the other business districts of Mumbai, have stillwitnessed an increase in the range 20-30%.

BKC which has seen the highest value land transaction coming its way in the year 2007, has emerged hasone of the most expensive office location in Mumbai where rentals for new office space have touchedRs.500/sq.ft. per month at present.

The residential market in Mumbai is presently witnessing acute shortage of ready apartments in themid-end segment. Under-construction projects are being booked at a swift rate with buyers reservingapartments long ahead. Majority of the newly constructed or under-construction properties listed in ourdatabase have an occupancy of close to 80% depicting strong demand situation.

The residential demand has shifted from South Mumbai to North Mumbai owing to new supply andcomparatively lower price points. In addition, with Suburban Business District emerging as a favoured officedestination, employees in these organizations prefer affordable and new accommodations in the suburbanlocations in close vicinity.

The year 2007 saw as addition of approximately 33 mn.sq.ft. of residential space to the residential stock.Bulk of this space, amounting to about 75% of the total supply in 2007, is concentrated in the suburbanlocations from Bandra to Dahisar and Kurla to Mulund. The residential developments on the mill lands ofCentral Mumbai have also added substantially to the current stock.

Some of the prominent projects of the year that are completed or nearing completion are Casa Grande by Ashford Housing Corporation at Lower Parel, Beaumonde Towers by Sheth Builders and Raheja Princess byK Raheja Universal at Prabhadevi, Oberoi Woods by Oberoi Group at Goregaon, Dreams by HDIL group atBhandup, etc.

The year 2008 will see an infusion of about 36 mn.sq.ft. of residential space. This takes into account the spillover of delayed projects, which were scheduled to be completed in 2007. Majority of this supply is againconcentrated in the suburban locations.

Prices have increased in every part of the city in the last 12 months, though the rates in which they haverisen have varied across the city.

Powai and Central Mumbai locations of Worli, Lower Parel and Prabhadevi have witnessed maximumappreciation in the range of 40-50%. Worli, Lower Parel and Prabhadevi have capital values ranging fromRs.25,000-35,000/sq.ft. whereas Powai and Chandivali at present command capital values ranging betweenRs.6,000-13,000/sq.ft.

Office Price and Rentals

Residential Supply and Demand

Residential Price


Minimum Maximum

Locations

S o u t

h M u m

b a i

W o r

l i

B a n d r a

( W )

A n

d h e r i

( W )

G o r e g a o n

t o B o r i v

i l i

G h a t

k o p a r

( E )

T h a n e

V a s h

i

R s .

/ s q . f t .

Figure 4

Residential Capital Values

40,000

0

50,000

60,000

30,000

20,000

10,000

Figure 3

New Residential Supply in Mumbai

A r e a

( m n . s q . f

t . )


Year


2008 2009 2010

20

0

40

60

36.05

12.7

48.75

7.89

56.64



4/28

www.knightfrank.com


Other suburban locations from Ghatkopar to Mulund and Goregoan to Borivali have also seen a healthyappreciation over the past year in the range of 25-35%. Capital values for projects in Bandra, Khar andSantacruz range from Rs.15,000-30,000/sq.ft. Andheri, Vile Parle and Juhu have also gained prominencewith capital values ranging between Rs.8,000-15,000/sq.ft. Ghatkopar, Vikroli, Bhandup and Mulund in theCentral Suburbs and Goregaon, Malad, Kandivali and Borivali in the western suburbs command capitalvalues in the range of Rs.6,000-8,500/sq.ft. and Rs.6,500-9,000/sq.ft. respectively. Capital values in Thaneand Navi Mumbai have remained stable over the year with current capital values ranging fromRs.4,500-6,000/sq.ft.

Retail supply has remained considerably stagnant over the year in the Island city with only one mall comingup in this region. Orchid City Centre Mall at Mumbai Central is the latest mall in Island City, houses brands

from the Future Group among other tenants. The year 2008 will see an infusion of about 5.2 mn.sq.ft. ofretail supply with 16 malls coming up in the city.

Significantly, a number of malls replete with entertainment, retail and leisure components have come up inthe suburbs and Navi Mumbai in 2007. The newest entrants to the mall scene in the suburbs include

Mega Mall (500,000 sq.ft.) at Jogeshwari Link Road and Thakur mall (150,000 sq.ft.) at Dahisar, whilePalm Beach Galleria (300,000 sq.ft.), Raghuleela Mall (250,000 sq.ft.) and City Centre (300,000 sq.ft.) havebecome operational at Vashi. Though, a number of malls have come up in Navi Mumbai, demand has notbeen very robust and this is evident from slower absorption rates and lower conversion rates in most of thenew malls.

The rental and capital values across the high streets and malls, witnessed an average appreciation in therange of 20-30% in the last one year. The retail rentals existing in the CBD of Nariman Point are in therange of Rs.275-400/sq.ft. per month, while the retail rates at Lower Parel are in the range ofRs.300-450/sq.ft. per month,. Suburban locations like Andheri and Malad have retail rentals quoted within arange of Rs.150-350/sq.ft. per month whereas existing mall rentals and high street retail rentals in Bandraare in the range of Rs.300-800/sq.ft. per month.

The year 2007 was marked with some landmark decisions for the real estate market of Mumbai, foremost ofwhich is the repealing to the Urban Land Ceiling and Regulation Act (ULCRA) 1976. With Government ofMaharashtra scrapping the ULCRA, the mega-polis of Mumbai along with Thane and Navi Mumbai will seean infusion of around 25,000 acres of land. However, only a small portion of this land may be vacant, withthe rest either encroached by slums or embroiled in litigations. It is believed that ULCRA, which accordingto most developers is hampering affordable construction, will cause the property prices to sober down by15-20% in the long run and also help bring transparency.

Mumbai's office market has appreciated considerably over the last one year and will continue to do so.Rental values for office market will continue their climb, but an infusion of close to 12 mn.sq.ft. of fresh

supply, 70% of which will be in the Grade-A category, will serve to arrest the steep rate of increase of officespace values. According to Knight Frank Research, Mumbai office space values across micro-markets willwitness an increase of 15-25% over the next few quarters and this will be much lower that what has beenwitnessed in the last few months. Going forward, the trend of suburbanization will continue, with locationslike BKC and Andheri gaining furthermore importance. If Mumbai Metropolitan Region Development

Authority's (MMRDA) decision to develop three new business growth centres near Vasai, Kalyan andKanjurmarg, along the lines of the BKC comes through, it will ease pressure off the SBD in the forthcoming

years.

On the residential front, in the face of substantial planned supply (approximately 36 mn.sq.ft.) expected toenter the market in 2008, values are expected to somewhat soften and undergo a 15-25% increase over thenext one year. Here again, variations will be observed across micro-markets. As in case of office market,suburbs will gain prominence even in the residential market.

Retail Supply and Demand

Retail Rentals

Outlook


Minimum Maximum

Locations

L o w e r

P a r e

l

A n d

h e r

i

M a l a d

V a s h

i

H a j

i A l i / K e m p s

C o r n e r

L i n

k i n g

R o a d

M u l u n

d

R s . / s

q . f

t . p e r m o n

t h

Figure 6

Retail Rental Values800

0

600

400

200

Figure 5

0

5

New Retail Supply in Mumbai

A r e a

( m n . s q . f

t . )


10

Year


2008 2009-10

5.23

2.91

8.14



5/28


With a number of infrastructure projects in the pipeline, the construction activities in the region will step-upeven further. Thane along with Navi Mumbai will be come favourable option for home-buyers in the middleincome category.

Organised retailing in the city has grown manifold and has become a popular retail format. However,

several malls are being built in the same locations leading to clustering of malls and tapping of the samecatchment area. If this is not taken care of, the success of the new malls will be affected.

Departmental stores, hypermarkets and supermarkets, discount stores and speciality malls are expected todrive the organised retail in the city, as they tend to have a higher conversion rate. With high quantum ofnew format retail space in the pipeline, differentiations will be the all-important element. Innovation,striking the right tenant mix, effective mall management and provision of ample parking space are also thecomponents that will decide the future success of mall development. Rental values in the retail market areexpected to appreciate by around 15-20% in the next 12-18 months.

The adjudications of 2007 will have significant repercussion on the real estate scenario of Mumbai. It beganwith augmenting of the FSI (to 4) for BKC, the Dharavi Redevelopment Project, noteworthy land auctions atBKC and the scrapping of the Urban Land Ceiling (Regulation) Act (ULCRA). All these developments mayhelp to reduce the current demand-supply mismatch and will have an impact on the spiralling real estatevalues in the long run.


6/28

www.knightfrank.com


PuneMarket Overview

Pune real estate sector has witnessed rapid growth in year the 2007. As before, maximum development hascontinued in peripheral regions due to lack of large land parcels in central locations. Out of this, majority ofdevelopment is concentrated in eastern and western part of Pune.

The Rajiv Gandhi Infotech Park at Hinjewadi was one of the first developments to take place in theperipheral locations of the city. Hinjewadi's strategic location, with proximity to the Mumbai-Puneexpressway and the Mumbai-Bangalore highway has supported other developments in the region. Of late,the eastern corridor along Nagar Road upto Magarpatta has also come up as a preferred location for the

financial sector as well as the IT/ITES companies.

Buoyed by strong economic conditions, favourable demographics and consumer spending, Pune continuesto grow at a rapid pace, a factor which is encouraging national retailers to continue expansion plans andoverseas retailers to continue to seek opportunities in the Pune market. Organised retailing has increasinglyshifting towards the newer residential pockets of Bavdhan, Hinjewadi, Baner etc due to their proximity to IT

destinations.

The residential market in Pune continues to remain strong, aided by strong demand from the IT/ITES sector.The developers have geared up to keep pace with the rise in quality demand leading to a significant changein project profiles, housing patterns and facilities offered. Increase in demand was spread throughout all sizecategories, but were most prevalent at the high end segment of the market.

In 2007 a number of projects in the eastern zone obtained the SEZ status. This includes the 400-acreMagarpatta City by Magarpatta Township Development & Construction Company Limited, a 4 mn.sq.ft. ofIT hub EON Free Zone by Panchshil Realty at Kharadi and SP Infociti by SPCL located at Sholapur Road.

Pune Central, Ganesh Khind Road Exotica, Koregoan Park

Office Supply and Demand Approximately 9.31 mn sq.ft of office space was added to stock by end 2007, out of which nearly 60%came up in the eastern zone, mainly in locations like Kharadi, Kalyani Nagar and Viman Nagar. On the other

hand, Hinjewadi, in the western zone contributed 20% to the total new supply in 2007. In Pune, the trendof leasing built-to-suit campus style facilities has continued in Pune. The total office space absorption inPune in 2007 doubled from 2006 and was reported to be approximately 5.5 mn.sq.ft. Besides this,pre-leases to the tune of 1 mn.sq.ft were also done in the same year.

Amongst projects that became operational in 2007, note can be of TechPark on Airport Road, SP Infociti onSholapur Road, Cybercity at Hadapsar, and GigaSpace and Weikfield IT Park at Vimannagar. In 2008,approximately 7.02 mn sq.ft of office space is expected to enter the market of which the eastern zone shallbe responsible for approximately 67% of the total supply. Important projects to be completed in 2008include Commerzone at Yerawada, Cerebrum at Kalyaninagar and Eternia at Wakdewadi.

40

0

R s . /

s q . f t . p

e r m o n

t h

60

80

20

6,000

0

8,000

10,000

4,000

2,000

Figure 8

Office Values for Pune



K a l y a n

i N a g a r

N a g a r

R o a d

H a d a p s a r

Y e r w a d a /

A i r p o r

t R d

.

B a n e r

A u n

d h

B u n

d G a r

d e n

R o a d

S e n a p a t

i B a p a t

R o a d

K a r v e

R o a d

/ K o t

h r u

d

Locations

Figure 7

0

10

New Office Supply in Pune

A r e a

( m n . s q . f

t . )


20

Year


2008 2009 2010

7.02 7.18

14.20

4.17

18.37



7/28




Residential Price

The eastern and western zone in Pune has seen the maximum real estate development over the past one year. Together with this, these regions witnessed strong leasing activity, thereby leading to reasonableappreciation in rental values for office space. Eastern zone office rentals which have increased by 25-30%

over the last one year are currently at since the values in 2007 and current values in this zone are in therange of Rs.35-45/sq.ft. per month. In the western zone, the rentals underwent an appreciation of 10-15%and are presently Rs.50-60/sq.ft.

Office space rental values in the central zone range between Rs.60-70/sq.ft. per month, reflecting anincrease of around 20% over last year's values. In upcoming eastern and northern locations like Manjiri,Shevalwadi and Phursungi average rental values range between Rs.30-35 /sq.ft.per month

Rapid residential construction which had been taking place in various newly developed pockets of Pune likeBaner is starting to slow down due to an increase in vacancy rates combined with increasing prices. Asanticipated, IT development in the city did not match the rapid residential development, resulting in loweroccupancy rates.

On the contrary, traditional residential pockets in the central zone like Model colony, Senapati Bapat Road,etc have almost nil vacancy. This can be attributed to the dearth of new residential supply in the region.Many old developments have been demolished to give way to new high rise developments due to limitedland availability in prime locations.

Approximately 26.21 mn sq.ft. of residential space has been added to the market in 2007, of which about35% each has been contributed by the western zone and eastern zone. Some of the prominent projectswhich were added to stock in 2007 are Sigma One Phase I in Kothrud, Kumar Presidency in Koregaon Park,

Water Front and Fortaleza in Kalyani Nagar etc. In 2008, 31.61 mn.sq.ft. of new residential supplyexpected to enter the Pune market. However, of the total supply projected, some of the developments mayget spilled over to 2009, on account of deliberate project delays incase a slowdown in the market isperceived.

A large share of the upcoming Grade A residential space is contributed by the various townships in Punea majority of which is concentrated in and around IT hubs. Blue Ridge, a 138 acre township by Paranjpe

schemes has been launched in western zone, near Hinjewadi, and it has residential and IT developmentalong with other facilities.

The upmarket residential locations of Central zone like Boat Club Road, Prabhat Road, etc command valuesranging between Rs.8,000-12,000/ sq.ft which denotes a appreciation of about 20-30% over the ratesexisting in 2007. Senapati Bapat Road is witnessing an unprecedented growth in office projects, mainly dueto the International Convention Centre, which also houses many IT/ITES companies. This has escalateddemand for high and mid-end residential projects. The price range for residential properties in thismicro-market is between Rs.5,500-7,500/sq.ft.

In northern zone the Pimpri Chinchwad Municipal Corporation (PCMC) which is the industrial twin of Pune,residential properties are in the range between Rs.2,800-3,500/sq.ft. These locations which predominantlycater to the middle income group have seen an appreciation of 15-20%.

Western zone capital values vary based on the location and amenities provided. Most projects in this zonecommand values ranging between Rs.3,050-4,500/sq.ft reflecting an appreciation of 10-15% over theprevious year's values. For instance, the new township project by Paranjpe schemes in Hinjewadi had beenlaunched at Rs.3,050/sq.ft.

In eastern zone, development of IT hubs and the construction of two new townships have led to anappreciation of 15-25% in the capital values. Residential properties in these locations command prices ofRs.2,700-6,000/sq.ft. On the other hand, the appreciation in southern zone is 20-25% with capital ratesranging between Rs.3,000-5,500/sq.ft.


Minimum Maximum

Locations

K o r e g a o n

P a r k

B o a t

C l u b R o a d

D e c c a n

K a l y a n i n a g a r

A u n

d h

K o t

h r u

d

S o p a n

b a u g

/ U d a y

B a u g

K a r v e

R o a d

R s . /

s q . f t .

Figure 10


8,000

0

10,000

12,000

6,000

4,000

2,000

Figure 9

New Residential Supply in Pune

A r e a

( m n . s q . f

t . )


Year


2008 2009 2010

20

0

40

60

31.61

11.46

43.07

4.58

47.65



8/28

www.knightfrank.com



Retail Rentals

Outlook

The prime locations in Pune where retail developments have traditionally been flourishing are concentratedin the CBD locations of MG Road, Camp, JM Road and FC Road.

Amongst the notable retail projects, Ascent Mall which houses Pune Central (93,654 sq.ft) has becomeoperational this year. Besides, other malls like Krome (120,000 sq.ft.) on Solapur Road and Ishanya(500,000 sq.ft), an interior specialty mall where Home Town and Crome have already started theiroperations, are the latest entrants to the mall scene of Pune.

A supply of approximately 1.28 mn.sq.ft entered the Pune retail market in 2007, while around 13 new mallstotaling to 1.35 mn.sq.ft of retail space is expected to enter the market by the end of 2008.

Key retail projects scheduled to be completed in 2008 include One Center Port (200,000 sq.ft) onGaneshkhind Road, Down Town (200,000 sq.ft) at Erandwane, Gold Mall (313,095 sq.ft) and Dolphin Mall(150,000 sq.ft.) at Hadapsar Road.

Rental and capital values in the retail market of the city have been rising since 2005 and various newlydeveloped real estate pockets have emerged as new retail destinations. In the western zone, Aundh hasdeveloped into a significant retail destination along with other residential and IT/ITES developments. Retailrental values have gone up to almost Rs.150/sq.ft per month having a 40% increase as compared to the last

year's values.

In the eastern zone, Nagar Road and Mundhawa-Kharadi bypass road are amongst the fast growing retaillocations due to their proximity to various IT developments. This has led to an appreciation of 20% in rentalvalues to a present value of almost Rs.110/sq.ft per month. In the Central zone, the rental values onSenapati Bapat Road have increased by around 40% escalating to Rs.180/sq.ft per month owing to thepresence of the ICC (International Convention Centre).

With the current accelerated growth in real estate sector, Pune has emerged as a promising market foroffice space development along with retail and residential. Major demand drivers have been the IT/ITESsector as well as the expanding automobile industry. The demand for office space is expected to remainbuoyant in the forthcoming months, with an expected appreciation of around 15-20% in office space rentalvalues. Residential and retail prices, riding on the back of the active office sector, shall continue to attractinvestor interest and will witness a price appreciation of around 15-20% - 25-30% respectively.

Pune is increasingly becoming an investor friendly destination as it has seen considerable appreciation inproperty values in last 3-4 years coupled with strong space demand. Also, the Maharashtra IndustrialDevelopment Corporation (MIDC) have been offering various incentives like exemption in stamp duty,electricity waivers, refund of octroi, etc. thus making Pune a favoured destination for IT/ITES companies.The JNNURM fund of 270 crores is facilitating the infrastructure development in Pune. Three major flyovershave become operational along with the development of newer roads while a metro rail is being planned

and a new airport is underway. These initiatives will provide the requisite environment to support future realestate growth in the city.

Besides, the above a new government legislation permits building to be built upto a height of 100 metersconsidering certain parameters.Consequently, Pune's skyline would be redefined with high rises inresidential and office developments. Further, the recently repealed Urban Land Ceiling and Regulation Acthave released around 17,000 acres of land, mostly in peripheral locations, thereby auguring expectations ofstabilising the property rates in sometime in future.

08

150

0

200

250

100

50


Minimum Maximum

Locations

C a m p

J . M R

o a d

D h o l e P a t i l R o a d

B u n

d G a r

d e n

R o a d

A u n

d h

S e n a p a t

i B a p a t

R o a d

K a r v e

R o a d

/ K o t

h r u

d

Y e r w a d a /

K a l y a n i

N a g a r

R s . / s q . f t . p

e r m o n

t h

Figure 12

Retail Rental Values

Figure 11

0

5

New Retail Supply in Pune

A r e a

( m n . s q . f

t . )


10

Year


2008 2009 2010

1.86

3.64

5.50

1.10

6.60



9/28


10/28

www.knightfrank.com


Delhi

Gurgaon

Noida and Greater Noida

Other Markets


In Delhi, Netaji Subhash Place, Saket and Jasola have emerged as major supply zones in office spacesegment. Due to excellent connectivity with satellite locations through the metro rail, Connaught Place hasrenewed the interest for office space among the corporates in 2007. City Centre project by Municipal

Corporation Delhi on Minto Road is also a landmark project under construction in Lutyen's Delhi. Around0.97 mn.sq.ft. of new office space is expected to come up Delhi in 2008.

With infrastructure developments like flyovers and expressways and owing to its proximity to the airport,Gurgaon has become a favoured office destination. NH-8 has witnessed substantial activity in the officesegment in Gurgaon with Cyber City buildings being leased to corporate majors. Golf Course Road andSohna Road are the new zones where most of the office space projects are coming up. The city will furthersee the infusion of approximately 11.2 mn.sq.ft. in 2008. Besides, IMT Manesar, in the vicinity of Gurgaon,will be offering approximately 1.14 mn.sq.ft. in 2008.

In recent times, Noida has become the preferred destination of companies with larger format. Locations likeSector-62 and Taj Expressway are favoured by the corporates and IT companies to locate their offices. Withestimated 11% share in office supply, Noida will witness the infusion of around 7.45 mn.sq.ft., whileGreater Noida will have new office space supply of about 3.83 mn.sq.ft. in 2008.

Approximately 10 IT parks and SEZ projects have been announced in Faridabad, which are at conceptualstage and are expected to contribute to the NCR office market by 2010-11. The announcement ofextension of Delhi Metro project till Kundli has triggered the pace of development on the fringes of Delhi.Kundli (Sonepat) is expected to add 10 mn.sq.ft. of office space supply in NCR by 2010.

A non-uniform trend-line in rental growth of NCR office space market has been observed. In CBD,Connaught Place, with an appreciation of 20% over the last year's values, the present rentals are recordedbetween Rs.250-350/sq.ft per month whereas capital values vary between Rs.22,500-45,000 per sq.ft.based on its proximity from inner circle.

Gurgaon witnessed 32% rental appreciation during the first quarter in 2007, however presently rentals havestabilised to some extent and vary between Rs. 85-110/sq.ft. per month for non-IT and Rs.55-70/sq.ft.per month for IT buildings. Capital values on NH-8 hover between Rs.13,000-16,000/sq.ft. whereas primelocation like MG Road commands Rs.18,000-20,000/sq.ft. In Manesar, capital values vary betweenRs.6,500-7,500/sq.ft.

Ongoing rentals in Noida for non-IT buildings are Rs.100-150/sq.ft. per month at key locations like Sectors16 and 18 whereas IT buildings command Rs.45-65/sq.ft. per month. Noida office space rental values haveappreciated at a rate of 40% on an average since the last year. Capital values are the highest in CBD,

Sector-18 with a price band of Rs.18,000-24,000/sq.ft. whereas peripheral locations on the Taj Expresswaycommand Rs.6,500-7,500/sq.ft. Rental values in Greater Noida vary between Rs.25-40/sq.ft. per month andcapital values vary between Rs.4,000-6,500/sq.ft.



Locations

C o n n a u g

h t P l a c e

N e h r u

P l a c e

O k h l a I n d u s

t r i a l A r e a

M o h a n

C o o p e r a

t i v e

A r e a

G u r g a o n

N o i

d a

B h i k a j

i C a m a j

i P l a c e

200

0

R s . /

s q . f

t . p e r m o n

t h

300

400

100

Figure 14

Office Values for NCR

40,000

0

50,000

30,000

20,000

10,000


11/28


Residential Supply and DemandDelhi

Gurgaon

Noida

Greater Noida

Faridabad

Ghaziabad

Sonepat/Panipat/Kundli and Bhiwadi/Dharuhera/Rewari/Alwar

With the commissioning of Delhi Metro, the residential locations of Dwarka and Rohini have experienced

substantial appreciation in capital values. Most of the residential construction in Delhi primarily constitutesof Builder Floors in the already developed areas. This is primarily because of non-availabilty of land parcelsin the city. Parsvnath has two projects under construction in north and west Delhi. DLF has also acquiredland for development in south Delhi. The total residential supply expected in Delhi by 2010 is2.65 mn.sq.ft.

Upcoming residential growth pockets in Gurgaon include Golf Course Road, Sohna Road, DLF Phase V(Nirvana Country) and sectors 47, 56, 57. Gurgaon accounts for about 53.68 mn.sq.ft. of total residentialspace coming up by 2010, of which about 22.34 mn.sq.ft. shall be ready by 2008. Projects in Gurgaon andManesar have achieved an occupancy rate of 80%.

Noida has been one of the most sought after residential markets in NCR with recorded occupancy of 75%.The stretch along the Greater Noida Expressway has large quantum of office development planned andthus is expected to see demand for quality residential space. Noida has around 41.17 mn.sq.ft. ofresidential space coming up by the year 2010, out of which 1.74 mn.sq.ft will be added in 2008 alone. Thesectors along the Greater Noida Expressway are expected to receive the maximum (approximately 95%) ofthe total supply.

The residential development was earlier concentrated in the sectors Omega I, II; Gamma I, II; Beta I, II;Delta II, III, Alpha I, II. With the increase in demand, development is shifting towards sectors Zeta II; Eta II;Omicron I, II, III; Phi I, II, III; Chi I, II; Psi II; Sigma I, II, III, IV; Pi I, II. The locations of the future includeSector Tau, Swarn Nagari, sectors Mu I, II; Nu I, II; Xu I, II, Kappa I, II; Eta I, II; Iota I,II. Approximately

27.72 mn.sq.ft. of residential space shall come up in Greater Noida by 2010 and 5.12 mn.sq.ft. will beadded in 2008 alone.

A large number of residential projects were announced in Faridabad in the year 2007. Even Surajkund-Badkal area has seen substantial development over the last 2 years. However, as the market is primarilyinvestment driven, there has been very little end-user demand in the area. The Delhi metro is expected tobe extended to the satellite township in the near future and this is expected to increase the number ofpeople willing to settle down in Faridabad. A total of 37.42 mn.sq.ft. of residential development is proposedto come up in the city by 2010 out of which 0.83 mn.sq.ft. will be added by the end of 2008.

The locational advantage has been one of the primary drivers for the growth of residential market inGhaziabad. The construction of the Delhi metro has already begun and is expected to boost the housingdemand in the region. The city is estimated to have a considerable supply of 66.19 mn.sq.ft. out of which14.63 mn.sq.ft. will be added in 2008, thereby responsible for contributing around 28% of the totalestimated supply of NCR. The development is concentrated more in the Indirapuram area along the NH-24.There are also various residential projects coming up along the NH-58, leading to Meerut.

Apart from the above mentioned micro-markets of NCR Delhi, substantial residential development is alsocoming up in Sonepat, Panipat and Kundli as well as in Bhiwadi, Dharuhera, Rewari and Alwar. Altogetherthese pockets will account for 37.64 mn.sq.ft of residential space by 2010 out of which 5.41 mn.sq.ft. willcome up by 2008.

Though these markets are currently investor driven, end-user demand is expected to grow in future as officedevelopments come up in these locations.

Figure 15

New Residential Supply in NCR

A r e a

( m n . s q . f

t . )


Year


2008 2009 2010

100

0

200

300

41.82

111.66

153.48

83.64

237.12



12/28

www.knightfrank.com


Residential PriceDelhi

Gurgaon

Noida

Greater Noida

Faridabad

Ghaziabad

Sonepat/Panipat/Kundli and Bhiwadi/Dharuhera/Rewari/Alwar

The capital values in Dwarka and Rohini are in the range of Rs.4,200-4,800/sq.ft. The current values in these

locations have seen an appreciation of 25% and 45% respectively over the last year. Chanakyapuricommands the maximum residential capital values of around Rs.45,000-50,000/sq.ft., with marginalappreciation in the past year owing to the saturation of residential stock. Mayur Vihar in east Delhi has seenthe average capital values appreciate by over 100% since 2004.

In Gurgaon, Sohna Road commands an average capital value of around Rs.3,250/sq.ft., an increase ofaround 20% since 2007 values. The capital values in DLF Phase V have gone up by 40% over the last yearand the average rate currently is Rs.6,000/sq.ft. Meanwhile, the average capital values in DLF Phase II and IVare in the range of Rs.5,000-5,500/sq.ft.

The residential capital values in the prime sectors (14, 14A, 15, 15A) of Noida are in the rangeRs.4,000-6,250/sq.ft. The rates have undergone an appreciation of approximately 55% since last year andthe maximum increase was in sectors 92, 93 and 93A. The average residential rates in these sectors arearound Rs.5,000/sq.ft. The recently launched Jaypee Greens in Sector 128 on the expressway has beenlaunched at Rs.6,100/sq.ft.

The residential capital values in Sector Phi and Omega have appreciated by over 45% since last year andhave reached an average present value of Rs.2,900/sq.ft. In sectors Alpha, Beta and Gamma, the residentialcapital values have risen by 20% since last year and by 60% since 2005 and are presently reported to beRs.3,000/sq.ft. Sector Tau, near Pari Chowk, has seen an appreciation of about 31% in residential capitalvalues since last year and are currently quoted at Rs.2,450/sq.ft.

The average appreciation in the major locations in Faridabad has been in the range of 30-35%. The locationnear the Surajkund Lake is the most sought after residential pocket in Faridabad owing to good connectivitywith Gurgaon and is commanding an average residential capital value of around Rs.4,775/sq.ft. Projects insectors 78 and 89 are however still available at an average rate of Rs.1,850/sq.ft.

The capital values in Vaishali and Indirapuram have gone up by 45% since last year. Vaishali, in proximity toeast Delhi is commanding an average capital value of Rs.2,950/sq.ft. while the average residential capitalvalues in Indirapuram (which has access through the NH-24) is Rs.2,800/sq.ft. Residential apartments arealso under construction on the NH-58, available at an average rate of Rs.1,600/sq.ft.

Residential capital values in Sonepat/Panipat/Kundli range between Rs.1,350-1,950/sq.ft. and have gone upby 30-80% in the last one year. Maximum appreciation has been in plot prices in Kundli. On a similar note,Bhiwadi/Dharuhera/Rewari/Alwar has residential values ranging between Rs.1,600-2,100/sq.ft. and thesehave appreciated by an average of 30% since last year. Dharuhera commands the maximum rates ofaround Rs.1,900-2,100/sq.ft. due to its proximity to Manesar and Gurgaon.


Minimum Maximum

Locations

C h a n a k y a p u r

i

J o r

B a g

h

G r e a t e r

k a i l a s h

I & I

P o c k e t s

i n G u r g a o n

( A G r a

d e )

N o i

d a

G r e a

t e r

N o i

d a

E a s t

D e l

h i ( M a y u r

V i h a r , P

r e e t

V i h a r , I P

e x t e n

t i o n

)

F a r i

d a b a d

G h a z

i a b a d

R s . /

s q . f t .

Figure 16


30,000

0

40,000

50,000

20,000

10,000


13/28


Retail Supply and DemandDelhi

Gurgaon

Noida

Greater Noida

Ghaziabad

Faridabad

Sonepat/Panipat/Kundli

Apart from the already established retail destinations of Connaught Place, Karol Bagh, Khan Market, South

Extension, etc. a number of malls have come up in west Delhi and south Delhi in the last 2-3 years. Approximately 5.81 mn.sq.ft. of retail space is expected to enter the Delhi market by 2010. Around4.05 mn.sq.ft. of new retail space was delivered in 2007 while approximately 4.77 mn.sq.ft. will be addedin 2008.

Gurgaon is expected to receive a total of 7.18 mn.sq.ft. of retail space by 2010. Approximately1.52 mn.sq.ft. of retail space became operational in 2007, with another 2.43 mn.sq.ft. estimated to beadded in 2008. Also, the stretch along the NH-8 is expected to develop as a major retail corridor withprestigious projects like Ambience Mall (operational) and DLF's Mall of India in the pipeline. MG Road is setto see more retail activity with malls like Unitech's Gurgaon Central under construction. With betterconnectivity through NH-8, and the proposed metro rail, Gurgaon is ready to give stiff competition to themalls in south Delhi.

The total retail space proposed for Noida is around 0.31 mn.sq.ft. by 2008. The recently operational mallproject 'Great India Place' (900,000 sq.ft.) by Unitech has put Sector 18 amongst the most preferred retailpockets in Noida. The scope for retail market growth in Noida is very extensive due to the absence ofmultiple business districts, thereby making way for the healthy co-existence of the organised and theunorganised retail.

Greater Noida has a good quantum of residential space under construction and thus the organised retailmarket has good growth prospects. The location having traditional retail presence in Greater Noida is the

Alpha Commercial Belt. However, over the years, other sectors have been developed by the Greater Noida

Development Authority, which has led to increased retail activity in the sectors Omega and Tau. The totalretail space coming up till 2008 is approximately 2.07 mn.sq.ft.

Ghaziabad has around 3.63 mn.sq.ft. of retail space coming up by the year 2010 of which 1.52 mn.sq.ft.will come up by 2008. The major growth areas are Indirapuram, along the NH-24 and the GT Road. As aspill-over, even Meerut (NH-58) is proposed to see good amount of retail development. Ghaziabad hasexcellent retail catchment and is also very close to the satellite towns of Noida and Greater Noida. TheMahagun Mall (450,000 sq.ft.) and The Gateway mall (500,000 sq.ft.) are some of the large scale projectsplanned for the future.

Organised retail is slowly expanding in Faridabad with development of new residential sectors. Approximately Faridabad will contribute to 1.57 mn.sq.ft. of retail space by in 2008. Most of thedevelopment is occurring along the NH-2, known as Mathura Road. Being an old industrial town, Faridabadhas a large customer base and these malls intend to cash in on this catchment. Crown Interiors is the largestmall (600,000 sq.ft.) under construction in Faridabad and is expected to be operational in 2008.

Organised retail is trickling down to the fringe areas like Sonepat, Panipat and Kundli which will account forapproximately 3.38 mn.sq.ft. retail space by the year 2010. Out of this Panipat is expected to receive themaximum supply of 1.72 mn.sq.ft. by 2010, of which a total of 0.67 mn.sq.ft. will be added in 2008.Dharuhera and Bhiwadi shall have around 0.92 mn.sq.ft. of retail space ready by the year 2009. The retailscenario in this area has not been able to pick up much due to the presence of the strong retail market ofGurgaon in the neighbourhood.

Figure 17

10

0

New Retail Supply in NCR

A r e a

( m n . s q . f

t . )


20

30

Year


2008 2009 2010

13.12

6.27

19.39

6.51

25.90



14/28

www.knightfrank.com


Retail RentalsDelhi

Gurgaon

Noida

Greater Noida

Ghaziabad

Faridabad

Sonepat/Panipat/Kundli

Outlook

The Central Business District (CBD) of Connaught Place which has undergone an 45% increase in rentals

over the last one year currently commands an average rental of Rs.800/sq.ft. per month. Retail rentals in Vasant Kunj and Khan Market have also seen an appreciation of approximately 40%, while Saket haswitnessed appreciation of about 25%. The average rentals quoted in these locations presently areRs.700/sq.ft. per month, Rs.1,250/sq.ft. per month and Rs.500/sq.ft. per month respectively.

The average rentals on the MG Road are in the range of Rs.200-250/sq.ft. per month, reflecting a 15%increase since last year. The average rental values on Sohna Road have appreciated by 30% and in DLFPhase V by 55%. Currently, the rentals reported in these locations are Rs.120/sq.ft. per month andRs.90/sq.ft. per month respectively.

The average retail rentals in the upmarket Sector 18 have gone up by 40% since last year. The ongoingaverage rentals in this sector are in the range of Rs.250-300/sq.ft. per month. However, the unorganised

Atta market has seen very little change in rentals.

The region near the famous Pari Chowk (Knowledge Park) is commanding the highest rentals ofRs.110-130/sq.ft. per month. The retail rentals here have gone up by around 35% since last year. OmaxeConnaught Place (OCP) is commanding an average rental of Rs.90/sq.ft. per month. Sector Omegacommands the maximum average rental of Rs.100/sq.ft. per month.

Indirapuram has seen an average appreciation of 20% in retail values since last year and are currentlyquoting rentals at a range of Rs.125-150/sq.ft. per month. Locations like Kaushambi and Vaishali have seen

appreciation of 25% and are commanding an average rental of Rs.250/sq.ft. per month. This is mainlybecause of the increased residential activity these locations are experiencing.

The rental values on the Mathura Road have gone up by 30% on an average since last year. The area iscommanding an average rental of Rs.108/sq.ft. per month. The reason behind the considerableappreciation can be attributed to the large residential base that exists there.

Retail rentals in Sonepat/Panipat/Kundli and Dharuhera/Bhiwadi/Rewari/Alwar are almost the same andaverage at about Rs.50/sq.ft. per month. This value denotes a 30-40% increase over the rates quoted last

year.

Given the project delivery schedule, NCR Delhi real estate market will witness robust activity in the forthcoming 2-3 years.

With RBI indications to stabilise the home loan interest rates, the NCR market is expected to witness growthin the residential sector which will further propel development of residential projects in the peripheralmarkets of Noida, Gurgaon and Faridabad with an average appreciation of 15%. Besides, infrastructureinitiatives like the commencement of the Metro line across Gurgaon, Faridabad, Kundli and Noida andother satellite towns in NCR will lead to further appreciation of upcoming areas by making them moreaccessible for end-users.

Induction of economic activities coupled with rapidly developing infrastructure willbring in more interest from the investors lobby.


Minimum Maximum

Locations

C o n n a u g

h t P l a c e

S o u t

h E x

K h a n

M a r

k e t

G K I

G u r g a o n

N o i

d a

G h a z

i a b a d

F a r i d a b a d

R s . /

s q . f

t . p e r m o n

t h

Figure 18


1,200

0

1,400

1,600

1,000

600

800

400

200


15/28


With the overall region on a growth trajectory, office activities will be on upswing. The development of anumber of SEZ projects in the region will make office space available in surplus with competitive rates.Projects like IT parks and large format office buildings will be good investment options with assured returns.Focus in office space segment may shift to Noida and Greater Noida from Gurgaon because of theconsistent upscaling of project formats and infrastructure. Office values in the region are expected toappreciate by around 12-18% in the next 12-18 months.

Retail in NCR will also be on an upswing with huge projects coming up in next 2-3 years. The trend of mallsin the neighbourhood is expected to catch up soon. Larger format malls are emerging on the canvas ofGurgaon and Noida with multiple brands under one roof. This can be attributed to increased spendingpower which gives a reason for specialty malls in these markets. The retail rental market in prime locationslike Connaught Place, Khan Market, South Extension will grow further by around 12-18%. New peripheralretail destinations like Dwarka and Saket will be the preferred destinations for organised retail in the region.


16/28

www.knightfrank.com


KolkataMarket Overview

Kolkata has witnessed considerable change in its real estate landscape over the past few years. The year2007 witnessed considerable real estate activity with hectic residential development, increased office spaceabsorption and retail penetration. Conducive government policy has improved the perception of thegeneral socio-political environment in both the city and the state. A number of infrastructure projects werealso initiated during the past year, leading to increased investor interest in the city. This includes theclearance for the proposal for East-West Metro connecting Kolkata's twin city Howrah in the west with theIT hub at Salt Lake Sector V.

At present, the city is undergoing extensive development in all directions. While most of the activity istaking place in the eastern suburbs of Salt Lake and New Town Rajarhat, the western part of Kolkatacomprising Howrah has also attracted a number of developers to set up large projects. Several majordevelopers with pan-India presence as well as a few international players have entered the Kolkata market.

Besides, at a time when scarcity of land has been pushing property prices steadily northward, Kolkata's real

estate market has been strengthened by a 150-acre windfall, with the National Textile Corporation (NTC)Ltd having sold nine of its 12 sick units on the fringes of the city for conversion into residential orcommercial properties. Majority of these NTC mills, idling since 2002-03, are located in Hooghly andNorth 24-Parganas districts and will be converted into housing estates or shopping malls by the newowners.

Greenfield Heights, Rajarhat Homeland, Bhawanipore

Office Supply and DemandThe office market in Kolkata continues to be driven by the IT/ITES sector. Suburban locations of New TownRajarhat and Salt Lake Sector V met the demand emanating from the IT/ITES sector whereas non-ITcompanies like the banking and insurance sector preferred the CBD and Off CBD locations. Off-CBDlocations like Park Circus and Rash Behari Connector continue to complement the CBD of Dalhousie.

In addition, the rise in corporate activities in the city has led to an increased demand for serviced officespaces. Due to the lack of quality business centres, most companies have leased space in star category

hotels in the city. Approximately 2.5 mn.sq.ft. of office space was taken up in Kolkata in 2007 which isabout 60% more than what was absorbed in 2006.

Approximately 2.76 mn.sq.ft. of office space was added to the total office stock by end 2007. Majority ofthis new stock came up in Salt Lake Sector V. Key projects like Omega by TCG Real Estate, Globsyn Crystalsby Globsyn & Intelligent Infrastructure Ltd. and Infinity Benchmark by Infinity Infotech Parks Ltd. atSalt Lake are few of the major office projects which became operational in 2007.

Many new projects are in the pipeline in Rajarhat as well as Salt Lake Sector V. With the plannedinfrastructure development in place, Rajarhat is expected to become the next IT/ITES centre in the city inthe next 3-4 years. Bantala, Batanagar and Jagdishpur will also emerge as important alternative ITdestinations with government approving a number of IT SEZs in these locations. By the end of 2008,around 5.31 mn.sq.ft. of new office supply is expected to be infused into the market.

R s . /

s q . f

t . p e r m o n

t h

Figure 20

Office Values for Kolkata



D a l

h o u s i e

Locations

C a m a c

S t r e e t

P a r k

S t r e e t

S a l t L a k e

6,000

0

8,000

10,000

4,000

2,000

80

0

100

120

60

40

20

Figure 19

0

New Office Supply in Kolkata

A r e a

( m n . s

q . f t . )


12

6

Year


2008 2009 2010

5.31

3.52

8.83

2.48

11.31


4

2

8

10


17/28




Residential Price


The base rentals in the off-CBD locations of Park Street, Camac Street have appreciated by 15% over theprevious year and are currently ranging between Rs.90-105/sq.ft. per month. Salt Lake, a preferreddestination for the IT/ITES sector has witnessed maximum appreciation of about 20%. The prevailing rental

value for the region is at Rs.55/sq.ft. per month. However, there has been no significant appreciation inrental values for the CBD location of Dalhousie Square area in the last year and they are stable atRs.45-65/sq.ft. per month. Rajarhat, the upcoming peripheral location for the IT/ITES sector, has averagerental values at Rs.42/sq.ft. per month.

Kolkata has seen considerable shift in consumer preference for housing needs over the last few years. In thepast one year alone, a number of large township developments have been announced in the outskirts of thecity by national and foreign players. These include the 390-acre Kolkata West International City located atHowrah by the Indonesia-based Salim Ciputra Group and the 100-acre Uniworld City by Bengal Unitech inRajarhat. Recently, two global real estate investment companies, Walton Street Capital and StarwoodCapital have announced their participation in the development of an integrated township in Uttarpara,

around 25 kms from Kolkata. The 313-acre township, to comprise residential, office, retail and otherinfrastructure facilities, by Bangalore-based Shriram Properties shall consist of 20 mn.sq.ft. of developedarea when completed in the next 3 years.

In another important development, Kolkata-based Eden Group and UK-based REIT Asset Management willconstruct a residential project worth Rs.10 billion spread over more than 72 acres in Maheshtala, insouth-west Kolkata, over the next five years.

In view of the investments and developments taking place in Kolkata, the city is set to receive around40 mn.sq.ft. of residential space in the forthcoming 2-3 years as against approximately 8 mn.sq.ft. of supplyadded to the stock in 2007. Out of the total new supply expected, around 9.15 mn.sq.ft. will enter themarket in 2008. Already majority of the residential projects under construction in the Rajarhat region havebeen completely booked and are awaiting completion in 2008. The 5,000 hectare satellite township ofRajarhat, which had been planned to accommodate around 5-7 million people, currently has several highprofile developers as well as state government promoters present in the region.

Residential real estate in Kolkata witnessed a stable growth in values, unlike the other metros where priceshave stabilised or even marginally dipped after a considerable rise in 2006. While established primelocations like Ballygunge and Alipore witnessed price appreciation of around 12-18%, mainly due to theshortage of new supply, upcoming locations like Rajarhat in the east and Behala in the south sawconsiderable appreciation of about 30-45% in the past one year. Presently, residential values in Rajarhatexist at around Rs.3,200/sq.ft.

Although there are no residential projects currently underway, Salt Lake, too, saw a rise in residential valueswhich can be attributed to the IT hub of Salt Lake Sector V in the vicinity. Locations further north like JessoreRoad and VIP Road, which has a number of mid-end residential projects, had price appreciation of around20-25% over the past one year and are currently quoted at a range of around Rs.2,500-2,800/sq.ft.

Kolkata witnessed increased organised retail penetration over the past one year in 2007. While a number ofnational and international brands already have their presence in the city, several large retailers haveannounced their plans of entering the city. Subhiksha is scheduled to launch around 17 stores in the next

few months just as Reliance Retail has been given the contract to redevelop Park Circus municipal market.On the other hand, foreign retailer Germany's Metro AG has already been allowed to set up operations inthe city, at the southern end of the EM Bypass.


Minimum Maximum

Locations

B a l l y g u n g e

A l i p o r e

S o u t

h o f

P a r k

S t

B e h a l a

N e w

T o w n

R a j a r h a t

S a l t L a k e

R s .

/ s q . f t .

Figure 22


7,000

0

8,000

9,000

6,000

5,000

4,000

3,000

2,000

1,000

Figure 21

New Residential Supply inKolkata

A r e a

( m n . s

q . f t . )


Year


2008 2009 2010

20

0

60

40

9.15

15.56

24.71

15.09

39.80



18/28

www.knightfrank.com


The demand for retail has been further encouraged by the advent of large departmental stores likeShoppers' Stop, Pantaloons, Westside, etc. Besides these, the Future Group will launch its firstCentral mall in Kolkata in the next two years. The mall, to be spread over 0.3 mn.sq.ft., will see morethan 400 brands selling products under one roof and will be located in Ballygunge Circular Road.

Significantly, around 1.48 mn.sq.ft. of retail space came in to the market during the past one year, withanother 2.8 mn.sq.ft. being under construction and scheduled to be ready in 2008. By the end of 2010,over 20 malls are expected to be operational in the city. The 1 mn.sq.ft. South City Mall, on Prince AnwarShah Road, was one of the major retail projects which became operational in 2007. Amongst the notableprojects scheduled to be operational in 2008 on EM Bypass include Mani Square, comprising 0.35 mn.sq.ft.of retail space besides a 0.13 mn.sq.ft. of IT block, with four anchor tenants to its credit and will host thecity's first IMAX screen, first McDonald's Drive-Thru, a Spencer's hypermarket and the third Westside.

An important observation over the last 2 years has been the shift of the organised retail market towards eastand north-eastern part of the city, with a total of 6 malls being underway in Rajarhat. This is primarily dueto the presence of IT in the region, which has also been responsible for creating a residential catchment forretail to thrive.

Retail space values have undergone considerable change with the advent of organised retailing in the city. While established retail markets of Park Street and Camac Street have seen prices appreciating by around35% during the last year, other highstreet retail markets like Gariahat and Rashbehari Avenue witnessed anincrease of approximately 30%.

Presently, Park Street has average rental value of Rs.300/sq.ft. per month, up from the previous values ofRs.220/sq.ft. a year ago. Emerging retail markets like Rajarhat and Salt Lake where majority of the malls areunder development have had a price appreciation of about 25-30% and are currently quoted at aboutRs.90/sq.ft. per month and Rs.150/sq.ft. per month respectively.

Kolkata has come a long way from its bureaucratic straitjacket years, with the present governmentproviding a number of incentives as well as taking up various steps to curb disorganised real estatedevelopment by way of entering in to joint ventures with developers. With over 20 large format malls, morethan 11 mn.sq.ft. of IT/ITES office space and 40 mn.sq.ft. of residential space by the year 2010, the city isset to become one of the foremost real estate destinations of the country, providing tough competition toother metros. While office space is will see prices appreciate by around 25-35%, on account of the supplylined up, retail and residential prices shall continue to appreciate by around 15-25% in the next 12-18months.

A number of star category hotels have also been announced in the city, including brands like Hilton,JW Marriott and Rradisson, with others like Novotel, Ginger and Lemon Tree biding their entry. Besides, theTata Motors factory, two large steel plants, several approved SEZs, a nuclear power plant in the anvil, theextension of the primary airport and a secondary sea port, huge investments into roads and rapid transportinfrastructure have also led to the overall attractiveness of the city.

However, Kolkata runs the risk of over-pricing its land. This has resulted in delaying the entry of IT major likeInfosys in to the city. Besides, facilities management companies are also paying up more to buildingmanagers than they would in established office space hubs like Bangalore, Pune or Hyderabad. Thus, withcontrol over these pricing hiccups, Kolkata can expect to expediently maintain its steady growth.

Retail Rentals

Outlook


Minimum Maximum

Locations

C a m a c

S t r e e t

G a r

i a h u t

R a s h

b e h a r

i A v e n u e

E . M

. B y p a s s

N e w

T o w n

( R a j a r

h a t

)

P a r k

S t r e e t

S a l t L a k e

R s . / s q . f t . p

e r m o n

t h

Figure 24


0

250

300

350

200

100

150

50

Figure 23

0

New Retail Supply in Kolkata

A r e a

( m n . s

q . f t . )


10

5

Year


2008 2009-10

2.8

5.1

7.9



19/28


R s . /

s q . f

t . p e r m o n

t h

Figure 26

Office Values for Bengaluru



M G

R o a d

W h i t e f i e l d

R e s i

d e n c y

R o a d

K o r a m a n g a l a

C u n n

i g h a m

R o a d

I n d i r a n a g a r

O u t e r

R i n g

R o a d

B a n e r g

h a t

t a R o a d

E l e c

t r o n

i c c i

t y

Locations

60

0

80

100

40

20

6,000

0

8,000

10,000

4,000

2,000

BengaluruMarket Overview

The real estate market of Bengaluru showed a steady albeit slow growth in 2007. A significant developmentin the first quarter of 2007 was the approval of the City Development Plan (CDP)-2015 for GreaterBengaluru. The revised CDP permits a FAR upto 3.5, which would result in taller buildings in future. TheCDP also proposes to set up five satellite towns around the city. The State Government has alsocommenced related infrastructure developments to improve connectivity across the city, which includes theMetro, the Monorail, elevated road to Electronic City, Peripheral Ring Road, expressway to the upcominginternational airport at Devanahalli and widening of the existing roads.

The office market in Bengaluru continued to remain buoyant with high absorption rate in the CBD. The ITcorridor stretching from Whitefield in the east to Bannerghatta Road in the south along the Sarjapur OuterRing Road witnessed the completion of major office developments, which were pre-leased prior to theircompletion.

With four malls becoming operational during 2007, the organised retail market in Bengaluru saw a robust

growth. While the traditional retail market continues to remain active across the key micro-markets of thecity, several malls coming up in the city indicates the rise of organised retailing in Bengaluru.

The residential market witnessed a slow down in the sale of properties as well as a stabilisation of prices inthe past year. However, this did not prevent the developers from launching new projects in the city. In thesouth region, Kanakapura Road, JP Nagar, Bannerghatta Road and Hosur Road emerged as new residentialmicro-markets. In the south-east quadrant, Sarjapur Outer Ring Road had a dominant supply of residentialspace last year. Most of the projects launched in 2007 were high-end developments catering to theincreasing needs of HNIs and expatriates.

Reflecting the optimism of the real estate market in Bengaluru, three local developers Sobha developers,Purvankara and Brigade group came up with their IPOs. Also, major developers in the city diversified intothe hospitality sector to minimise risk and to cash in on the demand-supply gap existing in this sector.

Sobha Tulip, JP Nagar Salarpuria Infozone, Electronic City

Office Supply and DemandBengaluru continues to be one the top IT destinations in the country. Though the IT/ITES sector remains themajor demand driver for office space in the city, other sectors like biotechnology and textile industry have

further fuelled the demand for office space. According to Knight Frank Research approximately13.5 mn.sq.ft. of office space was leased in Bangalore in 2007, 30% of which is constituted of pre-commitments. The new CDP predominantly favours the office market in terms of the revised FAR aroundthe planned metro stations. Besides, the plan has identified all major arterial and sub-arterial roads asMutation Corridors, which would further enhance the office developments along these corridors.

The IT corridor saw major office developments in the form of built-to-suit campuses and IT SEZs. Bengaluruhas been sanctioned 16 IT/ITES SEZs, of which three SEZs are already operational and four are underconstruction in the north and southeast locations of the city. According to Knight Frank Research,approximately 13 mn.sq.ft. of new office space entered the market in 2007. It is estimated that a fresh

supply of 8.3 mn.sq.ft. will be ready in 2008.

Figure 25

0

20

New Office Supply in Bangalore

A r e a

( m n . s

q . f t . )


40

Year


2008 2009 2010

8.31

11.66

19.97

12.6

32.57



20/28

www.knightfrank.com


In a notable development, the state government awarded the 9,187-acre Knowledge City project at Bidadito DLF last year. This project is expected to change the dynamics of the Mysore Road in the southwestregion. Meanwhile, Sarjapur Outer Ring Road will continue to contribute a major share of total supply ofoffice space in the southeast quadrant of the city.

Rental values in the CBD increased by 50% over the last year and reached as high as Rs.100/sq.ft.per month. A further increase in these values is expected due to the lack of new supply. Values haveincreased by 45% in the off-CBD locations and the current rental values range between Rs.60-70/sq.ft.per month.

In the peripheral locations, office space rentals have increased by 30-40% in the last one year. On Sarjapur-Outer ring Road, the rental values vary within a range of Rs.50-60/sq.ft. per month. Rental values in thesouth and southeast locations have shown an increase of 30% over the year. The rentals in BannerghattaRoad increased considerably since 2006 and are currently quoted in the range of Rs.50-60/sq.ft. per month.The average rentals in Hosur Road and Electronic City vary between Rs.30-40/sq.ft. per month. The rentalsin Whitefield saw a decline and are currently stable at Rs.25-35/sq.ft. per month.

The IT sector employees and NRIs are driving the demand for customised high-end residential properties inBengaluru. The demand for residential set-ups with amenities has led to townships projects in the peripherallocations. The International airport at Devanahalli and the improved connectivity to the city through the

four-laned Bellary Road are the key drivers for the rapid real estate developments in the north. Due toavailability of land parcels, high-end villas and row house projects are coming up in the north, east andsoutheast locations of city.

As compared to 2006, the residential market witnessed a slowdown in the sale of residential properties in2007. The increase in loan rates and speculation of the prices to decrease in future affected the growth ofthe residential sector in most of the micro-markets of the city. As compared to this, the residential unitslaunched in the vicinity of the CBD are sold out due to the high demand from HNIs and expatriates.

Supply in CBD is comparatively lower as only few high-end projects of 8-14 units were launched in 2007.There is massive concentration of residential projects in the east and south-east locations due to theproximity to the IT corridor. While, south of the city will have an influx of approximately 8 mn.sq.ft. ofresidential space by the end of 2008, the eastern quadrant will have a residential supply of 8.6 mn.sq.ft. in2008.

With the International airport to be operational in 2008, the northern location is estimated to have aresidential supply of 8 mn.sq.ft. approximately within this year. According to Knight Frank Research, a totalof around 27 mn.sq.ft of residential space will come up in 2008, as against the estimated addition of about16 mn.sq.ft. to the stock in 2007.

Due to high demand and low supply in the CBD, prices have appreciated by 75-80% in 2007 and arecurrently in the range of Rs.12,000-17,000/sq.ft. However, the capital values in the off-CBD locations haveshown a marginal increase of 15% over the year. Residential capital values in the east range betweenRs.2,500-3,700/sq.ft. and in the West, the average capital value is around Rs.4,800/sq.ft. In the southernlocation, the prices have remained steady with a nominal increase of 10-15% and the capital values herecurrently hover around Rs.2,800-4,000/sq.ft. The residential properties within the proximity of theupcoming International airport reported an increase of over 30% and are currently priced atRs.2,500-4,500/sq.ft. The capital values for villas are quoted in the range of Rs.5,000-6,800/sq.ft.

The organised retail sector in Bengaluru which had seemed to lag behind the other cities, witnessed robustgrowth in 2007. The demand for luxury retail and international brands from the burgeoning cosmopolitan

culture in the city, is leading to considerable growth of malls across all micro-markets in the city.



Residential Price



Minimum Maximum

Locations

M . G . R

o a d

K o r a m a n g

l a

I n d i r a n a g a r

S a d a s

h i v n a g a r

M a l

l e s h w a r a m

J . P . N

a g a r

B a s a v a n g u d

i

R a j a j i N a g a r

R s . /

s q . f t .

Figure 28


12,000

0

15,000

18,000

9,000

6,000

3,000

Figure 27

New Residential Supply inBangalore

A r e a

( m n . s q . f

t . )


Year


2008 2009 2010

27.17

36.66

63.83

8.62

72.45

20

0

40

80

60



21/28


Presently, the operational malls in the city are fully occupied, while the malls under construction have beenpre-leased by major retail brands. High street retail also continues to be in demand resulting in a highabsorption rate across various locations in city.

Knight Frank Research estimates that about 16 new malls will come up in the city, totaling to approximately

2.64 mn.sq.ft., in 2008. Prime retail supply in the CBD would come from the UB City mall with a built-uparea of 0.15 mn.sq.ft. which would be operational in 2008. Organised retail space of 1.6 mn.sq.ft. iscoming up at Whitefield and Sarjapur Outer Ring Road in expectation of the upcoming residential supply inthese locations.

The booming retail market in Bengaluru has resulted in steady increase in rental values across the primelocations of the city with the mall rentals undergoing an increase of 30% in the last one year. Rental values

for high street retail properties increased by 20% during the year. Rental values in Brigade Road rangebetween Rs.350-450/sq.ft per month and in MG Road values are Rs.250-300/sq.ft per month. InCommercial Street, highstreet rentals quoted are Rs.250-350/sq.ft. per month, while in secondarymicro-markets, rentals were in the range of Rs.100-150/sq.ft. per month over the year. Meanwhile, in

peripheral locations, rental values quoted are Rs.55-70/ sq.ft. per month.

North Bengaluru is the fastest growing micro-market in the city due to the development of the newInternational airport. This location is witnessing rapid developments in residential, office, hospitality andhealthcare sector as well. Whitefield and Sarjapur Outer Ring Road is slated to have a predominant supply ofresidential and office space due to the presence of the IT/ITES sector in the quadrant.

The quantum of supply that is lined up in all the sectors may restrict the price appreciation. The capitalvalues in the residential sector are projected to remain stagnant over the medium term. Demand for officespace in the CBD has increased after the Metro rail work has started, leading to sharp increase in rentalvalues and is speculated to steadily increase by around 20-30% in the near future. The rental values in theretail sector are projected to increase progressively this year, to the tune of about 25-35%.

Bengaluru's rapid growth has created several problems relating to traffic congestion and infrastructuralobsolescence which is limiting the growth of the real estate sector in city. The construction of the Metro iscausing bottlenecks along its route as the government had not planned alternate routes prior to itscommencement. Envisioning the potential growth of the city, the state government had planned newinfrastructure initiatives which would now be delayed due to its collapse.

The new International airport scheduled to open in the first quarter of 2008 would give another dimensionto the city's spiralling growth. The airport would also fuel the augmentation of the retail and logistics sectoras well as increasing the prospects for investments in other sectors. The city will witness all around growthin future on completion of the ongoing infrastructure projects. These projects would further add morepotential growth corridors along the peripheral locations of the city. The proposed SEZs for the textiles andbiotechnology sector, satellite towns and the Metro is bound to change the perspective of the city in the

years to come.

Retail Rentals

Outlook


Minimum Maximum

Locations

M G

R o a d

B r i g a d e

R o a d

C o m m e r c i a l

S t r e e t

M a l

l e s h w a r a m

J a y a n a g a r

K o r a m a n g a l a

I n d i r a

N a g a r

A i r p o r

t R o a d

R s . /

s q . f t . p

e r m o n

t h

Figure 30


300

0

400

500

200

100

Figure 29

0

New Retail Supply in Bangalore

A r e a

( m n . s q . f

t . )


5

15

Year


2008 2009 2010

2.64

7.97

10.6

1

12

10

Total supply : 12 mn.sq.ft.


22/28

www.knightfrank.com


HyderabadMarket Overview

Real estate development continued unabated in Hyderabad in 2007. The IT boom has led to thedevelopment of many other sectors, especially in the contiguous pockets of Hitech city. While variousmicro-markets have seen a substantial growth, the concentration of development has been confined to thewestern and north-western regions.

Positive government policies and proposed infrastructure projects has helped to propel the growth of theoffice real estate market in the city and continues to do so. While the existing companies have gone in forexpansion and consolidation, several new corporates have set up base in the in the city. The interest shownby these IT/ITES companies have led to a steady demand for office space over the years and the citydevelopers have geared up to offer large built-to-suit as well as ready space facilities.

Banjara Hills and Jubilee Hills continue to be considered as premium residential locations, though over thelast 24 months, large residential developments have increasingly been taken up in suburban and peripherallocations of Gachibowli, Madhapur, Kompally, Kukatpalli, Kondapur, etc. The retail segment has also

received a significant boost with the boom in the IT/ITES sector and the changing lifestyle of the youngergeneration. Currently, the city presents a unique mix of well established local brands along with nationaland international retailers, with some large apparel retailers viewing Hyderabad as one of the mostprofitable markets.

Silicon Towers, Madhapur Ashoka Metropolitan Mall, Banjara Hills

Office Supply and Demand While around 4.15 mn.sq.ft of new office space is estimated to have entered the office market in 2007, thecurrent year is expected to see the infusion of approximately 17.88 mn.sq.ft of new office space supply. Outof this, the peripheral markets of Madhapur, Gachibowli, Manikonda, Kondapur and Nanakramguda shallcontribute around 14.92 mn.sq.ft. while the distant peripheral markets of Shamshabad, Pocharam andother HADA localities shall add another 2.67 mn.sq.ft. Combined, these two micro-markets would thushave nearly 98% of the total stock addition in 2008.

A large share of the total Grade-A office space coming up in the city can be attributed to the projects taken

up by DLF, Lanco, K Raheja, etc. The Cybercity project (1.74 mn.sq.ft) in Gachibowli by the DLF Group is anotable development underway. Another recently launched project is that by Lanco Hills in Manikondawhich will have 12 IT office towers, 6 SEZ and 6 non-SEZ projects.

The Hyderabad office market continued to witness substantial leasing activity in 2007. An estimated3.5 mn.sq.ft. of office space was absorbed during the year which is similar to the take-up in 2006. Asbefore, the IT/ITES companies remain the major demand drivers for Grade-A office space to about 85% ofthe total space absorbed.

In the absence of any significant development in the CBD and off-CBD locations of Begumpet andSomajiguda, primary peripheral locations like Madhapur, Gachibowli, Nanakraguda and Raiguda catered tothe rising demand emanating from the IT/ITES sector. Smaller offices essentially from the BFSI sectorhowever preferred to be located in suburb

Real Estate Highlights 2008 Q1

Documents

Transcript of Real Estate Highlights 2008 Q1