The Seven Stars of India

Indias best performing micro markets for occupiers

2 On Point The Seven Stars of India

On Point The Seven Stars of India 3

Through the Turn

With Indias economic recovery well under way, its commercial real estate market is beginning to stabilize. While the landscape will remain favourable for tenants in 2010, landlords will have greater influence starting in 2011. This closing window of opportunity for occupiers means that they should be proactively looking to lock in attractive leases in the near term as office rents are beginning to bottom out and options for large, quality space abound. Indeed, most cities in India have already witnessed an uptick in the volume of lease transactions in 1Q 2010 with NCR-Delhi, Mumbai and Hyderabad having recorded more than a million sq ft of leases each. In 2009, occupiers showed a strong preference towards operational vacant stock rather than projects under construction, a departure from 2007-08. Figure 1: Pan India supply demand scenario 1Q 2010
80 Completions/Absorption (million sq ft) 70 58.5 60 50 42.5 41.6 40 32.9 32.0 28.8 28.8 30 22.8 22.3 20 10 0 2005 2006 2007 2008 32% 28% 24% 55.9 20% 16% 12% 8% 4% 2010F 2011F Vacancy 2012F 0% Vacancy (%) 43.5 42.6

With the forecasted growth of net completions expected to outpace that of net absorption, a significant supply overhang is expected to remain over the next one year. This will lead vacancy level across India, which was at 17.2% at end-2009 to rise to mid 20% by end-2010. Locational advantage and tenant mix will serve as key differentiators as landlords struggle to lease unoccupied space. The freefall in rental values has stopped or slowed significantly in all Indian metros with the exception of NCR-Delhi and Mumbai. While these two cities are currently feeling the affects of a large supply pipeline in the short term, they are also expected to lead the rebound in the property cycle, followed by Bangalore, Chennai, Pune, Hyderabad and Kolkata.

33.1

2009

New Completions
Source: Real Estate Intelligence Service

Net Absorption

Figure 2: Vacancy and absorption fluctuation 1Q 2010

Quarterly Absorption Rate (%) (Net Absorption as Percentage of Available Stock) 70 Available Stock for Absorption (million sq ft) (Vacant Stock from Previous Qtr + New Completions in Current Qtr) 60 50 40 30 20 10 2Q04 4Q04 2Q05 2Q06 4Q06 2Q07 4Q07 4Q08 2Q09 4Q05 2Q08 4Q09 0 70% 60% 50% 40% 30% 20% 10% 0%

Vacant Stock from Previous Qtr Quarterly Absorption Rate

Source: Real Estate Intelligence Service

19.6

New Completions in Current Qtr Net Absorption

29.3

35.5

4 On Point The Seven Stars of India

On Point The Seven Stars of India 5

The Changing Occupier

The IT/ITES industry has traditionally been a major driver for Grade A office space demand throughout India. In the face of severe cost pressure during 2009, both domestic and multinational players curbed real estate costs and expansion plans. The global economic recovery, along with rising software & services exports, has once again fuelled demand from the IT/ITES sector which accounted for nearly half of the absorption witnessed in 1Q10. A similar story was observed in Indias Sunshine Sectors of telecom, pharmaceuticals and manufacturing which, spurred by low rents, only provided weak, opportunistic demand for office space in 2009. 1Q10 saw a surge in demand from the BFSI and telecom sectors in particular. Going forward, the IT/ITES and BFSI sectors will lead the charge as net absorption of office space is forecasted to grow at a CAGR of 29.5% from 19.6 million sq ft in 2009 to 42.6 million sq ft in 2012.

New Strategies for the Post-Downturn Era

As new market realities unfold, the real estate strategies employed by occupiers will depend in large part on the share of their operational footprint within India vs. abroad. The occupiers, whom weve clubbed into three types (primarily global footprint long in India, primarily global footprint - new to India and domestic footprint), will see their strategies progress from cautious to optimistic at differing rates. Regardless of operational footprint, in 2010 occupiers are adjusting their decision parameters with respect to portfolio rationalization, cost reduction and location section.
Occupier Strategy Occupier Type A B C LEGEND Cautious Optimistic Growth Acceleration 2009 1H 2H 1H 2010 2H 1H 2011 2H 1H 2012 2H

Source: Jones Lang LaSalle Meghraj Research

A. Occupiers who have a global footprint, primarily operating out of Europe or the US, but are new to the Indian market. They face global cost pressures but do not want to miss the India cost arbitrage benefit. For example: Amazon, First Data, ANZ Bank. B. Occupiers who have a global footprint and have a long presence in the Indian market. These are tapping the present window of opportunity. For example: RBS, HSBC, Deutsche Bank, E&Y, Accenture. C. Domestic occupiers who foresee brighter economic times in the near term. For example: TCS, WIPRO, Uninor, Reliance being a few.

Figure 3: Quarterly rental value fluctuation 1Q 2010

% Q-o-Q Change in Stock Weighted Rental Values -0.25 -0.2 -0.15 -0.1 -0.05 0 India Bangalore Pune Chennai Hyderabad Kolkata NCR-Delhi Mumbai 1Q10 4Q09 3Q09 2Q09 1Q09

Decision Parameters 2009 Portfolio Rationalization Consolidation of multiple office spaces within a city Value recovery from underutilized properties through sale or subleasing Occupiers with a long term India vision and clarity on location opted to buy instead of lease Increased focus on reducing operational costs including headcounts Halt to expansion and diversification plans Rather than waiting and watching markets, occupiers actively renegotiated on rent and incentives to the maximum possible extent Long lease negotiation periods awaiting global expansion approvals Only operational, or ready to move in spaces are within the consideration set Focus on Indias top 7 markets (Tier I and Tier II cities) Scrutinize cost/benefit of a CBD location and actively explore options in SBD and suburbs 2010 Consolidation to give way to slow expansion towards a multiple location strategy - suburban back office coupled with a CBD head office Opportunistic sales and subleasing to continue, especially with prime city properties Buy vs. lease will continue to be closely scrutinized Cautious optimism leads to slow renewal of hiring and expansion in human resources and real estate Expansion options revisited Extent of leverage reduced with demand stabilization Still no room for large scale rental increments Leasing activity gains momentum occupiers lock in as a buffer against slowly rising rents Focus remains on operational projects Under-construction properties with a maximum horizon of 6-8 months might also be considered Tier I cities will continue to remain the most preferred locations, followed by Tier II markets Better performing Tier III cities might be considered by year end

Cost Reduction/ Operational Efficiency

Leverage
Source: Real Estate Intelligence Service

Figure 4: Sectoral classification of leasing activity in 2009

Sectoral Classification of Leasing Activity in 2009 100% Sectoral classification (%) 80% 60% 40% 20% 0%

Completed V/S Under-construction Building Preference

Location

Moving Ahead
NCR-Delhi IT/ITeS Mumbai BFSI Bangalore Hyderabad Telecom Chennai Pune Infrastructure Kolkata Others

Manufacturing

Demand from global players, headquartered abroad, might catch up with domestic occupier demand by the year end. IT/ITeS sector will continue to lead, followed by sunshine sectors including Telecom, Pharma and BFSI. Industrial growth might spur office space demand from the manufacturing and engineering sector. Occupiers to remain flexible in option selection; focus on growth and remain operationally efficient. Uncertainty over headcount will remain a challenge for CREs as they ensure that corporate real estate strategies are in line with broader organizational objectives. Occupier focus will be on Special Economic Zones, due to the STPI sunset clause by March 2011.

Source: Real Estate Intelligence Service

 On Point The Seven Stars of India

On Point The Seven Stars of India 

The 7 Stars of India

A relative comparison of 16 micro-markets across Indias tier I & tier II cities was carried out in order to identify those which are most favourable for occupiers. The analysis included a wide range of real estate, infrastructure and socio-economic parameters. Micro-markets were selected based upon expected supply, occupier demand and indicator movement. Central business districts and other high priced, low supply office destinations were not included in the analysis.
Delhi NCR Mumbai Thane-Navi Mumbai

Indicators Employed
Based on relative scores, which are weighted average indices for individual micro-markets, the best performers were collectively titled as The Stars of India. These micro-markets shall maintain top positions for occupiers, regardless of the industry type, having witnessed substantial leasing activity in the past, substantial rental correction making them affordable up to year 2005-06 levels and robust and good quality future supply. The scores listed are a weighted sum index for each of the seven broad parameters covered in our analysis. The sub-indicators covered under each parameter are explained below. Supply: A weighted index inclusive of: Existing stock Future supply till 2012 STPI options for next one year
Bangalore Chennai Pune Hyderabad Kolkata

Market Segmentation
Keeping city dynamics, historical growth and other externalities in mind, one micro-market from each city has been shortlisted to represent the star in that region. The star micro-markets represent the opportunities that occupiers have in each city to expand their base into.
Micro-market Segmentation City NCR Mumbai Bangalore Chennai Pune Hyderabad Kolkata
Source: Real Estate Intelligence Service

Star Gurgaon SBD North SBD Bangalore SBD Chennai SBD Pune Hitec City & Gachibowli Salt Lake

Aspirant Noida SBD Central, Thane & Navi Mumbai Whitefield OMR Hinjewadi

SEZ availability for next one year (ready to move in options for occupiers till 2011) Maximum supply score is 1.5

Eastern Suburbs

SBD Bangalore

Micro Market SBD Central SBD North Gurgaon

Western Suburbs

SBD Chennai

Hitech City & Gachibowli

Demand: A weighted index inclusive of:

Salt Lake Rajarhat

SBD Pune

Whitefield

Hinjewadi

Suburbs

Noida

Average annual absorption from 2007 to 2009 Average annual absorption for 2010 to 2012 (forecast) Vacancy change from peak (3Q 2008) and forecast for a year ahead Pre-commitment status (future supply till 2011)

Rajarhat

Demand Real Estate Parameters

1.15

0.85

0.85

0.90

0.90

0.83

0.78

1.05

0.73

0.95

0.88

0.90

0.83

1.10

0.73

0.78

Stars: Market is moving, go lock a deal Rents have reached their lows Leasing activity in existing projects is high, followed by projects getting operational in next six to nine months Occupiers A, B and C (as defined in the occupier strategy section) hold these as their first preferences for city expansion Large scale leases recorded in second half of 2009 and first half of 2010 Markets moving towards rent recovery in next six to eight months Aspirants: Options available but not for too long. Focus on rental negotiation; opt for the best option available. Marginal rent compression possible Leasing activity picked up from first few months of 2010 Second preference for occupier A, first preference for occupier B and C Developers should continue to demonstrate flexibility in pricing and offer rental incentives Rental recovery in 2011, not a 2010 picture

Supply

1.15

0.88

0.25

0.45

0.38

0.28

0.73

0.73

0.65

0.58

0.75

0.80

0.50

1.00

0.30

0.35

Maximum demand score is 1.5 Indicator Movement: A weighted index inclusive of: Rental decline from peak, and forecast for a year ahead Rental overheads such as CAM charges and property tax

Indicator Movement Real Estate Score

0.70

0.70

0.48

0.45

0.43

0.48

0.53

0.30

0.35

0.40

0.40

0.40

0.43

0.40

0.35

0.25

1.06*

0.83

0.66

0.72*

0.70

0.65

0.72

0.84*

0.64

0.77*

0.76

0.78*

0.68

0.94*

0.57

0.59*

Maximum indicator score is 1.0 Other Externalities: A weighted index inclusive of: Infrastructure: new infrastructure initiatives, geographical expansion, new transport and connectivity links, proximity to airport, telecom and power availability Social and Physical Environment: seismic risk, international level educational, medical and social facilities, city culture and recreation options, star hotel accommodation, cost of living and cost of expatriate accommodation Maximum externality score is 5.0

Other Occupier Considerations

Infrastructure Social & Physical Environment SocioEconomic & Infrastructure Score

4.50

4.50

4.00

4.25

3.50

4.00

3.50

4.50

4.00

4.00

3.50

4.00

3.50

4.75

3.25

3.75

3.45

3.30

3.90

4.80

3.85

3.55

3.65

3.98

3.33

3.45

2.68

3.80

2.90

2.80

3.00

3.78

3.87

3.78

3.94

4.58

3.71

3.73

3.59

4.19

3.60

3.67

3.01

3.88

3.14

3.58

3.10

3.77

Source: Real Estate Intelligence Service

The scores provided above are weighted average indices scored from an occupier point of view. This essentially enumerates that higher the rental depreciation, larger the vacancy fluctuation and more the SEZ and STPI expansion option availability in a micro-market, higher would be its scoring. Within the real estate parameters a higher focus has been provided to Occupier Demand, followed by Supply and Indicator fluctuation within a city. The segmentation above aims at combining quantitative parameters with qualitative assessment to identify one STAR performer from each city. Some of the remaining nine micro-markets were a close second to the star performers with strong fundamentals. These select micro-markets might emerge as rising stars of the future.

A supply overhang over the next two years would imply that the Stars and the Aspirants would compete directly with each other in attracting occupier demand. While Stars have traditionally been popular amongst occupiers (especially the A and B categories), they would continue to press them against Aspirants to offer more price discounts. By doing this the occupiers would try to stretch their negotiation leverage till second half or end of 2010, which might even postpone rental increments in Stars in the near future.

 On Point The Seven Stars of India

On Point The Seven Stars of India 

The Seven Star Quadrant Analysis

Star micro-markets are a combination of high real estate development, coupled with a well developed support infrastructure and a sustainable social and business environment.
4.70 4.50 4.30 4.10 SBD Central 3.90 3.70 3.50 3.30 3.10 2.90 0.40 Rajharat Hinjewadi Chennai Suburbs 0.50 0.60 0.70 0.80 Real Estate Scores 0.90 1.00 1.10 Salt Lake Eastern Suburbs Whitefield Western Suburbs SBD Pune Noida Gurgaon Hitech City & Gachhibowli SBD Bangalore SBD North

Introduction to the Seven Stars of India

DELHI NCR Gurgaon
Locations of Interest DLF-Cyber City Golf Course Road MG Road Sohna Road Udyog Vihar Key Developments* DLF Cybercity Time Tower Vatika Business Park Welldone Tech Park Unitech Infospace SEZ DLF Silokhera Reasons for Success Gurgaon is a clear winner when it comes to occupier demand and availability of options due to sufficient quality supply, steep rental depreciation and flexible approach of developers (led by DLF). It also scores high on a fair mix of retail, residential and hospitality concentration, MRTS transportation and regional connectivity, aided by proximity to the international airport. NOIDA comes close as a second alternative, especially for IT occupiers, boasting of an excellent infrastructure and lower rentals. Moving ahead, both Gurgaon and Noida would compete for tapping occupier demand. However, we believe that Gurgaon will continue to maintain its leadership position in the future.

Infrastructure, Social & Physical Environment Scores

SBD Chennai Thane & Navi Mumbai

Star Aspirant

MUMBAI
Andheri

SBD North
Locations of Interest

Reasons for Success

Balanced Balanced markets offer a great mix of social and physical environment along with favorable real estate indicators. With all these markets dependent on IT/ITes industry, their strategy should be to offer the best arbitrage on both fronts to remain competitive. SBD Pune SBD Chennai SBD Central Mumbai NOIDA East Suburbs Mumbai West Suburbs Mumbai Whitefield Thane & Navi Mumbai

Low on S&P* Although comparable to the Balanced in terms of real estate indicators, they score low on social and physical environment. A balanced approach towards development would result in increased preference towards these locations. Rajharat Hinjewadi Chennai Suburbs

High on RE** Leaders among the pack in terms of real estate indicators, they compare equably to the Balanced in social and physical environment and are preferred destinations for occupiers.

Outliers SBD North and SBD Bangalore are high on real estate activity, as well as social/physical infrastructure an attractive combination for occupiers.

Andheri-Kurla Road Key Developments* Kalpataru Square 215 Atrium Nataraj Akruti Star Leela Business Park

SBD North (primarily Andheri), at the heart of Mumbai, is closer to the city airport, has an under-construction MRTS connectivity, and boasts of more than dozen 3-5 star hotels, malls, social, medical and recreational facilities. With more than 3 million sq ft of future supply expected in the next few months and a diverse mix of occupiers, SBD North has recorded one of the best absorption rates in Mumbai over the past two years. Thane, Navi Mumbai, Western and Eastern suburban micromarkets shall continue to attract IT/ITeS occupiers primarily due to affordability.

Salt Lake has well established They should strive for becoming a infrastructure but lags behind in world class destination by focused real estate growth. Landlords must efforts towards enhancing social and continue to focus on affordable physical environment. rents. Gurgaon Hitec City and Gachibowli SBD North SBD Bangalore Salt Lake

BANGALORE

SBD Bangalore
Locations of Interest Outer Ring Road Inner Ring Road CV Raman Nagar Bannerghatta Road Key Developments* Embassy Manyata Tech Park Vrindavan Tech Village Pri Tech Park RMZ Ecospace

Reasons for Success Offering Grade A office space at the most affordable rental ranges (INR 38-40 psft pm) among the secondary districts in the country, SBD Bangalore has witnessed more than 5 million sq ft of average annual absorption from 2007-2009. With proximity to key residential areas and availability of large land parcels, connectivity to the international airport, elevated expressways, the SBD micro-market in Bangalore is currently the largest micro-market in the country in terms of operational grade A commercial stock with highest occupancy rate. We foresee the trend of single digit vacancy to continue in this micro-market due to controlled supply pipeline and robust occupier interest.

Source: Real Estate Intelligence Service *S&P: Infrastructure, Social and Physical Environment **RE: Real Estate

*Key developments include properties that are either operational or getting operational in the next six to eight months and witnessing large active leasing.

10 On Point The Seven Stars of India

On Point The Seven Stars of India 11

HYDERABAD

Hitec City and Gachibowli

Locations of Interest Hitec City Nanakramguda Key Developments*

Reasons for Success Having witnessed more than a million sq ft of leasing activity in 1Q 2010, Grade A office properties in Hitec City and Gachibowli have attracted a fair share of the resurging IT demand (TSI Waverock and K Raheja building 9 and 11). This micro-market offers good airport connectivity, well laid road and rail infrastructure, as well as solid IT infrastructure (Cyberabad). There are multiple spatial options available (particularly for IT companies), offering quality office space at affordable rentals. However, regional political sensitivity might discourage occupiers to consider Hyderabad city in the short-term. Still Hitec City and Gachibowli will clock good amount of leasing in the future primarily due to developed infrastructure, presence of quality tenants and affordable rentals. Reasons for Success SBD Pune excels over Hinjewadi due to better infrastructure and proximity to residential locations, presence of support infrastructure such as hotels, malls, educational and medical facilities. The SBD witnessed an average annual absorption of 2.2 million sq ft from 2007-2009 (against less than a million sq ft in Hinjewadi over the same time span), due to relatively larger rental correction. Encompassing major city locations like Magarpatta, Kharadi and Kalyani Nagar, state of the art IT infrastructure, together with a well established transportation network, and quality LEED certified office space (amidst bottomed out rentals) makes SBD Pune attractive for occupiers; notably the IT and manufacturing sectors.

Micro-Market Positioning:
Stars have been on the lower end of the vacancy variation, while witnessing rental dips comparable to Aspirants.

K Raheja Mindspace Building 9 and 11 TSI Waverock DLF Cybercity

Kick start 2010: post the downfall, where do they stand

Vacancy Rise from Peak (3Q 2008 - 1Q 2010) (Basis points) 3,000 2,500 Suburbs Chennai 2,000 1,500 1,000 Whitefield 500 SBD Bangalore 0% -10% -20% SBD Chennai Rajharat Hinjewadi Western Suburbs Hitech City & Gachibowli Noida SBD Pune Salt Lake -30% -40% Eastern Suburbs SBD Central Gurgaon Thane-Navi Mumbai

PUNE

SBD Pune
Locations of Interest Magarpatta Kharadi Kalyani Nagar Yerwada Nagar Road Viman Nagar Aundh Baner

Key Developments* Magarpatta City Raheja Commerzone EON SEZ (Kharadi) Tech Park I (Viman Nagar)

SBD - North -50% -60% -70%

Rental Drop from Peak (3Q 2008 - 1Q 2010) (% in INR terms)

CHENNAI

SBD Chennai
Locations of Interest DLF IT Park (SEZ) India Landtech Park Ambit IT Park Olympia Techpark Key Developments* DLF IT Park (SEZ) India Landtech Park Ambit IT Park Olympia Techpark

Reasons for Success The SBD and the suburbs of Chennai (primarily OMR) are closer in real estate scoring, as indicator movement and demand influx has been comparable in the two micromarkets (average annual absorption from 2007 2009 was about 2 million sq ft each, with a similar rental drop of 25-30% from peak). SBD Chennai has a large supply base and offers occupiers multiple options for good quality, well-maintained properties with a focus on Green and Sustainability. Affordable rents in a well sustained market further drive occupier interest. While SBD Chennai is currently far more attractive to occupiers as it offers strong regional connectivity, better social, institutional and residential infrastructure, suburbs are poised to give a strong competition in coming years. Reasons for Success

Bubble Size: Existing Commercial Office Stock as on 2010 (in sq ft; inclusive of IT, Non-IT and SEZ space)
Source: Real Estate Intelligence Service

Star

Aspirant Most of the Stars have witnessed relatively low vacancy rise from peak, as demand has managed to arrest micromarket decline. Mostly suburbs have witnessed large vacancy fluctuations (beyond 1000 basis points), due to a supply overhang and a demand drought. This continues to exert pressures on rents in these micro-markets.

Gurgaon (NCR), Thane and Navi Mumbai (Mumbai) have led all micro markets in rental depreciation, thus proving very attractive for many occupiers. However, despite a low rental correction in micro-markets such as Salt Lake (Kolkata), SBD Bangalore, SBD Chennai, Whitefield (Bangalore) and Hinjewadi (Pune), they continue to remain attractive for occupiers primarily due to low rental base, quality future supply and existing tenant profile.

KOLKATA

Salt Lake
Locations of Interest Salt Lake Sector V Key Developments* Infinity Benchmark Bengal Intelligence Park Globsyn Crystal South City Pinnacle Godrej Water side Srijan Techpark

Salt Lake is an established office destination of Kolkata, offering excellent retail and residential catchments, hotels and regional connectivity to IT/ITeS occupiers. However, moving ahead, Rajharat will score high due to ongoing SEZ projects, quality office and residential properties, besides relative proximity to domestic and international airport.

NCR, Mumbai and Bangalore lead the leasing activity in India, followed by Hyderabad, Pune, Chennai and Kolkata
*Key developments include properties that are either operational or getting operational in the next six to eight months and witnessing large active leasing.

12 On Point The Seven Stars of India

On Point The Seven Stars of India 13

Circa 2011: picture of a year ahead

1600 1400 1200 1000 800 600 400 200 0 -200 -10% -8% -6% -4% -2% 0% Noida Hitech City & Gachibowli Whitefield SBD Chennai Rajharat Suburbs Chennai Western Suburbs SBD Bangalore Eastern Suburbs SBD Pune Salt Lake Hinjewadi SBD-North

A New Map of Opportunity

The matrix below highlights the market transition from being overpriced-landlord dominated to affordable-tenant dominated destinations. Stars have been the first ones to tap the opportunistic demand resulting out of rental depreciation and ready good quality supply. Banking upon strong demand, the Stars would also lead rental appreciation and vacancy drop in 2011; Aspirants would follow suit.
OVERPRICED Micro-Market 1H07 Gurgaon
2% 4% 6%

Vacancy Variation (Basis Points)

Thane-Navi Mumbai

SBD-Central Gurgaon

TENANT BALANCED PAST

WINDOW OF OPPORTUNITY FUTURE 1H10 2H10 1H11 2H11

LANDLORD BALANCED 1H12 2H12

2H07

1H08

2H08

1H09

2H09

Noida SBD Central Mumbai SBD North Mumbai West Suburbs Mumbai East Suburbs Mumbai Thane - Navi Mumbai SBD Bangalore Whitefield SBD Chennai Suburbs Chennai SBD Pune Hinjewadi Hitech City & Gachibowli Salt Lake Rajarhat TENANT BALANCED Parameters Rental Trend Occupier Behaviour/ Strategy Availability of Space Bargaining Power of Buyers/ Occupiers OVERPRICED Rents peaking Avoid signing leases Low vacancy; Less option for tenants Low bargaining power Supply lags strong demand New projects planned in a hurry (Balanced with a tenant bias) Rents falling Renegotiate, consolidate, relocate Vacancy rising; Increasing options High bargaining power; Incentives available Demand wanes and is outstripped by new supply Focus on completion but no new launches LANDLORD BALANCED (Balanced with a landlord bias) Rents rising Consider BTS options, Hard options Peak or falling vacancy; Decreasing options Weakening bargaining power Demand recovers and becomes strong. Limited but new project launches

Rental Variation (% in INR terms) Bubble Size: Future Supply of commercial office till early 2011 (in sq ft; inclusive of IT, non-IT and SEZ space)
Source: Real Estate Intelligence Service

Star

Aspirant

Micro-markets will get aligned closer to rental stability, NCR and Mumbai being exceptions. It is visible that a lead in rental appreciation would be taken by micro-markets with less future supply like SBD Bangalore, SBD Pune and Salt Lake, wherein the supply overhang is relatively less pronounced. Gurgaon is in the left half due to large supply-poor demand scenario in upcoming locations of Sohna Road, Golf Course Extension and Manesar, which together shall witness supply of more than 15 million sq ft over the next 3 years. Prime areas of Gurgaon such as MG Road, NH-8 and Golf Course Road are expected to witness rental price appreciation as early as 1H 2011 due to forecasted strong demand recovery. Moving ahead, Stars will witness relatively low vacancy variation as these would be the most preferred destinations for rising occupier queries. Hence, these would either witness rental stability or positive rental appreciation. Although NOIDA is expected to witness rental pressure in the near-term, we foresee occupiers returning to the NOIDA market due to strong and improving infrastructure, emerging residential support at affordable pricing and existing population of about a million. Most micro-markets are expected to reach their rental lows within the next 2-3 quarters, if not reached as yet, which is reflected in the chart above. This indicates that the window of opportunity for occupiers, where balance of power favors them, continues to shrink with every passing quarter.

WINDOW OF OPPORTUNITY Rents bottoming at a plateau Sign leases / Renegotiate High vacancy; Large number of options Good bargaining power; Incentives available but reducing No or few new project launches as supply remains ahead of stagnant demand

Supply & Demand

Source: Real Estate Intelligence Service

14 On Point The Seven Stars of India

On Point The Seven Stars of India 15

Authors
Abhinav Joshi, Assistant Manager, Research & REIS abhinav.joshi@jllm.co.in +91 124 460 5100 Abhinav Joshi joined Jones Lang LaSalle Meghraj in January 2007 and handles the Delhi-NCR Research and Real Estate Intelligence Services (REIS) team. Based out of Gurgaon, he contributes to topical whitepapers, property market digest and research deliverables on the industrial, commercial, retail and residential real estate markets in India. He has also worked on numerous projects encompassing market research, business location advisory, feasibility and valuation. He is a town planner by qualification and is pursuing an executive education from Indian Institute of Management (Kolkata). Trivita Roy, Assistant Manager, Research & REIS trivita.roy@jllm.co.in +91 40 4040 9100 Trivita Roy has joined Jones Lang LaSalle Meghraj Research team in 2007. Based out of Hyderabad, she contributes to topical whitepapers, property market digest and research deliverables on industrial, commercial, retail and residential real estate markets in India. She is also responsible for Indian real estate intelligence service (REIS). Trivita is trained as City Planner from Indian Institute of Technology Kharagpur and has a two years experience in real estate research.

Avinash Mirchandani, Assistant Vice President, Research and REIS avinash.mirchandani@jllm.co.in +91 22 6141 6500 Avinash Mirchandani supports the Jones Lang LaSalle Meghraj India Research & REIS team. Based in Mumbai, he provides guidance and oversight on all of the teams research outputs and bespoke client projects. Avinash originally joined Jones Lang LaSalle in 2007 as the programme manager for the World Winning Cities Research Programme, a multi-year research initiative conducted by our Global Research team. Prior to that, he worked in a variety of consulting and research roles across the biotech, aerospace and IT industries in the United States. Avinash holds a bachelors degree in Economics from UCLA and an MBA from the Indian School of Business.

Abhishek Kiran Gupta, Associate Director, Research & REIS abhishekkiran.gupta@jllm.co.in +91 22 6141 6500 Abhishek Kiran Gupta leads the Jones Lang LaSalle Meghraj India Research team and is based in Mumbai. He manages research operations on a Pan-India level and is responsible for the teams outputs, including research reports such as topical white papers, property market digests and bespoke research projects based on specific client requirements. Prior to joining Jones Lang LaSalle, he had seven years of experience in market research, business analysis and market strategy consulting, servicing diversified industries including pharmaceutical, software publishing and insurance.

About Jones Lang LaSalle

Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2009 global revenue of $2.5 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.6 billion square feet worldwide. LaSalle Investment Management, the companys investment management business, is one of the worlds largest and most diverse in real estate with more than $40 billion of assets under management. For further information, please visit our web site, www.joneslanglasalle.com. Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 16,500 employees operating in 76 offices in 13 countries across the region.

About Jones Lang LaSalle Meghraj

Jones Lang LaSalle Meghraj, the Indian operations of Jones Lang LaSalle, is the premiere and largest real estate professional services firm in India. With an extensive geographic footprint across ten cities (Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 2900, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, consultancy, transactions, project and development services, integrated facility management, property and asset management, capital markets, residential, hotels and retail advisory. For further information, please visit www.jllm.co.in

Real Estate Intelligence Service (REIS) India is a subscription based research service designed to provide you with cutting
edge insights into Indias diverse and challenging real estate markets through collation, analysis and forecasts of property market indicators and trends across all major Indian markets across various real estate asset classes - office, retail, residential.

REIS empowers you with consistent and complete market data and analyses for all real estate indicators by specific micro markets. It is supplemented by value added services including client briefings, presentations and rapid market updates. For more details, contact, Ananth Narayanan +91 98840 21335 N.Ananth@jllm.co.in or Abhishek Kiran Gupta +91 9820312065 Abhishekkiran.Gupta@jllm.co.in

Confederation of Indian Industry (CII)

government alike through advisory and consultative processes.

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the growth of industry in India, partnering industry and CII is a non-government, not-for-profit, industry led and industry managed organisation, playing a proactive role in Indias development process. Founded over 114 years ago, it is Indias premier business association, with a direct membership of over 7800 organisations from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 90,000 companies from around 385 national and regional sectoral associations. CII catalyses change by working closely with government on policy issues, enhancing efficiency, competitiveness and expanding business opportunities for industry through a range of specialised services and global linkages. It also provides a platform for sectoral consensus building and networking. Major emphasis is laid on projecting a positive image of business, assisting industry to identify and execute corporate citizenship programmes. Partnerships with over 120 NGOs across the country carry forward our initiatives in integrated and inclusive development, which include health, education, livelihood, diversity management, skill development and water, to name a few. Complementing this vision, CIIs theme for 2009-10 is India@75: Economy, Infrastructure and Governance. Within the overarching agenda to facilitate Indias transformation into an economically vital, technologically innovative, socially and ethically vibrant global leader by year 2022, CIIs focus this year is on revival of the Economy, fast tracking Infrastructure and improved Governance. With 64 offices in India, 9 overseas in Australia, Austria, China, France, Germany, Japan, Singapore, UK, and USA, and institutional partnerships with 213 counterpart organisations in 88 countries, CII serves as a reference point for Indian industry and the international business community.
COPYRIGHT 2010 JONES LANG LASALLE MEGHRAJ. All rights reserved. No part of this publication may be published without prior written permission from Jones Lang LaSalle Meghraj. The information in this publication should be regarded solely as a general guide. While care has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the whole or any part. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions regarding numerous variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome, and we draw your attention to this factor.