RESEARCH

October 2009
E&r @ GLANCE
Economy & Realty
Knight Frank
Economic Outlook On account of the festive season, the Recent financial market activity indicates
consumer durables industry is expected to positive sentiments and high liquidity. The
Key economic indicators continue to reflect witness growth in excess of 20%. Players like equity markets continued to tread forward in
the Indian economy's gradual recovery from Godrej & Boyce recorded sales growth of 35% September'09 on account of the foreign
the recent financial slump. The September in September'09. For Samsung Electronics, institutional investor (FII) money chasing
quarter, on account of the festive season, the sales growth for the September quarter is Indian equities. While FIIs sold about
witnessed increased demand for consumer estimated to be around 30%. Further, the Rs.53,000 crores (net) of equities in 2008,
durables, FMCG, automobiles and other payment of entitlements under the sixth they have bought about Rs.65,500 crores
similar goods. The broader data for the first central pay commission will ensure higher (net) this year until October 16, 2009. The
half of the current financial year also reflect spending power in the December quarter, decent returns garnered by the institutional
improvement. Domestic automobile sales of which should help sustain growth in the investors on QIP issues since April'09 have
5.78 million during April-September' 09 aforementioned sectors. The payment of the further compelled them to invest in the Indian
exhibited a 15% improvement on sales during second installment, expected in October'09 market. The collective worth of these QIP
the same period last year. Similarly, during and amounting to Rs.29,373 Crores, could issues by 34 companies, which between them
the first half of this fiscal year, sales of translate into Rs.50,000 to Rs.2,00,000 in raised about Rs.29,000 Crores, is up 39% as
passenger vehicles and two-wheelers the hands of government employees in the of October 12, 2009. Major developers like
increased by about 13% and 16% A to C groups. DLF, Unitech, HDIL and Indiabulls Real Estate
respectively. This increase in sales is raised money through these QIP issues.
primarily due to the reduced cost of cars The Index of Industrial Production (IIP) Exchange Rate
55 15
following excise duty cuts offered in the continued its rising trend in August'09. The
10
stimulus package, easy financing options index recorded its best performance in the 50
5
and reduced auto loan interest rates of last 22 months in increasing by 10.4% in 45
0
around 10%. Some banks have been offering August'09. Also in August'09, the
40

Percent
-5
even lower interest rates for a limited period, manufacturing sector grew by 10.2% and the
INR

35 -10
an example being the IDBI Bank's offer of mining sector grew by 12.9%. Another
-15
auto loans at 8.5% for loans taken between indicator for economic activity, the 30
-20
October 1 and December 31, 2009 HSBC Markit Purchasing Managers' Index 25
-25
(PMI), rose from 53.2 in August'09 to 55 in
20 -30
Index of Industrial Production (IIP) September'09 on account of robust domestic
Mar-09
Feb-08

Jun-08

Sep-08

Dec-08

Jul-09

Oct-09

16
demand.
14 FII Investment in Equity Securities (Net)
25,000 INR/USD (LHS) Annual Appreciation/(Depreciation)
12 Source: Government of India
20,000
10 While the indicators discussed above signal a
15,000
8
Percent

10,000
revival on the back of improved domestic
6 consumption, overseas demand is still weak,
Rs. crores

5,000
4 resulting in negative growth of Indian
0
2
-5,000
exports. Adding to this plight is the
0
-10,000
appreciation of the Rupee relative to the USD.
-2
-15,000
The Indian currency has appreciated by
Feb-09
Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Apr-09

Jun-09

Aug-09

-20,000
around 10% since March'09, which has not
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09

Mining Mfg Electricity General

only affected the realization of export
Source: Government of India proceeds, but has also rendered these
Source: SEBI
Note: Oct'09 data until 16 Oct exports more expensive.

India Research KnightFrank.com

This report is published for general information only. Although high standards have been used in the
Samantak Das National Head - Research preparation of the information, analysis, views and projections presented in this report, no legal
+91 (022) 2267 0876 responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant
from the contents of this document. As a general report, this material does not necessarily represent the
samantak.das@in.knightfrank.com view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or
in part is allowed with proper reference to Knight Frank Research.
October 2009
E&R @ GLANCE
Inflation (Monthly Average)
14 Mumbai Office Space Outlook Sale transactions in the western suburbs
have been few and far between, but still
12
The office market in India was badly impacted account for a majority of 43% of commercial
10 by the global financial crisis. Prices tumbled sales around Mumbai during the ongoing
8 under the weight of reduced demand and financial year. During May, 19,000 sq.ft. of
Percent

6 cost cutting by corporates. However, as with commercial space, constituted by two

4 the realty market in general, India's transactions, was sold in Andheri East at an
2 commercial market is now showing signs of a average price of Rs.12,100 per sq.ft. During
0
revival and enquiries are on the rise. A glance July, a single transaction comprising
at office space transactions witnessed 70,000 sq.ft. was concluded in Malad East at
-2
around Mumbai over the course of the
Mar-09
Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

May-09

Jul-09

Sep-09

a price of Rs.4,800 per sq.ft. Given the large

ongoing financial year reveals a picture of quantum of existing and upcoming supply in
CPI WPI improvement characterized by sporadic western suburban markets, this region can be
Source: Government of India
transaction trends. expected to drive commercial activity in
Mumbai Office Space Transactions (Apr’09-Aug’09)
The inadequacy of the WPI inflation index in 900 Mumbai once the market is fully recovered.
capturing current consumption patterns has 800 Mumbai Office Space Transactions
600
been highlighted in earlier editions of this 700

report. The government recently announced 600 500

Sq.ft. (in ‘000)

the revamp of this index in order to make it 500

400
more contemporary. Accordingly, the number 400

Sq.ft. (in ‘000)

of constituents of this index will be increased 300 300

from the current 435 articles, which was last 200

200
revised in April'2000, to 850 articles. In line 100

with current consumption patterns, 0 100

South Mumbai

Navi Mumbai

Central Suburbs

Western Suburbs

manufactured product categories will include

0
items like cell phones, laptops and digital

June
April

August
May

July
cameras, all items that are widely used
Lease Sale Lease Sale
nowadays. The base year for computation of Source: Knight Frank Research Source: Knight Frank Research

this index will also be shifted from 1993-94 to During Apr'09 to Aug'09, markets in the Since the start of the ongoing fiscal year,
2004-05. In order to have less frequent but western suburbs have accounted for 61% of South Mumbai locations extending from
more reliable data, the frequency of the index commercial leasing around Mumbai. In April Nariman Point to Lower Parel has accounted
has been reduced from weekly to monthly. and May, a total of approximately for 16% of commercial leasing and 38% of
The new index, to be launched in 400,000 sq.ft. of space, constituted by commercial sales around Mumbai. In South
November'09, is expected to be more reliable 14 major transactions, was leased in Mumbai, notable purchase activity was
and contemporary. locations like Bandra Kurla Complex, Andheri witnessed in May and June, during which a
East and Goregaon. Although the months of total of 80,000 sq.ft. of commercial space,
The CPI measure of inflation, which stood at
June and July did not witness the same constituted by three transactions, was
11.9% in July'09, continued to remain high at
quantum of transactions, a nonetheless bought in Parel/Lower Parel at an average
11.7% in August'09. WPI inflation, which is
sizeable total of roughly 250,000 sq.ft., price of Rs.15,000 per sq.ft.. Leasing activity
lower on account of the high base effect, has
constituted by 8 major transactions, was has been more prevalent, especially from
started to inch upwards, and stood at 0.92%
leased during this period. During August and April onwards. During April and May, a
for week ended October 3, 2009. Although
September, a total of 220,000 sq.ft. of space, combined 200,000 sq.ft. of space,
increased liquidity in the system may warrant
constituted by 9 transactions, was leased constituted by 7 major transactions, was
an increase in interest rates in the next few
around the Western Suburbs. During Apr'09 leased around South Mumbai. The months of
months, the yields on long-term government
to Aug'09, transactions around BKC have June and July witnessed a similar quantum of
bonds have increased by close to 100 basis
been concluded at rentals ranging from 6 leasing transactions, but of a far lower
points in the last quarter. While the economy
Rs.200 to Rs.240 per sq.ft. per month, while square footage. A total of approximately
is currently firing on all cylinders, the
in Andheri East and Malad transactions have 30,000 sq.ft. of space was leased around
duration for which the current environment of
been concluded at rentals ranging from South Mumbai during this period. Leasing
low interest rates, flush liquidity and
Rs.80 to Rs.130 per sq.ft. per month. As the activity in South Mumbai since the start of the
controlled inflation persists will determine
stock of premium properties decline, select year has been evenly distributed around the
growth patterns further down the road.
properties across micro markets are expected major office micro markets of Nariman Point,
to witness 5-7% price appreciation.

India Research KnightFrank.com

This report is published for general information only. Although high standards have been used in the
Samantak Das National Head - Research preparation of the information, analysis, views and projections presented in this report, no legal
+91 (022) 2267 0876 responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant
from the contents of this document. As a general report, this material does not necessarily represent the
samantak.das@in.knightfrank.com view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or
in part is allowed with proper reference to Knight Frank Research.
October 2009
E&R @ GLANCE

16
Mumbai Office Space Transactions
Average rental values for Grade A office space (Rs. /sq.ft./month)
14 Mumbai Micro Market Mar'09 Jun'09 Sep'09

12 Nariman Point 300 300 300

No. of transactions

10
Fort/Ballard Estate/Churchgate 188 188 188

8
Worli - Prabhadevi 238 213 205

6
Lower Parel 180 148 165
BKC 255 250 255
4
Andheri (E) 110 110 110
2
Powai 115 115 115
0
June
April

Malad 110 110 110

August
May

July

Lease Sale Thane 48 48 48

Source: Knight Frank Research
LBS Marg 110 105 110
Lower Parel, Worli and Prabhadevi. Since the Navi Mumbai 53 53 53
start of the current financial year, lease Source: Knight Frank Research
transactions in Lower Parel/Parel have been
space has been transacted around Mumbai.
concluded at rates ranging from The IT/ITES sector,
90% of this transacted space is accounted for
Rs.155 to Rs.225 per sq.ft. per month, while in
by leasing. The bulk of commercial leasing which during past
Nariman point transacted rates have
exhibited a far smaller range of
and sales that occurred since the start of the prosperous years
fiscal year has occurred from April through
Rs.225 to Rs.240 per sq.ft. per month.
June. Thereafter, sales came to a standstill
was driving
In the central suburbs, leasing activity and leasing was prevalent as recently as commercial demand
August, during which 8 leasing transactions
occurred from April to June. During this across India,
period, a total of approximately were concluded around Mumbai. Analysis of
the demand that has been engaged in accounts for only
220,000 sq.ft. of commercial space,
comprising 4 major transactions, was leased commercial transactions since the start of 14% of commercial
FY'10 reveals that tenants from the BFSI
in LBS Road and Powai. During the sale and lease
subsequent months the central suburban sector account for a majority 43% of sale and
lease transactions concluded around Mumbai transactions
commercial market has been quiet. Lease
transactions in Powai during FY'10 have to this year. The IT/ITES sector, which during concluded around
past prosperous years was driving
date been concluded at rates ranging from
commercial demand across India, accounts
Mumbai during
Rs.85 to Rs.115 per sq.ft. per month.
for only 14% of commercial sale and lease Apr’09 to Aug’09
Since the start of the ongoing fiscal year, transactions concluded around Mumbai
approximately 2 million sq.ft. of commercial during Apr’09 to Aug’09. It is unsurprising to
see that while the BFSI sector has
Occupier-wise Distribution of Transactions (Apr’09-Aug’09) predominantly dominated South Mumbai
commercial transactions, IT/ITes and
manufacturing sector demand has been far
more prevalent in western suburban markets
where cheaper alternatives are available. The
commercial transactions data for the ongoing
fiscal year reveals sporadic and
unpredictable trends that are to be expected
until India's office market resumes consistent
growth.

BFSI - 43%
Manufacturing - 22%
IT/ITES - 14%
Others - 21%
Source: Knight Frank Research

India Research KnightFrank.com

This report is published for general information only. Although high standards have been used in the
Samantak Das National Head - Research preparation of the information, analysis, views and projections presented in this report, no legal
+91 (022) 2267 0876 responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant
from the contents of this document. As a general report, this material does not necessarily represent the
samantak.das@in.knightfrank.com view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or
in part is allowed with proper reference to Knight Frank Research.