onion tears in the indian residential sector · pdf fileonion tears in the indian residential...

Monthly Real Estate Monitor - December 2013

Monthly Real Estate Monitor – December 2013

Onion Tears in the Indian Residential SectorThe whole country was recently abuzz when the price of onions (one of the most essential staples of the Indian diet) rose above the price limit of INR 100 per kg (that’s nearly USD 0.75 per pound) in the country’s capital and surrounding areas. The reasons for this were a crop affected by unseasonal rains and hoarding by suppliers and a few large farmers to create an artificial supply shortfall. This story finds a parallel in the country’s residential sector.

This sector is characterised by delays in project possession and healthy interest by investors who are not end-users but speculators looking for capital appreciation. There is a certain similarity between onions and the housing sector because both are commodities that fulfil an important need – providing food and shelter. In 2008-09, when housing demand was adversely impacted by the Global Financial Crisis and investors and end-users deserted the residential market, prices tumbled by over 30% across different markets. The subsequent revival in demand took place in 2010 and it was accompanied by a revival in price as well. Prices have risen by nearly 50% from the market trough seen in 2009 and are trending at newer market peaks in most residential markets. The healthy buyer interest during 2010-2012 was the prime factor to drive theprices upwards but this is not the case in 2013.

A major factor in the demand revival has been the active investor interest in the residential sector. In fact, in select cities and corridors such as Gurgaon in the National Capital Region, the investor momentum has managed to marginalise end-users, who are relatively risk-averse. By investing in projects which have partial approvals, the investors have taken away a large chunk of the upcoming residential supply and this has been motivation for developers to offer their thus limited stock to end-users at higher prices. This has started to happen more regularly and has made many residential corridors more speculation-driven.

Back to the onion analogy, over the years, onions have seen stable prices (prices have remained at INR 22-32 per kg) as supply has been synchronised with demand. The wholesale market which hoards the commodity can be equated with the investors who keep end-users away from the market for short-term gains. Farmers – the onion producers who make a healthy profit in a short-supply

scenario by selling at higher prices are analogous to developers who look to book returns from their projects by ensuring that buyer demand is always chasing lower availability. The difference lies in the fact that the government intervened in the essential commodities market by importing onions to control price rises. No such method of control currently exists in the housing sector. Perhaps, beyond the normal income tax payable on house rent income (payable even for non-rented accommodation), some more punitive measures can be implemented to achieve better “price discovery” in the housing sector.

Grade A Capital ValueOffice Retail Residential

Delhi NCR

Mumbai

Bangalore

Chennai

Pune

Hyderabad

Kolkata

Rental Value

Deal of the MonthThe iconic building Express Towers at Nariman Point,

South Mumbai is to be bought by PE Fund

Blackstone in partnership with Pune-based Panchshil

Realty for INR 9 billion.

What’s New!!The Government of Punjab has reserved 1,700 acres of land at Mohali for development of an

Information Technology knowledge park. 40 acres in the

park has been earmarked forElectronics System Design

Manufacturing (ESDM) cluster. Green WallVirtusa Corporation a global

IT services company achieved a LEED Gold

certification for their campus in Hyderabad

Monthly Real Estate Monitor - December 2013Monthly Real Estate Monitor – December 2013

BangaloreTransaction activity in the Bangalore office market declined during November in comparison with the previous month, with modest absorption during the month. The combination of stable demand and

restricted supply was instrumental in keeping the city’s overall vacancy rate very low during November. Meanwhile, the major transactions of the month included Fiberlink, Continuous Computing, UHG and Novo Nordisk. Rents continued to remain stable across the city, while capital values witnessed marginal appreciation on the back of demand and investor sentiment.

The Bangalore retail market witnessed sluggishdemand in organised malls. However, modest absorption decreased the vacancy rate marginally in the malls. Major transactions during the month

included leasing by Allen Solly, Bombay Dyeing, Airtel and Madura Fashion & Lifestyle. Rents continued to remain unaltered over the month. Meanwhile, capital values remained stagnant on the back of poor investor sentiment towards the buying of retail assets.

Absorption was modest in the Bangalore residential market during November. The city witnessed amodest number of launches in the month, includingOrchids Lake, SJR Oxigen, MJR Clique and Ajmera

Stone Park. Rents increased marginally over the month. Capital values appreciated marginally across various sub-markets in November due to an increase in sales volumes and prices at most projects that are nearing completion.

Office Rents Capital Values

Key PrecinctsINR per sq ft per

month INR per sq ftCBD 80–130 10,000–20,000Old Airport Road 60–75 7,000–10,000Outer Ring Road (Eastern) 48–55 5,500–6,500Old Madras Road 45–60 5,000–6,500Electronic City 26–28 2,800–3,200

Retail Rents Capital Values


month INR per sq ftKoramangala 80–150 9,000–16,000Indiranagar 90–180 10,000–16,000New BEL Road 50–80 6,000–10,000Commercial Street 175–250 16,000–20,000Jayanagar 80–120 7,000–15,000

Residential Rents Capital Values

Key Precincts

INR per month for a 1,000 sq ft 2BHK apartment INR per sq ft

Old Madras Road 15,000–25,000 5,000– 6,000Indiranagar 20,000–30,000 10,000–25,000Bellary Road 12,000–18,000 4,500–9,000Hosur Road 10,000–14,000 3,000–6,500Whitefield 18,000–25,000 4,500–8,000Tumkur Road 8,000–12,000 3,000–5,000Kanakapura Road 8,000–12,000 3,000–5,500Mysore Road 8,000–10,000 3,000–4,000

INFRASTRUCTURE ONGOING>> Travelling on the Namma Metro between MG Road and Baiyapannahalli is set to become dearer with Bangalore Metro Rail Corporation Limited (BMRCL) working on hiking fares. The hike is imminent even though Reach 3 and 3A, between Swastik-Yeshwanthpur-Peenya, is yet to begin commercial operations. Incidentally, a study is underway on the fare hike and its effects ahead of the commissioning of the 9.9-km stretch of Reach 3 and 3A, which has ten stations. BMRCL officials said the Fare Fixation Committee has been working on the issue for some time and is going to pass an order soon. BMRCL is also seeking assistance from the Institute for Social and Economic Change to decide the fares.


ChennaiThe Chennai office market saw a steady improvement in demand. In November, major transactions included Access Health and Virtusa both taking up space on Mount-Poonamallee Road,

as well as Amazon expanding in pre-toll OMR. Meanwhile, CRISIL relocated from T Nagar and consolidated its operations in MRC Nagar. In addition, Sodexo, the Korean Consulate and ICICI Bank took space in different CBD locations. Rents continued to grow along the pre-toll OMR locations, while remaining restricted in other locations.

Chennai continued to see buoyant retail activity in both malls and on high streets during November. During the month, Arvind Store opened its new showroom on TTK Road & Bounce and Oryza

opened outlets on ECR. In addition, fine dining restaurants Anjappar and Sigree opened in Adyar. The city’s retail rents recorded marginal growth during the month.

Residential sales remained tepid during November. However, developers continued to increase housing options for homebuyers by launching new projectsduring the month. Major launches included Love by

Vijay Shanti in Mambakkam, Lanterns Court by Casa Grande in Thoraipakkam and Peru's by StepsStone Builders in Perumbakkam. In addition, the Alliance Group launched Villa Belvedere in Oragadam. Meanwhile, capital values remained stable amid strained sales.



month INR per sq ftMount Road 60–85 9,000–15,000RK Salai 65–85 10,000–15,000Pre-toll OMR 40–67 5,000–6,500Post-toll OMR 25–35 3,500–5,000Guindy 40–65 6,000–9,000Ambattur 20–29 3,250–4,300

RetailRents

(High Streets) Capital Values


month INR per sq ftT. Nagar 120–180 12,000–15,000Nungambakkam 130–150 13,000–16,000Velachery 80–120 10,000–12,000Pre-toll OMR 80–100 8,000–11,000Anna Nagar 120–150 11,000–13,000LB Road (Adyar) 120–150 10,500–13,500


Key Precincts

INR per month for a 1,000 sq ft

two-BHK apartment INR per sq ft

Adyar 20,000–30,000 12,000–22,000Medavakkam 7,000–14,000 3,600–5,500Tambaram 6,000–12,000 3,500–4,500Anna Nagar 15,000–25,000 9,000–15,000Porur 5,000–10,000 3,800–6,200Sholinganallur 9,000–12,000 4,250–5,800

INFRASTRUCTURE ONGOING>> The Tamil Nadu Government sanctioned INR 50 million for preparing a detailed project report for the proposed 55-km-long elevated corridor from Taramani to Mamallapuram on OMR.


DelhiDemand continued to remain stable and primarily driven by relocation and consolidation as a means for cost control. The vacancy rates in the city remained stable. Major transactions in November

included Panasonic leasing space in NH 8-Gurgaon, PVR and Fluor Daniel both renting space in Cybercity-Gurgaon and Delhi Film Council taking up space in Greater Noida. Meanwhile, Paras Trade Centre commenced operations in Golf Course Road-Gurgaon with very low occupancy. Rents and capital values both continued to remain stable across all the sub-markets of the city.

Demand remained weak due to constraints in the availability of good space, with brands being more cautious to relocate to a good location;consequently, non-performing malls witnessed high

vacancy rates. Retailers continued to remain active in pre-committing spaces in upcoming malls that offer the promise of good location, design, branding and business potential. Major transactions in November included Pink and Crocs both leasing space in Gurgaon Suburbs, and Indian Terrain, Gini & Jony and Lotto all taking up space in Noida Suburbs. Rents and capital values both continued to remain stable over the month of November.

Demand for residential units in Delhi was weak in November. Major launches during the month included Aakriti Vastus by the Aakriti Group in Dwarka Expressway, Mahagun Mantra Phase I by

the Mahagun Group in Greater Noida and Shubhkamna Sublime by Shubhkamna-Advert in Yamuna Expressway. In addition, Deepsons launched Atulya Heights in Vaishali-Ghaziabad. Rents and capital values remained stable during the month.



month INR per sq ftBarakhamba Road 170-400 28,000-35,000Jasola 110-170 17,000-21,000DLF Cybercity 75-78 NAMG Road 115-140 17,000-19,000Golf Course Road 85-98 12,500-15,000Sohna Road 47-55 6,500-8,000



month INR per sq ftSouth Delhi 180-300 24,000-32,000West and North Delhi 140-230 15,000-23,000Gurgaon-MG Road 140-270 17,500-23,000Rest of Gurgaon 60-100 8,000-14,000Noida 130-220 14,000-25,000Ghaziabad 90-150 10,500-16,000


Key Precincts

INR per month for a 1000 sq ft 2BHK

apartment INR per sq ftGolf Course Road 22,000-32,000 12,000-16,000Sohna Road 15,000-20,000 5,800-7,500Golf Course Extension Road 16,000-22,000 8,000-9,500NH 8 14,000-19,000 4,500-6,500Dwarka Expressway NA 5,500-7,500Noida-Greater Noida Expressway 12,000-14,000 4,000-6,100Noida City 12,000-14,500 4,700-6,000Indirapuram 10,000-12,000 4,200-5,000NH 24 7,000-9,000 2,400-3,200

INFRASTRUCTURE ONGOING>> The Noida authority is likely to start construction in January 2014 on an underpass project near Sector 94 to ease traffic congestion at the Mahamaya flyover. The 200-metre underpass, which will be constructed at a cost of INR 350 million between the Kalindi Kunj Bridge and the Mahamaya Flyover, will connect commuters to Sector 94/95 and ensure a signal-free ride for about 70,000 daily commuters.>> After missing several deadlines over the past few years, the country’s first private metro service – Rapid Metro – finally rolled on track in Millennium City Gurgaon on 14 November 2013.

POLICY UPDATE>> In a move that will aid buyers in choosing legally sound projects, the Noida, Greater Noida and Yamuna authorities are planning to upload on their official websites the details of all builders constructing housing projects.

Monthly Real Estate Monitor - December 2013Monthly Real Estate Monitor –December 2013

HyderabadLeasing volumes remained moderate in November. Occupiers continued to prefer Hitec City submarket.Few of the key transactions in November includedCSSI and People Tech taking space at Hitec City,BNP

Paribas leasing space at Banjara Hills and Infotech Technologiesleasing space at Uppal. Average market rents and capital values remained stable over the month.

Leasing activity remained stable both in upcoming malls and high streets in November. However the focus remained on high streets. VOI Jeans, Samsung, Vinegar and Hazzel Ice Cream leased

space at Jubilee Hills, Tanishq opened store at Kukatpally, Toy Globe opened store at Begumpet. Rents and capital values remained stable over the month.

Residential sales continued to remain sluggish in November. New launches also remained subdued.The projects launched were SMR Vinay Harmony County by SMR Holdings at Banlaguda near APPA

Junction and Armsburg My Space by Armsburg Properties at Suchitra Junction. Rents and capital values remained stable across all the submarkets due to sluggish demand.

Office Rents Capital Value


month INR per sq ftBegumpet 45–55 4,500–6,500

Banjara Hills 50–60 4,500–7,500Hitec City 36–42 4,000–5,200

Gachibowli 36–40 4,000–5,000Uppal 25–35 3,000–4,000

Shamshabad 20–25 3,000–4,000Retail Rents Capital Value


month INR per sq ftBanjara Hills 100–130 10,000–13,000

Jubilee Hills 110–140 11,000–14,000Secunderabad 80–100 8,000–10,000

Hitec City 100–130 10,000–13,000Kukatpally 100–120 10,000–12,000

Dilsukhnagar 100–120 10,000–12,000Residential Rents Capital Value

Key Precincts

INR per month for a 1,000 sq ft 2BHK

apartment INR per sq ftBanjara Hills 20,000–25,000 7,500–14,000Begumpet 12,000–16,000 4,000–5,500Kondapur 8,000–16,000 3,200–5,000Gachibowli 8,000-16,000 3,500-4,200

Tellapur 6,000–12,000 2,800–3,500Kukatpally 7,000–10,000 3,500–3,800Miyapur 5,000–8,000 2,400–3,500

INFRASTRUCTURE ONGOING>> L&T Metro Rail Hyderabad Ltd has begun laying rails on the metro viaduct between Nagole and Mettuguda which is a stretch of 8 kms in November.


KolkataThe Kolkata office market witnessed slow activityduring November. The overall vacancy rate in the city remained stable in the absence of large transactions. KPMG taking up space in Salt Lake

was the major transaction of the month. Large vacancy rates in the city’s office stock continued to create pressure on rents. However, except for a few sub-markets, capital values and rents remained flattish over the month across the city.

Retail activity in the malls of the city was buoyant during November. Lifestyle opened its first store in Kolkata in Quest Mall. In addition, other major transactions during the month included Just Cex

leasing space in the Avani Riverside Mall, Bata expanding its outlet in Mani Square and Yoforia taking up space in the Forum Mall.Rents marginally increased in select sub-markets on the back of increased retailer activity. Meanwhile, capital values remained unaltered across all the sub-markets in the city.

Residential demand in the city continued to be low in high-end and upper-mid-end units. Developers continued to offer discounts and cash back schemes along with freebies over the quoted price to do away

with unsold inventory of all classes. Notable launches during the month included North Grande by Mounthill Realty in Dum Dum, and Magnolia Skyview and Magnolia Prestige, both by Magnolia Infrastructure at Rajarhat. Meanwhile, rents and capital values remained flattish across the city.



month INR per sq ftPark Street 110–140 13,500–22,000Topsia 75–90 9,000–11,000Kasba 70–90 9,000–11,500Salt Lake Sector V 40–47 4,400–5,400Rajarhat and New Town 32–38 3,500–4,800



month INR per sq ftElgin Road 300–350 24,000–30,000Park Street (high street) 325–400 26,000–34,000Salt Lake 175–225 15,000–20,000Prince Anwar Shah Road 120–150 12,000–15,000Rajarhat and New Town 50–80 6,000–8,000Gariahat (high street) 200–250 18,000–22,000


Key Precincts

INR per month for a 1,000 sq ft 2BHK apartment INR per sq ft

Alipore 43,000–50,000 14,000–22,000Prince Anwar Shah Road 18,000–30,000 7,000–14,000EM Bypass 15,000–25,000 5,000–11,000Lake Town 11,000–17,000 3,500–7,500Behala 8,000–14,000 3,000–5,500Howrah 7,000–9,500 2,500–5,000New Town (AA I, II and III) 10,000–16,000 3,300–6,000Rajarhat 8,000–14,000 2,500–4,700

INFRASTRUCTURE ONGOING>> The Kolkata Metro railway fares went up by around 25% -100% for various distances from 7 November 2013. The totalrailway route has been divided into six zones, based on distance, in computing the raised fares; previously, there were five zones. The new zone is for distances between 25 and 30 km; previously, any distance above 20 km was considered one single zone.


MumbaiNovember saw moderate demand for office space in Mumbai. Healthy pre-commitments were recorded in select projects nearing completion. Meanwhile, the trend of office space consolidation continued during

November. Other than SBD Central, where vacancy rates decreased marginally, vacancy levels remained stable across the sub-markets. Projects that became operational in November witnessed notable pre-commitments. Major transactions in November included Kraft Foods leasing space in SBD Central and LexisNexis taking up space in the SBD North sub-market. LodhaSupremus was the lone project that became operational in SBD Central. Meanwhile, rents and capital values remained stable during the month.

Demand for retail space in Mumbai remained low in November. There were only a few deal closures. Retailers were cautious towards expansion because of the weak economic conditions. Meanwhile, select

retailers were seen consolidating operations by shutting down underperforming outlets in the Suburbs sub-market, causing vacancy rates in suburban malls to increase slightly during the month. Major transactions during the month included GAS renting space in the Suburbs sub-market and Chroma taking up space in the Prime South sub-market. Rents and capital values remained stable during November.

Demand for residential units remained subdued in November. Projects with smaller configurations were preferred by buyers over high-end projects. New launches in November included BBJ Roma by BBJ

Worldwide at Andheri, Aman Hills by the Amann Group at Andheri and Evergreen Heights by the Wadhwa Group at Kalwa. Meanwhile,there was no change over the previous month in rents and capital values.



month INR per sq ftLower Parel 155–185 19,000–23,000BKC 260–360 25,000–35,000Andheri 105–150 9,000–15,000Goregaon-Malad 85–105 8,100–10,000Wagle Estate 50–65 5,100–6,000Thane-Belapur Road 45–60 5,100–6,000

RetailRents

(mall space) Capital Values


month INR per sq ftLower Parel 260–380 22,000–32,000

Malad 160–250 12,500–20,000

Ghatkopar 140–225 10,100–18,000

Mulund 125–200 10,000–16,000

Thane 100–170 8,000–14,000Navi Mumbai 75–150 7,000–12,000

Residential Rents Capital Value

Key Precincts

INR per month for a 1,000 sq ft 2BHK

apartment INR per sq ftLower Parel 60,000–100,000 24,000–35,000Wadala 40,000–55,000 15,000–19,500Andheri 35,000–54,000 12,000–21,000

Ghatkopar 35,000–45,000 9,800–15,000Ghodbunder Road 12,000–25,000 5,500–9,000

Kharghar 12,000–18,000 4,800–8,000

INFRASTRUCTURE ONGOING>> The Mumbai Metropolitan Region Development Authority (MMRDA) is now looking at a 15 January 2014 deadline to begin commercial operations of Metro services on the Versova-Andheri-Ghatkopar (VAG) corridor.


PuneThe Pune office market witnessed moderate transaction activity in November. Vacancy rates increased marginally with the completion of Eon Cluster A located at Kharadi. Major transactions in

November included Infostrech leasing space at Blue Ridge in Hinjewadi and i Place renting space at WTC in Kharadi. In addition, a multinational bank has pre-committed to space in a ready for fit-out building located at Yerwada. ITTP Phase I is ready for fit-outsand it is likely to be operational in the coming 1-2 months. Rents and capital values remained stable across all the sub-markets during the month.

Pune's stock of retail space increased with the completion of the Prime Mall located at Pimpri. The mall commenced operation with a high level of occupancy and houses prominent brands such as

Men's Avenue and Mainland China. Croma taking up space in Geo Square located in Wakad was a major transaction in November.Rents and capital values remained stable in the city over the month.

Demand for residential units continued to remain stable during the month. Major launches included Spectrum Tower by Bhujbal Brothers at Kharadi, 24K Glamore by Kolte Patil at NIBM and Signature

Meadows by KPDL at Kharadi. Rents and capital values remainedstable in the city during the month.



month INR per sq ftHinjewadi 34–40 4,000–5,500Hadapsar 40–50 5,000–6,000Bund Garden Road 60–70 6,500–7,500Viman Nagar 50–60 6,000–7,000S.B. Road 55–75 6,500–7,500Koregaon Park 60–70 6,500–7,500

RetailRents

(High Streets) Capital Values


month INR per sq ftMG Road 100–150 10,000–15,000Bund Garden Road 90–130 9,000–13,000F.C. Road 100–150 10,000–15,000J.M. Road 100–150 10,000–15,000D.P. Road 90–130 9,000–11,000S.B. Road 80–130 8,000–11,000


Key Precincts

INR per month for a 1,000 sq ft

2BHK apartment INR per sq ftWakad 10,000–12,000 4,500–5,500Kharadi 11,000–15,000 4,800–5,800Hadapsar 12,000–16,000 5,000–7,300Hinjewadi 9,000–11,000 4.500–6,300Undri 9,000–12,000 3,800–4,800Pimpri-Chinchwad 8,000–12,000 4,000–5,200

INFRASTRUCTURE ONGOING>> In the Pune metropolitan area, an alternative road in Pimple Saudagar will be built by the Pimpri Chinchwad Municipal Corporation (PCMC) to link the area to the Sangvi-Kiwale bus rapid transit route in the city. The existing 2-km road from Planet Millenium to Rakshak chowk passes through defence areas. The road is the easiest route for residents of Pimple Saudagar to reach Aundh, Baner and other areas.

Monthly Real Estate Monitor - December 2013

About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expertteams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones LangLaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property andcorporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’sinvestment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management.Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 22,200 employees operating in 79 offices in 14 countries across theregion. The firm was named the Best Property Consultancy in Asia Pacific at ‘The Asia Pacific Property Awards 2012 in association with BloombergTelevision’. For further information, please visit our website, www.ap.joneslanglasalle.com

About Jones Lang LaSalle IndiaJones Lang LaSalle is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across elevencities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 5400,the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics,consultancy, transactions, project and developmentservices, integrated facility management, property and asset management, sustainability, Industrial, capital markets, residential, hotels, health care,senior living, education and retail advisory. For further information, please visit www.joneslanglasalle.co.in

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Ashutosh Limaye Trivita RoyHead, Research and REIS Assistant Vice President, [email protected] [email protected]+91 98211 07054 +91 40 4040 9100 About Bajaj Finserv LendingBajaj Finserv Lending is one of the most diversified NBFCs in the Indian market catering to more than 5 million customers across the country. Headquartered in Pune, the company’s product offering includes Consumer Durable Loans, Personal Loans, Loan against Property, Small Business Loans, Home loans, Credit Cards, Two-wheeler and Three-wheeler Loans, Construction Equipment Loans, Loan against Securities and the recently introduced Lifestyle Finance. Bajaj Finserv Lending prides itself for holding the highest credit rating of FAAA/Stable for any NBFC in the country today.

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