Thursday, January 29, 2009


Shobhit Agarwal
Jt. Managing Director, Capital Markets, Jones Lang LaSalle Meghraj

The last five years in Indian real estate constituted a one-off boom period triggered by the emergence of India as a global investment destination. This is a general phenomenon that every sector goes through before maturity - we can compare it to the boom of 2000-2001 or the stock market boom of 2007-2008. The end always comes as a surprise, and can never be accurately predicted.

This is not to say that the good times have come to an end - the real estate industry is one of the basic industries of any economy and will always be an important component. In times ahead, we will see the industry revive and accelerate, though through smaller and shorter cycles. We already know that every industry has a life cycle of explosive growth, stabilization and maturity, followed by moderate growth. Real estate used to be a niche industry in terms of stock market exposure and private equity funding – now, it will emerge a larger, more-organized industry with realistic growth in line with the GDP, and it will represent a better and more sustainable value proposition.

Over the past six months, the real estate industry in India underwent and continues to undergo various changes. Now that the popular myth of India being a decoupled economy is finally broken, we are faced with new challenges that will see the progression of the industry into the next phase of a general industry cycle.


It is historically established that as an industry matures, it gives way to fewer and stronger players who help to bring some sense in the industry. The coming months will see consolidation in an industry that is on a journey towards equilibrium price discovery, resulting in a win-win for both the developer and the end-user. Developers may not get the high margins which they were used to, but they can still make money through higher volumes and a faster cash cycle.

Consolidation will happen at different levels. Primarily, however, we will witness it at the national as well as regional levels - there will be niche-specialized players who are experts in local municipal approval processes, as well as national players who operate with a much larger focus. This consolidation will mark the extinction of the fly-by-the-night operators who had entered the industry and had made it deviate from its fundamentals


GDP growth and exports are slowing down, there is also a pain of rising unemployment. Post Satyam, questions are being raised about corporate governance in India. However, I do believe that India will be able to recover faster than other economies, since its people are inherently savings-oriented, subject to moderate leverage and typified by caution. In comparison to the rest of the world, we are still growing at a fairly fast rate, have the maximum number of people in our collective skilled work force and our financial sector has maintained a cautious approach. We will see the results of this before too long.


The projection of India needing approximately 22 million units still holds true. Therefore, demand still exists, and increasing affordability in housing will help tap this demand. Also, affordability has to transcend the current far-flung locations and kick in at the suburban levels, closer to CBD areas.

Currently, developers must not only complete projects under execution but also re-strategize to sell them quickly. Once they get out of the existing inventory and execution pipeline, they can look at new land parcels and new business ideas such as affordable housing and innovate. While there is certainly demand, it is essential for this strategizing to take place, so that affordable housing schemes become a win-win for both developers and end-users.


1. The advent of affordable housing
2. Increased consolidation, corrected valuations and a focus on delivery to exist
3. Decreased leverage
4. Decreased land banking
5. Increased focus on execution and timely delivery to gain end-user confidence
6. Emphasis on and more focused expansion in Tier-I and Tier-II cities, where demand is already proven
7. Decrease in speculative supply in commercial real estate
8. A better comprehension of the fact that buyers’ and sellers’ interests need to match for the market to exist
9. Players re-examining their valuations to make sound acquisition decisions
10. The return of the fundamental market focus – “An industry survives because of the users, and not vice-versa”.

2009, especially the second half, will bring excellent bargains for investors, as well as to those who have a medium-to-long term view on the industry and the necessary risk appetite. Much will depend on being bang on target in terms of location, product and entry valuation.

Sunday, January 18, 2009


Source : Jones Lang LaSalle Meghraj

Pankaj Renjhen – Managing Director (North India) Jones Lang LaSalle Meghraj
Gaurav Wahi – AVP, Strategic Consulting (North India)


The real estate market in Delhi-NCR, like in other parts of the country, is witnessing some slowdown and price correction in certain corridors and this trend may continue for some time. The slowdown may result in:

• Price rationalization in real estate products
• Price correction in select corridors
• Delay in project completions
• A continued wait-and-watch sentiment amongst end user and investor alike
• Reduction in demand for the developments across sectors

The booming Indian Information Technology (IT) sector is witnessing a slower growth in the current fiscal (08-09) due to the global economic slowdown and lower technology spending in the US and UK. US companies that had bought stakes in Indian real estate companies are facing a cash crunch, thereby slowing the demand in IT-led real estate development in NCR.

Project spans may witness an increase for existing projects and real estate developers may find it difficult to complete their projects, as the cash flows have become difficult to obtain from most sources (viz. financial institutions, funds, investors and even end users which actually drive the core consumption in real estate.)

However, recent relief measures announced by various Government institutions targeting the demand in the middle income segment have provided impetus to developers to position residential sector developments in this segment. Moreover, well-planned, branded and properly positioned projects are currently witnessing demand in prominent growth corridors. The present year may see rationalization of real estate products in terms of their quality, pricing and positioning; which, coupled with improvement in market sentiment, will boost demand in times to come.


- Residential Projects

• Gurgaon: Magnolias by DLF and Nirvana Country (integrated township) by Unitech
• Faridabad: The Forest by Omaxe, BPTP Grandeur, Pranayam by Puri Constructions
• Noida: Jaypee Greens by Jaypee Group, Unitech Grande, Assotech Celeste Towers
• Ghaziabad: Orange County by Meriton Group, Shipra Suncity by Suncity Projects

- Corporate Projects

• Gurgaon: Palm Drive by Emaar, DLF Corporate Park, Vatika Atrium
• Faridabad: Saffron Square, Charmswood Plaza
• Noida: Corenthum, Logix Cyber Park
• Ghaziabad: lacks any prominent commercial development


Among the major developers in Delhi-NCR region are:

• Unitech
• Parsvnath
• Omaxe
• Ansals
• Supertech
• Emaar MGF
• Vipul Group
• Vatika Group
• JMD Group
• Logix


The major areas in Delhi NCR witnessing developments in real estate sector are:

• Gurgaon: NH-8, Golf Course Road, Southern Periphery Road and Sohna Road
• Faridabad: NH-2 and areas across Agra Canal
• Noida: Sectors 18, 37, areas along Taj Expressway and Greater Noida Expressway
• Ghaziabad: Indirapuram and NH-24

The global financial crisis and the subsequent slowdown in real estate sector have led to A slowdown in investment activities across all segments of investors, viz. funds, HNIs, etc. Most investors are holding off their investment plans at present. However, a market scan for potential lucrative projects is an ongoing process.


At present, the focus of developers is to complete ongoing projects being developed for the HIG and MIG segments. However, given the incentives of targeting the middle income segment of the population in the wake of the recent relief measures, many developers are planning to position developments targeting the MIG and upper LIG segments. That said, as an after-effect of the economic slowdown and ongoing market sentiment, consumers are less inclined to buy real estate at present, and may stall their real estate procurement plans for some time. However, the softening of capital prices may act as a catalyst to boost demand.


The real estate market in present times is experiencing a great turmoil in terms of project timelines/completions, pricing strategies and intensity of demand for the developments across all its sectors. As for the different sectors of THE real estate industry - the financial crisis has resulted in noticeable price corrections across all sectors. For instance, in the retail realty sector, the impact of the recent slowdown has resulted in an overall price correction of approximately 15-20% in Delhi NCR region.

The impact has been observed to be more on the organised retail malls, where the retailers are under severe pressure due to major decrease in sales and high rentals. This has even forced some retailers to vacate space taken in operational malls, while the retailers who have signed agreements in upcoming malls have stepped back and have even withdrawn from their agreements. The high streets markets of the city have also experienced the impact of the retail slowdown, which has been reflected in a correction of rental values from those prevailing in the last 2-3 months. However, the market is witnessing price stability or correction depending on the supply situation from micro market to micro market.

Non IT and IT-BPO sector is also witnessing impacts that include lowering of contract rates with further delay in signing of contracts, decrease in growth rate of the IT sector and restricted employment in the sector. All these factors are resulting in the rapid lowering of rentals in IT/ITeS complexes, thereby creating severe problems for the developers. However, though some small and medium-sized companies are experiencing a heavy impact due to the slowdown, large IT companies (both Indian and MNCs) are likely to prevail.

The residential sector has also experienced the brunt of the slowdown. This has been evident from the major decrease in demand for residential projects among both investors and end users. The result is a lowering of sales of residential projects over the last 3-4 months, thereby leading to major problems for the developers.

Real estate developers are seriously affected by the severe fund crunch and are experiencing in executing projects. Many intend to delay their projects due to lack of demand. Major real estate developers like DLF etc. have not been as seriously affected, as they have been able to raise equity/debt from large private equity players, banks and hedge funds. However, there are some large developers who may be seriously impacted if they are not able to raise funds to meet ongoing commitments.

In all, major developers - irrespective of their leverage positions -, are seeking additional funds to complete their under-construction projects or pay off expensive loans.

Global Financial Crisis and Post-Olympic Slowdown Take Shine Off Commercial Property’s Golden Year

Source: Jones Lang LaSalle

Beijing, January 13, 2009 – The widening and deepening impact of the global financial crisis on Beijing’s commercial property markets became more apparent in 4Q08. Julien Zhang, Managing Director and Head of Markets at Jones Lang LaSalle’s Beijing office, commented, “Corporate occupiers in the office sector, who had previously viewed the influx of new supply as an opportunity to expand and upgrade from older quality developments, have turned cautious since the plunge in global financial markets in September. Uncertainties in the global and local economies have led to a growing number of corporate occupiers, especially multinational corporations (MNCs), scale back or defer expansion plans.” The softening in demand and rising vacancy rates, which is now up to 22.5%, saw average office rentals in the overall market retreat by 5.1% from their record highs and down 1% for the year as a whole. These same macroeconomic factors also transpired into a similar pattern of weakening demand in the retail sector. Jason Chang, General Manager of Sandalwood’s North China operations, commented, “The anticipated drop off in demand following the Olympic Games has been exacerbated by the decision of retailers and new market entrants to delay the opening of new stores, which led to the more-than-expected decline in leasing activity. Although retail sales have continued to grow, uncertainties around a slowing economy has seen retailers become more cautious in the opening of new stores. Instead, those already with a presence in the city opted to focus on consolidating existing business operations.” The slowdown in leasing activity since the Olympics has seen average rentals decline by 3.4% from their record highs and reduced full-year growth to just 0.6% despite vacancy remaining at a relatively low 10.1%.

Looking ahead into 2009, Beijing’s commercial property markets will continue to face many of the challenges that confronted the market in the latter part of 2008. Both office and retail property markets are expected to see another record year of supply. In the office sector, the completion of 2.33 million sqm of new supply will expand the market by a further 27%, while the retail sector is expected to expand by another 51% on the back of an additional 1.67 million sqm of new supply. This influx of new supply will increase the downward pressure on rentals as supply further overwhelms demand.

While the movement toward a tenants’ market will stimulate some demand from occupiers expanding and upgrading at reduced cost, the greater challenge will be drawing expansion demand from a weakening economic environment. To this end, government policies such as the additional RMB 1.2 trillion of government spending announced in October, should help. But these policies will take time to work through the gears of the economy and their effectiveness cannot be readily assured. Julien Zhang commented, “In a year where market conditions are likely to change at a rapid pace, those who are able to react and adjust their real estate decisions in the most timely and appropriate manner will be the ones who will be able to capture the best possible outcomes in an otherwise challenging environment.”


Landlords adapt to changing market conditions. Rising vacancy levels brought by the completion of an additional 413,380 sqm of new supply and another quarter of lacklustre demand saw landlords change their focus to tenant retention in 4Q08. Reductions in rentals were recorded across the whole quality spectrum, including some of the city’s highest-quality office buildings. Landlords of established buildings sought to offset the moves in upcoming and recently completed office projects, where incentives were being increased in an effort to drive up the occupancy. Among Beijing’s key office submarkets, the CBD recorded the sharpest drop in rentals, declining 6.2% q-o-q in 4Q08. Looking into 2009, the addition of yet more new supply is expected to see competition among landlords intensify, especially in the CBD where vacancy will be the highest. Indeed, the lower rentals on offer are likely to result in some re-centralization into the CBD and a slowdown in relocation toward business parks by some tenants. For 2009, average rentals are projected to fall by 15–20% in the overall market.

Growth in demand underscores Beijing’s importance as a regional business centre. Despite ending 2008 on a low note, there were still many positives in the office market to carry into 2009. The completion of 1.33 million sqm of new supply saw the office market expand by 18% and absorption reached 554,490 sqm despite the slackening in demand in the latter part of the year. As noted by Julien Zhang, Managing Director and Head of Markets at Jones Lang LaSalle’s Beijing office, “Unlike what we have seen in other regional office market, the impact of the global financial crisis has only weakened the demand for offices in Beijing. Though we have seen some tenants reduce their office requirements, occupancy at an aggregate level has continued to grow, underscoring the importance of Beijing as a leading business centre not only in China but within the region. While the global economic downturn will see MNCs remain cautious on expansion, the government’s massive stimulus packages and the opening up of more business markets to private enterprises will help drive demand from local companies in 2009.”

The continuing emergence of quality and green buildings. The growth of Grade A office space over the last two years in a market that was largely dominated by Grade B and C office buildings is ushering in the next stage of the Beijing office market’s development. The completion of 11 Grade A quality office buildings in 2008 (out of a total of 16 buildings) has provided quality-demanding tenants with a greater variety of suitable options to facilitate expansion requirements. This trend is set to continue with another 15 Grade A office buildings scheduled for completion in 2009. In addition to rising quality, the market is also beginning to see the move toward green buildings become a reality. The number of LEED-certified office buildings within the city is expected to soon increase to five. And the move toward green building construction and certification is likely to gather momentum as developers look at distinguishing their projects in an increasingly competitive market and corporate social responsibility (CSR) policies gather traction within companies.


2008 – a banner year for Beijing’s retail sector. The completion of a record amount of new supply, which saw the market grow 45% in size, and the hosting of the Summer Olympic Games helped spur demand for prime retail space to new record highs in 2008. The potential to leverage on marketing opportunities in the lead-up to the Olympics contributed to retailers leasing a record 925,000 sqm of additional retail floor space for the year. This is close to triple the amount posted in 2007 and more than double the previous record high posted in 1998. While demand has slowed significantly in the post-Olympic period, the strength of demand, especially in newly completed shopping centers, has kept vacancy relatively stable despite the weight of new supply and contributed to average rentals in the overall market peaking at a record high of RMB 7,238 per sqm per annum during the year.

Market looks toward new market entrants to underpin demand in 2009. Though the slowdown in the domestic economy has seen activity in the leasing market become quiet in recent months, growing retail sales, a greater variety of new high-quality shopping projects and attractive leasing terms are all expected to draw retailers back into the market in 2009. Retail sales, which grew by 21% y-o-y in the first 11 months of 2008 in Beijing, are expected to continue to grow in 2009 though economists are expecting growth to drop significantly in 2009 against the backdrop of a slowing economy. Policy changes aimed at boosting domestic consumption may alleviate some of the decline but are unlikely to be reflected in the market until the middle of 2009. In view of the expectation of weaker retail sales growth, established retailers are expected to continue to hold off on expansion plans. Instead, the leasing market will likely to be dominated by new market entrants who will be less concerned about the dilution effect on earnings associated with the opening of new stores. The weaker levels of demand for retail space, together with another year of record new supply, are expected to contribute to average retail rentals falling 15–20% in 2009, although established retail projects are expected to outperform the rest of the market.


Prices retreat from their record highs in the top-end of the residential property market. Beijing’s top-end residential property market closed the year on a low with prices retreating in 4Q08. High-end apartments fell by 6.3% q-o-q to an average price of RMB 19,711 per sqm, luxury apartments by 5.9% q-o-q to RMB 23,791 per sqm, and villas by 3.9% q-o-q to RMB 20,285 per sqm. A disappointing year of sales saw developers pull back prices in the primary market, putting further weight on prices in the secondary market already under pressure from poor market sentiments. Though transaction volumes in 2008 were down 25% y-o-y, the effect of lower residential prices and mortgage rates – the People’s Bank of China (PBC) benchmark mortgage rate lowered to 5.94% – did lead to relatively stronger transaction volumes over the last two months. Denis Ma, Head of Research at Jones Lang LaSalle’s Beijing office added “Despite the late pick-up in transaction volumes, prices at the top-end of the residential market are unlikely to be sustained entering into 2009. The expectation of buyers on developers to cut prices further and the potential for more incentives from the government, combined with a slumping leasing market, will keep a downward pressure on prices. The average price of high-end and luxury apartments are projected to fall 15–20% while those of villas by 10–15%.”

Announcement of policies to stimulate home buying. In an effort to boost flagging sales in the residential property market, a number of policy changes were made by the central government to boost home buying. The Ministry of Finance (MOF) announced an array of policy changes. These included lowering the minimum down payment requirement for first-time homebuyers from 30% to 20%, increasing the maximum discount on the benchmark mortgage rate allowed by commercial banks to 30%, reducing property deed tax for buyers of residential units less than 90 sqm in size from 1.5% to 1%, and the suspension of individual Land Appreciation Tax for homer sellers. Meanwhile, the PBC announced a reduction of the housing fund loan rate by 27 basis points to 4.05%. The central government has also allowed local governments more flexibility to introduce their own incentives and concessions to support local property markets. Although these changes are primarily aimed at increasing purchases of affordable housing in Beijing, potential purchasers of mid-range and even some high-end housing may also benefit.


Warehouse rentals decline as demand wanes. The strong demand for warehousing properties in the lead-up to the Olympic Games has been replaced with the reality of weakened demand and high vacancy rates. The continuing slowdown in the global economy has seen demand for warehousing properties drop significantly in recent months. This drop in demand, along with the expiring leases of Olympics-related occupiers and a large supply pipeline, has contributed to a sharp rise in vacancy rates and rentals falling 8% q-o-q and 5% in 2008 as a whole. Looking ahead, the expectations of a continuing slowdown in demand and a glut of new supply are expected to drive rentals down 15–20% in 2009.


Investment market closes the year on a quiet note. In the largest investment transaction recorded in 4Q08, Finance Street Holdings purchased Meisheng Plaza, which is a mixed retail/office project located in Finance Street, for USD 235.2 million. The deal marks the end of a challenging year for investment in the commercial property market. While transaction volumes did not deteriorate significantly from the previous year, the expectation gap between buyers and sellers remained wide. However, with prices starting to decline toward end-2008, this gap is likely to narrow and lead to a more active investment market in 2009. In view of declining rentals and higher yields required by investors to compensate for the riskier investment environment, we project average prices to fall in the range of 15–20% across all property sectors in 2009.

Cautious investors turn focus toward Tier I core investments; Tier I activity to pick up in 2009. Investors in the past few years turned to Tier II and III cities in search of higher yields and to escape overvalued assets in China’s Tier I cities. Global economic conditions have however changed this strategy as capital values in Tier I cities begin to fall significantly, presenting new investment opportunities. Although foreign acquisitions in Beijing slowed to a halt in the fourth quarter of 2008, a pick up in 2009 with foreign investment is expected to follow the easing of regulatory restrictions and as buyers and sellers adjust to more reasonable expectations for both parties. Capital raised in 2007 and 2008 hasn’t yet been spent, and investors wait in the sidelines for capital values to come down. In 2009, there is an expectation that it will be easier to raise RMB loans as credit restrictions are poised to loosen.

Government looks to broaden the investment landscape of property markets. The introduction of REITs and easing the restrictions on insurance companies investing directly in the domestic real estate markets are just two proposals currently under review that may change the investment market landscape in 2009. REITs not only provide developers and landlord/operators an additional avenue to financing but also allow a greater number of individuals and companies to invest in the real estate markets. Meanwhile, the eagerness of insurance companies, who are already starting to loom as major players in the domestic property markets, to invest in the property markets could potentially lend further support to commercial property prices.

Sunday, January 4, 2009



Asset class: Office

• Even the well–established CBDs markets are likely to face vacancies in 2009, as the first impact of the global recessionary economy is being felt by the financial and other fore-runner organizations. The vacancy may be further fuelled in CBD areas by the consolidation moves of many organizations.

• We will also see a reversal of the trend witnessed over the last two expansionary decades where large organizations moved from owned to leased assets. Given the drop in prices and availability of choice properties, this will be a good time for surviving organizations to announce their new leadership positions through trophy purchases. Jones Lang LaSalle Meghraj is currently transacting in many such mandates.

• This CBD vacancy rate, if triggered, can add significant pressure to the upcoming/newly developed premises in upcoming front-office districts such as Lower Parel in Mumbai and Nehru Place in Delhi.

• While the sentiment in the US and Europe towards outsourcing is positive in the long term, as the corporations there realize its need more than before, the active decision-taking for expansion by BPOs is totally suspended for the moment. We do not expect this to change in the 2009. Hence, the pressure on upcoming and announced projects –especially SEZs – will continue in 2009.

• In 2009, IT SEZs will also experience further pressure from the fact that the STPI concessions may be extended for another couple of years. While these concessions are important for IT companies’ survival during the recession, they will adversely impact SEZ developments.

• In 2009, the peripheral areas of metros as well as the Tier II/III cities will need to compete with the central or secondary business districts for the same set of talents, thus dissolving the clear segmentation which was emerging and separating various micro-markets over the last couple of expansionary years. Newly developed or announced projects are especially going to suffer and may see continued vacancy in 2009.

• However, 2009 will also see practices in the real estate business become more organized and professional, as they did in the late ‘90s and early 2000s with the introduction of FIs, foreign money and the creation of Government-supported large development formats. This time around, a similar professional approach may reach warehousing land acquisitions.

Asset Class: Retail

• 2009 is expected to be a year of consolidation for Indian retail sector. As a result of adoption of best practices and restructuring of business models by the retailers, organized retail is expected to realign itself to the market conditions and create new areas of growth in 2009.

• Given the market malady being faced by developers and retailers alike, it is possible that partnership models of growth through mechanisms such as revenue sharing would become more prominent.

• More deals are going to get renegotiated as priced drop in over-priced locations. The process of rationalization should reach its peak by March, 2009.

• In 2009, it is anticipated that the supply pipeline may witness further stalling

• Most players’ expansion plans for 2009 will slow down considerably. However, Projects that are planned well (incorporating approaches like proper zoning, optimal tenant mix strategies), implemented with high quality standards and incorporating appropriate mall management practices are anticipated to be successful

• In 2009, premier brands will look at Tier II cities, but certainly not Tier III. Luxury brands will stick to metros.

• Pan India mall developers will look at more practical rentals in 2009.High streets may see consolidation with a high possibility of a revenue-sharing model in terms of the overall cost-to-retailer on many high streets.

• For 2009, Jones Lang LaSalle Meghraj has seen a decisive upscale in transactions in the hypermarket category. However, the demand is clearly higher for stand-alone high street locations rather than mall-based locations.

Asset Class: Residential

• Much of the previously anticipated demand for 2009 will not see the light of day due to a confluence of various factors. Developers have only now begun to come down on their rates, and a lot depends on whether how many of them will follow suit in the coming year. The much-awaited drop in interest rates for home loans has happened, but not at a level sufficient to boost the residential sector out of the doldrums entirely.

• In response to the considerable demand for such formats, we anticipate more national players to launch affordable housing projects in 2009. However, since different cities will have different costs for land and construction of such homes, developers will have to define ‘affordable housing’ on a city level.

• We expect that at least 20% of the current players in residential real estate will begin to think on a portfolio rather than project level. So far, developers have been pricing their projects according to their expected profit margins vis-à-vis the cost of land in different locations. Buyers, however, are now not prepared to consider the initial and appreciated cost of land as a valid component of the buying price. When we speak of ‘portfolio level’, we mean that at least one fifth of these developers will now cross subsidize their construction costs internally and sell their project at prevailing selling rate.

• In terms of sales volumes and market recovery for 2009, there are two distinct and equally possible scenarios:

a) Buyers who were waiting for rates to drop to levels they could afford will make their moves when rates fall into their budget range. If this happens, developers will be able to move on to more projects and pull the market out of stagnation.

b) Buyers will continue to wait for the period in time that delivers the best rates – a point that may come and go without them being aware of it. They would, in other words, act more in the capacity of investors rather than end users. The fact that the purchased properties will appreciate over time in any case would be ignored in such a scenario. If this happens, market recovery for residential real estate would be further delayed.

• If rates drop by between 20-25% in the mid-level and high-end home segments, we will see a return of the previous effervescence. If they do not, developers will put on hold their expansion plans. This would lead to a clear shortage over 2-3 years, which would not be addressed, since there would be neither buyers nor sellers. In such a scenario, we will see complete stagnation in residential real estate.

• For 2009, Homebay Residential agency (a wholly owned subsidiary of Jones Lang LaSalle Meghraj) has registered deals in the luxury housing segment, but the overall demand remains muted. There is a significant NRI component to the overall buyer corpus, but the watch-and-wait stance is still evident. A certain number of transactions in the luxury segment that have remained on hold due to conflicting rumors concerning the optimum time to buy may crystallize in 2009.

Real Estate Capital Markets

• Judging from the mandates chalked up for execution, 2009 will see a good number of capital markets transactions. Then period from March 2009 to December will be a decisive time. All business sectors have been hit by the economic meltdown, and many will generate liquidity by divesting non core assets such as real estate.

• Type of enquiries are likely to be in the higher risk adjusted return segment with Greenfield opportunities seeing limited interest as most investors will be investing in Asia with chasing liquidity and not higher return. Residential projects in the middle income segment are likely to see renewed interest with interest rates declining in 2009.

• In 2009, we will also see the decisive arrival of sale-and-lease-back deals, in which owners currently occupying their properties will sell them and continue as lease tenants. Corporates have to address liquidity issues in their core businesses and are now eager to unlock the value of their non-core assets.

• In 2009, the biggest buyers would be FDI-compliant India-dedicated funds, domestic funds, high networth individuals and cash-rich corporate houses.

Projects & Development Services

2009 will be guided by dynamics of two contradictory forces:

1. Recession trend guided by capital market slow down, decrease in demand, caution in cost and spending.

2. Governmental and social efforts to regain growth momentum.

We feel that for first 3 to 6 months the impact of point 1 will be more significant while in the later half of 2009 the impetus and support to growth from government and global community will be more visible. Also it has been observed that a fall in economy is followed by increase in construction activity.

• The life cycle of projects normally last from 6 to 36 months and the revenue flow for projects are in general predictable. The finances and end use for most big projects are well planned and hence, significant proportion of ongoing projects of 2008 will go on in 2009 and construction at site will continue.

• While there has been slow down in new projects, the requirements for special use like consolidating operations of different offices of a company into one office, re-stacking and optimizing use of existing facilities, low cost housing etc will increase

• A segment of clients also feel that this period is apt for construction with lowering of prices for construction items and consultants fees and will look forward to use this lean period for construction and be ready for launch when the cycle again peaks.

• Individual office buildings as company’s corporate office use will increase due to reduction in the cost of acquisition.

• There will be more focus on seeking expert advice for risk analysis, cost control and efficient project management services. The demand for development advisory services like feasibility study, pre-investment due diligence, procurement strategy, value engineering etc should increase.

• Sectors like Infrastructure, Industrial, Health care, Life sciences, Logistics, R&D, Educational centers should get more attention in 2009

• Innovative and new methods of construction will be sought to reduce time and cost & increase quality of projects.