GURGAON - RESIDENTIAL REAL ESTATE SNAPSHOT 2010

Santhosh Kumar, CEO – Operations, Jones Lang LaSalle Meghraj

From complete obscurity to one of the most highly-hyped North Indian growth corridor, to overheating and back to the top slot in India ’s most lucrative residential real estate investment hotspots - when it comes to market status updates, Gurgaon has certainly been around.

As is invariably the case in new sectors, residential property demand at Gurgaon began on a strong and promising note. However, between 2007-08, it fell prey to speculators who purchased properties with the sole intention of making quick profits. This led to overheating of property prices in Gurgaon, and the market began correcting sharply when a series of severe stock market fluctuations took place. Investors into Gurgaon’s residential real estate market found themselves facing an unexpected lack of ready cash and began to sell their holdings. Prices corrected to the tune of 15-20% in most projects.

That said, the inherent strength of Gurgaon’s property market revealed itself during the recent economic recession and concurrent real estate market slowdown. While the demand dynamics there did waver, the fact that Gurgaon prevails as the most preferred North Indian locations for the corporate sector. The resultant demand for quality residential spaces had dropped primarily because of a lack of supply of appropriately priced mid-income housing, since most projects during the boom period focused squarely on the high-income segment.

THE DAWN OF REASON

During the recession, there was a marked slowdown in sales for higher-priced units at Gurgaon, but the degree of drop was no more and no less than on par with that witnessed in the rest of the country. This was a key phase, in which developers had to take decisions that would have an immediate and long-term effect on their business viability. Fortunately, they aligned their business models to the new demand dynamics and finally started catering to the middle income segment by launching affordable and mid-sized apartments.

With the return of economic stability and renewed focus on this vital market by domestic and international players, there has been a visible scaling up of development in terms of commercial office and retail space (from the current 22 million sq.ft. of office space to an anticipated 40 million sq. ft. by 2012). As a result, Gurgaon is once again witnessing a massive infusion of demand for quality residential properties.

In the main residential areas and projects of Gurgaon, such as DLF Phase I-V, Golf Course Road , M.G.Road National Highway 8, Nirvana Country, Sushant Lok, Sohna Road , etc. property rates have again started picking up. Residential as well as commercial properties of different varieties are available in these locations, and demand for them is perking up fast.

As of now, prices are rising again in the case of projects offering immediate or early possession. In fact, with the pickup in the economy and renewed interest by the corporate sector, builders have started moved back to luxury housing projects. The residential launches in past few months further validate this point.

PROPERTY PRICES / APPRECIATION POTENTIAL

With the return of demand – and considering the track record of overheating - there are obviously questions being asked about the rationality of residential property prices at Gurgaon. The fact is that while rates would definitely appear higher than those in some of the smaller cities, one needs to factor in the degree of overall development and the demand dynamics prevalent in this burgeoning North Indian business hub.

In market terms, residential prices in Gurgaon are validated by the available infrastructure and overall locational value. They are certainly still on par with those seen in middle segment housing in the rest of the country. In terms of locational value and overall desirability and demand, Gurgaon tops all other locations in the NCR region. Only South Delhi can compare on those fronts, but residential prices are even higher there.

Nevertheless, residential property in Gurgaon is not an option for buyers with budget restrictions beyond a certain point. Such buyers are looking at the newer, non-central sectors of Gurgaon, where prices are lower in keeping with the slower pace of overall development. Faridabad , the outer parts of Noida, Indrapuram and Ghaziabad are also seen as suitable options by budget home seekers within the NCR region.

The upshot - Gurgaon continues to be an excellent long-term real estate investment. The market there is growing at a rational and sustainable rate, and this is a healthy sign. Over-enthusiastic projections in terms of property investment returns have ceased. As is the case with all other cities at this point in time, actual returns at Gurgaon are still linked to overall economic performance and growth. However, any property investment made for a horizon of five years or above will definitely fetch satisfactory returns.

PREVAILING RESIDENTIAL RATES* IN THE PROMINENT AREAS OF GURGAON

LOCATION	Rates (per sq ft)	Remarks
Golf Course Road	Rs 6000-10,200 p sq ft	Rates refer to under construction premium apartment like Magnolias, Belaire, Park Place and Verandas
Golf Course Road Ext road	Rs 4200-5000 p sq ft	New Launches of developers like Pioneer Urban , BPTP , IREO, etc.
Sohna Road	Rs 3200-4500 p sq ft	New Launches of developers like Tulip, Unitech, BPTP
In and around M.G. Road	Rs 4500- 5500 p sq ft	Resale rate
DLF Phase V	Rs 6000 and above per sq ft	Prevailing rate

*(Quoted rates refer to basic selling price and not include extra costs)

Subhankar Mitra, AVP - Strategic Consulting, Jones Lang LaSalle Meghraj:

The end of the forest land debacle in Mumbai spells good news for developers whose projects were roadblocked in the affected areas of Mulund, Vikhroli, parts of Borivali, Goregaon and other fringe areas around the Sanjay Gandhi National Park. This marks an end to the long-standing uncertainty over these areas and the priojects that had been launched and not completed there. The builders in question can now complete their pending projects, anda the penalties involved will not be seen as a constraint in the light of the high property prices that these areas command. This is also the end to the suspense that buyers into these projects were subjected to.

The increase of residential supply in these areas will help in stabilizing property rates there in the short-to-medium term. Buyers can now take possession with the assurance that there will be no future legal entanglements. This fact will also reflect positively on the appreciation potential of these projects - apart from the fact that they can now be sold at the prevailing market rates, rather than the significantly discounted prices that were in evdience while the forest land issue was still pending in court.

PUNE RETAIL REAL ESTATE – THE PREMIUM BRANDS REVIVAL

Anand Dutta, Head (Retail) Pune, Jones Lang LaSalle Meghraj

In Pune, retail transactions have picked up noticeably, following a marked upsurge in shopper sentiments and a generalized correction in retail real estate rentals. Properties are now more viable for retailers, and the current scenario is now considered far more amenable to their bottom lines than it was before. Moreover, an increasing number of retail landlords in Pune’s malls and on key high street locations have opened up to the minimum guarantee and revenue sharing models. The general stance now is that if a retailer is making money, landlords are willing to offer reductions on rentals if the retailer is willing to sharing his topline. As a result, a number of retailers in Pune are now once again looking at expansion. The number of retail space deals has gone up significantly after the Dussera-Diwali period, which many players agree was better this year than in the previous year. Retailers are understandably displaying a predilection for ready properties.

Interest has revived not only in malls but also on Pune’s more prominent high streets of MG Road, JM Road, Aundh’s Parihar Chowk and Kothrud’s Karve Road. The highest activity levels in terms of expansion are currently being witnessed among vanilla retailers in the apparel, accessories, hypermarkets and jewelry categories. As before, value retail rules the roost in a budget-conscious city like Pune. However, we are also seeing a surprisingly fast

revival in terms of premium brands, and transactions for retail spaces in advantageous

locations in malls and on high streets are picking up.

The latest addition to Pune’s high-value retail sphere is Jewel Square at Koregaon Park, next

to Hotel Blue Diamond. This is naturally a premium location with an excellent high-profile shopper catchment, though this exclusive shopping centre encompasses only about a lakh

square feet, the occupier profile over its four levels is remarkable. Jewel Square, which is now

almost 90% booked out, is defined by premium brands who are eager to take advantage of this unique location, which is accessible to the affluent crowd of Pune and also close to other important micro markets such as Vimannagar, Kalyaninagar, Camp - and, of course, Koregaon Park.

Significantly, high-end brands like Mango, Promod, Aldo, Charles & Keith and Tommy Hilfigher are entering Pune’s mall territory for the first time with this project, which launches on 21st November, 2009. Other premium brands at Jewel Square include La Senza, Esprit, Calvin Klein, Forever New, Da Milano, Nike, Apple I Store, After Shock, Hi Design, Ritu Kumar, Chemistry, BIBA, Jashn, Satya Paul, Tie Rack London, Reliance Time Out and BJN Hotels.

Earlier, these high-end brands were shying away from entering the city. The fact that this mall

has garnered such concentrated enthusiasm by premium brands will give a big boost to mall developers for their upcoming projects and open up potential for other high end retailers to look at Pune as a suitable market.

CURRENT PUNE RETAIL RENTALS:

• MG Road: 140 - 170

• JM Road: 160 - 200

• Aundh: 125 - 150

• Karve Road: 100 - 120

HYDERABAD - Q3 2009 Office and Retail Update

Abhishek Kiran Gupta, Head - Research, Jones Lang LaSalle Meghraj

Hyderabad Office Sector - 3Q '09

Hyderabad office market continued to witness an increase in overall leasing activity in 3Q09 as compared to the last two quarters. The CBD (Begumpet, Somajiguda, and Raj Bhavan Road) did not witness any tenant vacating spaces for the first time in the year in 3Q09.However, there were incidents of tenants vacating spaces in SBD (Banjara Hills and Jubilee Hills) and Hitec City. The overall netabsorption witnessed a significant increase in 3Q09. Most of this absorption is due to the completion of the buildings that were pre-leased in the previous quarters. The overall vacancy increased in 3Q09 as compared with 2Q09, due to the high vacancy in the newly completed buildings in suburbs.

The city witnessed completion of three buildings in 3Q09 that include Divyasree Solitaire and Divyasree Trinity II in Hitec City and SecondPhase of DLF Cyber City in Gachibowli. This added about 1.3 million sq ft to the total stock and increased it to 17 million sq ft in 3Q09.The CBD and SBD did not witness any completion in 3Q09. The projects in SBD that are in the final stages of completion continued to move at a

slow pace as they did not witness any leasing.

The overall rental values continued to correct for another quarter in 3Q09. However, the rate of correction has slowed down as compared with 2Q09. Hitec city witnessed the highest correction as compared with the

other micro markets that was about 8% q-o-q (24% of correction from the peak in 3Q08). The capital values remained stable in most of the micro markets that shrank the yield rates in 3Q09.

Hyderabad Retail Sector - 3Q '09

Sentiment in the Hyderabad retail market continued to improve in 3Q09, witnessing a moderated demand. Due to the success of GVK Mall and other malls in the city in attracting strong footfalls, the market condition was optimistic in 3Q09 compared with the previous twoquarters of 2009. Net absorption in 3Q09 increased compared with that in 2Q09. However, despite the slight optimism witnessed by the market in 3Q09, we cannot state that demand has increased and the market conditions are improving based solely on this increase in netabsorption. This is because most of this net absorption came from pre-leased space in the previous quarters in newly operational malls.The high street continued to remain the prime choice of the retailers, where the retailer leased the entire building. Trent Ltd leased twosuch buildings in previous quarters and started their stores of Landmark (at Banjara Hills) and Westside and landmark (at Somajiguda) in 3Q09. There were few incidences of retailers leasing vanilla stores in the newly operational Inorbit Mall. There were no pre-leases recorded in 3Q09.

The IT hub of Hyderabad – Hitec City - witnessed its first mall (Inorbit Mall) going operational in 3Q09. With the operation of this mall, Hyderabad saw its first Hyper City store of about 100,000 sq ft. The MPM Bonsai mall is almost in the final stages of its completion and has been again postponed for another quarter as it awaits final approvals.

The overall rental values corrected by 9% q-o-q in 3Q09. This is about a 44% correction from its peak in 3Q08. The prime central micro market Banjara Hills and Jubilee Hills corrected by 4% q-o-q in 3Q09 and

prime suburbs- Hitec City and Gachibowli corrected by 9% q-o-q in 3Q09. The revenue share and minimum guarantee model continued tostrengthen its hold on the market as Inorbit mall has leased most of

its space in this model.

JLLM - 2010 Commonwealth Games Accommodation - Delhi Pulling Out All The Stops

Pankaj Renjhen, Managing Director – North India, Jones Lang LaSalle Meghraj

In terms of providing the required accommodation for the upcoming Commonwealth Games, Delhi has certainly been witnessing some significant operational challenges. There have been delays in approvals and permissions, and rather loud hiccups in the framework. Whatever finally happens at the delivery end, it has become fairly evident that there is bound to be a shortage of rooms in Delhi for the Commonwealth Games.

THE BED & BREAKFAST SCHEME

This has led to backup measures being put in place. Private residences have been given permission to register single rooms as bed-and-breakfast accommodation. The bed-and-breakfast system is not new in the Delhi region. However, it was not profitable until the coming of the Commonwealth Games. Now that the system has been revived and officially ratified, it will doubtlessly continue at an organized level even after the Games. Homeowners who have been issued bed-and-breakfast licenses will have to renew them every two years, and three months prior to expiry.

There has also been some speculation about farmhouses in the Delhi NCR region being mobilized as stopgap accommodation measures. Going by records, requests by farmhouse owners to utilize their properties for this purpose have certainly been made. The provisions for the Bed & Breakfast scheme would extend to farmhouses, as well. Conceivably, a certain number of farmhouse owners may rent out single rooms for tourist use during the Games.

However, because of the personal sentiments attached to these properties, their location, and the fact that they have residential-use status only, this temporary semi-commercial utilization will not turn into a long-standing trend after the Commonwealth Games. These farmhouses are at the luxury end of the residential market, often with carefully maintained ambiance and infrastructure. Offering them up for long-term tourist use would not be a concept that would appeal to many of these farmhouse owners.

In the second place, most farmhouses in the Delhi NCR region are located in clusters around Mehrauli, Bijwasan, Rajokri and Chattarpur, which are far from strategically placed in terms of where the main Commonwealth Games action will be. As such, they would not present much of an advantage for visitors.

Apart from the above measures, approximately 700 under-construction DDA flats coming up at Vasant Kunj and Rohini will be made ready to accommodate visitors.

THE HOTELS FRONT – AN UPDATE

Meanwhile, the hospitality sector is going all out to meet the deadline. Some of the 5 star hotels coming up for the Commonwealth Games are Crowne Plaza at Okhla Industrial area, Crowne Plaza at Mayur Vihar, Hilton (Piccadilly) at Janakpuri, Radisson Marina atConnaught Place and Hilton Convention Luxury Hotel at Dwarka, among others. The 5-star deluxe Leela Palace at Chanakyapuri is also in the pipeline. 4 star hotels include Holiday Inn at Mayur Vihar and Novotel at Jhandewalan. In the Gurgaon area, the 5 star supply includes Radisson Manesar and Frasers Serviced Apartments at Udyog Vihar. 5 star deluxe hotels include The Westin Gurgaon, The Oberoi, Four Seasons Gurgaon-DLF Golf Links and JW Marriott at Manesar. Some of the four star hotels are Courtyard by Marriott, Park Plazaextension & Convention Centre and Park Inn. However, this is not an exhaustive list.

Demand for larger homes picking up

Mohammed Aslam, Head – Pune, Jones Lang LaSalle Meghraj:

Pune’s real estate market is pulling itself out of the doldrums brought about by the slowdown. Over the last three months, buyers have begun populating the residential market again and are beating a path to various developers’ sites in search of good deals. Apart from a resurgence in positive sentiments, this renewed demand can also be attributed to the fact that HFI has brought down home loan interest rates to 8-8.5% on fixed interest loans for three years, which stands in marked contrast to the 10-11% that prevailed just six months ago.

While Pune’s real estate market was in the deepest throes of the downturn, the 1BHK and studio apartments were practically the only moving products. Today, general buyers preferences have once again evolved to 2-3BHK flats. The most popular price tags currently fall within the range of Rs. 25-35 lakh.

The slowdown has brought about residential space affordability and availability in areas that were previously out of reach for middle-income buyers. Due to reduction in pricing, residential property buyers now have a choice of attractive deals in preferred areas like Baner, Wakad, Kondhwa, NIBM Road and Aundh. There is also a high level of interest in projects along Nagar Road, which now falls in the new IT/ITES growth zone and represents considerable future appreciation potential.

Projects that were put on indefinite hold during the financial crunch are now seeing the light of day, with construction once again on a war footing across the city. Projects that are due to be launched within the next six months are being advertised heavily. For projects to be launched within the festive season, developers are not offering freebies and esoteric incentives but are focusing on price discounts for limited periods. Some of the most significant launches will include those by Pharande Spaces, Gera and Panchsheel.

On the downside, we have been seeing the first stirrings of price escalations in Pune. Based on the fact that the demand revival is still in its infancy, this represents a worrisome scenario which seems to indicate that the slowdown did not deliver a sufficiently convincing message. Owing to the price-conscious buyer profile that generally defines Pune, demand for residential spaces will only continue to grow as long as rates remain rational.

Middle Income Housing (MIH)– the next big real estate opportunity

Reveals Cityscape India 2009 survey

Mumbai, September 4, 2009: An all India survey conducted by Cityscape India reveals that real estate consumers across India are rooting for projects in the MIH (middle income housing) segment, which the real estate industry needs to introspect closely. Over 53% respondents felt that developers are not catering to the rising emerging middle class in India. Over 79% of the respondents with income of Rs. 6L per annum stated that the ideal affordable home would be in the range of Rs. 20Lacs – Rs. 30Lacs. Qualitative response indicates that most affordable housing projects are located in areas which are extremely distant from the main city and also lack infrastructural eco-systems.

Majority of the respondents felt that reputed developers only cater to the upper classes and do not have anything to offer the middle of the pyramid. The survey also revealed that ‘low cost housing’ projects of 400sq.ft were not typical projects that the middle class would buy into due to lack of infrastructure, poor quality of materials and lack of space for family.

Graham Wood, Cityscape India Group Director comments, “The Indian real estate industry need to listen actively to consumers across India. Their feedback is clearly indicating that MIH is a segment which they need to now focus upon actively. Affordable housing is a different category from MIH; and as the real estate market matures – developers will specifically need to come up with MIH solutions in various cities. Developers have to innovate to bring prices to realistic levels to win back their trust”

Consumers also feel that the 2006 real estate boom was primarily driven by investors and builders, not the real buyers. Today, very few developers are able to keep commitments on timely delivery of projects as banks have stopped lending and genuine buyers have lost trust in the industry.

The Cityscape India conference will have an opening session in Mumbai on December 2009 to discuss the above with leading influencers in the real estate industry.

About Cityscape India

India’s largest and only business-to-business real estate investment and development exhibition and conference will once again take place from 9 – 11 December 2009. The world’s top, real estate developers, leading architects, consultants, engineers and other professionals involved in the design and construction of real estate will attend Cityscape India to create joint ventures partnerships, source investment opportunities, build profitable relationships and access unbiased, in-depth information on the Indian real estate market

For more information please visit www.cityscape-india.com

World comes to Dubai seeking answers

Cityscape Dubai to explore how best to survive and prepare for the recovery in a still rapidly changing economic environment

The world of real estate investment is to descend on the United Arab Emirates this autumn to seek solutions from what some have referred to as the first great depression of the 21st century, say the organisers of the Cityscape Dubai.

“With reduced liquidity and many projects on hold, investors, developers, architects, indeed the entire real estate industry around the world, is looking for answers to the same questions,” said Chris Speller, Cityscape Group Director. “How do we survive the recession? When can we expect stabilisation? When will the banks start lending again? When will the crisis turn into an opportunity?”

Cityscape Dubai, now in its eighth year and part of the largest business-to-business real estate investment and development brand in the world, encompasses a major exhibition and a series of conferences taking place at the Dubai International Exhibition and Convention Centre from 5-8 October 2009.

“With the radical worldwide economic shakeout, attention has firmly turned onto realistic perspectives on the real estate investment landscape both globally and regionally,” Speller added. “Thousands of participants from more than 100 countries throughout the world have already registered to attend. They are serious players searching for specific answers, which is why Cityscape Dubai 2009 is embracing realism and transparency.”

Among them are companies such as ING Real Estate Investment Management of Hong Kong. Richard T.G. Price, CEO Asia, said: “It is more important than ever to get first hand insights from our clients and partners as to their objectives and expectations for the real estate markets around the world.”

Similarly, Jesper Koll, President and CEO of Tantallon Research, Japan, said: “We all want to know when the global crisis will turn into an opportunity. Cityscape Dubai is poised to help us find a solution.”

Kosta Petrov, Director of the Cityscape Dubai conference and the World Architecture Congress that runs in parallel, said this year’s event – while still the world’s largest real estate show of its kind – would not be about “out of this world” creations.

“Last year saw the beginning of what is being referred to by some economists as the first great depression of the 21st century,” he added. “With liquidity issues and many project developments still on pause, this year is about how best to survive and prepare for the recovery in a still rapidly changing economic environment. In terms of potential new business opportunities, Cityscape Dubai - as the world’s largest real estate show - has no global equivalent.”

Petrov said the Cityscape Dubai conference will bring together “some of the most powerful investors, developers and economists on the planet.” Meanwhile, the World Architecture Congress (5-7 October 2009) has been put together in association with Continental Europe, Hong Kong, Japan and UK chapters and the International Committee of the American Institute of Architects. “The world’s most respected visionaries will share their experience and outlook in a global recession,” he added.

In addition, the Cityscape Dubai Facilities and Asset Management Conference is on 4 – 8 October attracting delegates in the design, build and post-occupancy of buildings. There will also be a Cityscape Dubai “Green Day” on 7 October which will include green communities, green construction methods, energy saving issues, financing green buildings, regulations, facilities management, whole life costs and new materials and products.

For more information about Cityscape Dubai 2009, please visit www.cityscape.ae

JLLM - Global REIT & REOC Recovery Chart

• There has been a dramatic fall in capital values of the world's largest REITs and REOCs. February 28 marked the trough in equity values, with the CVs of the world's largest REITs and REOCs falling by an average (unweighted) of 66% from Dec 2007

• Since then, equity markets - including REITs and REOCs - have rallied strongly. REITs are up by an average of 88% and REOCs by 77% from Feb 28 to July 31. Some REITs such as Australia's GPT and Goodman are rising by 194% and 155% respectively, while the US based Host Hotels & Resorts rose 182%. REOCs also achieved large gains- the US REOC Forest City Enterprises is up 166% while Austria's Immoeast and the Sino Land Co of Hong Kong both rose by 146%
• Nevertheless, despite the strong rally, on average, both REIT and REOC capital values remain around 42% below Dec 2007 levels.

THE REAL ESTATE DYNAMICS OF SATELLITE TOWNS

Subhankar Mitra, AVP - Strategic Consulting, Jones Lang LaSalle
Meghraj

The immediate impacts of satellite town formation - and the primary
advantages - would be an at least partial decongestion of the central city and
a rise in property valuations in the satellite town. The appreciation rate would
depend on what kind of infrastructure has been/is being put in place in the
satellite town, and what other market drivers it features.

PRICE DYNAMICS

Since appreciation is of paramount interest from an investment point of view,
this aspect deserves amplification.
Property prices are a function of demand and supply. Demand is created by a
suitable combination of market drivers such as employment potential,
infrastructure and overall quality of living. If a satellite town offers these in
sufficient magnitude, and if there is sufficient connectivity to the main city by
means of road and rail, this new area can often put a slight downward
pressure on property prices in the more centralized regions while showing a
steady upward trend on its own property price graph. This, however, happens
only under optimum conditions, which must be created by meticulous town
planning and proactive local Government support.

THE DOWNSIDE

Of course, living in a satellite town is not everyone’s cup of tea. There would
be a perceived disadvantage for those use their home in the satellite town to
travel to their workplace in the central city, especially if the necessary degree
of road/train linkage has not been created. Also, buying a home in a satellite
town can lead to a sense of isolation and general dissatisfaction if the location
does not feature the kind of social life and entertainment that would be seen
as necessary lifestyle quotients.
Some central city dwellers would choose to move to such satellite towns in
response to the available relief from city-related stress and cheaper property
rates. However, the majority of metropolitan inhabitants would choose not to
relinquish their foothold in the main city. Many satellite towns coming up today
are of greater interest to migrant populations rather than core city inhabitants,
and local developers tend to zero in on this population while planning their
projects.

DEVELOPERS’ DELIGHT

A classic example of best-scenario satellite town planning would be the
Pimpri-Chinchwad Municipal Corporation (PCMC) of Pune, which is an
industrial hub in its own right. Within the PCMC area, Pradhikaran has
emerged as the location of choice for mid-to-high level management staff
working in the various surrounding industries, and various local development
concerns such as Pharande Spaces have recognized and focused on this
potential. Areas such as Navi Mumbai and Pune's PCMC are planned
developments that have their own social infrastructure as well as distinct
resident profiles social character.

If satellite townships have been meticulously masterminded by the relevant
town planning authorities, they will incorporate their own economic drivers
such as employment opportunities, social infrastructure and lifestyle quotients.
Simply put, such a combination of factors opens up a new growth area for the
real estate market. Under suitable circumstances, office, retail and residential
property will work in tandem to create a symbiotic growth pattern.

Moreover, once such a satellite town is established, it tends to attract various
industries specific to the available workforce, further boosting this pattern. The
overall effect is one of economic diversification of a possibly congested metro
into new directions. This naturally spells nothing but good news for the
region’s real estate market.