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.

THE TIER II / III REAL ESTATE STORY – THEN AND NOW

Sanjay Dutt, CEO – Business, Jones Lang LaSalle Meghraj

The demand fundamentals of the India story are now focused around all cities that have sufficient economic activity, be it industrial, service sector-driven or incentive-driven programs by the State Government. In Gujarat, which has seen considerable industrial progress, the key cities of Ahmedabad, Surat and Vadodara come readily to mind. Baddi in Himachal Pradesh and Pantnagar and Rudrapur in Uttaranchal attracted a lot of residential developers that met with success, thanks to proactive Government policies. In the South, Coimbatore, Vizag and Kochi emerged, either thanks to a large investor segment or as the outcome of sufficient economic activity. Towards the West, Pune, Nasik and Nagpur are noteworthy in this context. In all cases, developers positioned their development close to industrial hubs, targeting a totally different price segment and making the most of it.

WHAT WENT WRONG

This said, every developer was inspired to create a national footprint three to four years back. While this was a worthy ambition, it was poorly conceived as a plan since many of them did not factor in State Government-level regulatory challenges such as local municipal laws. They also did not consider that they may not have had the requisite financial resources, organizational depth and knowledge of the local markets to manage and execute projects in Tier II and Tier III cities. Nor had they accurately gauged the demand fundamentals of these locations.

Such developers proceeded to enter into land acquisition on their own equity and were caught short-footed, not realizing that the property cycles were then at their peak, and that there was bound to be a correction – if not a fall.

THE DAWN OF REASON

Major players are now going to re-align their positions vis-à-vis unexplored territories. There is now a very clear realization that it is extremely difficult to become a genuine Pan India player in every geography and real estate segment. Moreover, developers today have woken up to the fact that there is only limited capital available to real estate players today – capital that is earmarked for residential projects, construction funding against achieved leases and signed contracts, or for cities displaying sufficient demand even in subdued market conditions.

In the current context, it makes sense for developers to re-strategize and focus on their core geographies. For example, if a certain developer is extremely accomplished as a residential players in the South, having high credibility and sufficient brand recall in this region, such a company would ask itself how wise it is to experiment in the North or the West, and whether it would not make more sense to expand in the South.

Likewise, developers accomplished in IT projects would now concentrate on geographies that feature a healthy IT component, and avoid branching out into cities that lack a sufficient volume of such activity. Such developers would see the virtue of focusing on IT-centric cities such as Bangalore, Hyderabad, Chennai, Mumbai, Gurgaon and Pune, and re-think on plans to invest in cities that lack Information Technology activity.

THE RISE OF THE LOCAL DEVELOPER

Tier II and Tier III cities still represent a great story, especially in terms of affordable housing for industrial workforces. However, this story may no longer be suitable for some of the larger developers. These are locations where the strength of regional players will come into play.

There is at least one strong developer in every region. For instance, Panchshil Realty, Magarpatta, Paranjape Builders and Kumar Builders are very powerful local brands in Pune, with a company like Pharande Spaces practically spearheading the residential drive in Pune’s PCMC area. These brands have demonstrated that they understand their geographies better than any players who arrive from the outside to experiment on the Tier II / Tier III story.

The success of these local developers will inspire larger developers from beyond a region’s borders after the fundamentals of that area’s demand are captured sufficiently and the markets are sanitized in terms of municipal and financial market stabilization. In the next one to two years, developers will have realigned their business strategies sufficiently to leverage the potential of Tier II / III cities that have sufficient market drivers or are witnessing considerable investor activity (such as Kochi, Surat, Mohali and Chandigarh).

MCHI gets outstanding response for 2nd ‘Budget Property 2009’ expo

Mumbai, August 05, 2009: Maharashtra Chamber of Housing Industry (MCHI), the most prominent body of real estate builders and developers in India has received an awe-inspiring response to their recently organized 2^nd Budget Property exhibition simultaneously held at R City, LBS Marg, Ghatkopar (W) (central suburbs) and Raghuleela Mall, Kandivali (W) (western suburbs) during July 31 to August 2, 2009. The visitor’s turnout was 9,696 and 17,241 at Ghatkopar and Kandivali exhibition respectively.

This three days exhibition was inaugurated by Shri. Arun Kumar Agarwal, General Manager & Business Head (PB) - I, State Bank of India & Shri. Shubhash Runwal, Chairman, Runwal Group, at Ghatkopar and Smt. Shubha Raul, Mayor, Mumbai at Kandivali.

Considering the rising demand of affordable housing MCHI conducted property exhibition at two locations simultaneously. The exhibition was focused on properties in the range of Rs.10-50 lakh & Lifestyle Homes above 50 Lakh as well.

“We have seen an encouraging response from the home buyers as our exhibition was held when the large numbers of buyers were looking out for an affordable housing at various locations in the western and central suburbs of the Mumbai. The response also had confirmed that the trend is in favour of affordable housing as well as quality lifestyle homes”, said Mr. Pravin Doshi, President MCHI.

“It was a co-incidence that the central government announced a special incentive one percentage point interest subsidy together with the tax benefit that makes home loans really cheap. It had created a positive impact on the exhibition with potential buyers rushing towards the expo to grab the opportunity of the affordable homes showcased in the exhibitions.” said Mr. Harish Patel, Convener, Exhibitions MCHI.

“We are extremely happy with the success of the Budget Exhibitions, the concept MCHI unveiled last year to cater the changing need of the housing and also aided in reviving the market sentiments in general. The Budget Exhibitions also have mutually benefited the buyers and developers very well”, said Mr. Deepak Goradia, Co-convenor Exhibitions, MCHI.

As many as twenty one leading developers and builders from India including Ackruti City Ltd, Lodha Group, Mayfair Housing Pvt. Ltd., Rustomjee, Arihant Universal, Disha Direct Marketing Services Pvt Ltd., Dosti Group, Neelkanth Mansions Ltd, Everest India Limited, Nirmal Lifestyles, Neptune Group, Runwal Group, Mittal Builders, Royal Palms India Pvt. Ltd. , Godrej Properties Ltd., had showcased their properties at the exhibitions. Properties from Andheri to Virar and beyond were displayed in the western suburbs exhibition at Kandivali while properties from Ghatkopar/Chembur to Mulund, Thane, Kalyan, Navi Mumbai, Panvel and beyond were displayed in the central suburbs exhibition at Ghatkopar in the 2^nd Budget Expo 2009. Among the HFIs were State Bank of India, ICICI Home Finance and HDFC Ltd. at both the locations.

About MCHI:

Maharashtra Chamber of Housing Industry (MCHI), formed in 1982 is the most prominent body of real estate builders and developers in the country. MCHI brings together members dealing in real estate development on one common platform to address issues facing the industry. Members of MCHI account for 80 of new residential accommodation in Mumbai and its vicinity. MCHI helps both the Central and State governments in meeting their objectives of providing housing, which is a basic necessity. MCHI works towards raising awareness among the general public, real estate and construction industry while providing them with detailed information on projects and new developments in and around Mumbai. With over 400 well-recognized and reputed member builders and developers, MCHI is affiliated with leading industry associations like FICCI, IMC and CREDAI.

CHENNAI’S REAL ESTATE MARKET – Hurdles To Optimum Growth

Ramesh Nair, Managing Director (Chennai), Jones Lang LaSalle Meghraj

Few cities in India have managed to maintain a more or less even keel in the recent market turbulences, but Chennai definitely numbers among them. Being an essentially conservative market, it has managed to maintain its inherent potential while many other cities showed some rather extreme variations.

Nevertheless, there is still potential for positive change, and quite a few come to mind while considering the roadblocks to further progress on Chennai’s real estate front.

ORGANIZED RETAIL

To begin with, organized retail space in Chennai is in short supply. The only additions scheduled to augment the current supply of full-fledged shopping centers (Spencers and City Centre) over the next one year will be Ampa Skywalk (450,000 sq.ft.) on Poonamallee High Road, Express Avenue (8 lakh sq. ft.) on Whites Road, Coromandel Plaza (250,000 sq. ft.) on the OMR and Spectrum Mall (1.2 lakh sq. ft.). in Perambur, North Chennai. All other supply will take at least two years.

The total incoming supply over the next year accounts for only about 1.5 millions square feet. Considering that all brands perceive Chennai as a high-potential market in terms of consumption given the high spending capacity, and that they are very bullish on expansion, this supply is indeed an inadequate trickle to fails to exploit Chennai’s fullest retail potential.

The city indubitably needs more organized retail. What stands between the current retail potential and vastly expanded one is the ongoing and seemingly chronic mismatch between developers’ lease rental expectations and the paying capacity of occupiers’ business models. This needs to be addressed by an open dialogue between developers and retailers about what works and what doesn’t in Chennai’s highly individualistic retail milieu. Until this happens, there will be no incentive for organized retail to make a bigger footprint in the city.

COMMERCIAL SPACES

In terms of Chennai’s commercial real estate sector, there is a huge oversupply of IT space. These projects cannot be reinvested into other formats, since the Government has stipulated a lock-in period of five years for projects built to the higher FSI allowances made for IT / ITES. Chennai’s developer lobby has made several representations to the State Government to have this lock-in period removed. For commercial real estate in Chennai to recover more decisively, this move should be put on fast track.

RESIDENTIAL SECTOR

Chennai’s residential sector was never a speculator’s market, and therefore, prices did not shoot up as much as in most other metropolitan cities in India. By that coin, the downward slide was not as severe either. Sales on a month-on-month basis are picking up, and affordable home projects have been announced by all developers. Since the manufacturing sector in Chennai is as fast-paced as ever, the demand for homes is bound to increase.

However, delivery of these projects is delayed because the granting of regulatory approvals takes too long in Chennai. Speeding up the process of granting project approvals would boost the city’s housing sector.

‘Most of the housing demand in Chennai comes from services industries such as IT/ITES. Close to 48% of the total non-working population in Chennai falls under the age bracket of 15–59. We foresee a large proportion of this nonworking population to graduate and commence working. This will lead to an increase in the number of double-income-no-kids (DINK) families in Chennai and will result in a rise in housing demand over the same period.’ (Affordable Housing In Chennai: Calibrating The Ticket Size – Real Estate Intelligence Services, Jones Lang LaSalle Meghraj).

MANUFACTURING

Finally, a thought on one of Chennai’s key growth areas – Sriperumbadur. This is a very important manufacturing location in Chennai. As an automobile hub, it already boasts of names like Nokia, Flextronics, Samsung, Dell and Hyundai. However, Sriperumbadur suffers from a lack of connectivity between its manufacturing nodes and also to the main city. The roads that exist are incapable of handling the demands of current traffic volumes.

This area has the capacity to be a major real estate driver for Chennai, but it needs proper Metro and road connectivity to integrate the manufacturing and hardware hubs to the main city and to each other. Providing this connectivity will also open up Sriperumbadur’s residential sector.

JLLM Update - OFFICE SPACE TRENDS - Q2-Q3 2009

OFFICE SPACE TRENDS – Q2-Q3 2009

Pawan Swamy, Managing Director ( Western India) Jones Lang LaSalle Meghraj

Since the last quarter, there has been increased office space off-take in the top cities of Mumbai, Delhi and Bangalore. Vacancy levels have actually decreased as a result of a pep-up in office space transactions. This has taken the pressure off rentals, and we have not seen a dip in these values in the recent past. In other words, the hitherto witnessed downward trend in rental values has actually been arrested now. We expect them to stay flat the levels they are right now over the next quarter.

RENTAL VALUE MOVEMENT

In these three key Tier 1 cities, there has definitely been a declining trend from the peak rental values witnessed a year back. Depending on locations, project and sub-market dynamics, this decline has been anywhere between 25-40%. However, values have remained steady over the last quarter, showing no significant decline.

Interestingly, while rental values have remained steady, capital values are beginning to strengthen and the yield has started to compress more. This can be attributed to the fact that a number of office space owners began selling their holdings a couple of quarters ago in response to the liquidity crunch. There has been a significant improvement on the liquidity front of late; Mumbai was the first to witness this, followed by Delhi and Bangalore. The result of the improved fiscal situation has resulted in fresh access to debt for developers and investors, enabling them to assume a holding position on their properties.

DEMAND

In the current context, we note an indubitable improvement of overall sentiments in the commercial space sector. In clearer terms, we are now looking at a significant increase in demand, which is a decisive change from the scenario just a few months ago. The pattern that emerges is one of multinational occupiers beginning to look more favourably at a market where values have rationalized by 25-40% over the last 12 months. These occupiers justifiably anticipate that values are likely to strengthen again over the next 12-14 months, encouraging them to take a position in this market. They are now keen to lock the best of the available opportunities so that their firms can derive consummate value in the long term.

MICRO TRENDS

Of late, we have seen an emerging trend of Indian companies preferring to buy rather than lease space. Religare, the Stockholding Corporation and the National Stock Exchange have already made purchase decisions, and we anticipate that more companies will see the value that the actual possession of office space assets adds to their balance sheets going forward. As of now, multinationals are still displaying a degree of scepticism about taking a ‘buy’ position.

In terms of segments, there been no significant growth in the IT segment - most of the activity we are witnessing is on the corporate side, predominantly among multinationals with multiple offices in the same cities that are looking at consolidation. These entities are now actually signing deals. However, we have noted that most of these are pre-lease transactions, and not necessarily in context with ready buildings.

THE WAY FORWARD

It is critical that one understands that among all the asset classes, the one impacted most the by the global economy is office space. Residential demand has already made a remarkably fast comeback, and capital markets are opening up with the return of liquidity. Hotel rates are also beginning to firm up under the improving economy. However, the health of the Indian office space sector depends on how multinational occupiers fare at the global level. While the sentiments in country in terms of the economy in particular and the market in general are definitely positive now, it will take a while before India sees a significant surge in the rental and capital values of office buildings.

OVERSUPPLY?

There is also a large amount of supply coming in at the Tier 1, Tier 2 and Tier 3 city levels, and we must consider the possibility of an oversupply situation in certain markets. However, if we believe that the markets will make a comeback in next 12-18 months and factor in the consolidation approach by both foreign and Indian firms are taking as well as the expanded demand, there is a good probability that a large percentage of this excessive supply will be absorbed.

INDIAN REAL ESTATE'S REACTION TO THE BUDGET – AMBIVALENCE ALL THE WAY

Anuj Puri, Chairman & Country Head, Jones Lang LaSalle Meghraj

POSITIVES

The fact that India Infrastructure Finance Company (IIFCL) will be given more flexibility and has been authorized to raise Rs 100,000 crore in for the development of the infrastructure sector is an indirect boon to the real estate industry. Of late, an increasing number of infrastructure projects have a real estate component by virtue of a cross-subsidization principle. Therefore, boosting infrastructure projects gives an impetus to real estate, as well.

The intended clearing of regulatory bottlenecks for infrastructure projects will help bring forward many pending projects, thereby boosting the construction sector.

The fact that allocation for the NHAI has been increased will mean improved and accelerated connectivity, raising the value of existing real estate along these routes and also opening up new areas for development.

Allocation for JNNURM has been substantially increased. This is good news for urban infrastructure in general. JNNURM has been instrumental in proving road and rail connectivity in urban and suburban areas, and this will give a significant boost to mass housing schemes on the fringes of the metros.

The increased allocations towards Rural Electrification Scheme, the Rural Housing Fund and Rural Road scheme may serve to improve the real estate markets in far-flung areas and may also help to reduce inward migration from the villages by providing industrial growth in the hinterlands. This may herald the beginning of organized real estate in the semi-urban and rural areas.

The increase of funding for the Commonwealth Games will vastly enhance development potential in the Delhi NCR region and have direct positive implications for the hotel industry in this sector.

The facts that manufacturers of prefabricated concrete slabs and will now have a tax relief and that goods made at construction sites now have their exemption reinstated spells good news for developers of lower income housing segment, who depend largely on low construction costs.

NEGATIVES

The increase in Income tax exemption limits is not sufficient to make a significant difference in buyers’ purchasing power, but may serve as a feel-good factor.

STPI units will have to bear a higher burden of Minimum Alternate Tax (MAT). This is an indirect endorsement of SEZs, and in line with the Government’s stance to phase out benefits to STPI projects, thereby encouraging migration into SEZs. However, the Government is silent on the cost implications on the commercial use of STPI units that have hitherto enjoyed higher FSI at no extra charge.

The allocation increase to the Rajiv Awaas Yojna will enhance the prospects of urban slum dwellers of getting better quality housing. This scheme under JNNURM is intended to promote support and property rights to people living in slum areas.

The Budget did not mention FDI into the real estate sector or REITs and REMFs. We are also disappointed about the lack of affirmative action on increasing tax exemptions on housing loans, principal repayment and interest.

No mention was made on the undoing of service tax on rentals which were introduced in the previous budget. This is not going to improve the status in terms of commercial and retail leasing.

There is a lack of measures in terms of end user facilitation, boosting of buyer sentiments and the growth of mass housing.

Jones Lang LaSalle Ranked #1 Corporate Real Estate Services Provider

INDIA, July 2 2009 — Jones Lang LaSalle (NYSE:JLL) has been recognized as the best overall provider of corporate real estate services by the Watkins 2009 Survey of Corporate Real Estate Service Providers. Of the 19 providers evaluated by the largest users of commercial real estate services, Jones Lang LaSalle was rated #1 in every category, including delivery of results, adaptability of services, pricing, reputation and financial strength.

The survey, conducted every two years by the Watkins Research Group Inc., in a joint project with Flaspöhler Research Group, interviewed 204 corporate real estate (CRE) decision-makers from 182 companies, representing North America’s largest users of CRE services—including 59 Fortune 500 companies, 37 Financial Times Global 500 companies and eight government agencies.

Not only did Jones Lang LaSalle receive the highest overall rating among all firms, but it also was rated #1 for each of the 10 considerations respondents listed as most important in selecting CRE providers. These considerations, which were characterized as adding to clients’ bottom lines or demonstrating strong client orientation, are listed below in order of importance:

1. Delivers results on time and within agreed-upon budget (JLL #1)

2. Is business savvy (JLL #1)

3. Adapts services to fit firm (JLL #1)

4. Understands and avoids conflicts of interest (JLL #1)

5. Has rational pricing (JLL #1)

6. Has a strong reputation and is respected in the industry (JLL #1)

7. Is financially strong (JLL #1)

8. Has offices in all the major markets where needed (JLL #1)

9. Monitors performance with metrics (JLL #1)

10. Uses state-of-the-art technology (JLL #1)

“The Watkins survey is a clear indicator of what companies require and value,” said John Forrest , CEO of Jones Lang LaSalle’s Corporate Solutions business in Asia Pacific. “Real estate is often the third largest cost for many companies. Many are seeking to outsource these functions to reduce costs whilst maintaining similar or higher levels of service delivery.

“This recognition demonstrates that our continued investment in our global platform delivers in the areas that our clients consistently tell us they value – including quality service delivery, reputation for integrity and financial strength as a company.

“Our ability to provide an integrated service means that we can streamline delivery and maximize cost efficiencies for our clients across all areas of corporate real estate. In Asia Pacific, this translates into consistent, high-quality service delivery across diverse markets. It also means that we can leverage global knowledge and best practice for clients locally.

“It is a combination of these things that enable us to maintain our position as a market leader in Asia Pacific. In fact, we are continuing to grow and in the first six months of 2009, we have expanded our portfolio under management by over 30 million sq ft with clients from the banking, technology, industrial and consumer goods industries,” said Mr Forrest.

About the Watkins Research Group Inc.

The WATKINS RESEARCH GROUP, INC. is a marketing research firm headquartered in Kansas City. Specializing in primary business-to-business research, the firm fields studies where the issues are more complex and/or the audiences more sophisticated. WRG is particularly regarded for gathering, analyzing and cogently presenting intelligence from very select audiences who represent the most sought after business in an industry. More at WatkinsResearchGroup.com.

Jones Lang LaSalle Appointed by Iron Mountain to Manage Global Real Estate Transactions

MUMBAI, 15 June 2009 — Jones Lang LaSalle (NYSE:JLL), the leading integrated professional services firm specializing in real estate, has secured a five-year contract to manage Iron Mountain Incorporated’s real estate transactions worldwide. The information management services firm’s total industrial and office portfolio encompasses 65 million square feet in more than 35 countries. “It is exciting to be partnering with Iron Mountain, a leader in information management services, on this truly global project,” says Mr David Wilton, Head of Industrial – Asia at Jones Lang LaSalle. “This is a textbook example of a highly successful company, dominant in its field, leveraging outsourcing as a vehicle for speed to market while driving shareholder value.”Anuj Puri, Chairman & Country head, Jones Lang LaSalle Meghraj, adds, “This win underscores the growing potential of corporate outsourcing, India included. It also accentuates the fact that real estate services attuned to international standards are the new benchmark for a country that has so decisively joined the global village.” Jones Lang LaSalle will represent Iron Mountain in leasing and sales transactions as well as provide overall portfolio strategy. Approximately 53 million square feet of the real estate is located in North America, and 12 million square feet across Europe, South America and Asia Pacific. The Boston-based firm’s real estate portfolio consists of office space as well as highly specialized facilities for housing secure data centers, records storage, offsite media vaulting and commercial shredding operations. “Given our rapid global expansion over the last decade, we needed to partner with a leading global real estate firm that could not only execute the transaction work but also bring us strategic insight and consistent process to improve the management of our diverse portfolio, comprising of more than 1,000 facilities across more than 35 countries,” says Anthony Piazza, Iron Mountain’s Vice President of real estate finance and operations. “This partnership will allow our internal team to focus on our strategic priorities while leveraging Jones Lang LaSalle’s expertise and execution capabilities, gaining cost savings and other strategic advantages.”


About Iron MountainHeadquartered in Boston, Iron Mountain Incorporated (NYSE:IRM) helps organizations around the world reduce the costs and risks associated with information protection and storage. With 2008 revenues topping $3 billion, the Company offers comprehensive records management, data protection, and information destruction solutions along with the expertise and experience to address complex information challenges such as rising storage costs, litigation, regulatory compliance and disaster recovery. Founded in 1951, Iron Mountain is a trusted partner to more than 120,000 corporate clients throughout North America, Europe, Latin America and Asia Pacific. Iron Mountain was recently listed as an S&P 500 company. For more information, visit www.ironmountain.com

PUNE REAL ESTATE - THE ADVENT OF INNOVATIVE FINANCIAL STRUCTURING

Mohammed Aslam, Head - Pune, Jones Lang LaSalle Meghraj

The slowdown in for real, and it calls for innovation among Indian real estate's primary stakeholders. In Pune, we have witnessed some truly innovative financial structuring schemes - schemes that, by addressing the needs of clients rather than merely the developer's business aspirations, truly add real value in a changing world.

Mont Vert offers potential buyers the option of renting a 2BHK at a minimum rent of Rs. 12000 per month and with a deposit of Rs. 1 lakh, and buying the rented flat at a later date. The payments made should purchase of the flat ensue are then treated as down-payments. A lock-in period of three years is also part of the agreement. This allows occupants to either continue on a rental basis or to buy a flat they have grown familiar with at a date when the rates would conceivably have sunk to more rational levels.

Rohan Builders takes a down payment on an under-construction flat in any of six ongoing projects and offers to pay back the difference in the current and future market rates should the market correct further at a later stage. Yet another entity agrees to shoulder part of the interest rate on the buyer’s home loan for a year, but again introduces a lock-in period of three years. Such offers are, quite simply, aimed at encouraging fence-sitting buyers to either absorb existing ready inventory or to book flats in under-construction projects.

Pune represents a very individualistic real estate market for various reasons, and it comes as no surprise that we should see the genesis of such proactive measures in this city. However, it is our opinion that the customer-centric movement being launched there would do well to spread beyond this city's borders, as well. To a certain extent, it has.

In the metros, we are seeing a unique phenomenon among established development houses like DLF who are willing to pay buyers back the difference in price brought about by market correction. To a large extent, this is to prevent such buyers from demanding an outright refund. Certain builders also offer to shoulder the financial burden of Stamp Duty and registration due on the purchased property, and to pay the buyer's EMIs right until actual possession, these funds to be refunded at that stage.

Across the country, buyers find their negotiation power vis-à-vis the price of the property increasing when they bring 50% of the price or more to the bargaining table. These are the first responses to the clarion call for taking the lead on making home purchase a more financially feasible proposition for buyers. We applaud it and await the spread of this movement of innovation - especially since it makes sense both to buyers and sellers. In the current market scenario, the focus must often be re-directed from profitability to loss-cutting. While the primary objective has always been to turn a profit, this consideration takes a back-seat in the current slowdown scenario, when projects are not moving fast enough on the market to enable builders to meet their own financial obligations. Whether or not the builder is making an actual loss, there is certainly a loss on previously anticipated margins involved.

So far, these schemes are being witnessed only in the residential segment, and the more innovative ones may soon be evident in cities other than Pune. Commercial real estate is still a straight transaction segment in which negotiation potential is based on the stage of the project construction. Unlike residential, it is typified by customers who have the required buying power and/or funding avenues, and whose cost-sensitivity is only limited to their interest in securing the best possible deal.

The response to such financial structuring schemes has been varied, with the final asking price, location and exact specifications of the properties remaining important criteria. Where the location and client catchment for a project is good, such financial schemes have proved to be real market movers and have made a difference of up to 25% in a project’s selling potential. However, it is clear that the ultimate differentiators will still be a rationalized price and the builder’s overall market standing and credibility. Another model that works well even in the slowdown scenario is linking the payment instalments to the stage of construction.