C&W India Real Estate Outlook 2009

OUTLOOK 2009
INDIA REAL ESTATE OVERVIEW
A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION MARCH 2009

CONTENTS
Executive Summary 1
India Economic Outlook 2
Realty Sector Outlook 4
Mumbai Market Outlook 6
NCR Market Outlook 12
Bangalore Market Outlook 17
Pune Market Outlook 22
Chennai Market Outlook 27
Hyderabad Market Outlook 32
Kolkata Market Outlook 37
Ahmedabad Market Outlook 42
End Notes 46
EXECUTIVE SUMMARY
The year 2008 proved to be quite eventful for India's realty nearly 6% in 2008, with almost 30% of this space take-up
sector. Following the boom of the past couple of years, the being dominated by pre-commitments from last year. Fresh
sector was faced with the beginning of a downturn. Perhaps pre-commitments made in 2008 amounted to 12.8 million
'turbo-coupled' (the 'de-coupled' theory having rendered sq. ft., a 45% drop from 2007.
passé by now) with the global economy, by mid-2008 the
A considerable difference between supply and absorption,
effects of the US sub-prime crisis together with the stock
however, led to rising vacancy rates across all micro-markets,
market crash had reached Indian shores. Evaporating liquidity
causing significant rental corrections in the year. Though the
and gradually disappearing demand for real estate spaces lead
total office supply projection for 2009 is approximately 88
to corrections in prices across all asset classes by end-2008.
million sq.ft., Cushman & Wakefield Research estimates only
Tier-II and III cities and towns experienced a relatively lesser
about 50 million sq. ft. to get delivered by end-2009.
impact of the economic downturn in 2008.
On the retail front, the year saw an approximately 17%
The realty sector is currently facing significant trouble on increase in mall supply over 2007 at India's top metropolitan
declining housing sales and unavailability of finances. Under the centres. But at 9.6 million sq. ft., it was a substantial shortfall,
circumstances, as investment capacity gets impacted, large of more than 50%, from mall supply projections made earlier.
volumes of high-priced residential stock (as also, the supply Despite shortfall in mall supply, vacancy rates remained at a
pipeline) will need to re-align pricing. There is a likelihood of national average of 9%, suggesting that most malls were
continued delay in execution of on-going projects as well as finding it difficult to manage operational costs. By mid-2008,
postponement of newer developments in the housing sector. the supply shortage compounded by a demand slowdown had
The total supply for commercial office space across the top pushed down rentals, which fell significantly across most
1
eight cities of India in 2008 was approximately 60 million sq.ft. micro-markets. The correction in 2009 will in all likelihood
(about 34% higher than the previous year), with SEZ supply reach the non-metros, as the ripple effect of the economic
recorded at approximately 19.3 million sq. ft. Commercial downturn reach tier-II and III locations.
office space absorption across the top cities increased by
1 Mumbai, NCR, Bangalore, Pune, Chennai, Hyderabad, Kolkata and Ahmedabad
1
INDIA ECONOMIC OUTLOOK
The Indian economy experienced a setback in 2008 after Delhi Mumbai Industrial Corridor (DMIC), the Elevated
registering a robust growth pattern over the last couple of Expressway in Bangalore connecting Hosur Road to
years. India's GDP growth, which was recorded at 9% in 2007- Electronics City and several airport projects across the
08, saw a downward trend in 2008-09 and is estimated to country that are underway. Public Private Partnerships (PPP)
reach around 7% in 2009-101. In spite of this decline, it still too have proved to be a successful model for various projects
remains the second fastest growing economy in the world. ranging from mass rapid transport systems (MRTS) and roads
The country's growth drivers in the past few years have to airports and sea ports.
remained the agriculture, services, manufacturing, trade as well
Foreign Direct Investment (FDI)
as the construction sectors.
Since the opening up of the real estate sector in 2005, Private
Inflation reached an all time high of 13% in August 2008 which
Equity (PE) funds in India have been very active. A large
triggered the RBI to address the issue by raising the Cash
number of transactions have been recorded in the past three
Reserve Ratio (CRR), Repo and Reverse Repo Rates. As the
years at entity, portfolio and Special Purpose Vehicle (SPV)
cash crunch gained prominence, affecting growth rate and end
level. According to the Indian Department of Industrial Policy
user demand, fiscal stimuli were infused into the economy for
and Promotion (DIPP), there has been a substantial amount of
curbing inflation by the end of the year (from 13% in mid-
1 FDI inflow into the housing and Real Estate (RE) sector, with
2008 inflation fell to 5% by end-2008) .
approximately 78% of last year's inflows already having been
The real estate sector was greatly affected in 2H 2008 in light accumulated during the first six months of FY 2008-09. Given
of testing economic times. As the tremors of the US recession the current global and domestic economic situation in which
trickled to affect the home markets, banks and financial the Indian realty sector has been affected too, 2H 2008 hardly
institutions alike turned apprehensive of funding projects that witnessed any FDI inflows.
were earlier nurtured by foreign institutional investors (FIIs).
FDI inflow in Housing & Real Estate Sector
This resulted in the slowing down of several developments
that were under progress as well as the deferment of supply 100,000
for the year. The corporate sector too remained cautious and
restricted themselves from the aggressive expansion plans 80,000
Investment (INR million)
they had nurtured thus far. Correcting rentals for commercial

60,000
properties along with the attractive offers and easy leasing
terms being offered by developers stood testimony to the
40,000
slackness in demand for commercial space. The residential
segment too saw investors and speculators exiting the market, 20,000
making way for primary home buyers who anticipated further

corrections and more realistic and affordable price points. The 0
Apr 05 - Apr 06 - Apr 07 - Apr 08 -
turn of events through the year, have put the tenant back in Mar 06 Mar 07 Mar 08 Sept 08
the power seat as he holds the negotiation key in the realty Source: www.dippnic.in
markets today.
Infrastructure development has always remained the focus of 1 Interim Budget 2009 - 10 by Govt. of India (http://indiabudget.nic.in/)
the Indian government with planned projects such as the
2
INDIA ECONOMIC OUTLOOK
Private Equity (PE) Deals
Though economic factors were challenging in 2008, it highest fund-raising year in the history of the industry. India
remained a successful year for the global private equity too registered significant investment in the first half of 2008
industry as the first half of the year witnessed significant while the last quarter has been affected the most with
activity in this area too. According to Private Equity substantial projects being shelved. A few of the representative
Intelligence (PREQIN), the year 2008 was globally the second PE deals in 2008 across various asset classes are listed below:
Residential
Investor/Fund SPV Parent Company Kind of development Location of the project Proposed/Invested Investment
Citigroup Venture Indu Projects Residential project Hyderabad Invested USD 50 million
Capital International
ICICI Prudential PMSI DS Kulkarni Developers Residential project Bangalore Invested INR 35 crore
Real Estate Portfolio
HDFC AMC Ansal Properties & Residential project NOIDA Invested INR 236 crore/
Infrastructure USD 55 million
Westport Capital, Alliance Group Residential project Hyderabad Invested USD 100 million
US based firm
Red Fort Capital Indu Projects Residential project Hyderabad Invested INR 220 crore
Retail
Yatra Capital Palladium Constructions Retail cum residential Bangalore Invested INR 111.62
building complex crore
Triangle India Real Provogue (India) Ltd Retail Aurangabad, Indore, Proposed INR 457 crore
Estate Fund Nagpur and Jaipur
Commercial
TAIB Logix TechnoPark IT Park NOIDA Invested USD 69 million
Citi Property Investors BPTP IT Park Gurgaon Invested USD 160 million
Red Fort Capital Godrej Properties IT Park Kolkata Invested NA
Yatra Capital Riverbank Holdings Pvt. Ltd IT SEZ Kolkata Invested INR 115 crore
DE Shaw HDIL IT Park Mumbai Invested USD 250 million
Source: Cushman & Wakefield Research
Policy Changes & Impact

The year 2008-09 witnessed several announcements by the allowed corporate entities engaged in the development of
central government pertaining to policy changes as measures integrated townships, hotels, hospitals and non-banking
to curb inflation and to combat the effect of the global financial companies exclusively financing infrastructural
deleveraging on the nation's economy. Recommendations projects to avail ECBs under the approval route.
form various industries in these troubled times necessitated
?Housing loans to individuals carrying a risk weightage of
the government to take measures by formulating and altering
50% was increased from INR 2 million to INR 3 million
fiscal policies and stimulus packages to steer clear off
troubled waters. ?There was a decrease in stamp duty charges in states such
as Delhi, UP, Haryana etc.
?The Maharashtra government took a bold step by granting
100% extra Floor Space Index (FSI) in IT/ ITeS Parks to be ?The sunset clause on Software Technology Parks of India
used for financial services such as banks, insurance (STPI) benefits was extended for a year till 31st March 2010
companies and securities within the IT Parks.
?The government also allowed the rescheduling of bank
?The policy on External Commercial Borrowing (ECB) was debt without it being classified as NPL (Non Performing
also reviewed by the Reserve Bank of India (RBI) to Loans)
provide the required momentum to the realty market. It
3
REALTY SECTORAL OUTLOOK
Commercial Office Space Retail Space
The total supply for commercial office space across the top Though the year 2008 saw approximately 17% increase in
eight cities of India in 2008 was approximately 60 million sq.ft. mall supply over 2007 at India's top metropolitan centres
While this was about 34% higher than supply of the previous at 9.6 million sq. ft., it was still a significant shortfall, in
year, it was also 24% less than the office supply projected for excess of 50% from earlier mall supply projections. The
2008 at the beginning of the year. Delhi NCR accounted for average mall vacancy rate for the top seven cities (see table
the highest supply (14.07 million sq.ft) in 2008, followed by below) stood at 9% in 4Q 2008, with Delhi NCR witnessing
Bangalore, Chennai and Mumbai. These four metropolitan the highest mall vacancy rate, suggesting that most malls
centres together accounted for nearly 74% of the total office across India were finding it difficult to manage their
supply across the major cities. SEZ supply for the year was operational costs. This was largely due to uneven distribution
recorded at approximately 19.3 million sq. ft., with Bangalore of mall space in the major cities, where mall supply has been
accounting for the highest SEZ supply (5.71 million sq.ft), concentrated within a single district targeting same or similar
followed by Pune (4.1 million sq.ft) and Chennai (3.87 million consumer profiles. From the retailers' point of view, the
sq.ft). preference largely remained for premium high streets over
malls, further aggravating the situation. In 2008 the highest
Commercial office space absorption across major cities
level of vacancy was witnessed in NCR (24%) and Pune (15%),
increased by nearly 6% in 2008 with almost 30% of the total
while the lowest vacancy level was witnessed in Chennai at
dominated by pre-commitments from previous years. Delhi
approximately 1%.
NCR saw nearly 5.86 million sq. ft. of pre-commitments for
projects due in 2009, the highest among all major cities. Fresh Price Fluctuations in Major Markets
pre-commitments for the year (to be absorbed by 2009) City Vacancy Locations Rental %
amounted to 12.8 million sq. ft., which was a 45% drop from Rate in Change
4Q 08 Over 1 Yr
that of 2007 and stands testimony to the cautious expansion
plans from the corporate sector in this current overcast NCR 24%
economic climate. With fresh pre-commitments having Main Street CP/Karol Bagh/Basant Lok -16%
declined in 2008 over 2007, the impact will certainly be felt in Mall West Delhi -27%
the space absorption trends of 2009. PUNE 15%
Office Supply Mall Ganeshkhind Road -14%
16 Main Street MG Road -13%
14
MUMBAI 10.20%
Area (million sq. ft.)
12
10 Mall Lower Parel -27%
8
Mall Vashi -17%
6
4 KOLKATA 5.60%
2 Main Street Theatre Road -15%
0
Ahmedabad
Hyderabad
Chennai
Mumbai
Bangalore
Kolkata
Pune
NCR
Main Street Park Street -9%

Mall South Kolkata -7%
HYDERABAD 4.70%
2007 2008

Main Street Banjara Hills -29%
Mall Banjara Hills, Road No. 1 -20%
Office Absorption
BANGALORE 3%
16
14
Main Street Sampige Road, Malleswaram -28%
Area (million sq. ft.)
12 Main Street MG Road -25%

10
8
CHENNAI 1.30%
6 Main Street Anna Nagar, 2nd Avenue -33%
4
Main Street Cathedral Road, RK Salai -33%
2
0
Ahmedabad
Hyderabad
Chennai
Mumbai
Bangalore
Kolkata
Pune
NCR
2007 2008
4
REALTY SECTORAL OUTLOOK
Over the last six months quality real estate supply shortage, By the year-end one could see the correction rolling in on the
compounded by a demand slowdown in the segment, has cities that had seen the highest percentage increase in values
pushed down rentals which are likely to witness a further during the bull-run and across the nation the most overheated
drop in the coming quarters of 2009. The last quarter of 2008, micro-markets saw the deepest of corrections from their peak
especially, recorded a fall across main streets and malls in values.
most micro-markets; with rentals likely to see further
Price Fluctuations in Key Markets
weakening in the short- to mid-term.
City Values Locations % Change
Mall Supply 2007-08 Over 1 Yr
AHMEDABAD
5.00
4.50
High End Capital Navarangpura -13%
4.00 BANGALORE
Area (million sq.ft.)
3.50
3.00
High End Capital Koramangala, Outer -10%
2.50 Ring Road
2.00
Mid End Capital Marathhalli, Whitefield, -17%
1.50
1.00
Airport Road
0.50 Mid End Rental Koramangala, Jakkasandra -10%
0.00
CHENNAI
Ahmedabad
Hyderabad
Chennai
Mumbai
Bangalore
Kolkata
Pune
NCR
High End Rental Nungambakkam, 0%

Anna Nagar, Kilpauk
2007 2008 HYDERABAD
Source: Cushman & Wakefield Research High End Capital West & East Marredpally -5%
Mid End Rental Himayathnagar -13%
Residential Space KOLKATA
High End Capital Salt Lake -5%
The beginning of 2008 saw a strong real estate market with
luxury residential projects being launched by both established High End Rental Ballygunge, Queens Park, -12%
Gurusaday Road
and new developers. However, demand witnessed a serious
MUMBAI
set back across markets in the country with constrained
High End Capital Powai -15%
consumer spending in light of the downturn. The initial signs
of weakness were seen in 3Q 2008, with the consumers Mid End Capital Worli, Prabhadevi, -18%
Lower Parel/Parel, Powai
being courted with discounts and freebies such as free cars,
High End Rental Malabar Hill, Breach Candy, -19%
parking space, fit-outs, pre-EMI payments, gold and even free Pedder Road, etc.
vacations. Mid End Rental Andheri (W), -24%
Malad, Goregaon
The astute individual investors seeing the first signs of
NCR
weakness started to exit the realty market and the gap
widened further in the Indian housing sector. As exiting High End Capital Noida -5%
investors started to off-load projects, there was an apparent Mid End Capital Gurgaon -10%
disparity in the rates being offered by developers and the PUNE
ones available in the secondary market. High End Capital Wanowrie -20%
Mid End Capital Wakad -15%
High End Rental Wanowrie -21%
Mid End Rental Aundh -20%
5
MUMBAI MARKET OUTLOOK
Vasai Creek
Bhiwandi
Borivli Sanjay Gandhi

National Park
Malad Thane
Mulund
Goregaon
Bhandup Thane
Jogeshwari Belapur Rd
Andheri
NAVI
Santacruz (E) Ghatkopar MUMBAI
Bandra (W) Vashi
Bandra (E)
Mahim
MUMBAI Belapur
Worli
Lower
Parel
Kemps
Corner Shedung
Kolkhe
Village
Village
Fort/ Fountain
Nariman
Point
Colaba
Source: Cushman & Wakefield
Commercial Retail Residential

Micro Market Micro Market Micro Market
Maximum Rental Correction Maximum Rental Correction Maximum Value Correction High End
Maximum Rental Growth Maximum Rental Growth Maximum Value Growth High End
COMMERCIAL commitments in upcoming projects from IT/ITeS and BFSI

(Banking Financial Services Insurance) sectors, which have
In 2008, Mumbai witnessed a total supply of approximately been the principal drivers of office space demand in the city.
9.48 million sq.ft. which was the highest single year
development in the city in the last 5 years. However this was Majority of supply in 2008 was concentrated in suburban
still well short of the total anticipated supply in the beginning locations of Bandra (2.34 million sq.ft.), Andheri (2.14 million
of the year which was expected to be approximately 18 million sq.ft.) and Malad (1.80 million sq.ft.). CBD and Off CBD
sq.ft., most of which is now deferred to 2009. The deferment (Worli) locations did not witness any new supply due to
in supply can be attributed to the constrained availability of limited opportunities for new developments in these locations.
finances to real estate developers as well as subdued pre- The ongoing mill land redevelopment at Lower Parel resulted
Office Supply - 2008 Sectorwise Absorption Trend - 2008

43% 29%
17%
28%
2% 16%
2% 2% 3% 3%
55%
IT/ITeS BFSI Others Construction
Commercial IT SEZ IT Media Aviation Pharmaceuticals Manufacturing
Source: Cushman & Wakefield Research Source: Cushman & Wakefield Research
6
in a supply of about 458,000 sq.ft. in 2008. The space With the slowdown in global economy, many corporates have
constrained city also witness it's first SEZ supply of 1.6 million eased or postponed their expansion plans resulting in subdued
sq.ft. in suburban location of Powai. demand for office space in the city. As a result Mumbai
1
witnessed an overall vacancy of about 12% in 2008 which is
In 2008 the total demand for commercial office space in
significantly higher as compared to 2007, when the vacancy
Mumbai was recorded at 5.32 million sq.ft. which was about
levels were recorded at about 4-5%. Vacancy in CBD inched
15% higher as compared to the demand in 2007.
closer to 5% in 2008 as compared to 1-2% in 2007 on account
Concerned with rescheduling of timelines of under of restrained demand and low renewals of expired lease
construction projects by several developers, tenants showed agreements by corporates. Off CBD locations like Worli and
increasing preference towards ready to move opportunities. Lower Parel witnessed a vacancy of approximately 7-9%.
As a result, the total demand in 2008 was driven by Vacancy levels in suburban markets of Andheri, Malad and
absorption rather than pre-commitments. Bandra soared to 14-15% due to large fresh supply coupled
with low demand in these markets.
Of the total demand for 2008, absorption comprised of
approximately 3.36 million sq.ft. while new pre-commitments Average Rental Values - Office Districts2
were recorded at 1.96 million sq.ft. Additionally about 5.16 500 0
Rental Values (INR/sq.ft./month)

million sq.ft. of office space, which was pre-committed to in -5
400
previous years, got absorbed in 2008. The first half of 2008
Growth Rate (%)

-10
accounted for approximately 80% of the annual demand which 300
-15
moderated significantly thereafter due to the impact of the
200
global economic slowdown on the Indian economy. -20
100
-25
Supply, Absorption and Vacancy Trends
0 -30
14
Nariman
Andheri
Bandra
Malad - IT
Powai - IT
Vashi - IT
Belapur - IT
10
Kurla
Lower
Kurla
Parel
Point
Worli
Thane
9 12
8
10
7
Vacancy Rate (%)
Dec 2007 Dec 2008 Growth Rate (%)

6 8
5
6
4
Average Rental Values Trend - Office Districts2
3 4
500
2
2
1 500
0 0
2003 2004 2005 2006 2007 2008 400
Supply Absorption Vacancy Rate (%) 300
Source: Cushman & Wakefield Research 200
100
IT/ITeS and BFSI sectors continued to remain the principal
0
drivers accounting for 43 % and 29% of the total commercial
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
space demand in the city respectively. Additionally Mumbai

also witnessed increasing demand from sectors such as Nariman Point Worli Lower Parel
Bandra Kurla Andheri Kurla Malad - IT
pharmaceuticals, aviation and infrastructure/real estate Powai - IT Vashi - IT Thane Belapur Road - IT
developers, albeit their contribution to overall demand was Source: Cushman & Wakefield Research
marginal.
Mumbai witnessed a drop in rental values across most micro
Of the total demand, about 222,000 sq.ft. of office space was markets in 2008. Highest rental drop of 25% was recorded in
also absorbed by business centres in locations like Bandra, Andheri followed by Malad (-11%) and Bandra (-9%). Drop in
Lower Parel and Fort. Some of the major business centre rental values in these markets can be attributed to low
players operating in the city included Avanta, Regus, Stylus and existing demand coupled with increasing vacancies and large
DBS. upcoming supply in these micro markets.
With STPI benefits slated to end in 2009-10, Mumbai Subdued demand and increasing vacancy rates led to a drop in
witnessed significant demand for IT - SEZ space in 2008. The rental values at Nariman Point and Worli by 9% and 13%
supply of 1.6 million sq.ft. of SEZ space in Powai was almost respectively. However rental values at Lower Parel,Vashi and
entirely absorbed due to lack of other SEZ options in the city. Thane Belapur Road have largely remained stable due to
Significant demand was also recorded at Bandra (17%), Lower limited supply in these markets.
Parel (13%) and Malad (11%)
1 Demand= Fresh Pre commitment + Fresh Absorption for the year.
2 Average rentals are for bareshell facilities
7
Outlook RESIDENTIAL
The office space market in 2009 is likely to be characterized The global economic slowdown affecting the Indian economy
by large anticipated supply (approximately 16 million sq.ft.), on the whole had a direct bearing upon the residential market
rising vacancy rates and reduced demand. Given a rather which saw a gradual slowdown in investor activities. Monetary
stringent macro economic environment, developers and measures to curb inflation not only led to increase in home
landlords are likely to experience difficulty in maintaining loan interest rates but also curtailed availability of funds to
rental values at current levels. real estate developers in second half of 2008. This, coupled
with growing belief that capital values have already peaked
In the absence of any major upcoming supply over the next
and likely to witness correction, resulted in investors and
12 months, drop in rental values for CBD and Off CBD
end-users adopting a wait and watch, approach thereby
locations is expected to be marginal. However planned large
bringing a slowdown in Mumbai residential sector.
scale redevelopment of mill land for commercial use at Lower
Parel coupled with reducing demand is likely to result in Developers also restricted the launch of new projects in 2008
significant correction in rental values. due to low pre commitments by investors and restrained
demand from end users for under construction projects. With
About 50% of anticipated supply in 2009 is expected to be
limited opportunities for development in south and south
concentrated in suburban markets of Andheri, Malad and
central Mumbai, most of the new supply was concentrated in
Bandra which includes IT/ITeS specific supply of approximately
suburban locations of far north Mumbai (Andheri, Goregaon
2 million sq.ft. This large upcoming supply coupled with
and Malad). However central Mumbai (Worli and Lower Parel)
existing high vacancies is expected to keep rental values
and North Mumbai (Bandra, Santacruz and Juhu) witnessed
under pressure.
sporadic supply of premium projects.
Micro markets of Thane and Thane Belapur Road are
Recent policy reforms such as repealing of the Urban Land
expected to witness a supply of about 6 million sq.ft. in 2009,
Ceiling Act, increase in Floor Space Index (FSI) for townships
nearly 55% of which is likely to be IT/ITeS specific. In spite of
and allowing upto 100% FDI for township development
the state government's recent resolution to allow financial
enticed township developments in peripheral locations of the
service providers to occupy up to 80% of space in an IT Park,
city. As a result Mumbai witnessed launch of two township
the large IT/ITeS specific supply coupled with reduced demand
projects in peripheral locations of Panvel and Thane in 2008.
from IT/ITeS sector is likely to create a supply to demand
mismatch keeping rental values under pressure in these Capital Values
markets.
Almost a complete absence of investors, increasing interest
Rental Cycle rates on home loans and anticipation of correction in the
Rental
existing high capital values led to restrained demand in second
Peak half of 2008. As a result capital values in the city which had
witnessed accelerated growth over the last 4-5 years stabilised
Market Market 4Q 2008 by 3Q 2008 and softened by the end of the year 2008.
Slowing Recession
Weakening
As compared to 2007, capital values witnessed mixed
Strengthening
Market Market response across various micro markets in 2008. While demand
for high end projects remained buoyant, consistent increase in
Market Market
Recovery Bottoming home loan interest rates resulted in drop in affordability for
end-users for mid end projects.
Rental Average Residential Capital Values - High End1
Trough 4Q 2009 (F2)
70,000 0
60,000 -2
Capital Values (INR/sq.ft.)
Annual Growth Rate (%)
-4
With STPI benefits stated to end in 2009, the limited IT/ITeS 50,000
-6
specific demand is expected to be steered towards the 40,000 -8
upcoming SEZ space along the Thane Belapur Road on 30,000 -10
account of lower rentals and prevailing tax benefits in SEZs 20,000
-12
-14
space. With limited availability of SEZ space in the city, SEZ 10,000
-16
rentals in Thane Belapur Road are expected to remain stable.
0 -18
Central
South
South
Central
North
Far North
North East
Peripheral locations like Thane and eastern suburbs (Vikhroli,

Kanjurmarg, Bhandup and Mulund) are likely to emerge as
Low High Annual Growth Rate (%)
new commercial hubs in the city due to low rentals and large
upcoming supply in these markets.
1 Average high end values are for properties ranging from 3,000 to 6,000 sq.ft.
2 Forecast
8
2 2
Average Residential Capital Values - Mid End Average Residential Rental Values - Mid End
50,000 0 450,000 0
45,000 -2 400,000
Rental Values (INR/month)

40,000

-4

350,000 -5
35,000 -6
300,000
30,000 -8 -10
250,000
25,000 -10
200,000
20,000 -12 -15
15,000 150,000
-14
10,000 -16 100,000 -20
5,000 -18 50,000
0 -20 0 -25
Central
Central
South
South
Central
North
Far North
South
South
Central
North
Far North
North East
North East
Low High Annual Growth Rate (%) Low High Annual Growth Rate (%)
On account of limited fresh supply and buoyant demand, south Mumbai due to low rentals and accessibility to
south and south central Mumbai remained largely insulated commercial hubs like Bandra Kurla Complex, Andheri and
from slowdown in residential sector and witnessed marginal Malad, south and south central Mumbai witnessed significant
softening in capital values for both high and mid end segment. correction in rental values of high end apartments.
However price sensitive markets of far north (Andheri,
However mid range properties in south and south central
Goregaon and Malad) and north east (Powai) witnessed
Mumbai which witnessed marginal correction due to limited
significant softening in capital values for both mid end and high
availabilities. The highest rental correction was recorded in
projects (-11% to -17%) due to large supply and restrained
mid range properties across price sensitive locations like far
demand from end-users due to reduced affordability and
north and north east Mumbai which witnessed 21-24% drop in
anticipation of further price correction. Lower demand for
rentals due to drop in affordability.
under construction projects resulted in steep correction in
capital values for both high end (-12%) and mid end projects Outlook
(-18%) in central Mumbai.
Increasing preference is likely to be given to smaller units and
Rental Values lower cost housing projects for middle income groups,
especially in price sensitive markets. As a result developers in
Rental values which had remained stable in first half of 2008,
far northern locations (Andheri, Goregaon and Malad) are
witnessed significant correction across all micro markets due
likely to focus on small sized apartments (1-2 BHK3
to overall restrained demand and realignment of rental
apartments) catering to middle income group.
expectation to market sentiments by property owners who
had earlier held on to their rental expectations in anticipation With Supreme Court allowing redevelopment of over 19,000
of growing demand from end users. buildings across Mumbai, south and south central Mumbai
could witness the launch of a few new mid and high range
Significant softening of rental values were recorded for both
projects in second half of 2009. This could lead to softening of
high and mid range properties. With multinationals showing
capital values in these markets which have so far remained
increasing preference for north and far north Mumbai over
insulated from correction due to limited supply and still
1
buoyant demand.
Average Residential Rental Values - High End
1,200,000 0%
In 2009, as most developers are likely to focus on reducing
-2% existing inventory, capital values for both high and mid end are
1,000,000
likely to remain under pressure over the next 10 to 12
Rental Value (INR/month)
-4%
-6%
800,000 months across most micro markets.
-8%
600,000 -10%
-12%
400,000
-14%
-16%
200,000 Key to the Residential Locations:
-18%
South: Colaba, Cuffe Parade, Nariman Point, Churchgate
0 -20%
South Central: Altamount Rd., Carmichael Rd., Malabar Hill, Napeansea Rd., Breach
Central
South
South
Central
North
Far North
North East
Candy, Pedder Rd.

Central: Worli, Prabhadevi, Lower Parel / Parel
Low High Annual Growth Rate (%) North: Bandra (W), Khar (W), Santacruz (W), Juhu
Far North: Andheri (W), Malad, Goregaon
Source: Cushman & Wakefield Research North East: Powai
2 Average mid end values are for properties ranging from 1,400 to 2,200 sq.ft.
3 BHK - Bedroom, Hall & Kitchen
9
RETAIL Average Mall Rental Trend1
800
With several brands undergoing an expansion spree, Mumbai

700
retail market witnessed accelerated retail activity in the
600
beginning of 2008. However by end of the year, the slump in
500
consumer demand due to increasing inflation and slowdown
400
in economy resulted in many brands postponing or cutting 300
short their expansion plans. 200
With brands increasingly focusing on cost containment, 100
significant correction in rental values was witnessed across 0

1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
most micro markets. Additionally brands exhibited preference
Lower Parel Malad Link Road, Andheri (W)
to established markets over emerging peripheral locations in Mulund Goregaon Vashi
Ghatkopar
order to ensure business viability.
Mall Development
Realignment of expansion plans and wait and watch approach
In 2008, Mumbai witnessed development of seven malls with a from retailers has led to reduced leasing activity, thereby
total built up area of about 2.02 million sq.ft., taking the total postponing major upcoming supply in Lower Parel. As a result
mall stock in the city to about 7.66 million sq.ft.. However this in spite of marginal vacancy (3-5%), Lower Parel witnessed a
was well short of anticipated supply which was estimated at sharp year-on-year decline (-27%) in rental values. Rental
4.37 million sq.ft. in the beginning of 2008. About 2.17 million values at Vashi witnessed a correction of approximately 17% in
sq.ft. of mall space which was expected in 2008 has been 2008 due to addition of significant new supply and high
deferred to 2009 largely due to rescheduling of construction vacancy levels of approximately 10% in existing mall stock.
plans. Majority of deferred supply is expected to be available
Lal Bahadur Shastri Marg (LBS Marg) which runs through
in second half of 2009. Additionally, sizeable retail
central Mumbai (Ghatkopar-Vikhroli-Bhandup-Mulund-Thane)
development of 150,000 sq.ft. to 170,000 sq.ft. which was
is expected to witness large supply of approximately 2 million
planned in 2008 has now been converted into commercial
sq. ft, over the next 12-18 months. The upcoming supply is
office space.
likely to create additional retail hubs along the eastern suburbs
Mall Supply Trend which otherwise was polarized in Mulund. Anticipated drop in
5
footfalls and upcoming opportunities in adjoining areas has
4.5 affected market attractiveness of Mulund and has led to a drop
4 in demand for retail space in Mulund resulting in softening of
rental values by 14%.
3.5
2.5
Goregaon, which recorded accelerated growth in rental values
2
in the beginning of 2008 due to favorable demand supply
1.5 scenario, experienced a slowdown in demand due to concerns
1 about non-viability of business at such high rental values
0.5 resulting in a steep correction of about 17% in the second half
0 of 2008. However consistent business performance by most
2006 2007 2008 2009 (F) 2010 (F)
Year brands resulted in Malad witnessing a year-on-year
Source: Cushman & Wakefield Research appreciation of 17% in 2008. Vacancy levels in Malad and
Goregaon were recorded at 3-5% in 2008.
Accelerated residential developments in peripheral locations
resulted in increasing demand for retail space in certain Main Street Development
markets. As a result majority of mall supply in 2008 was
Main street rental values which had recorded a steep increase
concentrated in peripheral locations like Vashi (770,000 sq.ft.), in the beginning of 2008, witnessed a correction in second half
Kharghar (250,000 sq.ft.) and Kalyan (104,000 sq.ft.). While of 2008 as a direct result of reduced leasing activities and
suburban location of Goregaon witnessed opening of Oberoi cautious expansion plan by many retailers.
Mall (400,000 sq.ft.), Grand Galleria (150,000 sq.ft.) became
operational at Highstreet Phoenix in Lower Parel. Mall During 4Q 2007 to 1Q 2008, main streets of south Mumbai
developments were also recorded in suburban locations of (Colaba Causeway and Fort/ Fountain) witnessed significant
Andheri. appreciation in rental values as a result of accelerated
expansion plans by various brands. However most brands
Mall rental values which reached a record high in first half of curtailed their expansion plans in second half of 2008 in
2008 witnessed a decisive drop by the end of 2008 across response to the economic slowdown resulting in subdued
most micro markets, barring a few. leasing activity in these main streets. The restrained demand
has strengthened tenant's position and resulted in significant
1 Average rentals are for ground floor premises on carpet area. correction of rental values in these markets.
10
Linking Road witnessed more leasing transaction as compared Outlook
to other high streets. Retail chains like Croma, Manzoni,
Increasing residential development and availability of land
Woodland, etc opened their stores here. Rental values which
parcels to develop malls in the peripheral locations will create
reached record high in first half of 2008 plunged thereafter by
new shopping and entertainment centres in the city. In 2009,
approximately 40% due to overriding market sentiments
Mumbai is expected to witness a total mall supply of
resulting in realignment of rental expectations to market
approximately 5.44 million sq.ft. including 2.17 million sq.ft. of
sentiments and business viability.
deferred supply from 2008 and 3.27 million sq.ft. of fresh
Average Main Street Rental Trend supply for 2009. Significant part of the upcoming supply will be
1600 concentrated in peripheral locations. The upcoming supply
1400 will predominately comprise of mid and small formats malls;

1200 however, Mumbai is likely to witness few large format malls in
1000 peripheral locations in the next 2 years.
800
600
The current economic slump has adversely impacted
400
consumer demand forcing many retailers to re-evaluate their
200
expansion plans. As the slowdown in the economy in
0
expected to continue in near future, mall rental values could
1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08 witness a further correction in first half of 2009 on account of
Linking Road Kemps Corner/Breach Candy high vacancies, large upcoming supply and low demand.
Colaba Causeway Lokhandwala Andheri
Fort/Fountain Restrained leasing activities is likely to keep the main street
Source: Cushman & Wakefield Research rental values in 2009 under pressure.
Rental values at Lokhandwala-Andheri and Kemps
Note :
Corner/ Breach Candy largely remained stable on account
l The rental values indicated are base rents and do not include interest cost of
of low vacancy levels and buoyant demand in these security deposit, maintenance charges and other such outgoings.
markets. l Average rentals are for ground floor premises on carpet area
11
NCR MARKET OUTLOOK
Bhagat
Singh Park
Libaspur Roop Nagar
St. Nagar
Jahangirpuri Raj Nagar
Rohini
Shalimar Majlis Karawal
Inder Enclave Bagh Park Nagar Amar
Pitampura GHAZIABAD
Colony
Prem Nagar Mangolpuri
Shakurpur
Ashok Vihar
NH 10 Prem Nagar II Colony Dilshad Garden
Paschim Vihar
NH 10 Shahdara
Daya Basti
Rajouri Sahibabad
Garden Kirti Nagar Dharam Rajgarh Industrial Area
Pura Colony
Vishnu Garden
Vikaspuri Old Rajender Nagar Nirman
Mohan Vihar
Garden Hari Nagar Karol Bagh
Janak Puri NEW DELHI Yamuna
River Mayur Vihar
Najafgarh Connaught Place Mayur Vihar
Uttam Nagar Khan Golf
Sector - 16B Sagarpur Phase I
Market Link
NH 8
Shanti NOIDA
Dwarka NH 2
Niketan South Friends
R.K. Puram Lajpat
Sector 23 Palam Ext. Anand Colony
Nagar
Niti Lok Aghapur
Nangal Safdarganj Bagh Nehru Jasola Vihar
Dewat Development GK-1
Mahiapalpur Place
Area GK-11 Okhla Hazipur
Saket Village
Vasant Kunj
Rajokri Vishwakarma
Udyog Vihar Khanpur Colony
Sangam Vihar
Pulpehladpur
Sector 5
DLF Industrial
GURGAON Sushant Lok Area
Sector 9 DLF Green Fields
Phase 5 Colony
Sector 10B Sector 39
Sector 34 Dera Spring Field Colony
Sector 35 Sector 19
NH 8 Sector 16

COMMERCIAL Majority of the office development catered to the IT/ITeS

sector as 66% of the new stock added in the region during the
The commercial office supply in NCR was approximately 14.1
year was IT SEZ and other IT developments followed by
million sq.ft. during the year 2008 as compared to the planned
corporate office space.
supply of over 18 million sq.ft. in the beginning of the year.
Majority of the supply was concentrated in the suburban The global economic crisis leading to credit crunch affected
locations of Gurgaon (53%) and Noida (39%) due to the timeliness of several projects, also the delay in
availability of land parcels in the region. The uncertainty over construction schedule has caused deferment of certain
the extension of the STPI benefits was one of the factors developments. As a result few projects admeasuring 6.2 million
encouraging developers to undertake several SEZ projects sq.ft. stand deferred to 2009, majority of which caters to the
admeasuring 1.3 million sq.ft. in 2008. IT/ITeS sector.
3% 6% 11%
9% 3%
10%
34%
57%
67%
Other (construction, advertising, aviation etc.) IT & ITeS Automobile

IT Developments Non-IT IT SEZ Research & Consulting Telecom BFSI
12
NCR MARKET OUTLOOK
Supply, Absorption and Vacancy Trends price points achieved during previous years. Other locations
such as SCBD2, Gurgaon and Noida started to witness
16 25
correction since the third quarter of the year. These
14
20 locations recorded a correction of 11% in the last quarter
12
primarily due to economic conditions in addition to new
Vacancy Rate (%)

10 15
stock added which exerted downward pressure on the
8
rental values.
10
6
4 Average Rental Values Trend - Office Districts3

5
2 400
Rental Values (INR/Sq.ft./month)

0 350
0
2002 2003 2004 2005 2006 2007 2008 300
Supply Absorption Vacancy Rate (%) 250
200
150
The demand for commercial office space in NCR was 100
recorded at 14.4 million sq.ft. during 2008 which includes 5.8 50
0
million sq.ft of space pre-committed during the year on supply
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
likely to enter in 2009. The demand was primarily driven by
IT/ITeS sector which accounted for nearly 67% of the total CBD Off CBD SCBD
South Micro Gurgaon - Commercial Gurgaon (IT/SEZ)
absorption. In addition, IT/ITeS developments witnessed Noida - Commercial
1
Noida (IT/SEZ)
1
majority (97%) of the pre-commitments likely to be absorbed Source: Cushman & Wakefield Research
in 2009.
Outlook
The increase in supply and weakening business sentiment led
to increase in vacancy levels in the region, which is currently The demand is likely to decline in wake of slowdown in
in the range of 8-10%. The vacancy level in Gurgaon and economic growth and deferred expansion plans of the
Noida stood in the range of 7-9% and 16-17% respectively at corporate. Office supply anticipated in 2009 is approximately
the end of the year. However, vacancy rate in CBD and Off 18 million sq.ft. which is likely to further correct rentals. As
CBD locations remained stable in range of 3-4% due to quick majority (72%) of the upcoming supply caters to the IT/ITeS
take up of space. segment with SEZ development of approximately 7 million
sq.ft. in the suburban locations, this segment is likely to foresee
Average Rental Values - Office Districts3
further correction.
400 20
350 15 The pre-commitments are likely to reduce in the near future

300 10
as the corporate sector adopts cautious expansion
Growth Rate (%)
250 5
strategy leading to reduced demand. The corporate occupiers
200 0
will now look to re-negotiate leasing terms and
150 -5
rentals with the developers or consider re-location to
100 -10
50
more cost effective locations, now readily available due to
-15
-20
increase in availability in certain suburban micro markets.
0
1
1
CBD
Off CBD
SCBD
(Commercial)
(IT/ SEZ)
Micro Market
Gurgaon
(IT/SEZ)
(Commercial)
Noida
Gurgaon
South
Rental Cycle
Noida
Rental 4Q 2008
Peak
Source: Cushman & Wakefield Research 4Q 2009(F)
Market Market
The year witnessed the rental values (except IT/SEZ segment) Slowing Recession
exhibiting an upward trend in the first half of the year before Weakening
Strengthening
Market Market
declining in the last two quarters owing to the exogenous
factors adversely affecting the economy and trickling down to
Market Market
the real estate sector. The rental values of the IT/SEZ segment, Recovery Bottoming
on the other hand, depicted correction from the second

quarter due to weakening demand and fear of oversupply in Rental
Trough
some pockets. CBD and Off CBD locations despite being the
traditional office destination in NCR noted correction in the Source: Cushman & Wakefield Research
range of 14-16% in the last quarter of the year due to the
weakening business sentiment and non-sustainability of high 1 Warm shell rentals that include power back-up and high side air-conditioning
2 SCBD - Secondary Central Business District
13
NCR MARKET OUTLOOK
It is anticipated that the flexible leasing terms will continue in and under construction projects with the latter depicting
the long term highlighting the shift from the landlords market relatively higher correction.
to the tenants market with the bargaining strength with the
Average Residential Capital Values - Mid End2
latter.
25,000 15
RESIDENTIAL

20,000 10
The demand in residential segment in NCR witnessed a 15,000

5
gradual shift from investor driven market to that driven by 0

end users. However, high property prices inhibited certain 10,000
-5
individuals to make purchase decisions despite several interest 5,000
-10
rate cuts by the Central Bank in an attempt to revive demand.
Certain developers also made a conscious effort to renew 0 -15
South
Central
Gurgaon
Noida
South East
demand by offering incentives such as free parking, deferment
of payment of EMI till possession and customising payment
scheme for projects nearing completion.
The credit crisis made the developers conscious of the offer
The Delhi locations recorded a decline in values in the range
price/launch price of new project launches reflecting a
of 10-12% in the last quarter over the previous quarter.
relatively higher correction than in prices of ready to move in
However, the values in most of these locations increased in
properties. The residential development for the mid income
the range of 4-12% over the year. These micromarkets
group gained prominence as this segment was unaddressed
witnessed appreciation in values up till the first half of the year
and contained huge demand. A few projects such as Wish
as the demand was driven by consulates and high commissions.
Town Klassic, Park Serene and DLF Express Greens to name a
However, thereafter the decline in the last quarter was not
few catering to mid income group were launched in the
steep to pull values from the level prevailing in the beginning
suburban locations of Gurgaon and Noida, despite the
of the year, although the demand weakened. The high end
slowdown.
segment of Gurgaon noted highest appreciation of capital
Capital Values value over the year owing to demand from senior
management/top executives.
The capital values witnessed appreciation until the first half of
the year in both the high end and the mid end segment. Rental Values
However, correction was noted in the last quarter of the year Similar trend was noted with rental values appreciating in the
in the range of 7-18% over the previous quarter in all micro first half of the year and witnessing marginal correction in the
markets. This decline in values across majority of the micro
Average Residential Rental Values - High End1
markets was not steep and it still held up to the level
prevailing in the beginning of the year. However, values in high 400,000 20
350,000

1 15
Average Residential Capital Values - High End 300,000
10
250,000
60,000 10
200,000 5
8
50,000
150,000
6 0
40,000 100,000
4
-5
50,000
30,000 2
0 0 -10
Central
South
Central
Gurgaon
Noida
South West
South East
20,000
-2
10,000
-4
0 -6 Low High Annual Growth Rate (%)
Central
South
Central
Gurgaon
Noida
South West
South East
Key to the Residential Locations:

High End Segment
Source: Cushman & Wakefield Research South West: Shanti Niketan, Westend, Anand Niketan,Vasant Vihar
South East: Friends Colony, Maharani Bagh, Greater Kailash - I & II
end segment of Noida and the mid end segment of Gurgaon South Central: Defence Colony, Anand Lok, Niti Bagh, Gulmohar Park, Hauz Khas
Enclave, Panchsheel Park etc.
and Noida declined in the range of 1-10% over the year falling Central: Jorbagh, Golf Links, Amrita Shergil Marg, Aurangzeb Road, Prithviraj Road,
below the level prevailing in the beginning of the year. The Sikandara Road, Tilak Marg, Mann Singh Road, Tees January Marg, Chanakyapuri etc.
correction noted varied across ready to move in properties Mid End Segment
South East: New Friends Colony, Kalindi Colony, Ishwar Nagar, Sukhdev Vihar,
Kailash Colony, Pamposh Enclave
South Central: Green Park, Saket, Asiad Village, Geetanjali Enclave, Safdarjung
Enclave, Panchsheel Enclave etc.
14
NCR MARKET OUTLOOK
range of 2-9% in the last quarter vis-à-vis the previous Mall Supply Trend
quarter. This is owing to companies and individuals adopting a
7.00
cautious approach in leasing a property due to availability of
diverse options. The values across Delhi locations appreciated 6.00
in the range of 4-11% over the year except high end segment

5.00
of south east location which witnessed decline of 6% over the
4.00
year. This was due to reduced activity from boutique builders
to refurbish properties and limited demand from expatriates 3.00
in current economic scenario. 2.00
1
Average Residential Rental Values - Mid End 1.00
180,000 25 0.00
160,000 2006 2007 2008 2009 (F) 2010 (F)
Year
20

140,000
120,000 Source: Cushman & Wakefield Research
15
100,000
80,000
10
The mall rentals were stagnant for the first half of the year as
60,000 the supply that entered the market could not generate
40,000 5 demand inspite of being available for leasing much before it
20,000
0 0
became operational. However, the rental values started to
South
Central
Gurgaon
Noida
South East
correct in the third quarter due to cautious expansion plans

of retailers under prevailing economic conditions and
Low High Annual Growth Rage (%)
substantial mall space (2.0 million sq.ft) getting operational.
Average Mall Rental Trend
Despite correction in values, the mid-end segment in the 700
Rental Values (INR/Sq.ft./month)
suburban locations of Gurgaon and Noida witnessed highest 600
appreciation in the range of 21-24% over the year. 500
400
Outlook
300
The capital values are likely to continue to decline in the 200
medium term due to subdued demand from the end users. 100
The launch of new projects and slowdown in demand is likely 0
to compel the developer to soften prices in the suburban Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
locations and increase marketing efforts. NOIDA South Delhi

West Delhi Gurgaon
Rental values are expected to decline owing to the weakening
economic sentiment. Certain companies and individuals have
started to prefer suburban locations over Delhi locations as it The weak economic conditions led to low or negative revenue
provides better quality of living at relatively lower price/value growth of the retailers. This made it difficult for the retailers
which may lead to correction in values in Delhi in the medium to hold onto the current rental payout forcing them to re-
term. evaluate their expansion plans by either resizing or opting out.
Certain retailers and developers are also considering revenue
RETAIL
sharing with minimum guarantee to moderate the effect of the
Mall Development
Average Main Street Rental Trend
NCR witnessed mall supply of approximately 4.6 million sq.ft
1600
during 2008, depicting an increase of 21% over the last year.
1400
The supply was evenly spread across locations of South Delhi, 1200
Greater Noida and Faridabad, each of which witnessed new 1000
mall development of approximately 1.0 million sq.ft. 800
representing 64% of the total mall supply. Locations of West 600
Delhi, Gurgaon and Ghaziabad accounted for the remaining 400
supply of 1.6 million sq.ft. during the year. 200
0
Additionally, malls comprising 1.4 million sq.ft. completed 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
construction but have not commenced operations either due

Khan Market Connaught Place (Inner Circle) South Extension I & II
to pending approvals or lack of tenants. Karol Bagh Basant Lok Greater Kailash I, M Block
1 Average mid end values are for properties ranging from 1,600 to 2,000 sq.ft. Source: Cushman & Wakefield Research
15
NCR MARKET OUTLOOK
slowdown. Several developers are also contemplating to lifestyle retailers who were keen to establish their presence.
convert existing or planned retail developments to However, leasing activity remained subdued in the second half
commercial office space in order to cope up with the tough due to worsening economic conditions and cautious
economic conditions. expansion strategy of followed by various brands.
The last quarter of the year noted dip in rental values in the The rental values were holding up to previous years level up
range of 12-27% over the previous year. West Delhi locations till the third quarter, thereafter the values began witnessing
saw maximum correction of 27% over the last year due to correction across all micromarkets in NCR, with maximum
high vacancy in the existing development of north-west Delhi decline of 16% noted in prominent main streets of Connaught
in addition to the anticipated supply in 2009. Whereas, rental Place (Inner Circle), Karol Bagh and Basant Lok compared to
values in South Delhi micromarket witnessed relatively lower the previous year. These retail markets had achieved high price
correction of 12% over the year due the nature of points during last couple of years which seemed unsustainable
developments and lower vacancy levels. in prevailing economic scenario forcing a correction.
Mall vacancy levels across NCR increased marginally (1%) in Outlook
the last quarter of the year vis-à-vis the previous quarter. At
Low conversions and reduced demand is likely to put pressure
the end of the year, vacancy level stood at 24% owing to
on the rental values across both malls and main street
increase in available space in Delhi and Gurgaon. This has
locations in the medium term. The anticipated mall supply of
resulted in the deferment of several mall developments
6.3 million sq.ft. in 2009, with majority of it in South Delhi and
amounting to 2.4 million sq.ft. to 2009.
Gurgaon will further lead to correction in these
Main Street Development micromarkets. In the immediate future, the retailers are
expected to consolidate their operations focussing mainly on
The leasing activity across various Main Streets was active up
more viable outlets. Certain landlords/developers have
till the second quarter of the year and increase in rental
depicted flexible approach to lease agreement in order to hold
values was recorded. Many existing shopkeepers capitalised
on the demand. This is likely to continue in the long run amidst
on the upturn of the sector and provided opportunity to the
weakening business sentiment.
Note :
l The rental values indicated are base rents and do not include interest cost of security deposit, maintenance charges and other such outgoings.
l Average rentals are for ground floor premises on carpet area
16
BANGALORE MARKET OUTLOOK

COMMERCIAL Electronics City. A significant supply of nearly 5.28 million

sq.ft. was witnessed on the ORR stretch from Hebbal to
Bangalore's commercial market witnessed a fair quantum of
Sarjapur.
supply in 2008 totalling 11.18 million sq.ft., with an annual
growth rate of nearly 16%. There was an even distribution of Given the liquidity crunch in the markets and the reduced
SEZ and non-SEZ space, with the former accounting for 51% demand for office space following the global economic
of the total supply in 2008. Peripheral locations were the slowdown, 2H 2008 witnessed the postponement of a lot of
highest contributors to commercial office space supply with projects to 1H 2009. Nearly 20% of the total supply projected
approximately 10 million sq.ft. (89%) of the total annual supply. for 2008 in the beginning of the year is expected to get
Whitefield and Outer Ring Road (ORR) were the primary delivered in 2009. IT/ ITeS accounts for nearly 90% of
contributors with minimal contribution from Hosur Road and commercial office space in Bangalore and currently many IT
1%1%
49% 5%
51%
88%
Others IT & ITeS Automotive

IT SEZ Non SEZ
Telecommunications BFSI
17
firms have started to base their leasing activities on short- With total office space absorption of nearly 10.36 million sq.ft.
term outlook rather than on long term expansion plans. in 2008, Bangalore witnessed the highest space take up in the
While demand for soft options is disappearing, need-based country. This can largely be attributed to the pre-
leasing of IT space is gradually gaining ground. In this climate commitments of previous years that were delivered in 2008,
of reduced visibility in space demand, SEZs in the city have accounting for nearly 62% of the total absorption for the year.
also been affected. Similar to the supply trend for the year, ORR, a key peripheral
micro-market, witnessed about 5 million sq.ft. of absorption,
Massive multi-product SEZs requiring huge investments have
followed by Whitefield (2.65 million sq.ft.). Despite the IT
been the worst affected in this economic meltdown; but even
slowdown, major office space demand drivers for the city
Bangalore, which mostly accounts for small sector-specific
continued to be the IT/ ITeS sector, followed distantly by other
(notified) SEZs, have been affected to some extent. Some IT
sectors like Telecom, Automotive and Biotech etc.
SEZs planned along the ORR and Whitefield micro-markets
have already seen slowdown in their phased developments, Average Rental Values Trend - Office Districts1
with much of the project construction having been deferred 90

to 2009-10. The city's real estate sector in 2H 2008 mirrored 80
global economic conditions and unlike trends noticed over 70
the past few years, fresh pre-commitments saw a drop. 60
50
The demand for commercial office space in Bangalore stood 40
at 6.36 million sq.ft. in 2008, which is a substantial decrease 30
from last year. Principal reason for this downturn is a 20
significant reduction in the total amount of pre-commitments 10
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
registered this year in comparison to 2007 and 2006. Nearly
CBD
1.62 million sq.ft. of space pre-committed to in 2008 is set to Off CBD
Suburban - Koramangala / Indiranagar Peripheral - ITPL
get delivered in 2009, while another 845,750 sq.ft. will reach Peripheral - Whitefield, Electronic City, Hebbal Peripheral - ORR (Sarjapur - Hebbal)
completion by 2010. Another demand trend saw some firms Source: Cushman & Wakefield Research
backing out of initial commitments, while others reduced the
The vacancy rate in Bangalore increased significantly in the
built-up-area committed to in earlier quarters/ years.
fourth quarter, reaching 16% as against a range of 7-10% in
Supply, Absorption and Vacancy Trends earlier quarters. This was mainly because of the high vacant
18 18
stock in the Whitefield and ORR micro-markets. Peripheral
16 16 micro-markets (especially Whitefield) witnessed vacancy rates
14 14 in excess of 30% largely because of a continuing over-supply
Vacancy Rate (%)
12 12 situation (predominantly the first time developers) which got

10 10 aggravated due to the addition of fresh supply. CBD/ Off CBD
8 8 locations saw an increase of 8% (mainly due to many second
6 6 generation buildings coming into stock).
4 4
1 2 On the rental front CBD/off CBD and suburban areas saw a

0 0 significant increase by approximately 18% and 14%,
2001 2002 2003 2004 2005 2006 2007 2008
respectively, over last year because of limited Grade A supply
Supply Absorption VacancyRate (%) in these micro-markets. Peripheral micro-markets of ORR and
Source: Cushman & Wakefield Research Electronics City however, hardly witnessed any significant
increase because of fresh supply, and second generation
Average Rental Values - Office Districts
building becoming available for leasing.
90 30
80
25
70 Outlook
Growth Rate (%)
60
20
50 There is approximately 14 million sq.ft. of commercial office
50 15
supply expected in 2009 with a likelihood of 6 million sq.ft.
40
30
10 that is currently expected by 4Q 2009 to spill over to 2010.
20
5 The wait-and-watch approach adopted by corporates is
10
expected to result in a further decrease in office space
0 0
Suburban
Peripheral
Peripheral
demand and is likely to impact the project delivery schedule of

Peripheral /
CBD / Off
Whitefield /
Electronics
ORR
CBD
ITPL
City
various developers. Peripheral locations will continue to be

the highest space contributor to the city's total supply while
SEZs are likely account for the majority of supply.
Rentals are likely to weaken across the CBD/ Off CBD micro
1 Above rentals are for warm shell facilities (shell and core facility, power, high side markets and are expected to stay stable in the peripheral
air conditioning and 100% power backup
18
micro markets. However, developers active in peripheral of 2008. The only exception to this case was the mid-range
locations are expected to be more flexible towards other micro-market of Whitefield and Marathahalli, which continued
lease terms such as rent free periods, escalation rates etc. to witness minor rental corrections since the beginning of the
Bangalore's office market has been predominantly driven by year. This was essentially due to the oversupply of large
IT/ ITeS with the sector being the major office space occupier residential developments from prominent as well as lesser-
over the past 4-5 years. However, following the trends of 2008 know developers in these areas.
as mentioned above, the Telecom, Automotive and Biotech 1
Average Residential Rental Values - High End
sectors are likely to be more active in office space leasing in
600,000 1
2009.

0
Rental Cycle
400,000 -1
Rental 4Q 2008
-2
Peak
200,000 -3
4Q 2009 (F)
-4
Market Market
Slowing Recession
0 -5
Koramangala,
Outer Ring Rd
Whitefield
(Villas)
Frazer Town
Benson Town
Richards Town
Dollars Colony
Lavelle Rd
Off Palace Rd
Off Cunnigham Rd
Ulsoor Rd
Richmond Rd
Sadhashivnagar
Hebbal
Yelahanka
Jakkur
Strengthening Weakening
Market Market
Market Market
Recovery Bottoming Low High Annual Growth Rate (%)

Rental
Trough Average Residential Rental Values - Mid End2
140,000 5
120,000 0

100,000 -5
RESIDENTIAL 80,000 -10
60,000
There has been a progressive demand slowdown in -15
40,000 -20
Bangalore's residential market over the last year with
20,000 -25
successive rises in interest rates since end-2007, that led to
0 -30
home loans becoming increasingly unaffordable for the
Brunton Rd
Artillery Rd
Ali Askar Rd
Marathalli
Whitefield
Airport Rd
Koramangala
Jakasandra
Cox Town
Frazer Town
Banaswadi
HRBR
Sarjapur Rd
Outer Ring Rd
HSR Layout
Jayanagar, JP
Hebbal
Bellary Rd
Yelahanka
Dodballapur
Nagar, Kanakpura
Rd, Kanakpura Rd
Vasanth Nagar
Richmond Town
Indiranagar
Malleshwaram
Rajajinagar
common man. In a bid to encourage sagging consumer
confidence, private and nationalised banks lowered home loan
rates during the last few months of 2008, although the decline
was marginal and the impact limited.
This slump led to an alternative option for end-users to
purchase property from the secondary market, where By 4Q 2008, the mid-range segment finally witnessed an
investors had begun to increasingly take the distress sale average drop by 10% across all micro-markets, except off
route by mid-2008. A few of the city's quality projects from central locations which remained stable. The maximum rental
reputed developers also saw distress sales in the range of 10- depreciation took place in the micro-markets of Whitefield
15% discounted rates in the secondary market.This primary and Marathalli (east), which saw a continuation of their earlier
market fall in sales led a few developers to even resort to correctional trend. These particular micro-markets were
freebies and early bird discounts, offering anything from free understandably hit the hardest at a time when the market in
cars and free fit-outs to parking space discounts and pre-EMI general began to bottom out.
cost-bearing facilities in a bid to push sales.
With sufficient choice available to end users coupled with
While the demand slowdown from end-users and investors subdued demand, tenants in the city seem to have gained an
continued, especially in the sale/ purchase of residential units, edge over landlords with regard to negotiations.
the added pressure from the secondary market finally forced
Capital Values
primary market values to start declining in the fourth quarter
of 2008. By end-2008 even the secondary market sale Capital values for both high-end and mid-range properties
volumes became limited, greatly impacting the city's residential across the city remained stable on an average till 3Q 2008. It
market. was not till 4Q 2008 that a select few developers in the city
began to announce price cuts ranging from a 10% cut across
Rental Values
all properties to an average 30% dip for premium projects
Rental values for both high-end and mid-range properties alone.
across most micro-markets in the city remained stable till 3Q
1 Average high end values are for properties in the range of 3,000 - 5,000 sq.ft.
2008, before the correctional trend began in the last quarter 2 Average mid end values are for properties in the range of 1,700 - 2,500 sq.ft.
19
Towards the last quarter of 2008, residential capital values to be ready by 2010-11. The Kanakpura Road stretch is also
saw an average drop of 10% across both high-end and likely to see approximately 7,000-8,000 residential units by the
mid-range properties in most micro-markets. As discussed same time period. Hosur Road and Electronics City are other
earlier, the only micro-market to witness corrections areas that are also likely to see some fresh residential supply
throughout the year was Whitefield and Marathahalli. The mid- in the next couple of years.
range south east micro-market of Sarjapur Road, Outer Ring
The current economic scenario has changed the outlook for
Road and HSR Layout also saw significant depreciation in
investment options in this sector in Bangalore. The market is
capital values over last year. This was primarily because quite a
expected to witness further price weakening in the mid-term,
few projects on Sarjapur Road witnessed a 19-20% dip in the
till market conditions and consumer confidence improve. At
secondary market over end-2007, forcing primary values to
present the market is suited for long-term investors; more so
come down too.
for end-users rather than for investors looking at short-term
Average Residential Capital Values - Mid End2 capital gains.
8,000 5
7,000
Affordable housing projects in the city are likely to gain

0
6,000
importance in the coming years (2009-2010). A growing trend
5,000 -5
4,000
has already seen budget, 2 BHK properties (800-1,000 sq.ft.)
3,000 -10 from prominent developers priced in the INR 2-3 million
2,000
-15
bracket.
1,000
0 -20
RETAIL
Brunton Rd
Artillery Rd
Ali Askar Rd
Marathalli
Whitefield
Airport Rd
Koramangala
Jakasandra
Cox Town, Frazer

Town, Banaswadi
HRBR
Sarjapur Rd
Outer Ring Rd
HSR Layout
Hebbal
Bellary Rd
Yelahanka
Dodballapur
Jayanagar, JP
Nagar, Kanakpura,
Rd, Kanakpura Rd
Vasanth Nagar
Richmond Town
Indiranagar
Malleshwaram
Rajajinagar
By 2H 2008 Bangalore's retail real estate sector began feeling

the heat of the current economic slowdown. The general drop
in consumer spending together with unviable retail rentals
Low High Annual Growth Rage (%) translated into dipping rental rates, especially across the city's
Source: Cushman & Wakefield Research prime high streets. Mall rentals, however, continued to remain
Average Residential Capital Values - High End1 stable over the year, basically because of the lack of any
20,000 4 significant mall supply and a very low churn-out rate in
2 operational malls. The overall environment of cautious
15,000 0 commitment to fresh space uptake from retailers and mall

-2
developers alike will most likely continue in the mid-term, till
1,0000 -4
-6
the market begins to recover and consumers return to
5,000 -8
stronger consumption patterns.
-10
0 -12
Mall Development
Lavelle Rd
Off Palace Rd
Off Cunnigham Rd
Ulsoor Rd
Richmond Rd
Sadhashivnagar
Whitefield
(Villas)
Frazer Town
Benson Town
Richards Town
Dollars Colony
Koramangala,
Outer Ring Rd
Hebbal
Yelahanka
Jakkur
Bangalore witnessed about 0.34 million sq.ft. of mall

development in 2008, which is about half the supply (55%) as
compared to last year. The new malls become operational in
Low High Annual Growth Rage (%) the second and the fourth quarters of the year. The country's
first luxury mall, The Collection, became operational in 2Q
Outlook 2008 with luxury retail giant, Louis Vuitton, as one of its
anchors. The mall today houses luxury fashion and lifestyle
North Bangalore gained special significance for city
developers ever since plans for the Bangalore International Mall Supply Trend
Airport (BIA) at Devanahalli were finalised. The state 10.00
government was also proactive towards this end by providing
the necessary support infrastructure and by improving 8.00
connectivity with the CBD. Quite a number of projects were

launched in this micro-market over the last couple of years 6.00
from reputed developers. While a few of these projects are

4.00
already operational in Hebbal, Sahakar Nagar, Jakkur, etc.,
others are expected to come into the market by 2009-10 in
2.00
and around Yelahanka, Coffee Board Layout, Thanisandra, etc.
Another micro-market to see a significant amount of future 0.00
2006 2007 2008 2009 (F) 2010 (F)
residential supply is Bannerghatta Road and Kanakpura Road Year
in south Bangalore. There are quite a few residential Source: Cushman & Wakefield Research
developments planned along Bannerghatta Road and its 1 Average high end values are for properties ranging from 3,000 to 5,000 sq.ft.
surrounding areas, with approximately 4,000 units proposed 2 Average mid end values are for properties ranging from 1,700 to 2,500 sq.ft.
20
Average Mall Rental Trend 2008 were Reliance Mart, Spencer's Hyper and Croma.
600
Indiranagar 100 Feet Road, followed by Koramangala 80 Feet
500
Road, saw the maximum store launches in 4Q 2008. The last
400 quarter also saw the launch of Prestige Emporium (60,000
300
sq.ft) on MG Road, with fashion outlets of Stanza, Indigo
Nation, Provogue, Urbana, etc. More fashion and lifestyle
200
stores are expected to start operations here in 1Q 2009.
100
0
400
1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08

Koramangala Magrath Road Cunningham Road
Mysore Road Vittal Mallya Road 300

200
outlets of Canali, Dunhill, Tod's, Salvatore Ferragamo, Tag
Heuer, Mont Blanc and Ermenegildo Zegna among others. 100
On the other end of the retail spectrum, Total Hypermarket

began operations at the Total Mall on old Airport Road in 4Q 0
1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
2008. Upcoming stores at this partially operational mall MG Road Brigade Road Commercial Street
include Benetton, McDonald's, Adidas, etc. With the Bengaluru Indiranagar - 100 Feet Rd Jayanagar - 4th Block, 11th Main Malleswaram - Sampige Rd
International Airport (BIA) becoming operational in 2Q 2008, Koramangala - 80 Feet Rd Vittal Mallya Road New BEL Road
modern airport retailing also made an entry into the city this Source: Cushman & Wakefield Research
year.
While ground floor rentals of a few established main streets
But what needs to be noted is that nearly 1.5 million sq.ft. of experienced a marginal upswing in 1Q 2008, by 2Q 2008
supply was expected for the city in the beginning of the year rental values peaked, and the market witnessed resistance to
and only 23% was delivered. Limited supply addition helped to the lease of retail spaces at those values. By 2H 2008 another
keep the city's vacancy level to a low of about 3%. Of the trend saw a few retailers, who had already committed to space
proposed 2008 supply, about 1.14 million sq.ft. has been earlier in the year, beginning to re-negotiate on lease terms in
deferred, with nearly 82% of this staggered supply expected the light of the economic downturn.
to come up by the second half of 2009. The remaining has so
far been scheduled for completion by 2011. At present the In 4Q 2008 main street rentals saw an average rental
expected mall supply for 2009 is about 2.52 million sq.ft. over depreciation of approximately 15% across all micro-markets
approximately eight malls. over 4Q 2007, with Sampige Road, Malleshwarm (-28%), and
MG Road (-25%) witnessing the maximum fall in rentals. Main
The vacancy rate for the city's malls stood at about 3.12% by street rentals in the city are likely to continue dipping in the
year end, which marginally increased from 2.20% in 3Q 2008. mid-term.
This was largely because of the partially operational Total Mall
(Old Airport Road) coming up in 4Q 2008.Vacancy rates Outlook
were lowest in the CBD/off CBD, while the suburban area Since 2H 2008 most branded retail players in the city held
had the highest vacant stock by end-2008. The net retail new property deals at bay, because of the current economic
absorption for the last quarter of 2008 stood at 154,282 sq.ft. slowdown. As a fall-out rental corrections set in by end-2008.
In the absence of leasing volumes in existing and upcoming With bottom lines of retail businesses getting affected because
properties (together with the low turnover in existing malls of the comparatively conservative buying behaviour among the
since 2007), it has been difficult to establish a rental trend for city's shoppers over the previous year, in addition to peak
the year which appears to be stagnant. However it is rentals earlier in the year, retailers have understandably kept
anticipated that new transactions in the current retail market off fresh occupancy offers. This overall hesitant attitude is
scenario will more likely be at corrected rates. likely to continue into 2009, till the retail market recovers.
Main Street Development At present both mall and high street rentals in the city are
expected to continue depreciating in the mid-term. Such a
In line with last year's trend, the city's main streets remained correction might translate to a healthy sectoral growth in the
more active than its malls in 2008, albeit at a much slower long term as realty prices make more business sense for
pace during 2H 2008 in comparison to retail activities during retailers. Considering the unavailability of large spaces at
the same period in 2007. In the first quarter, Koramangala operational malls and the limited supply set to come in by
especially saw the launch of quite a few standalone large end-2009, high streets are likely to remain active in Bangalore.
format outlets, such as, Star Bazaar from Trent Ltd and the
Note :
Landmark Group's Oasis Centre, which houses SPAR
Hypermarket, Lifestyle, Home Centre and Max Retail among security deposit, maintenance charges and other such outgoings.
others. Other large format outlets to start operations in 1H l Average rentals are for ground floor premises on carpet area
21
PUNE MARKET OUTLOOK
Kasarwadi
Lohegaon
St Nagar
Wakad
Hinjewadi
Army Area
Sanghvi Adarsh
Rakshak
Society Dapodi Nagar
Tingre
Mula River
Rd
Khadki Nagar
t
or
Viman
rp
Khadki Phulenagar Nagar
Ai
Aundh Bazaar
Parvati r Rd
Baner Naga
Sindhi Kharadi
Range Hills
Colony Bombay Wadgaon
Kalyani
Ganesh Khind Rd Sappers Sheri
Nagar
Regiment
NCL
Ashok
Sus Gaun Colony
Nagar
SB Road Sangamvadi Cavalry
Bund Kavadewadi Line Sho
lapu
rR
d
Garden d
FC R
d
Koregaon
JM R
Ghorpuri
Park
Wadervadi PUNE
MG Rd
Bavdhan Magarpatta
Goklalenagar
City
Kothrud Navi Peth
Pune
Dattavadi Cantonment Wanowri
Parvati Hills Sasane Hadapsar
Hingne Nagar
Budrukh
Parvati Maharshi Wanwadi
Darshan Nagar
Vittalvadi
Warje
Malvadi
Balaji
Wadgaon Kondhwa
Nagar
Khadakwasla Budruk Khurd

COMMERCIAL sq.ft. respectively. Total supply of approximately 804,000 sq.ft,

has been deferred to 1Q 2009 owing to delays in construction
The total supply of commercial office space across Pune was
schedule of various projects. Majority of this supply was
9.41 million sq.ft. in 2008, recording an increase of
concentrated in suburban micro market and catered to the IT/
approximately 20% over the last year. Approximately 4.1
ITeS sector.
million sq.ft. of this supply was in SEZs. Peripheral locations
were the major contributors adding approximately 62% Pune witnessed a total demand of approximately 3.65 million
towards supply, primarily catering to IT/ITeS sector. Kharadi sq.ft. in 2008 of which 1.73 million sq.ft. was absorbed during
witnessed the maximum supply in 2008 totalling the year and an additional 1.92 million sq.ft. was pre
approximately 2.3 million sq.ft. followed by Hadapsar and committed for the supply expected to enter the market in
Hinjewadi which witnessed 1.5 million sq.ft. and 1.1 million 2009. The total absorption in 2008, including 1.29 million sq.ft.
1% 6%
1% 3%
48%
44%
89%
8%
Other IT & ITeS BFSI
Non IT IT SEZ IT Park Shipping Telecommunication
22
PUNE MARKET OUTLOOK
absorbed from pre-commitments from before 2008, serviced office spaces, Regus expanded its operations in
accounted for 3.02 million sq.ft. 1Q 2008 witnessed the Hadapsar in 3Q 2008.
highest absorption of 1.68 million sq.ft. mostly consisting of
1
pre-commitments from the previous years. 2Q 2008 Average Rental Values Trend - Office Districts
90
recorded absorption of 570,000 sq.ft. where as the absorption
80
Rental Values (inr/sq.ft./month)

in the third and fourth quarter was 390,000 sq.ft. and 380,000
70
sq.ft. respectively. 60
50
The highest demand of 1.91 million sq.ft. was witnessed in 1Q 40
2008 led largely by pre-commitments of 1.42 million sq.ft. The 30
global market slowdown led to reduced demand in the 20
second half of 2008 which was entirely driven by absorption 10

0
with no pre commitments.
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
Supply, Absorption and Vacancy Trends Camp/ Bund Garden Rd SB Road Airport Road
Aundh / Baner Kalyani Nagar and Nagar Rd Viman Nagar
10 18 Hadapsar / Kharadi Sholapur Rd Hinjewadi
9 16 Source: Cushman & Wakefield Research
8 14
Vacancy Rate (%)
Pune recorded an overall vacancy in the range of 16-20% in

7
12
6
10
2008 as compared to 8% the year before due to a
5
8
combination factors like excess supply and lower demand in a
4
6
slowing market. The peripheral micro markets witnessed
3
2
4 approximately 62% of the total supply during the year causing
1 2 it to also witness the highest vacancy of approximately 18-
0 0 20%. CBD and Off CBD locations witnessed vacancy in the
2001 2002 2003 2004 2005 2006 2007 2008
range of 10-15%, largely due to companies showing a
Supply Absorption Vacancy Rate (%) preference towards peripheral locations as they have lower
Source: Cushman & Wakefield Research rental values. The first three quarters witnessed constrained
vacancy rates ranging from 4-7% which significantly increased
to approximately 16-20% in 4Q 2008.
80 20
70 The quarter – on – quarter growth in rentals was high in the

16
60 first two quarters due to buoyant demand witnessed in the
Growth Rate (%)
50 12 first half of 2008. With a large amount of supply entering the

40 Pune market in the third quarter, the rental values stabilized
8
30
across all micro markets in that period and showed clear signs
20
4 of softening thereafter in all micro markets in the fourth
10
quarter largely due to a slowdown in activities from the key
0 0
Camp/ Bund
SB Road
Airport Rd
Hinjewadi
Aundh/
Hadapsar /
Kalyani Nagar
Viman Nagar
Sholapur
demand drivers like IT/ITeS and BFSI sectors. The steepest

Garden Rd.
Baner
Kharadi
Road
Nagar Rd
and
decline of 17% was recorded in the peripheral locations such

as Hadapsar and Kharadi in 4Q 2008, as these markets had
attained unrealistic price points forcing them to undergo a
correction. Owing to general downturn in leasing activities
The primary demand driver was IT/ITeS sector followed by due to limited expansion plans by companies, coupled with
other sectors such as BFSI, Shipping, Telecommunication, etc. large vacant stock, the rental values in Kalyani Nagar and
Hinjewadi witnessed the highest demand of commercial office Nagar Road witnessed a quarterly drop of 10% in 4Q 2008
space in 2008 driven primarily by IT/ITeS sector companies followed by Aundh and Baner at 9%.
accounting for approximately 49% of the total demand. Out of
Outlook
the total pre commitments of 1.92 million sq.ft. made during
the year, approximately 1.25 million sq.ft was witnessed in Pune is expected to witness fresh supply of approximately
Hinjewadi by the IT/ITeS sector, majority of which were seen 9.78 million sq.ft. in 2009 of which approximately 2.98 million
in the SEZs. will be dedicated to SEZs and concentrated in the peripheral
micro markets. This large upcoming supply coupled with
Pune has been witnessing an upward trend in the demand for
subdued demand is likely to bring further correction in rental
premium and internationally accredited Business Centres.
values. The demand will continue to be driven primarily by the
Vatika Business Center, Regus Business Center and MLS are
ITeS and BFSI (Banking, Financial Services and Insurance)
the premium business centres currently operating from the
micro markets of CBD, Off CBD and peripheral aresa of the 1 Above rentals are for warm shell facilities (shell and core facility, power, high side
city respectively. Owing to the increasing demand of such air conditioning and 100% power backup)
23
PUNE MARKET OUTLOOK
sector companies but is expected to remain subdued due to Average Residential Rental Values - Mid End
2
large supply which is expected to enter the market in 2009.

45000 15
40000 10
Rental Cycle

35000 5
Rental 30000
Peak 0
4Q 2008 25000
-5
20000
4Q 2009 (F) -10
Market Market 15000
Slowing Recession 10000 -15
5000 -20
Market Market 0 -25
Aundh
Baner
Wanowri
Koregaon
Park
Bund
Garden
Kharadi
Wakad
Kalyani
Nagar
Market Market
Recovery Bottoming

Rental
Trough
been deferred by six to eight months and projects in planning/
Source: Cushman & Wakefield Research initial construction stages are expected to be delayed further.
RESIDENTIAL Rental Values
Pune witnessed a mix of township developments as well as Rental values across both mid end and high end segment
standalone apartment projects during 2008. Due to limited remained stable till 3Q 2008 with an exception of micro
availability of land in the central locations, large scale supply markets such as Koregaon Park, Bund Garden Road, Kharadi
was primarily concentrated in the peripheral and suburban and Kalyani Nagar, which observed appreciation in both high
locations such as Hinjewadi, Hadapsar, Kharadi and Wakad. end and mid end rental values in the 3Q 2008 mainly due to
increased demand from multinational clients. However, in 4Q
With investors abstaining from the market it was essentially
2008 the rental values across most micro markets witnessed
an end users driven demand due to which Pune witnessed a
correction in both high and mid range properties. The global
slowdown in demand in 3Q 2008. Conservative approach
economic slowdown affecting the hiring decisions of IT/ITeS,
from end users and successive increase in interest rates as
BFSI and other sector companies led to slowdown in fresh
compared to 2007 led to slowdown in demand. However
uptake of mid end residential apartments. This, along with
during 4Q 2008, the city witnessed a drop in rental and
excess supply caused the mid end rental values to decline
capital values in response to slow demand. Owing to
across all micro markets in 4Q 2008. However limited
economic downturn and slowdown in IT/ITeS and other
availability of high end lease-able units in the central locations
service sectors, there was a definite erosion of job confidence
like Koregaon Park, Bund Garden Road, Kharadi and Kalyani
which directly impacted the end users who deferred their
Nagar led to stabilization of rental values in 4Q 2008.
purchase decisions. This also led to a negative demand supply
ratio with supply superseding demand. Various developers, in Capital Values
order to boost their sales, were compelled to revise pricing
Capital values for both high end and mid end segment
of their residential properties and promotional methods such
remained stable across majority of the micro markets till 3Q
as discounts and incentives. Credit crunch to developers and
2008. It was only in 4Q 2008 that the capital values began to
subdued end-user demand have resulted in delays in
construction of certain on going projects and postponement Average Residential Capital Values - High End1
of a few upcoming projects. Several on going projects have 12000 0

10000 -5
8000
300000 20
-10
6000
250000
10
-15
4000
200000
0
2000 -20
150000
-10
100000 0 -25
Aundh
Wanowri
Koregaon
Park
Bund
Garden
Kharadi
Kalyani
Nagar
-20
50000
0 -30
Aundh
Wanowri
Koregaon
Park
Bund
Garden
Kharadi
Kalyani
Nagar
Low High Annual Growth Rate (%) 1 Average high end values are for properties ranging from 1,650 to 3,000 sq.ft.
Source: Cushman & Wakefield Research 2 Average mid end values are for properties ranging from 1,200 to 1,400 sq.ft.
24
PUNE MARKET OUTLOOK

expressway and old Mumbai-Pune highway. The micro market
is expected to witness a few large township developments
6000 5
with state of the art amenities and facilities. The demand for
5000 such developments is expected to be driven by employees

4000 from the manufacturing sector, along with investors from Pune
-5
3000
as well as Mumbai. With the proximity to the new
-10 international airport coming up in Chakan, this micro market
2000
is likely to witness appreciation in capital values in long term.
-15
1000
0 -20 RETAIL
Aundh
Baner
Wanowri
Koregaon
Park
Bund
Garden
Kharadi
Wakad
Kalyani
Nagar
Leasing activity was concentrated more on the main streets
as compared to malls in 2008, with JM Road being the most
active of all main streets. Both malls and main streets rentals
witnessed correction during the second half of 2008 due to
decline. Due to excess supply entering the market, Wanowrie slowdown in demand resulting from cautious expansion plans
witnessed the highest year on year decline of 20% across high by retailers.
end residential segment followed by Kalyani Nagar (13%)
which attained high price points forcing it to undergo Mall Development
correction in the last quarter.
Pune witnessed fresh mall supply of 218,000 sq.ft. in 2008 as
In the mid end segment, Wakad recorded the highest decline against 850,000 sq.ft. last year with only one mall namely
of 15% over the year due to excess supply of projects under Kakade Centerport, commencing operations in 3Q 2008. The
construction. With no new mid end supply Kalyani Nagar mall has Westside and Odyssey as its anchor tenants and
witnessed stable rentals throughout the year. The only micro houses several brands such as Next, The Body Shop, Louis
market that witnessed a minor appreciation in mid end capital Philippe, Adidas, Reebok, Levi's and Giordano, among others.
values was Aundh which recorded a marginal increase of About 100,000 sq.ft. of anticipated supply for 2008 has been
about 3% in mid end capital values over the year. The boost to deferred and is likely to enter the market in 2Q 2009. The
this micro market was provided by the corresponding growth expected supply in 2009 therefore stands at approximately
of retail and commercial activities and improved connectivity 995,000 sq.ft. spread across 4 malls.
from various parts of the city that impacted the demand in
Mall Supply Trend
this location positively.
5
Outlook
4
The current economic condition will further lead to reduced
demand affecting the rental and capital values which are 3

expected to weaken across all micro markets in short to mid
term. Excess supply concentrated in the peripheral locations 2
may lead to larger correction in these locations.
1
Developers are expected to focus more on affordable
housing projects to meet the price-sensitive end user demand 0
in the city.Various developers who have started construction 2006 2007 2008 2009 (F) 2010 (F)
Year
work on their projects are already seen to have revised their
plans by reducing the apartment size and thus the price per
unit. Average Mall Rental Trend
400
The supply for high end residential projects is expected to be
seen mainly in locations such as Koregaon Park, Hadapsar and

300
Kalyani Nagar. The prominent upcoming high end projects are
Matrix, Diva, Ritz by Marvel Developers and One North by
200
Panchshil developers. These projects are likely to be
completed in 2009-10. In the mid end segment, supply is
100
likely to be concentrated in the suburban and peripheral
locations such as Aundh, Baner, Kharadi, etc.
0
Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
Chinchwad has emerged as a preferred residential location
MG Road Bund Garden Road/Koregoan Park
owing to its good connectivity with the Mumbai-Pune
Ganeshkhind Road Nagar Road
1 Average mid end values are for properties ranging from 1,200 to 1,400 sq.ft. Source: Cushman & Wakefield Research
25
PUNE MARKET OUTLOOK
The leasing activity on Ganeshkhind Road remained limited Wrangler,VIP, Adidas, United Colors of Benetton, X-cite, etc,
pushing the vacancy levels to approximately 13%. This opened their stores on this main street during the year.
resulted in a decline of approximately 14% in rental values
The main streets witnessed increased demand from retailers
over the year in Ganeshkhind Road. However, micro markets
in the beginning of 2008 due to lack of fresh mall supply as
such as MG Road, Bund Garden Road and Koregaon Park
well as limited availability of space in operational malls. This
registered year-on-year growth in rentals in the range of 7-9%
resulted in appreciation of rental values across all main streets
largely due to lack of fresh supply entering the market during
the year. in 1Q 2008. However, there was a slowdown in rental growth
in 2Q 2008 vis-à-vis 1Q 2008 and subsequently the rentals
Main Street Development declined in the second half of 2008. As a result of the
economic uncertainty, the retailers adopted cautious
The demand in 2008 was largely concentrated around the expansion strategies which resulted in a slowdown of demand
main streets of JM Road and Aundh. JM Road was the most for retail space during the second half of 2008, hence leading
active of all main streets with brands such as Reebok, Pepe to rental correction across most main streets. Overall, as
and Stanza marking their presence on JM Road and United against 2007, the rental values witnessed an appreciation
Colors of Benetton relocated to a larger store. Aundh has across most micro markets with JM Road witnessing the
also emerged as a preferred main street due to its proximity highest year-on-year appreciation to the
to residential hubs. Additionally limited availability of space tune of 48% followed by Aundh at 29%. MG Road was an
coupled with high rental values on established main streets exception witnessing correction of approximately 13% in
has boosted demand for Aundh. Several brands such as Lee, rental values over the year. The rental values on MG Road
reached its peak during the first half of 2008 pressuring store
viabilities. Subsequently the rentals declined in the last two
500
quarters.
400
Outlook
300
Both malls and main street rental values are likely to weaken
200
in short to medium term due to restrained expansion plans
100
by retailers. The fresh mall supply that is expected to enter
the market in 2009 may further pressurize mall rentals. The
0 slowdown in demand is likely to lead to further weakening of
Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
rental values in most main streets in short to medium term.
MG Road JM Road FC Road
Koregaon Park Aundh Bund Garden Road
However, main street of MG Road may witness stable rentals
due to higher demand and lack of available leasable space.
Note :
26
CHENNAI MARKET OUTLOOK
Korattur Vyasarpadi Royapuram
Korattur Eri Villivakkam Perambur
Old
CHENNAI Washermanpet
Dairy Rd Man Rd
Ayanavaram
MTH Rd Choolai George

New Avadi Rd Town
Purusavakam
Periyamet Sowcarpet
Ambattur Thirumangalam Kilpauk High Rd
Industrial Anna GH Rd
Estate Nagar Poonamallee High Rd
Nu Hi
KNK Rd Chintadripet
ng gh R
Koyambedu
am d
Maduraivoyal
Choolaimedu
ba
lai
kk
Vadapalani a Sa
Ann
am
Vanagaram Triplicane
NSK Salai
Valasaravakkam Usman Royapettah Marina
Arcot Rd Rd Poes Cathedral R Beach
d
Theyagaraya Garden RK Salai
Porur
Nagar Teynampet Mylapore
RA Puram Santhome
Mowlivakkam Jawaharlal
Beach
Nehru Rd Nandanam Boat Club
Nandambakkam Adyar River

Sardar Patel Rd Besant
St Thomas Adyar Nagar
Alandur Guindy
Mt
IIT Madras Tharamani

GST Rd Airport
Thiruvanmiyur
Sriperumbudur Madipakkam
Pallavaram Valmiki
Velachery Nagar
Puzhuthivakkam
Perungudi Kotivakkam
Palavakkam
Rajiv Gandhi
Pallikaranai Salai

COMMERCIAL witnessed last year which is a difference of approximately 2

million sq.ft. This lowering trend is expected to continue in the
The total absorption for the year 2008 was approximately
future owing to the large amount of existing vacant IT space
4.02 million sq.ft., considerably lower than the absorption of
coupled with the STPI tax benefits expiring as of March 2010.
approximately 7 million sq.ft. witnessed in the previous year.
Approximately 39% (3.87 million sq.ft.) of the total supply was
Of this 4.02 million sq.ft. approximately 1.95 million sq.ft. was
recorded as SEZ, with the remainder 7% (652,000 sq.ft.) being
pre committed absorption while additional fresh pre
non IT commercial space, almost double when compared to
commitments were recorded at 680,000 sq.ft. for the year
the 343,000 sq.ft. in 2007. During the year, the third quarter
2009, bringing the demand estimate at 3.33 million sq.ft for
witnessed the highest absorption of 1.73 million sq.ft. in line
the year 2008. Of the 9.8 million sq.ft. supply, approximately
with the highest supply of 3.3 million. 3Q also witnessed the
54% was contributed by IT Parks, down from the 75%
13%
7%
3%
39% 5%
14%
65%
54%
BFSI IT & ITeS Others
Commercial IT SEZ IT Parks Infrastructure Manufacturing
27
weakening of rentals especially in the CBD and off CBD areas in other suburban areas only in the 4Q mainly due to negative
with developers willing to close out on larger deals and market sentiments and economic uncertainty. IT/ ITeS, BFSI &
agreeing to tenant-favourable terms and lower rentals. Telecom sector continued to be the main demand drivers in
the suburban areas, although the year also saw the rise of
The main demand drivers were IT/ ITeS, BFSI, Logistics and
manufacturing corporations as space occupiers.
Telecom in the CBD and Off CBD regions. CBD witnessed
supply of 222,000 sq.ft. of which 54% (120,000 sq.ft.) was Vacancy sharply increased from 13-15% in 2Q across the city
absorbed during the year. Off CBD had the highest to approximately 18% at year end. This surge can be mainly
percentage absorption when compared with the supply that attributed to the speculative supply seen in the suburban
came in during the year. Areas such as T. Nagar, Chetpet and markets increasing the suburban vacancy rate from 6-8% in
R.A. Puram, witnessed the highest quantum of absorption 2Q to 18% at year end. Peripheral vacancy rates continued to
within the Off CBD region and continued to remain the remain above 40% although the deferment and slowdown in
preferred destination for corporates during the year. Off CBD supply resulted in arresting the already acute vacancy situation.
witnessed absorption of 150,000 sq.ft. for each quarter, During the year, peripheral regions saw supply of 2.2 million
except for 4Q when absorption dipped to 60,000 sq.ft. sq.ft. of which approximately 1 million sq.ft. was absorbed.
Although rentals dipped in September, 4Q saw a drop in space Rents stabilized in 2Q for the remainder of the year, although
absorption with an uncertain economic outlook resulting in the current falling rentals in suburban areas are now expected
postponed of expansion plans of various firms. to bring down rents further in the peripheral regions as well.
Supply, Absorption and Vacancy Trends Average Rental Values Trend - Office Districts1
90
12 25 80
70
10 20 60
Vacancy Rate (%)
8 50
15 40
6 30
10 20
4
10
5 0
2
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
0 0
2002 2003 2004 2005 2006 2007 2008 CBD-Anna Salai, RK Ralai (Corporate) CBD-Anna Salai, RK Ralai (IT Space)
Off CBD-T.Nagar, Alwarpet (Corporate) Off CBD-T.Nagar, Alwarpet (IT Space)
Suburban-Guindy Suburban-Ambattur
Supply Absorption Vacancy Rate (%)
Suburban-Perungudi-Taramani Peripheral-Rajiv Gandhi Salai
1
Average Rental Values - Office Districts Outlook
90 0%
80 The supply spill over of approximately 2.6 million sq.ft. from
-5%
70 2008 is likely to increase supply for 2009 projected at
Growth Rate (%)
60
-10% approximately 15.7 million sq.ft. of which approximately 7.3
50
40
million sq.ft. is accounted by SEZ. New SEZ projects and large
-15%
30 scale campus developments of companies are likely to be
20 -20% deferred owing to a sea change in the business environment of
10 companies that were previously in expansion mode. Whilst
0 -25%
demand is likely to be driven by the IT/ ITeS sector, companies
Suburban-
Perungudi,
Taramani
Peripheral-Rajiv
Gandhi Salai
Off CBD-T.Nagar,
Alwarpet
(Corporate)
Off CBD-T.Nagar,
Alwarpet
(IT-Space)
Suburban-
Guindy
CBD-Anna
Salai, RK Salai
(Corporate)
CBD-Anna
Salai, RK Salai
(IT Space)
Suburban
Ambattur
intending to commit space are likely to tread carefully in order

to control their financial exposure.
2007 2008 Growth Rate (%)
As funding options remain scarce and an extended dip in
demand continues to plague market sentiments along with
Suburban areas recorded the highest quantum of supply and increasing vacancies, developers are likely to offer more
absorption during the year although excessive speculative innovative commercial terms to prospective tenants. For
supply in Ambattur of approximately 2.16 million sq.ft. example, lease tenures are expected to reduce from the
resulted in an acute oversupply situation in this micro market. current 5 years to approximately 2 to 3 years with a reduced
This oversupply could be noted in the rental movements as lock in period while demand for fully furnished space is
the rents corrected by 13% during 3Q and further in 4Q expected to increase due to an apparent reduction in capital
bringing it to a drop of 22% from its peak in 2008. Although expenditure by corporations. The right to sublease is expected
Mt. Poonamallee Road witnessed the highest quantum of to be a strong point of negotiation between tenants and
supply amounting to 2.8 million sq.ft. the pre-commitments in
1 Above rentals are for warm shell facilities (shell and core facility, power, high side
the SEZs here ensured low vacancy rates. Rentals corrected air conditioning and 100% power backup)
28
Rental Cycle half of the year. Thus, most micro markets witnessed double
Rental digit annual appreciation in capital values.
Peak
4Q 2008
The city witnessed growth during the year in two main
Market Market
corridors: in the south which includes areas such as
Slowing Recession Tambaram,Velachery, Rajiv Ghandi Salai and GST Road and in
Strengthening Weakening the west, the suburban markets of Mogappair, Porur,
Market Market
Virugambakkam and Nandambakkam. These markets
witnessed capital appreciation of 20-40% over last year in the
Market Market
Recovery Bottoming mid end segment with strong demand owing to the proximity
to work and infrastructural initiatives undertaken by the
Rental government in these areas. SINK's and DINK's (Single income
Trough 4Q 2009 (F)
no kids and double income no kids) showed preference
Source: Cushman & Wakefield Research towards residences closer to their workplace while families
with children took into consideration social infrastructure
developers; additionally spaces signed at premium rates in
such as schools & recreation centres thus preferring to limit
areas such as RK Salai, Nungammbakam High Road, MRC
their search to the suburban areas. On the Rajiv Ghandi Salai
Nagar and Guindy are likely to be renegotiated in the near
stretch, beyond Sholinganalur, the price movement was project
future.
specific rather than location specific. Additionally,
Areas such as Ambattur, which suffers from an oversupply of infrastructure initiatives like metro connectivity, construction
non SEZ - IT developments, will continue to witness of the Inner Ring Road (between GST road and NH4) etc.
weakening rentals and deter corporate space take up unless have brought additional demand to north-western regions of
the government and/or developers improve the infrastructure Anna Nagar and Mogappair.
in the vicinity. Certain IT Parks within the city limits are
expected to apply for conversion back to non-IT park status, Average Residential Capital Values - High End1
30,000 80
in light of the reduced IT demand and ambiguity over STPI tax
70
exemption. 25,000

60
20,000
50
RESIDENTIAL 15,000 40
30
10,000
In Chennai, the demand for apartments has progressively 20
increased over the past few years as compared to the 5,000
10
traditional independent housing bias that used to be 0 0
Boat Club
R. A. Puram
Adyar
Poes Garden
Nungambakkam
Anna Nagar
Kilpauk
previously predominant. This is mainly attributable to the
investor population and rise in the number of nuclear families,
resulting in an increase in the sales for apartments and
residential townships announced. Low High Annual Growth Rate (%)

Capital Values
The affluent continued to favour coveted central locations of
18,000 45
Boat Club, Poes Garden, RA Puram etc., and the former two 16,000 40
locations witnessed launches of ultra luxury apartments. The 14,000 35
high demand for quality housing ensured the steady rise of 12,000 30
10,000 25
capital values ranging from 12-28% in these areas. 8,000 20
6,000 15
Nungambakkam did not witnesses any launch in the high end 4,000 10
market during the year of 2007 and the launch of Patio by 2,000 5
Vijaya Shanti during 2008 met the pent up demand in this area 0 0
R. A Puram
Adyar
Rajiv gandhi
Salai
(Perungudi)
Velachery
Poes Garden
T. Nagar
Nungambakkam
Anna Nagar
Kilpauk
leading to the phenomenal rise in capital values of 71% over

the previous year. However, this rise has been skewed heavily
by this particular project and on an average the increase in Low High Annual Growth Rate (%)
values was more subdued. Source: Cushman & Wakefield Research
Chennai residential sale market continued to remain insulated

from the correction that is being witnessed in the other 1 Average high end values are for properties ranging from 1,800 to 4,000 sq.ft.
sectors of the city and across other parts of the nation. The 2 Average mid end values are for properties ranging from 1,000 to 2,000 sq.ft.
capital values across Chennai saw stabilization in the second
half of the year after witnessing a steep incline during the first
29
Rental Values development rights. Additionally market dynamics will also
prompt developers to focus on the affordable category and
While the rental markets in the high end segment continued
thus focus on value housing thus providing stronger
to be buoyant during the first half of the year, it witnessed
infrastructure and less frills such as clubs, swimming pools etc.
stabilisation in the last quarter. The Tamil Nadu Electricity
This can be seen in some of the recent announcements by
Board (TNEB) announced load shedding in various parts of
developers to create projects along these lines.
the city, which resulted in properties, with 100% power back
up, commanding a hefty premium in rentals. Landlords in the The relaxation on costal regulation zone constructions is likely
high end rental market are increasingly providing the lessee to generate renewed interest by developers and investors
with the power back up option in order to command a higher along the East Cost Road. Rajiv Ghandi Salai is expected to
rental. continue to see weakening capital values due to large supply
entering the market in 2009, delays in existing projects causing
Average Residential Rental Values - High End1 investors to exit at a discounted value, weak social
300,000 60 infrastructure which in turn is likely to prompt more focus on
GST Road that boasts of a relatively stronger physical and

250,000 50
social infrastructure in this region.
200,000 40
150,000 30 GST Road is expected to be a preferred destination, as it

100,000 20 enjoys good road and rail connectivity to all parts of the city.
50,000 10
Additionally, being well connected to the IT and industrial
corridor has created demand for both middle income and
0 0
Boat Club
R.A. Puram
Adyar
Poes Garden
Nungambakkam
Anna Nagar
Kilpauk
premium residential buildings in this locality.
RETAIL
Source: Cushman & Wakefield Research Chennai continues to witness a dearth of quality retail supply
across the city and the deferment of various malls added to
Average Residential Rental Values - Mid End2 the woes of high end retailers seeking to enter Chennai. The
60,000 100
city witnessed correction in retail rentals during the fourth
90 quarter as economic uncertainty led to a more conservative
50,000 80
70
attitude from both consumers and retailers alike.
40,000
60
30,000 50 Mall Development
40
20,000
30 The dry spell of 2007 continued in the first 3 quarters of 2008,
20
10,000
10 while in the last quarter Chennai witnessed a supply of 0.15
0 0 million sq.ft. with the long overdue Ampa Mall becoming
R. A. Puram
Adyar
Velachery
Nungambakkam
Rajiv Gandhi
Salai
(Perungudi)
Poes Garden
T. Nagar
Anna Nagar
Kilpauk
operational. The proposed 1.15 million sq.ft. of mall space,

spread over 2 malls, that was expected during the year 2008
has been deferred into 2009. The years 2010 and 2011 are
projected to witness approximately 14 malls (approximately
Mall Supply Trend

The mid end rental markets continued to remain stable for
the whole year. Additionally the landlords continued to have a 3.00
conservative attitude as most refrained from increasing rent

substantially and were willing to negotiate rents in order to fill
the vacancy. Leasing volumes continued to remain robust for 2.00
the entire year and are expected to remain so in the near

future.
1.00
Outlook
The Chennai Master Plan 2026 is expected to provide the LIG
0.00
and EWS housing sector with the necessary fillip and is 2006 2007 2008 2009 (F) 2010 (F)
expected to bring a change in the residential scenario of Year
Chennai especially in the peripheral regions. Developers are Source: Cushman & Wakefield Research
expected to focus on LIG and EWS housing due to the

incentives offered in the master plan 2026 of extra FSI, 1 Average high end values are for properties ranging from 1,800 to 4,000 sq.ft.
relaxation in development control rules and transfer of
30
Average Mall Rental Trend Average Main Street Rental Trend

250
300

250 200
200 150
150
100
100
50
50
0
0 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
Khadar Nawaz Khan Rd Anna Nagar 2nd Avenue Nungambakkam High Rd
Cathedral Rd - RK Salai Adyar Main Rd Purusavakam High Rd
Chennai - CBD (central) Chennai - Suburbs (western)
Usman Rd - South Khadar Nawaz Khan Rd
6.2 million sq ft.); however, it is anticipated that a majority of in order to gain first mover advantage and expand their
this mall supply will not be operational as per schedule since presence across the city. Demand for retail space relatively
several of these projects are yet to commence construction. decreased during the last quarter leading to lower number of
Malls in their initial stages of construction are actively seeking transactions causing the rentals to correct across all micro
to sign up with key anchors like Hyper markets, department markets.
store and multiplexes.
Outlook
During the start of the year, approvals were the main concern
Retailers are cautious about their financial commitments in
with most of the malls, although towards the latter half
any location, which in turn will prolong negotiations despite
apprehensions regarding liquidity and construction schedules
their interest in the city. Traditionally south has been working
became more apparent. Although mall rentals witnessed
on higher security deposits, but due to the increasing rentals
correction, the quantum of this drop was not comparable to
in previous years the deposit amount have become substantial
other cities that had recorded significant appreciation over
and this amount is expected to receive increased emphasis by
the years and hence had a larger scope for correction.
retailers during future negotiations.
Additionally due to the continuous deferment and limited
supply entering the market, mall rentals in Chennai witnessed Infrastructure developments announced during the year and
and are expected to continue witnessing a lower correction the new city master plan are changing the landscape of the city
in percentage terms as compared to other cities as well as as flyovers and MMRTS, metro is making retailers and
against most high streets within the city. Projects in the developers alike reconsider their positioning in the market, in
central and western regions of Chennai are being closely order to maximize footfalls and visibility.
watched by retailers - wanting to establish a footprint across
the city but are weary of the delays; these projects are Rentals across Chennai are expected to further correct from
expected to witness a surge in leasing as the mall nears their current levels across all micro markets. As retail space
completion.Various international brands looking at per person in Chennai is very low, the limited future supply
establishing a footprint in the city are considering options in will ensure the correction to not be as sharp as other cities.
the more mature markets and thus want to be located Emerging high streets such as Wallace Garden Road, Anna
centrally. Nagar 3rd Avenue are expected to witness sharper correction
as compared to established high streets like Nungambakkam
Main Street Development High Road, Cathedral Road - RK Salai, T. Nagar (pondy bazzar)
nd
and Anna Nagar 2 Avenue to name a few. Premium retailers
Due to the low mall supply, retailers maintained a bias would reconsider markets such as Khader Nawaz Khan Road
towards main streets and especially towards stand alone nd
in light of the correction while Anna Nagar 2 Avenue, T.
stores. Developments offering larger floor plates in Nagar, are expected to witness demand from lifestyle brands
established retail precincts continued to remain sought after due to the heavy footfalls and strong catchments of these
and this trend is expected to continue into the near future. markets. Rentals are expected to stabilize towards 2H 2009
New high end retailers continued to explore options in the with demand is likely to improve considerably from current
established markets of Khadar Nawaz Khan Road and levels as the falling rentals will enable retailers to set up
Nungambakkam High Road due to the presence of high end profitable stores.
catchments and large visibility. However, limited availability of
quality space caused them to refrain from signing up on space
during the year. Established regional retailers continued to Note :
expand their operations into new micro markets especially security deposit, maintenance charges and other such outgoings.
focusing on the peripheral micro market of Rajiv Ghandi Salai l Average rentals are for ground floor premises on carpet area
31
HYDERABAD MARKET OUTLOOK
Kukatpally NH9
University of
Marredpally
Hyderabad SR Nagar
Hitech City Malkajgiri
Madhapur
Begumpet
Gachibowli Ameerpet Sanjeevajah Nacharam
Yousufguda Park Industrial Area
Jubilee NTR
Garden Tarnaka
Mumbai Rd Hills
Somajiguda Hussain Himayat Padmarao
Banjara Sagar Nagar Nagar
Punjagutta Habsiguda
Hill
KBR Uppal
National Park Ram Nagar
Osmania
Shaikpet University
Army Area Masab Warangal Rd
Tank Nallakunta
Manikonda Mehdipatnam
Ramanthapur
Vijay Nagar Nagole Rd
Tolichowki Kachiguda
Colony Nampally Amberpet
Osman Sagar Rd Langar Abids
House Karwan HYDERABAD Uppal Kalan
Military Area
Malakpet Nagole
Rambagh Dilsukhnagar
Mrigavani Nehru
Zoological LB Nagar Rd
National Park Saidabad
Park Colony
Charminar
Chintalmet
Mir Alam Lal LB Nagar Mahavir Harini
Katedhan Tank Barwaza
Industrial Area NH 9 Vanasthali
Nawab Kanchan National Park
Saheb Kunta Bagh
Musa River Vanasthalipuram
Rajendra
Hymayat Sagar Rd Nagar
Premavathi Inner Ring Rd
Pet NH 7
Himayat
Sagar Budvel Gurram
Shamsabad
Guda
Hayat

COMMERCIAL ITeS sector continued to be the prime focus amongst

developers as nearly 85% of the 2008 supply was targeted
Hyderabad witnessed approximately 3.84 million sq.ft. of
towards this sector with IT SEZ supply being estimated at
fresh supply across all micro markets during 2008 as
34% of the total.
compared to 4 million sq.ft. witnessed in the previous year.
Although, nearly 7 million sq.ft. of fresh supply was anticipated
Suburban regions comprising of Madhapur and Gachibowli
to be available during 2008, only 55% of the same
witnessed majority of the supply (69%) including 930,000
materialized. Most of the projects in the suburban micro
sq.ft of SEZ supply. Peripheral region of Pocharam witnessed
market were deferred due to the prevailing uncertainties in
360,000 sq.ft. of SEZ development and with this the total SEZ
the economy, thus adversely impacting the real estate sector
supply in the city stood at nearly of 1.29 million sq.ft. The IT/
at large. Fourth quarter of 2008 witnessed the highest supply
2% 2% 2%
15% 15%
34%
79%
51%
BFSI IT & ITeS Others
IT Developments Non-IT IT SEZ Infrastructure Consulting
32
(46%) of approximately 1.78 million sq.ft. due to delayed constituted approximately 1.33 million sq.ft. (inclusive of pre-
completion of projects. Shrinking liquidity with developers, committed absorption totaling 249,000 sq.ft.) and the balance
staggered consumer demand and increase in overall cost of constituted of fresh pre-commitments entirely in IT/ITeS
construction are the prominent factors responsible for delay developments which are likely to be absorbed in the first half
in project completion. of 2009. The suburban micro market accounted for 933,600
sq.ft. (70%) of the total absorption which was followed by the
Supply, Absorption and Vacancy Trends
peripheral micro market of Pocharam and Off CBD micro
5 20 markets each accounting nearly 11% of the total absorption.
18
4 16 CBD, Off CBD and Prime Suburban micro markets witnessed
Vacancy Rate (%)

14 annual rental growth largely due to the demand-supply
3 12
mismatch coupled with limited Grade-A supply options.
10
2 8
However, rental appreciation was prominent in the first half
6 of the year with the second half witnessing a dip in select
1 4 markets. Rentals in the suburban region including IT SEZ
2 witnessed marginal correction in the last quarter in order to
0 0
2001 2002 2003 2004 2005 2006 2007 2008
re-align with market expectations and excess supply built up.
Pocharam, even while being an emerging peripheral micro
Supply Absorption Vacancy Rate (%)
market witnessed stable rentals as supply outstripped the
demand with an obvious downward pressure on rentals and
Average Rental Values - Office Districts1 correction taking place in the office space segment.
70 25
The overall vacancy rates in the city were estimated in the
60 20
range of 9-14% as against 3-4% during the first quarter of the
50 15
Growth Rate (%)
year. This largely indicated the increasing gap between supply

10
40 and space uptake due to demand slowdown.Vacancy rate in
30 5 both CBD and Off CBD micro markets was nearly 11%
20 0 where as the same for prime suburban areas was the highest
10 -5 at approximately 14% due to un-leased concentration of
0 -10 Grade B stock. Suburban areas of Madhapur and Gachibowli
Suburban
Suburban
Peripheral
Peripheral
CBD
Off CBD
Prime
witnessed vacancy of nearly 9% due to un-leased stock across

II
I
Non-SEZ development.
2007 2008 Growth Rate (%)
Outlook
Fresh office space supply in 2009 is expected to be nearly 5
Average Rental Values Trend - Office Districts1
70
million sq.ft. inclusive of nearly 3 million sq.ft. of IT SEZ
developments, majority of which are scheduled for the first
Rental Value (INR/sq.ft./month)
60
half of the year. This additional supply is likely to further
50
increase the existing supply-demand gap resulting in
40
increasing vacancy.
30
20 Office space demand in 2009 will be similar to or even lesser

10
than that of 2008 as the IT/ ITeS sector which was earlier
0
growing at nearly 20 to 25% per annum will now be limited
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
Rental Cycle
CBD Off CBD Prime Suburban Rental 4Q 2008
Suburban Peripheral I Peripheral II Peak

4Q 2009 (F)
Office space demand declined by nearly 46% to register Market Market
Slowing Recession
approximately 2.39 million sq.ft. in 2008 when compared to
4.47 million sq.ft. recorded in the previous year. Overall Market Market
slowdown in the Indian economy at large and its immediate
consequences on the domestic IT/ITeS sector were the Market Market
Recovery Bottoming
primary attributes for depressed demand. Of the total
demand of 2.39 million sq. ft. in the year 2008, absorption
Rental
Trough
1 Above rentals are for warm shell facilities (shell and core facility, power, high side
air conditioning and 100% power backup) Source: Cushman & Wakefield Research
33
to 10 to 15%. Madhapur and Gachibowli will continue to etc. focused on affordable housing. National developers such
remain as preferred IT/ ITeS region over the other micro as DLF Homes and Bangalore based Mantri developers to
markets due to comparatively low occupancy cost and name a few announced launch of apartment projects in the
availability of Grade A supply. Rentals across all micro city but are yet to start construction activities.
markets inclusive of SEZ rentals are expected to see further
Capital Values
correction by first half of 2009, with stabilization likely in
select regions in the second half. Some of the pre- Average capital values for high-end properties witnessed
commitments as well already committed space may also get lesser impact despite the slump and overall decrease in
vacant with companies preferring just-in time deals rather residential demand. As of December 2008, annual appreciation
than holding large vacant spaces like they use to do earlier. in capital values was estimated between 9 to 20% barring
Himayathnagar and West and East Marredpally where
RESIDENTIAL average values declined by 3% and 5% respectively over the
previous year.
Established residential micro markets of Jubilee Hills, Banjara
Hills, Srinagar Colony, Somajiguda, Punjagutta, Himayathnagar, As the effect of slowdown was more pronounced during the
Begumpet, Marredpally and Sainikpuri etc. witnessed mid- second half of 2008, the changes in capital values during that
segment standalone apartment projects through the year time frame reflect the actual correction taking place in the
2008. However, limited land availability for new developments market. During June to December 2008, average values eased
within the city led to large scale developments taking place in between 7 to 11%. However, Banjara Hills and Jubilee Hills
suburban and peripheral regions of the city. Apart from being the prime residential locations did not succumb to any
scattered standalone apartment projects by local developers, negative correction during the second half of the year.
planned apartment projects were visible in Andhra Pradesh
Police Academy (APPA) Junction in south-west, Kukatpally in Average Residential Capital Values - High End1
8,000 25
north-west, Nagole, LB Nagar in east; Kondapur, Gachibowli
7,000
and Nallagandla in west and ECIL X Road in north-east to 20

6,000
name a few. 15
5,000
10
Few select precincts of the city witnessed development of 4,000
5
3,000
gated communities comprising of villas and duplex houses. 0
2,000
These regions include Kompally, Medchal Road, Dundigul,
1,000 -5
Yapral and Shamirpet in the north; Ghatkesar, Cherlapally,
0 -10
Nagole in the east, Tellapur in the west; Qutbullapur and
Banjara
Hills
Jubliee
Hills
West & East

Marredpally
Begumpet
Somajiguda
Kukatpally
Himayatnagar
Madhapur
Gachibowli
Bachupally in north-west as well as Shamshabad, Kothur and
Sri Sailam Road in south of Hyderabad. However, currently
most of these regions lack adequate social infrastructure and Low High Annual Growth Rate (%)
therefore witnessed a sluggish response from end users. Source: Cushman & Wakefield Research
With the global economic meltdown dampening overall sales Average Residential Capital Values - Mid End2
prospects, several property developers in the city resorted to
4,500 10%
re-pricing of properties to boost sluggish sales and thereby 4,000 8%
expedite completion of projects with significant bookings by
3,500
6%
customers.Various projects set for completion during the 3,000
2,500 4%
year were deferred as developers faced liquidity issues. In
2,000 2%
certain cases, developers even delayed the launch of new 1,500
0%
projects anticipating passive response from buyers. This is 1,000
-2%
primarily attributed to buyers shying away to make capital 500
commitments given the uncertainties in the economy coupled 0 -4%

Banjara
Hills
Jubliee
Hills
West & East

Marredpally
Begumpet
Somajiguda
Kukatpally
Himayatnagar
Madhapur
Gachibowli
with over heated property rates making them unaffordable.

Fresh residential supply took a back seat as the prime
concern with developers was to make prices affordable for a Low High Annual Growth Rate (%)
larger mass of potential buyers. Source: Cushman & Wakefield Research
On the other end of the spectrum, developers such as Bharat Banjara Hills, Jubilee Hills and Himayathnagar registered
Infratech (Bharat Iconia), Lodha Developers (Lodha Bellezza), marginal decline in average capital values by nearly 2% to
Radha Realty (U 31) and Emaar-MGF (Boulder Hills) etc. stabilize at INR 3,800 and INR 2,800 per sq.ft. respectively.
announced launch of ultra luxury residential projects in the
second half of the year while a handful such as Janapriya 1 Average high end values are for properties ranging from 1,600 to 3,250 sq.ft.
Engineers Syndicate, Modi Properties and Manjeera Projects 2 Average mid end values are for properties ranging from 1,200 to 1,600 sq.ft.
34
Average values in West & East Marredpally, Madhapur as well of 13% followed by Madhapur and Gachibowli each witnessing
as Gachibowli stabilized at last year's values. negative 2% correction.
Rental Values Outlook

Lack of fresh supply coupled with buoyant demand for high- Residential activities including new developments are expected
end residential properties across Banjara Hills and Jubilee Hills to be concentrated in the suburban and peripheral areas of
led to average rentals hardening by 70% and 56% respectively the city due to the obvious reason like scarcity of land parcels
over the last 12 months. These two premium residential in the central areas. On account of fewer new job prospects
locations have high concentration of independent villas, duplex and curtailed spending both by individuals and corporate,
houses and luxury apartments. The demand for properties in demand for residential properties will continue to be passive.
these regions being insulated to the economic slump This situation is likely to force select residential developers to
witnessed rise in rentals. Begumpet and Somajiguda witnessed follow distress sale route.
45% annual appreciation mostly due to supply lagging demand.
Regulatory measures such as reduction in home loan rates
Himayathnagar was the only location that witnessed
both by the government owned financial institutions and
correction in rentals of high end properties by 7% over the
private banks etc. are expected to help in reviving the demand.
similar time frame.
Recent proposal by the Government of Andhra Pradesh to
1
Average Residential Rental Values - High End exempt the stamp duty (5%) and applicability of only
180,000 80
70
registration fee (2.5%) on new apartments up to 1,200 sq.ft.
160,000
140,000 60 starting from January 2009 till December 2010 is a positive

120,000 50 move in favour of end users.
40
100,000
30
80,000 As a last resort to revive demand, selling at minimal margin is
20
60,000
10
expected to spread amongst certain group of developers,
40,000 0 although this initiative has already been adopted by few. In this
20,000 -10
process, buyers looking for budget and mid-segment
0 -20
residential properties can achieve savings on the first offer
Banjara
Hills
Jubliee
Hills
West & East

Marredpally
Begumpet
Somajiguda
Kukatpally
Himayatnagar
Madhapur
Gachibowli
itself.
Low High Annual Growth Rate (%) RETAIL

Mall Development
2
Average Residential Rental Values - Mid End
Mall stock in the city was recorded at approximately 550,000
30,000 15%
sq.ft. by the end of 2008. Ashoka Metropolitan mall at Banjara
25,000 10%
Hills Road No.1 getting operational during first quarter of
20,000 5% 2008 added approximately 150,000 sq.ft. to the retail mall
15,000 0% stock. Mall rentals in Banjara Hills Road No.1 and
10,000 -5%
Himayathnagar witnessed downward correction by 20% and
4% respectively over the previous year as it reached high price
5,000 -10%
0 -15%
Mall Supply Trend
Banjara
Hills
Jubliee
Hills
West & East

Marredpally
Begumpet
Kukatpally
Somajiguda
Himayatnagar
Madhapur
Gachibowli
5.00
Low High Annual Growth Rate (%) 4.00


3.00
Average rentals in the mid-segment started weakening mostly
in the second half of 2008. Banjara Hills and Jubilee Hills, 2.00
Begumpet & Somajiguda as well as Kukatpally witnessed

1.00
annual rental increment of 2%, 11% and 8% respectively due
to sustained activity in the existing stock. However, it is 0.00
2006 2007 2008 2009 (F) 2010 (F)
interesting to note that during the second half of 2008, these
Year
locations saw a decline in rental growth between 7 to 15%
due to obvious slowdown in the demand from end users.
Average mid end rentals in Himayathnagar being already
overheated saw maximum negative correction to the extent
35
Average Mall Rental Trend Somajiguda witnessed organized retail activities primarily from
250 apparel, lifestyle retail brands and consumer durables segment.
200 Main street rentals dipped across most micro markets

between 12-29% over the previous year. However, during the
INR/Sq.ft./Month
150
same timeframe Raj Bhavan Road, Somajiguda and Jubilee Hills
100
saw a slower rate of depreciation with a correction of 3-6%
due to non-availability of properties.
50
Luxury car makers like BMW, Audi,Volkswagen and Volvo etc.
0
Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
established their presence along main streets of Raj Bhavan
Road, Banjara Hills and Jubilee Hills, while entry of
NTR Gardens Himayathnagar Banjara Hills, Rd No.1 international luxury brands was very minimal. Hypermarket
format stores such as Reliance Mart and SPAR getting
Source: Cushman & Wakefield Research operational during the second half of the year established
points not matching expectations. With the apparent softening consumer preference for such stores in Hyderabad.
of demand, mall supply witnessed a set back as two planned
Outlook
mall projects, one each in Himayathnagar and Banjara Hills
Road No.1 earlier scheduled to be operational by end of Hyderabad is set to witness planned mall development of
2008, were deferred to 2009. The latter witnessed pre-lease approximately 1.2 million sq.ft. in 2009 spread across three
commitments from leading international brands, mostly in the malls in Banjara Hills Road No.1, Himayathnagar and
apparel segment. Madhapur/ Hitec City.
Mall vacancy stagnated at approximately 5% by end of 2008 as Rentals across select malls and main streets are expected to
compared to nearly 18% during 1Q of 2008. Space availability witness further correction between 5 to 10% by first half of
in Ashoka Metropolitan Mall which was subsequently leased 2009 given their susceptibility to demand slowdown and
to various retailers led to the overall high vacancy during in additional retail space infusion.Various mall developers who
1Q of 08. anticipated project completion in the next two years may face
execution risk due to the liquidity crunch leading to further
Main Street Development delay in their schedules. Revenue sharing between mall
The city's retail market witnessed preference for main streets developers and tenants, although not yet a prominent trend in
due to better visibility for the brands coupled with minimal Hyderabad, may see the light of day in 2009. Existing tenants in
retail space in malls. Prominent main streets such as Jubilee main streets are in a better position to re-negotiate rentals
Hills Road No. 36, Banjara Hills Road No. 12, Begumpet and with landlords as demand remains low.

Unlike all the existing main streets where new supply is scarce,
Jubilee Hills Road No. 36 looks promising as this location is
250
250
expected to be supply heavy. This is evident from the
250 numerous standalone properties which are under various

250 stages of completion along the 4 kilometres stretch starting
250 from Jubilee Hills check post till Kavuri Hills. Retailers dealing
200 with apparel, electronics and consumer goods are committed
150
to the standalone stores. Other main streets are likely to
100
50
witness moderate activities as new supply is likely to be very
0 limited.
1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
M.G Road S.P Road/ Begumpet Raj Bhavan Road/ Somajiguda
Banjara Hills Abids Himayathnagar
Punjagutta Ameerpet Jubilee Hills Note :
Kukatpally A S Rao Nagar Madhapur
Source: Cushman & Wakefield Research security deposit, maintenance charges and other such outgoings.
36
KOLKATA MARKET OUTLOOK
Liluah South
Paikpara
Dum Dum
Rajarhat
Shalkiya
Mail Ultadanga
Beniatola
Panchghara
Salt Lake
Narkeldanga
Shibpur Kankurgachi
KOLKATA
Bow Beleghata
Bazaar
Kulia
Hooghly Shalimar
River Par Tangra
kS
tree
t
Gobra
Garden
Reach Dhapa
Bhawanipur Topsia
Ballygunge
Mominpur Alipore Tiljala
Rajarhat Nature Park

Gopalpur
Kalighat Kasba
Taratala
Garfa Haltu
Behala
Tollygunge
Santoshpur
Royal Calcutta
Golf Club Bijoygarh
Paschim Kazipara Baishnabghata

Purba
Darisha Darisha Naktala Patuli Township

COMMERCIAL Of the entire supply delivered in the year , IT SEZ accounted

for 40% of the supply at approximately 790,000 sq.ft which
The total office space supply in Kolkata was recorded at 1.97
was entirely concentrated in Rajarhat. Salt Lake accounted for
million sq.ft in 2008, which was lower by 10% than the supply
the entire IT/ITeS (non SEZ) supply at approximately 606,000
received in 2007 of approximately 2.2 million sq.ft. Almost
sq.ft. During 1Q 2008, the supply was concentrated entirely in
89% of the supply in 2008 was concentrated in the peripheral
Rajarhat while Salt Lake and CBD dominated the supply
locations, with Salt Lake accounting for 48%, followed by
scenario in 2Q 2008. In 3Q 2008, all major micro markets
Rajarhat at 41%. Dalhousie and Park Circus Connector
baring Dalhousie and Park Circus Connector witnessed
witnessed no new supply in 2008 while CBD registered
infusion of fresh supply. The peripheral locations of Salt Lake
around 10 % of the total supply.
and Rajarhat accounted for the entire supply in 4Q 2008. The
Annual
Office Supply
Supply -- 2008
2008 Sectorwise Absorption Trend - 2008
4%
29% 13%
40%
18%
61%
4%
31%
Automotive Others Telecommunication
IT Non-IT IT-SEZ IT/ITeS BFSI
37
city was witness to significant supply in the commercial space sq.ft. concentrated entirely in the peripheral locations.
segment in 2008. Salt Lake registered the highest commercial Rajarhat witnessed almost 84% of the pre-commitments
space supply at 343,000 sq.ft primarily on account of primarily due to higher quality of supply and considerably
substantial demand from corporates for high quality office lower rentals in comparison to other micro markets. The city
space in the location while CBD followed with supply at was witness to about 63% decline in absorption at 780,000
200,000 sq.ft in the segment. Supply fell short by over 50% sq.ft in 2008 as against 2007; attributable to the recessionary
than the projected supply of 4.2 million sq.ft in the beginning conditions of the economy as major corporate houses shelved
of 2008. This was primarily due to deferment of a number of their expansion plans during the last two quarters of the year.
significant projects in wake of global economic crisis Absorptions included 63,000 sq.ft of pre-commitment of
contracting the demand scenario in the city. earlier years.
The city recorded total demand of approximately 1.8 million IT/ITeS sector accounted for 62% of the total absorptions in
sq.ft during 2008 primarily driven by the IT/ITeS segment 2008. The first and last quarter of 2008 witnessed maximum
comprising of pre-commitments of approximately 1.09 million absorptions in the IT/ITeS segment. During 1Q 2008, almost
51% of the new supply delivered was absorbed; with Rajarhat
Supply, Absorption and Vacancy Trends dominating the absorptions. In the second and third quarter of
2.50 12 2008, entire absorption was in the commercial office space
segment. In 2008, Salt Lake saw maximum absorption in the
10
2.00 commercial office space. Prime CBD locations and Dalhousie
Vacancy Rate (%)
8 witnessed almost 67% of the absorptions during 2Q 2008. A

1.50
key feature was that most of the absorption was on the
6
1.00
existing vacant space available.
4
The overall vacancy levels across the city increased
0.50
2
considerably from 6% in the beginning of the year to 11% by
0.00 0 the end of 2008. Only 24% of the new supply delivered was
2003 2004 2005 2006 2007 2008
absorbed in 2008. Peripheral locations recorded the highest
Supply Absorption Vacancy Rate (%) vacancy levels escalating from 8% at the beginning of the year
Source: Cushman & Wakefield Research to 18% by the end of 2008. This was primarily on account of
infusion of fresh supply in the micro markets and the new
Average Rental Values - Office Districts1 supply remaining unabsorbed.Vacancy rates in CBD however,
120 20
remained below 4% due to limited new supply in the micro
15
100 market.
10
Growth Rate (%)
80
5
Pursuant to the general slowdown in the economy, Kolkata
60
0
witnessed significant correction in the rental values across
40 almost all micro-markets by the end of 2008. During 1Q 2008,
-5
20
only Park Street and Rajarhat witnessed an increase in the
-10
rentals. Rentals stabilized in 2Q 2008 baring a marginal rise in
0 -15
CBD locations and Dalhousie due to the buoyancy in demand
Salt Lake2
Rajarhat2
Rash Behari
Dalhousie
Park Circus
Camac Street
Connector
Connector
Park Street/
Square
(Topsia)
(Ruby)
for corporate office space in the region. The peripheral

locations witnessed a correction in 3Q 2008 on account of
Dec 2007 Dec 2008 Growth Rate (%) increasing vacancy while CBD, along with Rash Behari
Source: Cushman & Wakefield Research Connector and Dalhousie continued their northward trend
1 attributable to the demand from the corporates. However, by
Average Rental Values Trend - Office Districts
4Q 2008 CBD and Dalhousie registered a double digit decline
140
while Park Circus Connector and Rash Behari Connector
120
registered decline in the range of 4-5% , primarily due to the
100
limited new supply in the offing. Rajarhat and Salt Lake
80
continued with their trend of rental correction attributable to
60
the rising levels of vacancy.
40
20
0 2 Rentals are for warm shell facilities (shell and core facility, power, high side air
conditioning and 100% power backup)
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
2
Park Street / Camac Street Dalhousie Square Salt Lake
2
Park Circus (Topsia) Rash Behari Connector (Ruby) Rajarhat
38
Outlook which have come up as new residential hubs in addition to
south Kolkata. However the infrastructural complexities have
The projected office space supply for 2009 is expected to be
slowed down the pace as well as the attractiveness of the
approximately 2.5 million sq.ft., a substantial part of which is
projects in the new locations especially in Rajarhat to some
deferred supply from 2008. Most of the upcoming supply will
extent.
be concentrated in the peripheral locations of Salt Lake and
Rajarhat. Of the total expected supply, approximately 1 million Newer locations were characterised by substantial number of
sq. ft. will be in SEZs. Deferred supply of 2008 will constitute projects in the mid range segment. Certain micro markets
majority of the supply in 2009. Salt Lake and Rajarhat are mainly in the prime residential pockets also observed re-
expected to witness higher vacancy levels as well as further development of properties. However, the city at large,
correction in the rentals as few major projects are lined up witnessed limited number of projects being delivered in 2008.
for delivery by the second quarter of 2009. E.M. Bypass and A few mega-townships projects were observed being shelved
Park Circus Connector too may witness a fall in rental values or deferred while certain others saw projects size being
as couple of mixed-use developments are anticipated to infuse trimmed down in wake of the prevalent conditions.
new supply in these micro-markets. Kolkata market is likely to
see a mixed trend in demand comprising of both IT/ITeS and Capital Values
commercial office space. The city is likely to witness pre- Capital values in Kolkata witnessed minor changes during the
commitments of approximately 1 million sq.ft turning to year remaining largely stable across most micro-market in
absorptions in 2009. With the prevalent economic conditions, both the segments. Kolkata market exhibited least panic sales
new requirements from IT/ITeS sector, which has been the key in wake of the economic slowdown. Towards the end of 2008,
demand driver, is expected to be slow and thus impacting the a slight decline was observed in the locations of Ballygunge,
demand for new office space supply. But with major IT/ITeS Alipore Road, Rajarhat and south Kolkata markets. Mid-range
pre-commitments of 2008 expected to get absorbed, the housing characterised by end-users preferred to hold on to
share of the IT/ITeS segment will still surpass demand for their assets thus reducing any major fluctuations barring a
commercial office space in 2009. minor decline in south Kolkata. The high end segment
recorded a minor decline on account of few investors seeking
Rental Cycle
disposal of their investments.
Rental 4Q 2008
Peak 1
Average Residential Capital Values - High End
4Q 2009(F) 12,000 30
25
Market Market 10,000

Slowing Recession 20
8,000
15
Market Market 6,000 10
5
4,000
Market Market 0
Recovery Bottoming
2,000
-5
0 -10
Southern
Avenue,
Dover Lane
Ballygunge
Queen Park,
Rainy Park
Gurusday Rd
EM Bypass
Alipre Park Rd,

Ashoka Rd,
Belvedere Rd
Lansdowne,
Park Street
Salt Lake
Rajarhat
Rental
Trough

RESIDENTIAL Source: Cushman & Wakefield Research

2
Kolkata residential market exhibited a largely stable position Source: CushmanAverage Residential
& Wakefield ResearchCapital Values - Mid End
during 2008. The market was least prone to any major 6,000 18
fluctuations and was characterised by thoughtful and cautious 16
5,000
14
approach. Investors showed an inclination to exit the
4,000 12
investments. With the global slump, funding from financial 10
3,000
institutions was constricted to a certain extent leading to 8
2,000 6
lesser demand for residential properties. An anticipation of
4
further correction in the prices too has restrained demand 1,000
2
from end users and investors alike both in the mid-range and 0 0
New Alipore,
Golf Green,
Tollygunj
Hindustan
Park
EM Bypass
Rajarhat
Kakurgachi,
Lake Town,
Jessore Rd,
Jltadanga
high end segment.

Kolkata, over the last few years has seen an increased interest
from corporate to set up offices herein bringing in a flock of Low High Annual Growth Rate (%)
senior and middle management to the city. It has further Source: Cushman & Wakefield Research
accentuated the emergence of newer locations like EM Bypass 1 Average high end values are for properties above 3,000 sq.ft.
and Rajarhat and outer peripheries of Kolkata district etc. 2 Average mid end values are for properties below 2,000 sq.ft.
39
Rental Values residential pockets are unlikely to witness any major
fluctuations as opposed to the trend observed during the
Rentals values in Kolkata witnessed mild fluctuations during
fourth quarter of the year.
the first three quarters of 2008 across all micro-markets in
the high-end segment. The mid range segment remained stable Outlook
due to buoyant demand and also due to the fact that this
The rental and capital values in prime residential locations are
segment is price sensitive and could have been negatively
likely to remain stable over next few months largely due to
impacted incase of any increase in rental values. Thus in a
continued demand at the current values. With overall market
deliberate attempt to ensure healthy demand, landlords
sentiments trickling into the Kolkata market, the propensity of
largely maintained their rental values at the existing rates.
the lessee to lease at higher values is limited thereby bringing
However, high end segment witnessed major drop ranging
in stabilisation in values. However, emerging locations and new
from 4- 22% in rental values over a single quarter during 4Q
projects may see some corrections in the prices owing to the
2008. Least change was observed in the south east Kolkata
present economic slowdown lessening the pace and quantum
(EM Bypass) across all quarters and segments during the year.
of transaction activities in the market. The market is unlikely
This was primarily due to its proximity to the major business
to witness new project launches until it regains its lost
districts and easy connectivity in addition to high-quality
confidence; new projects even if launched are likely to be
projects.
more oriented towards affordable housing.
140,000 25 RETAIL
20
120,000
15
The retail sector in Kolkata which demonstrated signs of
100,000
10 revival in early 2008 with two major malls becoming
80,000
5 operational witnessed no fresh mall supply in the second half
60,000
0 of the year. Few major mall projects that were earlier
40,000
-5
expected to become operational during the year have now
20,000 -10
0 -15
Mall Supply Trend
Southern
Avenue,
Dover Lane
Ballygunge
Queen Park,
Rainy Park
Gurusday Rd
EM Bypass
Alipre Park Rd,

Ashoka Rd,
Belvedere Rd
Lansdowne,
Park Street
Salt Lake
Rajarhat
3.50
3.00
Source: Cushman & Wakefield Research 2.50
2.00
Average Residential Rental Values - Mid End2
1.50
40,000 140
1.00
35,000
120
30,000 100 0.50

25,000
80
20,000 0.00
60 2007 2008 2009 (F) 2010 (F)
15,000 Year
40
10,000
5,000 20
0 0
Average Mall Rental Trend
New Alipore,
Golf Green,
Tollygunj
Hindustan
Park
EM Bypass
Rajarhat
Kakurgachi,
Lake Town,
Jessore Rd,
Ultadanga
550
500
450
Low High Annual Growth Rate (%) 400
Source: Cushman & Wakefield Research 350
300
250
North east Kolkata particularly Rajarhat was expected to 200
change the dynamics of residential market in Kolkata but it 150
failed to make any significant impact on account of 100

50
infrastructural problems posing impediments with a number
0
of projects both in the construction stage and those delivered 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
facing serious hurdles. It has led to a decline in the rentals and Salt Lake Elgin Road
South Kolkata Rajarhat
is likely to see further decline probably in the end-user driven
mid range segment. Ballygunge, Gurusaday Road, Alipore Road,
Ashoka Road and Belvedere Road which have been quoting 1 Average high end values are for properties above 3,000 sq.ft.
highest rentals on account of their positioning as traditional 2 Average mid end values are for properties below 2,000 sq.ft.
40
been deferred and are slated for 2009 launch. In Kolkata renegotiating the rental values to cover on the rising
market, the retailers have shown a preference for being operational costs.
present across the city's various malls. Retail rental values
across the city's main streets stabilized during the first three Main Street Development
quarters of 2008; however by the end of the year some
During 2008, the prominent main streets of Kolkata - Park
corrections were observed in Park Street and Theatre Road.
Street, Camac Street, Elgin Road and Theatre Road witnessed
Mall Development restrained activities as compared to the malls. Retail rentals
across the city's main streets remained stable over the first
The city witnessed about 1.37 million sq.ft of new mall supply three quarters of 2008. By fourth quarter of 2008, a slight
in 2008 which was entirely accounted for by two malls -
South City Mall in south Kolkata and Mani Square in EM Average Main Street Rental Trend
Bypass that started operations in the first half of 2008. The 300
South City Mall measuring approximately 1 million sq.ft

became operational in the first quarter of the year and is the 250
largest mall in Kolkata with retail giants such as Shoppers 200

Stop, Pantaloons and Starmark as anchors. The mall houses
150
other eminent brands as Lladro,Van Heusen, Next, Swarovski
and Hidesign, etc. among others. 100
Mall supply in Kolkata was projected at 3.9 million sq.ft at the 50
beginning of 2008 but fell short by over 64%. By the third 0

quarter of 2008, pursuant to the general economic conditions 1Q-07 2Q-07 3Q-07 4Q-07 1Q-08 2Q-08 3Q-08 4Q-08
a number of projects were either shelved or deferred to later Camac Street Park Street
Theatre Road Elgin Road
years. Over 70% of the deferred mall projects were in the
micro-market of Rajarhat in anticipation of the potential
catchments from a number of ongoing residential and decline was registered in Park Street and Theatre Road with a
commercial projects. But the slow pace of development in few prominent properties remaining vacant in these locations
addition to the infrastructural impediments curtailed the largely due to the higher asking rates.
attractiveness of Rajarhat as the next major retail destination
in Kolkata. The city's high streets lacked new space options as there was
no re-development or new construction activity. Large format
Few big retailers who had earlier committed substantial retail retailers showed preference for traditional markets like
spaces in their upcoming mall projects exited their Gariahat but limited space and lack of quality infrastructure
commitments in wake of the present conditions and curtailed further activities in the micro-market. New locations
deferment of the projects. The city also witnessed few mall like New Alipore, south Kolkata and Kankurgachi saw some
projects across significant locations getting converted into activities due to factors like affordable real estate prices and
mixed use developments with relatively less space assigned established catchments. The year also saw some leasing activity
for retail developments attributable to the current economic off high streets with brands like Levi's, Reebok, Reliance
conditions. Digital, etc opening their outlets in such locations.
Mall rentals in south Kolkata and Rajarhat during the first
Outlook
three quarters of 2008 maintained a northward trend. The
presence of major retail brands and high occupancy was the Kolkata is likely to witness further softening in rental values
prime determinant in the escalation of the rentals in South across both malls and main streets. Mall supply is expected to
Kolkata; while Rajarhat gained on account of it's positioning as considerably come down from the earlier projections of 3.3
the next retail destination and comparatively lower rentals. million sq.ft in 2009 as many developers are now converting
Salt Lake and Elgin Road saw stabilisation in the rental values their planned retail spaces to office spaces or have delayed the
primarily on account of unavailability of vacant space. project. Most of the new mall supply in 2009 will comprise of
However by 4Q 2008, rental values across major micro deferred projects of 2008. Retail segments like value retail and
markets barring Salt Lake registered a decline. The mall discount format, food and beverage retail is expected to see
vacancy levels in the city stood at 5.59% at the end of 2008 more activity. Locations like Kankurgachi with lower rental
with relatively reduced leasing activities during the fourth values off the main streets with established catchments are
quarter. The market was also witness to retailers expected to emerge as newer destinations.
Note :
41
AHMEDABAD MARKET OUTLOOK
Sardar
Gota
Patel
Chandkheda Ring Rd
ONGC
Ram Nagar GIDC

Acher Naroda
Chandlodia Hansol Kuber

Nirnay Ranip NH 59
Nagar
Nagar
Ghatlodia Nava
Sardar Naroda
Patel Sola
Ring Rd Megani Nagar
Thaltej Shahibagh
Drive-in Rd Naranpura Kalapi Thakkarbapa
Nagar Nagar Nicol
Navrangpura Haripura
Judges Bungalow
University Hirawadi
AHMEDABAD
ay
Vastrapur Area
hw
Rd
Hig
Ashram Rd Saraspura
G.
Satellite Rd Odhav
C.
S.G
Jodhpur Law Garden Rakhial Rd

Village
Prahlad
Fatehpur
Nagar
Vasana Kankaria Lake
Vejalpur Paldi Amraiwadi Sardar
Patel
Mani Nagar Ring Rd
Juhapura CTM
Makarba
Vasana Chandola Laxmi Narayan
Sanand Hwy Lake Society
Sarkhej Ahm
Kankarai Ghodasar eda
bad
Amraiwadi Vad
Isanpur oda
ra E
xpr
ess
Mani Nagar Hw
Narol y
CTM
Sabarmati Vatwa
SH 4 NH 8
River
SH 3
Lambha

COMMERCIAL and was mainly concentrated in 2Q 2008 (51%) and 4Q 2008

The total demand for commercial office space in Ahmedabad (45%). Owing to the availability of land for development,
was recorded at 349,000 sq. ft. in 2008. With marginal suburban micro markets of Satellite Road ( 58%) and Sarkhej
pre commitments of 32,000 sq. ft., absorption (317,000 sq. ft.) Gandhinagar Highway (11%) accounted for about 69 % of the
accounted for approximately 91% of the total demand in total supply in 2008, while C.G Road made up for
2008. The micro market of Sarkhej Gandhinagar Highway approximately 23% of the of the total supply in 2008.
(S.G Road) witnessed the highest demand of the year at Traditionally a strong office space market, Ashram Road did
186,900 sq. ft. followed by C.G Road (110,764 sq. ft.). Owing not witness any significant new supply, due to limited
to the marginal supply and the current high rentals Ashram opportunities for new commercial space development.
Road witnessed the least demand in 2008. Sector like Telecom
Sectorwise Absorption Trend - 2008
and Communication (27%) and BFSI (26%) were the main
14%
demand drivers of commercial space in 2008. Pharmaceuticals 26%
recorded a demand of about 16% while sectors like IT/ITeS

and infrastructure/ construction witnessed limited demand for
corporate office space in 2008. 27%
In 2008 Ahmedabad witnessed fresh office supply of

17%
about 590,000 sq. ft. catering mainly to the non-IT sector. 16%
As compared to 2007, Ahmedabad witnessed a drop of 16%
BFSI Infrastructure / Construction Pharmaceuticals
in total supply in 2008 due to delays in completion of Telecommunication Others
certain on going projects. Supply was also sporadic in 2008
42
Owing to the significantly reduced supply, Ahmedabad projects and even postponement in launch of a few new
witnessed an average vacancy of approximately 3-4% in 2008 projects thus curtailing the entry of new supply in the first few
which was marginally lower than the vacancy levels of 5-7% months of 2009. Owing to the limited supply in the next 3-6
observed in 2007. With a few companies vacating premises months, the rental and capital values across most micro
and reduced leasing activity happening across Ashram Road, markets are expected to remain stable over short to medium
the micro market witnessed the highest vacancy of about 6%. term.
Sarkhej Gandhinagar Highway and Satellite Road witnessed
vacancy of approximately 4% followed by C.G Road which Rental Cycle
recorded the lowest vacancy of about 2%. Rental 4Q 2008
Peak

40 35
Market Market
35 Slowing Recession
30
30 Weakening
25 Strengthening
Growth Rate (%)

Market Market
25
20
20
15 Market Market
15 Recovery Bottoming
10
10
5 5
Rental
0 0 Trough 4Q 2009 (F)
C.G Road
Ashram
Satellite
Gandhinagar
Road
Road
Highway
Sarkhej
2007 2008 Growth Rate (%) Sarkhej Gandhinagar Highway is expected to be an active
Source: Cushman & Wakefield Research commercial corridor of the city due to its accessibility to
several planned SEZs, Gujarat International Finance Tech City
Average Rental Values Trend - Office Districts1 (GIFT) and Industrial Parks such as Sanand. Sarkhej
100
Gandhinagar Highway along with Satellite Road will be
80
witnessing development of commercial buildings with no retail
component which is expected to command a premium over
60
other mixed use developments.
40
RESIDENTIAL
20
Historically the Ahmedabad residential sector has been
0 dominated by independent row houses and villas. However the
1Q - 04
2Q - 04
3Q - 04
4Q - 04
1Q - 03
2Q - 03
3Q - 03
4Q - 03
1Q - 06
2Q - 06
3Q - 06
4Q - 06
1Q - 07
2Q - 07
3Q - 07
4Q - 07
1Q - 08
2Q - 08
3Q - 08
4Q - 08
1Q - 05
2Q - 05
3Q - 05
4Q - 05
trend is now changing with a number of mid and high range

C. G. Road Sarkhej-Gandhinagar Highway apartments being planned and developed in micro markets of
Ashram Road Satellite Road western Ahmedabad such as Satellite Road, Prahlad Nagar,
Source: Cushman & Wakefield Research Judges Bungalow and Vastrapur. Due to limited availability of
land in central locations such as C.G Road and Ashram Road,
Ahmedabad witnessed consistent growth in rental values
supply was mainly concentrated in suburban micro markets
across most micro markets for first three quarters of 2008
such as Satellite Road and Prahlad Nagar. In 2008, Ahmedabad
and reached a record high in 3Q 2008. However with
witnessed subdued demand owing to a wait and watch policy
sufficient supply meeting the current demand, rental values
adopted by end users.
stabilized across all micro markets in 4Q 2008. With majority
of new developments in micro markets of Sarkhej Locations such as Gujarat High Court, Thaltej, Gota, Ghatlodia
Gandhinagar Highway and Satellite Road offering larger floor and Sola have emerged as new residential destinations catering
plates and other amenities such as ample parking space which to mid and high segment. These locations are expected to
was not seen in the earlier developments, these micro witness an increase in residential developments in 2009 due to
markets witnessed highest year-on-year appreciation of 27% their proximity to Sarkhej Gandhinagar Highway, Sardar Patel
followed by C.G Road witnessing a 23% increase in rental Ring Road, proposed SEZs, upcoming IT Parks and Gujarat
values over 2007. International Finance Tech (GIFT) City along with other
amenities like educational institutes.
Outlook
In the wake of current economic slowdown which has Capital Values
significantly reduced demand for office spaces Ahmedabad is In 2008 Ahmedabad residential market witnessed softening of
likely to witness delays in completion of certain ongoing capital values for both high and mid end properties due to a
slowdown in demand which was primarily driven by end users.
43
Average Residential Capital Values - High End1 Outlook
3,000 0 With developers postponing their projects as a result of

-2
2,500 limited availability of funds, Ahmedabad is expected to witness
-4
2,000
marginal supply in short to medium term leading to
-6
stabilization in capital values in next 3-6 months. However
1,500 -8
rental values are also expected to remain stable in next 3-6
-10
1,000 months. Upcoming locations of Naroda, Nikol and Gota are
-12
500 likely to witness spurt in demand due to their proximity to
-14
0 -16
infrastructural developments such as Bus Rapid Transit System
Satellite
Road
Navrangpura
Judges
Bungalow
Nagar
Vastrapur
Mani
Nagar
(BRTS) and Mass Rapid Transit System (MRTS).
A few integrated townships by local and national developers
Low High Annual Growth Rate (%) have been proposed in peripheral locations of Ahmedabad
Source: Cushman & Wakefield Research such as Sanathal, Dantali and Sardar Patel Ring Road which are
expected to add more supply of mid and high end properties
Investor activity which was largely confined in western in Ahmedabad in near future.
Ahmedabad also subsided in the second half of 2008 due to
curtailed availability of funds. Navrangpura and Vastrapur
RETAIL
witnessed highest drop in capital values across high end
residential properties due to increasing preference of end Organized retail in Ahmedabad is primarily concentrated in
users towards new residential developments in Prahlad Nagar western parts of the city in locations such as C.G Road,
and Satellite Road. However a conservative approach and Sarkhej Gandhinagar Highway, Satellite Road and Drive-in
postponement of purchase decisions by end users has forced Road. In 2008 main streets witnessed higher leasing activity as
developers to offer discounts and freebees. compared to malls with C.G Road being the most active and
sought after main street in Ahmedabad. An overall slowdown
Rental Values in consumer spend has resulted in a drop in sales which has
Since capital values appreciated by about 2-3 times over the forced many retailers in the city to either reconsider their
last few years and investors looked to maintain their returns, expansion plans or reduce new or previously committed space
an increase in rental values across all micro markets of Mall Supply Trend
Ahmedabad was witnessed in 2008. Decrease in affordability
1.4
of end users due to significant high interest rates has also led
to increase in demand for rental accommodation. As 1.2
compared to eastern Ahmedabad, micro markets in western

1
Ahmedabad commands higher rental values due to their
0.8
proximity to offices and improved social and physical
infrastructure. Proximity to commercial and retail hubs such 0.6
as Sarkhej Gandhinagar Highway and Satellite Road led micro 0.4
markets of Satellite Road, Judges Bungalow,Vastrapur and

0.2
Prahlad Nagar to witness highest rental appreciation across
0
high end residential properties. 2006 2007 2008 2009 (F) 2010 (F)
Year
Average Residential Rental Values - High End1 Source: Cushman & Wakefield Research
20,000 30
18,000 Average Mall Rental Trend
25
Capital Values (INR/month)
16,000
300
14,000
20
Rental Values )INR/sq.ft./month)
12,000
10,000 15
8,000 200
6,000 10
4,000
5
2,000
100
0 0
Satellite
Road
Navrangpura
Judges
Bungalow
Nagar
Vastrapur
Mani
Nagar
0
Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
Source: Cushman & Wakefield Research Vastrapur SG Highway

Drive-in Road Kankaria Lake
1 Average high end values are for properties ranging from 1,500 to 4,000 sq.ft. Source: Cushman & Wakefield Research
44
take up. In the last 4 quarters, rental values have gone down Average Main Street Rental Trend
by approximately 6-26% across main streets and about 16- 200
30% across malls.

150
Mall Development
100
Ahmedabad saw the commencement of two malls in 2008
which were mostly concentrated in micro markets of Sarkhej
50
Gandhinagar Highway (350,000 sq.ft.) and Satellite Road
(220,000 sq.ft.) adding 570,000 sq. ft. of mall space, taking the 0
total mall stock of the city to 2.63 million sq.ft. However, as Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08
compared to 2007, Ahmedabad witnessed significantly CG Road Law Garden

reduced mall supply in 2008. Two other malls with a total Satellite Road SG Highway
retail space of approximately 650,000 sq. ft. are expected to

get operational in first half of 2009. Sarkhej Gandhinagar
Highway, with about 77% of the total upcoming mall exclusive brand outlets over other main street locations and
development in 2009, is expected to remain an active retail malls. Reduced demand for retail space due to cautious
corridor of the city. Ahmedabad is expected to witness small expansion strategy by the retailers impacted main street rental
and mid format mall supply in 2009. values in Ahmedabad with all micro markets registering a
decline in rental values in 2008. Satellite Road witnessed the
After witnessing stability in the first half, Ahmedabad highest year-on-year decline of about 26% followed by Law
observed a drop in mall rental values across all micro markets garden (19%). Even though C.G Road remained an active main
in second half of 2008. Lower than expected revenues, street location in the city, it witnessed softening of rental
disproportionately higher occupancy cost and poor values by approximately 14%. Sarkhej Gandhinagar highway
conversions forced retailers/brands re - look at their portfolio witnessed lowest year-on-year decline of 6% in rental values
leading to many retailers canceling or downsizing their space which could be attributed to city's development pattern
requirements and thus adding to higher vacancies of about towards western region, availability of large floor plates and
15-40% in the few existing malls in the city. Micro market of proximity to upcoming commercial and residential
Sarkhej Gandhinagar Highway witnessed the highest vacancy developments.
of about 40% followed by Kankaria Lake (35%) and Drive-in
Road and Satellite Road (15%). Owing to limited leasing Outlook
activity and high vacancy of about 35% in the operational mall,
micro market of Kankaria Lake witnessed highest year-on- With retailers postponing their expansion plans in wake of
year decline of about 30% followed by Sarkhej Gandhinagar consolidating and correcting their portfolio, Ahmedabad is
Highway observing a drop of about 21% in rental values over expected to witness a slowdown in leasing activity in next 3-6
a single year. months. The upcoming mall supply coupled with changes and
realignment in retailers' outlook are likely to put further
Main Street Development pressure on mall rental values leading to further decline of
rental values in short to medium term. However C.G Road
C.G Road continues to be the most active and sought after and Sarkhej Gandhinagar Highway are expected to witness
main streets in Ahmedabad and was preferred by retailers for some leasing activity in short to mid term.
Note :
45
END NOTES
According to a Cushman & Wakefield report on the economy Despite positive intentions, these measures failed to create any
and its impact on real estate, the good news for Asia is that immediate impact on the sector, save lowered construction
growth is still expected to do better than in previous costs. For starters, a more pro-active role was expected from
downturns experienced by the region. The big Asian banks as far as instantaneous sanctioning of affordable housing
economies of China and India are forecast to grow at 8.5% loans was concerned.
and 6.3% respectively, compared to sub-zero growth in the
To strengthen the credit/fiscal front of the economy the
USA and EU. In addition, domestic demand from the two and
Centre is expected to announce its second stimulus package in
a half billion consumers of Asia's two strongest emerging
early January 2009. At the end of the day, till these measures
economies will help support intra-regional Asian trade even in
get translated from the drawing board on to the marketplace,
such dismal times.
it is really too early to assess the impact of such stimulus
Governments and international institutions have put in place packages on the realty sector in the short to medium term.
mechanisms to try to prevent the transmission of the crisis
India Realty Confidence Index 2008
from the advanced economies into Asia. Though it is too soon
yet to indicate its success, the great advantage Asia has is that The slowdown in the Indian economy along with restrained
its governments have sufficient reserves and surpluses and are availability of funds and reducing demand across all
better placed to survive the turmoil than emerging markets in sectors (commercial, retail and residential) have taken a
other regions. toll on confidence levels of developers, financial institutions
and end users alike. Stakeholders' confidence nosedived in
As investment markets become more liquid, Asia will be well
2H 2008, particularly for major cities like Mumbai and NCR,
placed to benefit from that investment and will continue to be
which witnessed subdued demand for commercial office
a great place to hold real estate assets. At present even
space during the period, coupled with large upcoming supply
though real estate deals are somewhat slow, as markets start
and increasing vacancies. The drop in confidence level was
to ease, economic conditions combined with government
comparatively lower in cities like Hyderabad, Pune and
reserves available for stimulus packages should continue to
Bangalore. This can be attributed to developers anticipating
make Asia attractive for investments.
an upswing in demand, particularly for residential space
Though not on the massive scale of the Chinese government, over the next six months as a fall out of lowering home loan
but the Indian government too introduced several fiscal and interest rates.
stimulus packages. Since October 2008 the Reserve Bank of
India (RBI) had been taking several steps to lower interest Real Estate Confidence Index - 2008
0
rates in a bid to revive market conditions. But with banks -20
-10 10
20
treating the real estate sector with extreme caution, a -30 30
-40 40
plunging consumer confidence index and crashing valuations,
-50 50
the resources of both developers and funds are limited,
-60 60
leading to frozen projects and staggered/aborted expansion
-70 70
plans. The hardest hit, are the small and medium-ticket
players. -80 80
As a stimulus package for the sector (and to help the rollover -90 90
of existing debt), industry bodies such as the National Real -100 100
Estate Development Council (NAREDCO) and the NCR Mumbai Hyderabad Kolkata
Confederation of Real Estate Developers' Associations of Pune Chennai Ahmedabad Bangalore
India (CREDAI) had appealed to the Government to ease FDI Source: Cushman & Wakefield Research
and ECB norms as well as to formulate fresh policies for
City Confidence Index
rescheduling term/ construction loans.
NCR 4Q 2008
As part of the first stimulus package announced by the H1 2009
Government in December 2008, the RE sector was allowed Mumbai
special treatment by banks, while the housing sector was Hyderabad

accorded priority sector status in a move to trigger demand.
Pune
An additional INR 20,000 crore was pumped into the current
fiscal as incentives for sectors like infrastructure, housing, Chennai
textiles and exports. Ahmedabad
What the first stimulus package spelt for the RE sector Bangalore
?Priority sector status for low-value loans 0 10 20 30 40 50 60 70 80 90 100
?Restructuring of loans for commercial RE projects Confidence Index (%)
?Excise duty cuts on construction costs like steel and cement Source: Cushman & Wakefield Research
46
END NOTES
Drop in confidence levels have resulted in developers ?Resizing of retail outlets, increasing renegotiations on
postponing launch of new projects and focusing on reducing rentals and even exit from unviable retail locations
their current inventory; while financial institutions have ?Retail spaces seeing conversion into office space for quick
adopted a cautious approach in investing in upcoming real revenue returns in certain micro markets
estate projects.
?Sustaining retail business through innovative revenue
In spite of several fiscal measures being undertaken by the RBI models, such as minimum guarantee and revenue sharing
and central government to stimulate demand, real estate
?Buy out of space rather than lease, by firms with enough
stakeholders are likely to remain cautious in 1H 2009 across
liquidity
most markets. A large number of respondents foresee real
estate and finance market conditions worsening over the next ?Consolidation of small-ticket players by bigger, more stable
six months, indicating that 2009 is likely to have a weaker start players in the realty sector
as compared to 2008. Long-Term India Story Remains Intact
Confidence Index Methodology
The long-term India story remains intact because the
Cushman & Wakefield's Real Estate Confidence Index is a measure fundamental growth drivers of the economy continue to exist.
of the stakeholders' confidence level and expectation based on the The present crisis may be taken up in a positive spirit as a
current market scenario and future outlook. To asses the current
learning experience for the sector to grow stronger, more
confidence levels, a survey was conducted across the country, where
respondents (developers, financial institutions and end users) gave disciplined and organised at the end of the day, with greater
their opinion on factors like financial environment, business transparency. While the short-term investor has been hit, the
conditions, current and anticipated demand, movement of rental and long-term investors as well as primary end user demand
capital values, etc. remains intact. With the nation's realty growth drivers
The gathered data was collated to assess shifts in confidence levels, remaining unchanged, the current situation is more like a
which would influence future business cycles in the Indian real estate temporary, albeit longish, market upheaval which will right
sector. A positive confidence level indicates increasing availability of itself in the long-term.
funds, heightened constructions activity and increasing demand. A
drop in confidence level, however, highlights a pessimistic view Long-Term Growth Drivers in India
resulting in a slowdown in demand and consumer spending.
?The rise of the middle class,
?The rise of a knowledge-based economy,
Outlook ?Greater deregulation, and
Despite the credit crunch, real estate deals are still taking ?Growing lifestyle aspirations and growing affluence
place although at a slower pace. The outlook for the real
estate sector in India remains broadly better than other
The current economic slowdown is forcing companies across
emerging markets across the globe. According to Cushman &
the world to formulate strategies that will help in surviving the
Wakefield Research, greater demand from consumers and
downturn. Falling demand and dropping top lines have
falling dependency ratios will provide the basis for growth in
necessitated cost optimisation and a disciplined approach to
the Asia Pacific region, including India, which in turn will
growth. Companies are finding these economic conditions
support demand for real estate.
challenging and with compressed profit margins, it is likely that
New Trends: Current & Upcoming they will squeeze operational efficiencies to extract maximum
value. In such a scenario, real estate, given its share in the
?Companies basing office leasing activities on short-term
operational or capital expenditure of a company, can
outlook rather than on long-term expansion plans
contribute significantly to reducing operational cost and
?Need-based leasing of space gradually gaining ground as protecting the bottom line. This, however, will not be achieved
demand for soft options declines by mere downscaling of the real estate exposure, but by
?Increasing subleasing of space by corporates in the office making real estate a key part of the overall business strategy
sector of any company.
?Exit by commercial space takers from CBDs and probable Given the changing landscape, developments with a balanced
relocation to more sustainable areas mix of real estate are likely to do better than most. Realistic
?Home buyers will look out for affordable and quality and more affordable price points in the housing sector, instead
developments in a price-sensitive market of merely reduced square footage, are also required to revive
the market. To survive, the sector now needs to return its
?Township projects with a balanced mix of developments
focus on quality, affordability, efficiency and delivery.
will do better
?Increasing opportunity being created by developers for
smaller space occupiers
47
C&W OUTLOOK
CUSHMAN & WAKEFIELD
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today has 227 offices in 59 countries around the globe with over 15,000 talented professionals. Cushman & Wakefield is
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Cushman & Wakefield commenced India operations in 1997 and was the first international real estate service provider to
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Pune, C&W has serviced the needs of clients in all major Indian cities like Mohali, Chandigarh, Baroda, Goa, Nagpur, Jaipur,
Mysore, Coimbatore, Tuticorin, Cochin, amongst others.
India is one of the most promising countries in Asia while also being one of the finest IT destinations today; however, the
Indian real estate market is considered to be one of the most complex markets within Asia, hence creating the need for
professional real estate management.
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worldwide basis to major corporations, developers, retailers, investors, entrepreneurs, government entities, small and
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We are strategically poised to service the varied needs of clients throughout the Indian sub-continent through our
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48
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C&amp;W India Real Estate Outlook 2009

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OUTLOOK 2009

INDIA REAL ESTATE OVERVIEW

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION MARCH 2009

India Economic Outlook 2

Realty Sector Outlook 4

Mumbai Market Outlook 6

NCR Market Outlook 12

Bangalore Market Outlook 17

Pune Market Outlook 22

Chennai Market Outlook 27

Hyderabad Market Outlook 32

Kolkata Market Outlook 37

Ahmedabad Market Outlook 42

1 Mumbai, NCR, Bangalore, Pune, Chennai, Hyderabad, Kolkata and Ahmedabad

they had nurtured thus far. Correcting rentals for commercial

making way for primary home buyers who anticipated further

the Indian government with planned projects such as the

Policy Changes & Impact

Main Street Park Street -9%

Source: Cushman & Wakefield Research

12 Main Street MG Road -25%

Source: Cushman & Wakefield Research

High End Rental Nungambakkam, 0%

Borivli Sanjay Gandhi

Source: Cushman & Wakefield

Commercial Retail Residential

COMMERCIAL commitments in upcoming projects from IT/ITeS and BFSI

Office Supply - 2008 Sectorwise Absorption Trend - 2008

Rental Values (INR/sq.ft./month)

Growth Rate (%)

Dec 2007 Dec 2008 Growth Rate (%)

Supply Absorption Vacancy Rate (%) 300

Source: Cushman & Wakefield Research 200

space demand in the city respectively. Additionally Mumbai

Annual Growth Rate (%)

Peripheral locations like Thane and eastern suburbs (Vikhroli,

Rental Values (INR/month)

Annual Growth Rate (%)

Annual Growth Rate (%)

Annual Growth Rate (%)

Candy, Pedder Rd.

Rental Values (INR/sq.ft./month)

With brands increasingly focusing on cost containment, 100

significant correction in rental values was witnessed across 0

1400 will predominately comprise of mid and small formats malls;

Source: Cushman & Wakefield

Commercial Retail Residential

COMMERCIAL Majority of the office development catered to the IT/ITeS

Other (construction, advertising, aviation etc.) IT & ITeS Automobile

Vacancy Rate (%)

4 Average Rental Values Trend - Office Districts3

Rental Values (INR/Sq.ft./month)

Supply Absorption Vacancy Rate (%) 250

The demand for commercial office space in NCR was 100

recorded at 14.4 million sq.ft. during 2008 which includes 5.8 50

350 15 The pre-commitments are likely to reduce in the near future

Source: Cushman & Wakefield Research 4Q 2009(F)

on the other hand, depicted correction from the second

Capital Values (INR/sq.ft.)

Annual Growth Rate (%)

The demand in residential segment in NCR witnessed a 15,000

gradual shift from investor driven market to that driven by 0

Annual Growth Rate (%)

C&W India Real Estate Outlook 2009

C&W India Real Estate Outlook 2009