TABLE OF CONTENT

LIST OF TABLES i
CHAPTER TITLE PAGE NO:

1. INTRODUCTION
1.1 Introduction & Background of the Problem 1
1.2 Objective of the study 4
1.3 Scope of the study 5
1.4 Limitation of the study 5

2. REVIEW OF RELATED LITERATURE

2.1 Review of related literature 6
2.2 Industry profile 7
2.3 Company profile 11

3. RESEARCH DESIGN & METHODOLOGY

3.1 Research Design 14
3.2 Data Collection 15
3.3 Methodology and Sample Selection 15

4. DATA ANALYSIS AND INTERPRETATION

4.1 Data Analysis and Interpretation 18

5. RESULTS AND DISCUSSIONS

5.1 Findings of the study 57
5.2 Suggestions / Recommendations 60
5.3 Conclusion 60

6. BIBLIOGRAPHY
6.1 Bibliography 61
A STUDY ON REALTY INVESTMENT OPPORTUNITIES IN MAJOR
CITIES AND MARKETS OF INDIA AND US

LIST OF TABLES

CHAPTER TITLE PAGE NO:

1. Capital Value – Bangalore 19

2. Trend Analysis For Bangalore 21

3. Rental Value – Bangalore 21

4. Latest Residential Market Price - Bangalore 22

5. Capital Value – Chennai 26

6. Trend Analysis For Chennai 27

7. Rental Value – Chennai 27

8. Latest Residential Market Price - Chennai 30

9. Grade Office A Rent – Delhi 40

10. Grade Office B Rent – Delhi 40

11. Trend Analysis For Grade A Office Delhi 41

12. Trend Analysis For Grade B Office Delhi 41

13. Latest Commercial Market Price - Delhi 42

14. Grade Office A Rent – Mumbai 47

15. Grade Office B Rent – Mumbai 48

16. Trend Analysis For Grade A Office Mumbai 49

17. Trend Analysis For Grade B Office Mumbai 49

18. Latest Commercial Market Price - Mumbai 50

A STUDY ON REALTY INVESTMENT OPPORTUNITIES IN MAJOR
CITIES AND MARKETS OF INDIA AND US

1. Introduction and Background of the Problem

1.1. Introduction
In the mid-nineties, the Indian real estate was booming. Projects were
being launched (and sold) across all cities and price points. It turned out that
most of the frenzied buying was being done by investors – both local and
overseas. Towards the end of 1996–97, the party wound up. A bloodbath
followed, investors pulled out and projects were left incomplete. Property prices
halved and in some cases even reached one-third levels vis-à-vis their peaks.
From then on it was a very slow and painful recovery, leaving only the
best men standing, a `going back to the roots’ scenario. A turnaround was
witnessed in 2000 when markets started strengthening; the middle class
consumption (driven by low rates of interest) increased dramatically. Also the off
take by the IT sector has been huge, prices have moved upwards, in some cases
too sharply for comfort. There are opportunities available today for investment
across all types of real estate and across all budgets.
Indian real estate market is roaring thanks to the rapidly growing
economy, soaring stock market, influx of foreign investment and the growing
middle class. Property prices have gone up at least 20 – 25% over the past nine
to twelve months across all segments. While Information Technology (IT) and
Business Process Outsourcing (BPO) companies continue to drive current real
estate growth; the resurgence of manufacturing, organized retail and distribution
warehousing will be the additional drivers in coming years.
According to the Nasscom-McKinsey Report 2006 “The IT industry will
grow at a Compounded Annual Growth Rate (CAGR) of 28% to reach $60 billion
in export revenues by 2010 while the offshore IT solutions business will grow at
25% to touch $35 billion in export revenues, the BPO business will witness a
CAGR of 37% to account for $25 billion of the projected $60 billion”. This will
have a strong influence on the buoyant real estate industry. Much of the current
growth in the real estate sector across India is due to the boom in IT and ITES,
which needs fully-developed properties. This sector is also projected to demand
around 80 million SF of space over the next five years.
Indian property developers are moving to smaller towns and cities due to
faster pace of growth and increase in demand for quality development. Cities like
Ahmedabad, Cochin, Chandigarh, Indore, Jaipur, Mysore and Nagpur are
gaining popularity over the metro cities due to increasing labour, real estate costs
and attrition rates. Many multinationals have unveiled plans for the small cities to
take advantage of the availability of large land parcels at affordable rates,
improving telecom and infrastructure. Software Technology Parks of India (STPI)
will open 12 new software parks across the country targeting primarily tier- II and
III cities. STPI hopes that the proposed parks will generate employment for
around two lakhs people over a couple of years and will have significant impact
on real estate development. Tier- III cities currently provide cost advantages of
15 to 30% over tier I and II cities and will have the effect of prolonging India's
position of global leadership in the off-shoring of IT activities for the next few
years.
The Indian retail sector is set to expand two-fold in the next three years,
with food and apparel segments expected to drive the growth. The UPA- Left
alliance has approved 51% foreign direct investment (FDI) in single brand
retailing however, all FDI proposals will have to be approved by the Foreign
Investment Promotion Board (FIPB). The share of organized retail has gone from
INR 50 billion in 1992 to INR 350 billion in 2005. Around 400 malls, shopping
centers and multiplexes admeasuring to 50 million SF of quality space are under
construction in tier- I and II cities across India.
The overall industries-having a direct bearing on infrastructure and
accounting for 27 per cent weight in the Index of Industrial Production (IIP)-
registered a growth of 8.3 per cent during April-December 2006, which was
higher than the 5.5 per cent registered during the same period in the previous
year. In the first nine months of 2006-07, crude petroleum, refinery products and
electricity generation registered accelerated growth rates.
While its global counterpart may grow a measly 5 per cent, India's
construction equipment sector is growing at a scorching pace of over 30 per cent
annually-driven by huge investments by both the Government and the private
sector in infrastructure development.
With sustained growth in infrastructure, the order book position of the 10
large construction companies in India has gone up by over 50 per cent year-on-
year for the quarter ending June '06. With such bullish prospects in infrastructure,
affiliated industries such as cement are on a high. Cement consumption, for the
first time, is set to exceed the 150-million tonne mark. Reflecting the demand for
the commodity, capacity utilisation rose to over 100 per cent-to touch 102 per
cent in January 2007-with dispatches touching 14.10 million tonnes as against
the production of 14 million tonnes.
As opportunities in the sector continue to come to the fore, foreign direct
investment has been moving northwards. The real estate and construction
sectors received FDI of US$ 289.1 million in the first half of the current fiscal, with
most inflows coming through the popular Mauritius route.
 1.2. Objectives and Methodology:

1.2.1. Objectives
 To analyze the residential and commercial realty investment opportunities
in India and US.
 To find out the real property investment opportunities & prices and rents
prevailing in the major cities of India and in major markets of US.
 To analyze the growth reasons of realty investment in each of the major
cities of India and in major markets of US.
 To interpret the growth potentials and forecast the investment
opportunities of real property in the major cities and markets.
 To suggest the investors to invest in high return and low risk realty
investment available in the major cities and markets based on the
forecasting.
1.3. Scope of the Study:

This analytical research is restricted to four major cities in India and three
major markets in US, because the forecasting, which has to be done, gives
the outlook of the investment opportunities between the major cities in India
and also between the major markets in US. The forecasting is based on long
term perspective on future Indian markets by telling the factors driving the US
markets.

1.4. Limitation of the Study:

The major limitations of this research are

 Only secondary data of last 2 years for India and 5 years data for
US is used for analysis.
 Study gives suggestion only for investor of the real property in the
major cities and markets and not for the buyers whose ultimate aim
is to buy for living purpose and also not for brokers of real estate.
 2.1. Review of Literature

According to Bharat Book Bureau (2005), The rapidly growing real estate
market in India is moving towards maturity with increasing participation from
large local and international players, rising investor interest and a market-friendly
approach. The government’s decisions to allow 100% foreign direct investment
(FDI) and the entry of venture funds in real estate are expected to add to the
growth momentum created by affordable financing options and rising disposable
incomes. Further, there are indications that obstacles such as the absence of
investment instruments in real estate are likely to be removed. Already, real
estate mutual funds have been allowed to be floated in a move industry
observers believe will pave the way for the setting-up of Real Estate Investment
Trust-like structures. Apart from the IT sector, demand for commercial space is
also expected to be driven by the special economic zones, large retail formats
and warehousing.

The real estate market is likely to touch US $xx by 2008, up from US$16
billion in 2004-05.It is estimated that private equity funds would invest about US
$xx in the country’s real estate sector between 2006-2008, attracted by yields
that are among the highest in the region. In mature markets of advanced
countries, developers can at best hope for 5-7% return, but in India, real estate
investment yields are in the range of xx%. The widening demand-supply gap for
international quality real estate space in the A-grade cities like Delhi, Mumbai,
Chennai, Bangalore, Hyderabad and Kolkata has created a spillover demand in
smaller cities. The mounting pressure has raised prices of both residential and
commercial properties in these cities.A look at the demographics and economic
development indices suggest that residential and commercial demand can be
expected to remain high. Increasing disposable incomes, affordable home loans,
urbanization and the emergence of a younger earning age group (aged between
25-45 years) as the largest constituent of population will sustain demand for
housing.

According to India Brand Equity foundation, The real estate story in India
is growing bigger by the day as it continues to receive an ever-increasing influx of
funds. While more than 35 big-ticket foreign funds have already checked in, the
first half of 2007 will see at least 20 more funds making an India entry. Meaning,
US$ 10 billion of foreign direct investment (FDI) will be injected into the real
estate sector.

Merrill Lynch forecasts that the Indian realty sector will grow from US$ 12
billion in 2005 to US$ 90 billion by 2015. Prominent global funds including
Carlyle, Blackstone, Morgan Stanley, Trikona and Warbus Pincus are sitting on a
total corpus of US$ 12-15 billion, say experts.

Retailers in India--the most aggressive in Asia when it comes to

expanding their businesses--are creating a huge demand for real estate. The
Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia revealed that
India topped the chart with 45 per cent expanding rapidly followed by Greater
China at 27 per cent and other South East Asian capitals at 6 per cent.

According to the view of Calvo (2006) The size of the real estate market
has shown a steady growth of approximately 2.3% per annum since 2001. This
growth is fuelled by the increase in the construction of low income residential
homes; commercial space; tourism, oil, hydraulic, electric and industrial
infrastructure.

The main area of growth has been in residential development, not only the
low income segment but also the middle and high-value residential segment.
This is due to the fact that the US government identified and earmarked the
development of residential property and infrastructure as one of the main drivers
in its strategy for economic development.
2.2. Industry Profile
2.2.1. Real Estate
The real estate story in India is growing bigger by the day as it
continues to receive an ever-increasing influx of funds. While more than 35 big-
ticket foreign funds have already checked in, the first half of 2007 will see at least
20 more funds making an India entry. Meaning, US$ 10 billion of foreign direct
investment (FDI) will be injected into the real estate sector.
Merrill Lynch forecasts that the Indian realty sector will grow from US$ 12
billion in 2005 to US$ 90 billion by 2015. Prominent global funds including
Carlyle, Blackstone, Morgan Stanley, Trikona and Warbus Pincus are sitting on a
total corpus of US$ 12-15 billion, say experts.
Retailers in India--the most aggressive in Asia when it comes to
expanding their businesses--are creating a huge demand for real estate. The
Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia revealed that
India topped the chart with 45 per cent expanding rapidly followed by Greater
China at 27 per cent and other South East Asian capitals at 6 per cent.
After IT, it was Real Estate in the pipeline, two years back real estate
showed a beginning of growth, boom and huge profits. This trend followed for
quite long but then came the time for this rosy picture to fade and correction
came into the scene. With the beginning of this correction phase, real estate
turned to be not so attractive, not so profitable and a difficulty for a common man
who desired to own home or one who found himself stuck in the home loan trap.
High profile NRIs are now choosing to come back home, to their own land.
Almost all the major cities, both metros and tier II cities fall on the radar of NRIs
who plan to come back and settle here in India, Bangalore alone has witnessed a
come back of 35000 NRIs. India being an economy that’s growing at a high
pace and seeing innumerable changes in almost every aspect portraits herself to
be a challenge. Thus attracting all those who love to challenge the challenges
and crave to prove themselves all over again by working in a startup. Also, these
high profile NRIs have a lot added to their CVs by their working experience
outside India . Now with India expanding its horizons and with the upcoming of
new and specialized sectors like retail, real estate, financial services, R&D etc it
is the right time for them to gain new experiences and add another feather to
their careers.
With this diaspora real estate is undoubtedly to grow despite of the severe
dip in the domestic demand. NRIs now constitute 20-25% of the total real estate
market and this migration is expected to grow the industry @ 20% annually.
These days all the major upcoming townships, housing complexes etc are being
developed specifically to meet the demands of NRIs. With lavishly done
condominiums, thoughtfully laid out three/four bedroom apartments and
beautifully landscaped villas are few efforts done by realty developers to bag an
amount of 1.5cr to 12cr in a convenient way.
This “Reverse Brain Drain” to what extent will help other sectors and
Indian economy to grow as a whole is still a question, but for sure NRIs coming
back has turned to be a boon for Indian Real Estate Industry.

2.2.2. Financial BPO/KPO Industry

Business Process Outsourcing (BPO) is the delegation of one or more IT-
intensive business processes to an external provider that, in turn, owns,
administrates and manages the selected processes, bases upon defined and
measurable performance metrics.
The BPO Service matrix
Horizontal Services

Human Resources Finance & Accounting

• Payroll Outsourcing • Financial Reporting
• Recruitment/ Staffing • Financial Management
• Retrial Benefits & Trust • Shareholder Services\
Financial Services Healthcare Airlines Back Insurance
Administration • Accounts Receivable/ Payable/
Office
• Hiring/ TrainingMedical Billing
Tax Processing Airlines Data Accounting
General Application
Asset Management Claims Adjudication Services
• Reimbursements & processing
Credit Card/ Cheque Member Revenue Underwriting
Processing Incentives management
Management Accounting Claims Adjudication
Loan Processing Services Frequent Flier Member
Mortgage Cashless Program Management
Processing Hospitalization Management Services
Services Vertical-Focused Services
Cargo Support
Services
.

2.2.2.1. The Indian ITES-BPO Scenario

The Indian ITES-BPO segment continues to chart strong year-on-year
growth, estimated at 37 per cent for FY 2005-06. Growth is being driven by a
steady increase in scale and depth of existing service lines, and by the addition
of newer vertical specific and emerging, niche business services.
To better reflect how the industry and customer markets view the portfolio
of services sourced from India, NASSCOM has re-classified the manner in which
it reports the various segments included within IT-ITES. For instance, this year
onwards, engineering and R&D services are being identified as an independent
service line and will be reported separately. Further, NASSCOM has increased
its overall estimate of industry exports for the previous year (FY 2004-05), based
on the details reported to NASSCOM and STPI by individual companies.
As a result of the reclassification and the revision of estimates, the
historical values for a few segments have changed. In addition to the projections
for FY 2005-06, to help ease comparisons we have restated the details for the
preceding years FY 2003-04 and FY 2004-05 as per the new classification.
 Market size of Indian Vendors (In US $ Billion)
9
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Fig. 1.3. India’s Share in the Global BPO Market

2.3. Company Profile

Established in mid 2000, Global Realty Outsourcing’s unique onshore/
offshore outsourcing model focuses solely on providing services to the real
estate and financial services industries.

GRO in the BPO Industry

Domainexpertise/ Analysis
GRO
I nception
Level of Complexity

Business support functions

Line of Commoditization
Customer interaction

Back office functions

1995 1998 2000 2003 2005

Sources: UBS/McKinsey
Global Realty Outsourcing is one of the leading providers of business process
outsourcing solutions to the real estate and financial services industries. Their
services enable clients to focus on their core business while outsourcing complex
analytics, accounting, and support services to a highly skilled and cost effective
partner. With experienced leaders and 450 global professionals, their business
model delivers unprecedented speed, scale and savings to their clients.
Global Realty Outsourcing (GRO) pioneered the concept of developing
and delivering higher level offshore solutions for the real estate and financial
services industry. Their unique onshore/offshore approach combines U.S.
domain expertise, a proven process migration methodology, and a large team of
highly trained offshore finance professionals. GRO allows their clients (generally
financial institutions and real estate investment firms), to focus on their core
business by utilizing its cost effective resources and scaleable platform to
execute non-core activities.
In order to add sustained long term value, GRO believes that outsourcing
firms must have as much industry and process knowledge as their clients,
particularly with the more sophisticated outsourcing solutions GRO provides. Its
40-person team of U.S. professionals averages over 14 years of experience
working for financial services firms within the specific areas they operate. This
experience enables us to understand client concerns, mitigate potential risks and
consistently deliver the rewards of offshore outsourcing. GRO’s global operations
are supported by a highly capitalized and sophisticated investor base, which
includes some of the largest international financial institutions (Citigroup,
Wachovia) and significant providers of investment capital (Capital Trust, Actis).
With the business process outsourcing industry still in its infancy, GRO is
one of the few companies with a long track record of delivering successful
results. To date, they have executed several thousand commercial real estate
transactions involving over 20,000 properties totaling $175 billion of asset value.
For the residential real estate industry, they provide primary and master servicing
functions on several hundred thousand mortgages each month, and manage a
$25 billion portfolio of mortgages. As with any business, experience counts. They
believe that GRO’s real estate and financial services industry focus, proven track
record and satisfied client base distinguishes us among the universe of
outsourcing firms that will emerge as U.S. corporations continue to seek the
benefits of offshore resources.

2.3.1. Corporate Mission

GRO’s mission is to be the most trusted strategic partner for outsourced real
estate and financial services processes. Leveraging their global resources,
scalable service delivery platform and proven industry expertise, they are able to
generate extraordinary results for their clients.

2.3.2. Product Profile

By combining GRO’s industry expertise, proven offshore process methodology,
and a highly trained team of professionals, they are able to consistently deliver
efficiency gains, quality improvements and cost savings to their clients.
 Capital Markets Services
 Transaction Services
 Residential Services
 Information Services

• Capital Markets Services

GRO's Capital Markets Group conducts a wide range of analysis and due
diligence on loan portfolios and real estate assets.

• Transaction Services
GRO's Transaction Services Group provides high-volume accounting and
portfolio risk management services to institutional real estate lenders and
investors.
• Residential Services
GRO’s Residential Services Group provides processing, servicing and
operational support for a variety of residential real estate services.

• Information Services
GRO's Information Services Group develops research and technology
solutions to assist in executing client assignments, as well as independent
database applications that capture due diligence information for client and
third party use.
3.1. Research Design
Research is a process in which the researcher wishes to find out the end
result for a given problem and thus the solution helps in the future course of
action. Redman and Mory defines research as a “systematized effort to gain new
knowledge”
A research design is the arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure. In fact, the research design is the
conceptual structure within which research is conducted; it constitutes the blue
print for the collection, measurement and analysis of data.

3.1.1. Analytical Study

The research design used in this study is Analytical Study.
In this analytical study, the researcher has to use information or facts,
which is already available, and analysis these to make a critical evaluation of the
material.
This study used to determine the market potentials of the cities in both
India and US and forecast the opportunities available in the market. The analysis
used here are demand-supply analysis and trend analysis. This analytical study
gives the investor to invest in high return realty investment in major cities of India
and US.

3.1.2. Demand – Supply Analysis

In this analysis, the prices are forecasted based on demand and supply.
After forecasting, interpret and suggests the investor to take right decision to buy
the real property.
3.1.3. Trend Analysis
In this analysis, the prices are forecasted based on past movement of
appreciation prices and rents. After forecasting, interpret and suggests the
investor to take right decision to buy the real property.
3.2. Data Collection
3.2.1. Primary Data
This research does not used primary data.
3.2.2. Secondary Data
The research depends on secondary data from various sources. The data
for the analysis are gathered from Real Estate researcher’s websites and also
from leading real estate related journals and magazines for both India and US.

3.2.3. Nature of Data

The data collected are
 Median Price and Rent prevailing in the market
 Vacancy Rate
 Construction and Absorption (Demand and Supply)
 Interest Rate of home loan
 Inflation Rate
 Unemployment Rate

3.2.4. Sources of Data

The sources of the data are
 GRO’s Client Data
 Market Reports prepared by GRO for clients
 Leading Researchers websites
 Leading Real Estate related journals and magazines.

3.3. Methodology and Sample Selection:

The selection of markets in US and cities in India is important for
researcher and the selection should be meaningful. This research covers both
Residential and Commercial Real Estate Market in both US and India. The
selection of cities and markets has to cover both Residential and Commercial
markets.
3.3.1. Residential Market:
The sample selection for Residential market in both US and India is based
on the Per Capita Income of the Cities. Because the respective country’s Per
Capita Income is positively correlated with Average Residential Median Price
(/Unit).
The above said correlation value of
 US Per Capita Income with US Average Residential Median Price
is 0.97
 India’s Per Capita Income with India Average Residential Median
Price is 0.956
Hence the Per Capita Income based selection is suitable for Residential
market for US and India. The highest Per Capita Income market and cities are
 New York Residential Market in US
 Bangalore and Chennai in India.
3.3.2. Commercial Office Market:
The sample selection for Commercial Office market in both US and India
is based on the Total Employment Inc/Dec and Unemployment Rate. Because
the respective country’s Total Employment Inc/Dec (In numbers) or Employment
Growth is positively correlated with Average Commercial Office Median Price
(/SF) and Rent (/SF) and also the respective country’s Unemployment Rate is
negatively correlated with Average Commercial Office Median Price (/SF) and
Rent (/SF). The above said correlation value of
 US Total Employment Inc/Dec with US Average Commercial Office
Median Price is 0.967 and with Rent is 0.934.
 India’s Employment Growth with India’s Average Commercial Office
Rent is 0.913.
Hence the Employment factors based selection is suitable for Commercial
Office market for US and India. Based on these criteria, the selected market and
cities are
  Phoenix Office Market in US
 Delhi and Mumbai in India.
3.3.3. Commercial Retail Market:
The sample selection for Commercial Retail market in both US and India
is based on the Retail Sales (In $ and Rs). Because the respective country’s
Retail sales is positively correlated with Average Commercial Retail Median Price
(/SF) and Rent (/SF).
The above said correlation value of
 US Retail Sales (in $) with US Average Commercial Retail Median
Price is 0.98 and with Rent is 0.9578.
 India’s Retail Sales (In Rs) with India’s Average Commercial Retail
Rent is 0.9432.
Hence the Retail Sales based selection is suitable for Commercial Retail
market for US and India. Based on these criteria, the selected market and cities
are
 Phoenix Retail Market in US
 Delhi and Mumbai in India.
 4. Analysis and Interpretation
4.1. Residential Market
For residential market, Chennai and Bangalore are the Indian cities
selected for analysis based on the Indian cities Per Capita Income and New York
Apartment Market is the US residential market selected for analysis based on the
US market Per Capita Income.
4.1.1. India – Bangalore
Bangalore is the Information Technology hub of India. The city is
growing rapidly and so is the real estate industry. All the new industries and
foreign investors coming up are just adding to it. A lot of business establishments
are coming to Bangalore generating more job opportunities for people and a
need for infrastructure.
Real estate values around Bangalore have shot off the charts since 1991.
Land on the outskirts of Bangalore that was selling for US $0.10 per square foot
rose to $2.00 per sq. ft. Prices started to drop in 1995 and are now beginning to
show gains again. This inexorable increase in land prices presents an intriguing
trend. Land prices are on the up in micro markets like Outer Ring Road where
vacancy is very low (and office space demand is high as well as in a micro
market like Whitefield where there is already increasing demand of office space
and high vacancy rate.
The population pressure places a great demand on Bangalore real estate.
Thirty years ago, Bangalore was a city of only 300,000. Now Bangalore has
about 5 million people.
The booming software industry has changed the very landscape of
Bangalore dramatically. The presence of international companies fuels the brand
growth and this in turn helps it attract more global companies. Bangalore is in a
positive cycle that is helping it grow and expand.
Demand - Supply Analysis:
 The residential market of Bangalore comprises of both apartments and
independent residences. Presently, the high-end residential developments are
mainly concentrated in CBD and East & South Side of the city.
In H2-05, Independent Bungalows, apartments located on the outer ring
road attract a lot of demand from expatriates and MNC’s and offer facilities like
swimming pool. Since identification of the IT corridor by the Karnataka
Government, demand for housing in adjoining areas has seen a steep rise. As a
result, Airport road, M.G.Road, Cunningham Road, Infantry Road, Hosur Road,
Whitefield, Electronic City, Koramangala, J.P.Nagar, Jayanagar and HAL have
come up as areas of choice for most IT professionals.
During H1-06, the CBD did not see any major supply, but Outer Ring road
and outer peripheral road witnessed the launch of new projects from well-
established developers like Purvankara, Shobha and Mantri.
In H2 of 2006, the demand in residential market remained continuous with
expatriates and MNC's looking out for high-quality facility spaces. There was no
major supply addition in this H2-06 however; year 2007 is going to witness
substantial supply addition to Bangalore Residential market. The demand for
properties on Kanakpura Road has also been observed due to upcoming NICE
Expressway (connecting Hosur Road, Mysore road & Tumkur Road). Being
designed & built on International Standard, it has made Kanakpura Road the
hottest location for builders & buyers.
Trend Analysis:
As a result of the demand shift towards the IT corridor in Q2 and the
capital and rental values in these areas have seen a steep rise. Rentals have
almost doubled in Whitefield and have appreciated by 50% to 80% in Jayanagar,
Koramangalam and Indiranagar since the last half of 2004. Similarly, capital
values have seen an appreciation of 13% to 34%. An appreciation of about 5% -
10% in the capital values is hence expected in the first half of 2006.
Capital Value (Rs / SF)
Place H2-05 H1-06 H2-06
Central 7900 9200 9300
Cooke Place 3700 5000 5000
 Jayanagar 10600 4900 4800
Palace Orchard 5100 6500 4800
Airport Road 3000 3200 4600
Indranagar 4700 6000 5500
Koramangala 3300 4500 6000
Whitefield 2100 2300 2600

Bangalore - Residential
Capital Price (Rs/SF)

12000
10000
8000 H2-05
6000 H1-06
4000
H2-06
2000
0
Cooke Place

Airport Road

Koramangala
Jayanagar

Indranagar
Orchard
Central

Whitefield
Palace

Location

In H1-06, residential market saw uniform rise in prices. The capital values
are increases by a range of 15% to 40% in Cookie town, Palace Orchard and
Indranagar and decreases by almost half in Jayanagar. However, the lease
residential market continued to grow owing to demand from MNC's. The
Bangalore market saw a steady influx of expatriates and regional executives,
which kept the demand high and pressure on supply side.
Bangalore residential market witnessed a significant increase in capital
and rental values since H2 of 2006. Due to less availability of land for new
projects in CBD, the demand has pushed the prices to INR 20,000 PSF in some
locations of CBD. The prime areas like Indiranagar, Airport road & CBD
witnessed an increase of 10-16% in prices while the rentals there increased by
25-35%. In other areas like Cooke town, Jayanagar, koramangala & Whitefield,
 the capital values rose by 10% - 18% while the rentals moved up marginally.
Also, progress in the development of International Airport is affecting the prices in
Place 2006 2007 2008 2009 2010 2011 2012 2013
Central 9200 10580 12167 13992.05 16090.86 18504.49 21280.16 24472.18
cooke place 5000 5750 6612.5 7604.375 8745.031 10056.79 11565.3 13300.1
palace orchard 6500 7475 8596.25 9885.688 11368.54 13073.82 15034.89 17290.13
indra nagar 6000 6900 7935 9125.25 10494.04 12068.14 13878.36 15960.12
white field 2300 2645 3041.75 3498.013 4022.714 4626.122 5320.04 6118.046
surrounding areas to some extent.

TREND ANALYSIS FOR BANGLORE

In this research trend analysis is used to forecast 7 years rent in

Bangalore City. Here the forecast is done on the basis of the assumption that
there should be a 3% inflation and 12% market growth rate.

Rental Value (Rs / SF / Mo)

Place H2-05 H1-06 H2-06
Central 32.5 30 50
Cooke Place 22 19 25
Jayanagar 18.5 22.5 25
Palace Orchard 32.5 30 34
Airport Road 22.5 22 21
Indranagar 27 32 40
Koramangala 30 28 35
Whitefield 22.5 17.5 21
 Bangalore - Residential

Rental (Rs/SF/Mo)
60
50
40 H2-05
30 H1-06
20 H2-06
10
0

Jayanagar

Indranagar
Orchard

Airport Road
Cooke Place

Koramangala
Central

Palace

Whitefield
Location

The latest residential market prices in Bangalore as on Mar-07 are listed below.

Bangalore Mar-07
Location Residential
Minimum Maximum
1 M. G Road 2800 4000
2 Cunningham Road 2800 5500
3 Jayanagar 2500 3400
4 Basavangudi 2100 3200
5 Koramangala 1800 2800
6 Ulsoor 1800 3000
7 Langford Road 1600 2800
8 Richmond Road 1600 2800
9 Palace Cross Road 1200 2200
10 Levelle Road 2500 4000
11 Domlur 1500 1800
12 Bannerghetta Road 1100 1600
13 Nagarbhavi 1200 1600
14 R. T. Nagar 1500 1800
15 Cox Town 1800 2500
16 Yelahanka 1150 1600
17 J. P Nagar 1500 2100
18 Augodi 1200 1400
19 Maker Circle 1400 2200
 20 Dollars Colony 1600 1800
21 Brigade Road 3000 4500

The Bangalore market witnessed continuous influx of expatriates, which

kept the demand high and pressure on the supply side. Due to high demand from
MNC's & expatriates, the capital values of villas will see a growth of around 25%
in areas like Whitefield in future. Meanwhile,
Q1 of 2007 is expected to see 3 to 4 million SF of supply in the residential
market. The long awaited new Comprehensive Development Plan (CDP) is
expected shortly, which proposes additional Floor Area Ratio (FAR). It is
expected that, with approval of CDP, several new projects may be launched
which may result in over supply of residential units in the market for some time.
This is also expected to control the rates to some extent, thus causing
competitive pricing.

Interpretation:
 Bangalore is the first highest earning city in India with Per Capita
Income of around Rs 2,50,000 which is almost 5 times bigger than Delhi. This
 leads to high demand in real estate by appreciating the prices of the real
property.
 Average Residential Price per SF at present in Bangalore ranges from Rs
1800 to Rs 2700 with CAGR of minimum 25% and maximum 30% pa.
 The costliest residential areas in Bangalore are MG Road, Jayanagar,
Cunningham Road, and Brigade Road with average price per SF of Rs 4100.
 The moderate residential areas in Bangalore are Koramangala,
Basavangudi, Ulsoor, Langford Road and Richmond Road with an average
price per SF of Rs 2900.
 The cheapest residential areas in Bangalore are Bhannarghatta Road,
Domlur, Palace Cross Road and Nagabhavi with an average price per SF of
Rs 1700.
 In 2006, the CBD did not see any major supply, but Outer Ring road and
outer peripheral road witnessed the launch of new projects from well-
established developers like Purvankara, Shobha and Mantri. So, year 2007 is
going to witness substantial supply addition to Bangalore Residential market.
 Due to less availability of land for new projects in CBD, the demand has
pushed the prices to INR 20,000 PSF in some locations of CBD.
 The high demand for properties on Kanakpura Road has also been
observed due to upcoming NICE Expressway (connecting Hosur Road,
Mysore road & Tumkur Road). Being designed & built on International
Standard, it has made Kanakpura Road the hottest location for builders &
buyers.
4.1.2. India - Chennai
Chennai is the fourth largest metro city in India. It is a major trade center,
being well linked by road, rail and air to important cities besides being a seaport.
Lower operational cost, availability of land and low cost of accommodation
has been the major attracting factors for many domestic and multinational
companies to settle their operations from Chennai.
Chennai is an important base for all the IT majors, including Wipro,
Ascendas, Tata Consultancy Services, Infosys and Polaris. Apart from the Tier I
companies, there are several smaller ones that operate in the IT-Enabled
Services (ITES) and Business Process Outsourcing (BPO) segments. Rising
incomes from the IT, automobiles and electronics sector which form the
backbone of Chennai's business, have been instrumental in pushing up demand
for residential spaces.
On the advent of many multinational corporate houses other than IT and
BPOs, like BMW, Nokia, Hyundai, and St.Gobain setting up their state of the art
production units, real estate business in this Southern Metropolis is on record
growth and apartments which were available at the rate of Rs.75 Lakhs per flat in
2003 has touched the Rs.1 crore level within the last two years period, despite all
odds of lack of infrastructure and all time scarcity in supply of potable water and
electricity. The Tsunami effect brought the prices a bit lower for sometime but it
has again started rocketing up in sea front areas like Mylapore and have seen a
remarkable increase in bookings and the cost of a flat at rate of Rs.50 lakhs and
above depends on the facilities offered.
Demand – Supply Analysis:
The luxury residential areas in Chennai include Adyar, Thiruvanmiyur,
Kotturpuram, Beach Road in South Chennai; Nungambakkam, Chetpet, Poes
Garden, Egmore, Alwarpet, T. Nagar/ Mylapore in Central Chennai; and Anna
Nagar in North West Chennai. South Chennai is a prime residential location with
a good assortment of apartments and independent houses in proximity to the
beach. Central Chennai provides proximity to the central business district. The
North-western Chennai is comparatively a recent development with an
assortment of bungalows and apartments.
As expatriates and MNC executive’s throng the city, demand is shifting to
the central part of city due to its proximity to malls, restaurants and clubs. East
coast road continues to be a preferred location for expatriates looking for Beach
Houses / Independent Bungalows. In H2-05, the demand for independent houses
and apartments reached an all time high with number of queries coming in from
expatriates and MNC executives. The supply was however unable to keep pace
with the steep demand hike and a demand shift was observed towards centrally
located properties.
In H1-06, the demand from expatriates continues to rise in Central and
South Chennai supplemented by the entry of new Multi Nationals such as Nokia,
BMW, Caterpillar etc. However, a demand shift has now been observed towards
the suburbs due to restricted availability of land. The 22-km stretch of Old
Mahabalipuram Road which runs parallel to the East Cost Road (IT Corridor) is
buzzing with real estate development. Huge demand for residential apartments is
being generated by the IT corridor and development of large IT Parks on OMR
Road.
With people getting more familiar to “Apartment culture” in H2-06, a
demand shift from independent bungalows to High- end residential apartments is
currently being observed. The unabated growth of Indian IT and ITES sector is
responsible for increasing demand for residential spaces in Chennai. The influx
of expatriates has also affected real estate market remarkably. In 2006, the city
witnessed a spurt in high-end premium residential projects offering amenities and
social infrastructure to make a complete package of an urban, up market living
for the buyers. Supplementing this, the Government is promoting the area
between Tidel Park and Kelambakkam as software corridor. This area is
emerging as the most preferred location by expatriates as a result of which the
demand & real estate prices have increased substantially.
Trend Analysis:
As a result of the demand shift towards central locations (Boat club,
Besant Nagar, T.Nagar and R.A.Puram) in H2-05, a rise of 16% to 18% in rentals
and 10% to 33% in capital values has been witnessed in these areas. This
demand shift has also led to decreasing capital values in Adyar.
In H1-06, the residential property prices witnessed a substantial increase
in most of the micro markets. The increasing demand led 10% to 20% rise in
capital values in Adyar, Anna Nagar and other sub markets. While the rental
values increased by 10% in most of the central Chennai residential areas except
for T Nagar, which saw an increase of almost 40% from H1. However the rentals
in other areas remained almost stable.

Capital Value (Rs / SF)

Place H2-05 H1-06 H2-06
Nungabakkam 3200 4000 5800
Anna Nagar 3000 4100 5000
Adyar 3000 4400 5400
Besant Nagar 3300 4200 5600
T Nagar 2900 4000 5000
Alwarpet / RA Puram 3900 6400 8000
Velachery 2400 3200 3800

Chennai - Residential
Capital Price (Rs/SF)

16000
14000
12000 H2-05
10000
8000 H1-06
6000
4000 H2-06
2000
0
T Nagar
Adyar
Anna Nagar

Besant Nagar
Nungabakkam

Alwarpet / RA

Velachery
Boat Club

Puram

Location

The phenomenon of demand exceeding the supply in premium residential

market resulted in price hike during H2 of 2006. Despite consistently high land
prices in the city, a rise in the number of transactions in residential market was
witnessed during H2.
H2-06 saw a major increase in property prices in most of the residential
micro markets in Chennai. The capital values in areas like Alwarpet/ RA Puram,
Adyar & Anna Nagar increased by 15% - 25% since H1. In Besant Nagar, Boat
Club & Nungambakkam, the hike was steeper ranging from 35-45%. The rental
values also saw a considerable increase of 15% – 25% in most of the residential
micro markets. While in areas like Alwarpet/ RA Puram, the rentals witnessed a
massive jump of 40 - 50%.

TREND ANALYSIS FOR CHENNAI

Place 2006 2007 2008 2009 2010 2011 2012 2013

Nungabakkam 3000 3450 3967.5 4562.625 5247.019 6034.072 6939.182 7980.06
Anna Nagar 4100 4715 5422.25 6235.588 7170.926 8246.564 9483.549 10906.08
Adayar 4400 5060 5819 6691.85 7695.628 8849.972 10177.47 11704.09
T nagar 4000 4600 5290 6083.5 6996.025 8045.429 9252.243 10640.08

In this research trend analysis is used to forecast 7 years rent in

Bangalore City. Here the forecast is done on the basis of the assumption that
there should be a 3% inflation and 12% market growth rate.

Rental Value (Rs / SF / Mo)

Place H2-05 H1-06 H2-06
Nungabakkam 15 16 18.5
Anna Nagar 12.5 14.5 17
Adyar 17 17.5 21
Besant Nagar 14 16 25
T Nagar 12.5 19 24
Alwarpet / RA Puram 22 24 33.5
Velachery 12 12.5 15

Chennai - Residential
Rental (Rs/SF/Mo)

60
50
40 H2-05
30 H1-06
20 H2-06
10
0
T Nagar
Anna Nagar

Adyar

Besant Nagar
Nungabakkam

Alwarpet / RA

Velachery
Boat Club

Puram

Location
 In Chennai places like T. Nagar, Mylapore, Abhiramapuram, and Adayar
are the most attracted places by the investors for housing since they have good
proximity to schools, hospitals and industrial areas. Also, establishment of more
IT Companies, higher education institutions and hospitals have brought out
tremendous developmental scope to suburban areas such as Old
Mahabalipuram Road, where unlike other places in Chennai have good
availability of water and land area and unpolluted surroundings. Chennai
witnessed a steep price increase in 2005 with an average of 10% increase in
capital and rental values. Residential land and Apartment prices have surged
with prices in the city ranging from Rs.3,000 - Rs.8,000 PSF and areas like Boat
Club have even higher prices. Also, the NRI investment also saw considerable
improvement in the last 4-5 years. Apartments in range between 8 to 20 lakhs
were in good demand and more and more developers engaged in the
construction of luxury apartment business due to higher demands from the
relocating executives and other professionals. Residential plot sale and steep
increase in prices expected even in city outskirts like Kulathur, Teachers Colony,
Britania Nagar, and Vinayaka Puram where prices were at the rate of Rs.65 PSF
to Rs.100 PSF in 2000 have surged up to Rs.250 or more PSF. It is expected to
further increase due to the establishment of a large number of educational
institutions like the one from the famous Velammal Educational Society
Engineering College and schools as well as churches and unpolluted
atmosphere-attracting people to these areas.
Though, the land and real estate prices have gone through the roof for
some Chennai natives but in comparison to other metro cities, Chennai prices
are still sustainable. According to survey conducted in 2005, the average price
for the premium end of the residential market is about Rs 3,000 per sq ft and the
price is likely to go up further. In comparison to this are the top end residential
market in Delhi and Mumbai, ranging between Rs 12,000 sq ft and Rs 15,000 per
sq ft. The IT and ITES drive the lease rentals. In Delhi and Mumbai rent ranges
between Rs 32 to Rs 35 per sq ft, while in Chennai it is Rs 23 to Rs 25 per sq ft.
In retail space, the rental rates in Chennai ranges about Rs 50 to Rs 55 per sq ft
while in Mumbai and Delhi the rates are about Rs 80 to Rs 85 per sq ft.
With the high expansion and face-lifting plans taking place in Chennai the
prices are said to be rising further. The old Mahabalipuram IT corridor is also
seeing a new face. This six-lane highway stretching 20 kms is home to many
MNCs who are setting up operations here. This has resulted in property prices
shooting up in this area. Prices of lands in the Guindy and Ambattur are also
shooting up. A ground costs is anywhere between Rs. 40 - 50 lakhs in Guindy.
Residential property prices have also seen an upswing owing to increased
demand for premium housing apartments as well as budget flats. Typical prices
in Sholinganallur are about Rs 2.5 crores an acre. Even the current residential
market has grown from 30% to that of 35% in one year, within the city suburbs.
Velachery, Mogappair, Gowriwakkam and Koyambedu are good places for
buying property as investments as home rentals have amplified considerably.
2BHK prices start from Rs.10 lakhs and can reach up to Rs 32 lakhs for a luxury
house in these areas. Rents of Rs. 8,000 to Rs. 14,000 can be expected for a
2BHK apartment for a month.

The latest residential market prices in Chennai as on Mar-07 are listed below.

Chennai Mar-07
Location Residential
Minimum Maximum
1 Adyar 1800 2800
2 Alwarpet 2400 2900
3 Besant Road 2200 2900
4 Chetpur / Kilpauk 2100 2700
5 K. K Nagar 1200 1700
 6 Tiruvanmiyur 1700 2200
7 Mylapore 2200 3000
8 Nugabakkam 2000 2900
9 T. Nagar 1400 2400
10 Kodambakkam 1500 1800
11 Chamiers Road 2200 3000
Raja
12 1800 3050
Annamalipuram
13 Royapettah 1800 2450
14 Egmore 2400 3000
15 Valasaravakkam 1100 1400
16 Anna Nagar East 1450 2200
17 Guindy 1200 1700
18 Velacherry 800 1100
19 Shastrinagar 1400 2200
20 Ashok Nagar 1200 2200
21 Lloyds Road 1500 2200
Radhakrishnan
22 1500 2000
Road
23 Mount Road 2000 4500

The residential market in Chennai has been growing steadily in the lower
and middle segment. Although the demand for the high-end properties is not as
strong as lower segments, still the developers have started large-scale projects
with improved amenities. With the advent of Myriad software companies, several
foreign banks & booming retail market, capital values and rentals are expected to
rise further in 2007. Also with the relaxation of Foreign Direct Investment (FDI)
norms, some global funds like Government Investment Corporation of Singapore
has invested in Chennai residential market which is going to boost the real estate
scenario in a big way.

Interpretation:
 Chennai is the fourth highest earning city with Per Capita Income of
Rs 46,746 in India. This reflects mostly in the prices of the real property.
 Average Residential Price per SF at present in Chennai ranges
from Rs 1690 to Rs 2450 with an average increase of 30% pa.
 The costliest residential areas in Chennai Metropolitan are Mount
Road (Anna Salai), Adyar, Anna Nagar, Besant Nagar, Mylapore and Raja
Annamalai Puram with an average price per SF of Rs 3450.
 The moderate residential areas in Chennai Metropolitan are
T.Nagar, Thiruvanmiyur, KK Nagar, Anna Nagar, and Radha Krishnan
Road with an average price per SF of Rs 2100.
 The cheapest residential areas in Chennai Metropolitan are Guindy,
Valasaravakkam, Kodambakkam, and Velacherry with an average price
per SF of Rs 1800.
 With people getting more familiar to “Apartment culture”, a demand
shift from independent bungalows to high-end residential apartments is
currently being observed. The unabated growth of Indian IT and ITES
sector is responsible for increasing demand for residential spaces in
Chennai. But the inadequate supply increases the residential prices in
Chennai.
 As demand increases and supply decreases in Metro areas, the
peoples are shifting towards suburbs. Residential plot sale and steep
increase in prices expected even in city outskirts like Kulathur, Teachers
 Colony, Britania Nagar, and Vinayaka Puram where prices were at the
rate of Rs.65 PSF to Rs.100 PSF in 2000 have surged up to Rs.250 or
more PSF at present.
 The average price for the premium end of the residential market in
Chennai is about Rs 3,000 per SF and the price is likely to go up further.
In comparison to this, are the top end residential market in Delhi and
Mumbai, ranging between Rs 12,000 per SF and Rs 15,000 per SF.
 The land prices are shooting up. Due to that, residential property
prices have also seen an upswing owing to increased demand for
premium housing apartments as well as budget flats in Metro areas.
 In IT highway, the land prices are appreciated like anything due to
high demand from IT Companies. Typical prices in Sholinganallur are
about Rs 2.5 crores an acre, which is appreciated 150% in just one year.
This highway is recorded as fastest growing area in the Chennai city.

4.1.3. US - New York Market

New York City vaults to the top spot of the National Apartments
Index (NAI) this year, propelled by continued strong employment growth along
with the lowest vacancy rate in the index. Below-average vacancy rates and
strong rent growth in this market will continue to be supported by low for-sale
housing affordability. The condo conversion craze has clearly reached the end of
the line, as the once super-heated housing market is now acting as a drag on
economic growth. Just one year ago, condo conversion activity was rapidly
reducing apartment stock in many major markets, leading to significant gains in
occupancy and subsequently, rents. In spite of the changes under way, most
signs continue to point to another healthy year for the majority of the nation’s
apartment markets. New York City gained four positions to claim the #1 spot. In
spite of a minor up-tick in vacancy forecast by year-end, New York City is still
expected to post the lowest overall vacancy rate and strongest rent growth in the
nation. The wide affordability gap between owning and renting in New York will
help to sustain strong renter demand in spite of above average rent increases.
Trend Analysis:
GDP is expected to increase by 2.7 percent in 2007, after registering
growth of an estimated 3.2 percent in 2006. After driving economic expansion for
several years, the housing market has become a drag on growth and will likely
slow well into 2007, albeit at a more moderate pace than registered in the second
half of 2006. For-sale inventories increased dramatically last year but have
begun to level off, and even decline in some markets, as many sellers are
recognizing that their pricing expectations may be unrealistic at this point in the
cycle. The effects of the housing market slowdown are expected to be felt across
several industries. The construction sector began to shed jobs in the second half
of last year as homebuilding activity dropped off. In the retail sector, sales growth
is expected to slow in the coming year as residential cash-out refinancing activity
declines by approximately 40 percent. While demand for condos has waned and
many for-sale units are being offered as rentals, the net result of the cooling
housing market is positive for apartment owners. Many first-time buyers relied on
adjustable-rate mortgages (ARMs) to qualify for home purchases in recent years.
Rates for ARMs are tied to short-term indices, which have increased significantly
over the past year, reducing affordability for potential buyers. In addition, as
ARMs originated over the past few years reset, many recent buyers are finding it
increasingly difficult to afford monthly mortgage payments. As a result, many
owners will return to the renter pool over the next few years.

As hiring picks up later in the year and more individuals actively seek
work, the unemployment rate is likely to rise modestly to the high-4 percent
range. In 2007, employers are expected to add jobs for the fourth consecutive
year, though growth is forecast to moderate to 0.9 percent, down from 1.2
percent in 2006.
 The apartment market is well positioned to stage another strong
performance in 2007. Vacancy will continue to decline, allowing owners to again
raise rents and cut concessions. The pace of improvement will moderate from
2005 and 2006, however, when the condo conversion frenzy led to significant
apartment supply reductions. Based on the current rate of construction, it would
take developers more than three years to replenish stock lost to conversions
since 2004. While the housing market slowdown will lead to the return of
additional condos to the rental market, a temporary increase in competition is not
expected to have a significant or prolonged effect on vacancy. On the demand
side, the renter pool is set to expand dramatically over the next several years.
The homeownership rate in the less-than-25 age group increased approximately
600 basis points to 27 percent between 2000 and late 2005, but has since edged
down to around 25 percent. A large share of new jobs in 2007 will be in higher-
paying industries, which combined with limited housing affordability lends support
to the Class A outlook. Furthermore, the disparity that exists between the
average rent and typical mortgage payment is at its widest point in 25 years, and
even a moderate correction in home prices would have a minimal impact on
apartment demand. The Class B/C sector is again expected to record steady
growth in 2007. Market-wide, vacancy in the sector is forecast to fall below 5
percent by year-end due to the relatively stable pool of renters seeking more
affordable apartments.
 Availability of capital has remained elevated over the past year. A wide
pool of mortgage providers, particularly conduits and portfolio lenders, remain
aggressive in financing apartment transactions, which is resulting in attractive
pricing for buyers. Loans of $3 million and more are currently being priced at 95
basis points to 110 basis points above the 10-year Treasury, with debt-service
coverage (DSC) of 1.15x to 1.20x. For smaller loans, the spreads widen to a
range of 115 basis points to 150 basis points, though the DSC falls to 1.10x or
less. In markets with strong rent growth forecasts, it is not uncommon for deals to
be done at a break even DSC.
Apartment investors remain highly optimistic about the market’s future,
and for good reason. Demand-side drivers remain firmly in place, and capital
flows into the sector are holding at high levels. Cap rates softened temporarily in
mid-2006 due to rising long-term rates and a falloff in conversion sales, but the
average has since declined modestly. Market-wide, there is a growing willingness
on the part of private investors to look outside of their home state to achieve
higher yields. Over the past year, private-out-state activity accounted for
approximately 20 percent of total dollar volume in the $5 million-plus segment of
the market, compared with less than 10 percent over the previous 12-month
period. Still-low interest rates, strong capital flows and improving fundamentals
are expected to result in relatively stable cap rates in 2007. At this point in the
cycle, investors are focusing on the potential for growth, placing more weight on
total return than going-in cap rates. Over the past few years, total returns have
come in well above average, driven in large part by price appreciation. While
prices gains will be more tempered in 2007, favorable renter demographics and a
healthy supply-demand balance will support stronger revenue growth and price
appreciation in the years ahead. Cap rates will ultimately tick up as NOIs rise
faster than prices but are not expected to return to long-term averages over the
foreseeable future.

Asking Median Vacancy Employment

New York Rent Completion Price Rate Growth
Apartment ($ / Unit) (In Units) ($ / Unit) (In %) (In %)
2004 2,287 2,481 152,780 3.30% 0.5%
2005 2,399 3,975 166,880 2.90% 1.1%
2006 2,553 2,200 184,410 2.70% 1.4%
2007** 2,719 3,200 N/A 2.80% 1.1%

With the local economy growing at a healthy pace in New York, rental
demand in all boroughs of New York City will increase in 2007. Vacancy fell to
less than 4 percent in each of Manhattan’s submarkets last year and will continue
to edge up modestly in 2007. Properties in the Upper West Side and Upper East
Side will maintain a history of low vacancy and consistently strong rent growth.
Additionally, prospective residents are increasingly warming to outer boroughs
such as Brooklyn and Queens, where vacancy is projected to reside in the mid-3
percent range. Apartment properties near transportation hubs in Brooklyn and
Queens seem positioned to perform extremely well in the quarters ahead. On the
development front, completions are projected to rise this year, led by a 50
percent increase in new supply in the borough of Manhattan. Last year, the
median price of properties in the borough of Manhattan rose 19 percent to
$200,000 per unit, an amount that is likely less than replacement cost. Investors
remain willing to accept initial returns ranging from 4.5 percent to 5.8 percent. In
the outer boroughs, meanwhile, deal flow is expected to accelerate as more
owners realize that properties listed for sale draw an expanding number of
interested buyers.
Interpretation:
 GDP is expected to increase by 2.7 percent in 2007, after
registering growth of an estimated 3.2 percent in 2006. A spike in oil prices or
steeper-than-expected declines in the housing market are among the key
risks to the outlook.
 New York City vaults to the top spot of the NAI this year, propelled
by continued strong employment growth along with the lowest vacancy rate in
the index.
 Household Income in New York City is $53,553 and is expected to
be $55,976 in 2007. This raises the demand of the residential apartment and
the median prices are expected to rise sharply in 2007.
 Total non-farm employment growth is forecast to decelerate to 0.9
percent in 2007, an addition of 1.2 million jobs. Last year, employment grew
by an estimated 1.2 percent. Expansion is forecast to remain concentrated in
the professional and business and educational and health services sectors,
with weaker conditions expected to persist in manufacturing and construction.
In New York, employers are expected to create 61,500 jobs in 2007, a 1.7
percent increase and up from 45,000 positions added last year. By borough,
Manhattan will lead job growth in 2007 with 42,000 new hires, while an
aggregate 14,000 positions will be added in Brooklyn and Queens.
 Adjustable-rate mortgages accounted for approximately 25 percent
of originations in recent years. As loans reset, a growing number of
households will find payments unaffordable. In high-priced markets,
homeowners already spend up to 48 percent of incomes on housing.
 Long-term interest rates declined during the second half of 2006
after peaking in July. Short-term rates plateau in the latter half of last year as
the Fed held the Federal funds rate stable after consistently increasing the
rate since 2004. The yield on the 10-year U.S. Treasury will likely continue to
trade in the 4.5 percent to 5.0 percent range through the better part of 2007.
  Based on current economic conditions, inflationary pressures
should moderate in 2007. Core inflation is expected to come in at less than
2.5 percent this year. The tight employment market does, however, create
some concerns of building wage pressures.
 In US, by year-end 2007, vacancy is projected to improve 20 basis
points to 5.1 percent, compared with a 40 basis point decline in 2006. Rent
growth is forecast to slow modestly, with asking rents expected to rise 4.3
percent, while effective rents advance by 4.8 percent. In New York, while the
citywide vacancy rate is projected to increase 10 basis points to 2.8 percent,
New York City will remain the tightest apartment market in the nation. Asking
rents are forecast to climb 6.5 percent to $2,719 per month in 2007, following
a 6.4 percent jump last year. Effective rents across the city are projected to
rise 6.8 percent to $2,668 per month. New York City will remain the tightest
apartment market in the nation.
 Developers will add approximately 3,200 rental units to New York
City this year, with 2,700 units are scheduled for delivery in the borough of
Manhattan and another 500 units in Brooklyn. Within the city, there are
approximately 2,000 units under way that are either non-market-rate units or
additions to small commercial buildings.
 Properties in the emerging Chelsea section of Manhattan and other
downtown neighborhoods will attract a greater number of investors.
Redevelopment initiatives in Brooklyn will stimulate greater long-term renter
demand and motivate investors to establish local portfolios sooner rather than
later.
4.2. Commercial Market
For commercial office/Retail market, Delhi and Mumbai are the Indian
cities selected for analysis based on the Indian cities Employment Growth, and
New York Office Market and Phoenix Retail Market are the US commercial
markets selected for analysis based on the US market Average Employment
Inc/Dec and Unemployment Rate.
4.2.1. India – Delhi
 Delhi is the capital city of India and also known as the heart of
India. Delhi is the prime location for properties since majority of the government
and private buildings are located in this magnificent city. Real estate Delhi was
and is always on a high, and flourishing.
Delhi is considered as one of the popular and important tourist
destinations in India. About 61% of the total international tourist arrivals in India
visit the capital and among them about 22% of them prefer star hotels. The
number of five star hotels in Delhi is 24, of four star is 8 and of three star is 11.
Occupancy levels in Delhi hotels have witnessed a growth of 11% in 2005-06
and the average room rates have registered a growth of 29%. The significant
growth in occupancy and average room rates indicate the rising demand in the
hospitality sector.
Demand – Supply Analysis:
The commercial areas in New Delhi can broadly be classified into CBD &
SBD with CBD referring to Connaught Place area and SBD referring to Nehru
Place and Bhikaji Cama Place in South Delhi. Over the years commercial activity
has also spilled over to the suburbs of Gurgaon and Noida. Apart from these,
Jasola and Saket are the two upcoming areas with a combination of commercial
and retail developments.
In H1 of 2006, fresh A Grade supply of around 0.2 million sq ft was added
in the SBD. The CBD did not see any new supply for the 3rd consecutive year.
The second half is however expected to witness high level of activity with
addition of around 2.5 million sq ft in the NCR. Out of this, more than 3/4 th is
expected in Gurgaon and the remaining in Noida and Saket. Demand was driven
by IT/ITES looking for a large floor plates (25000 sq ft onwards) in Grade A office
spaces, most of which available in Gurgaon and Noida. In the backdrop of
abysmally small supply, the vacancy levels in the CBD plummeted to an all time
low of 3% to 4% with demand supported by financial institutions and corporate
offices.
H2-06 saw an addition of approximately 2.7 million sq ft of Grade A office
space in NCR with 75% of it concentrated in Gurgaon and the rest in Saket. With
this addition, the Grade A stock in Delhi is estimated to exceed 17 million sq ft.
There has however been no addition in CBD and other sub- markets. With this
addition, year 2007 saw fresh supply addition of more than 6 million sq ft into the
commercial market. H1-07 is expected to see some more supply, out of which
more than 80% will be concentrated in Gurgaon and other suburbs. In Delhi, the
demand for commercial spaces is on a high due to the existing supply crunch
and also because number of companies are relocating from residential to
commercial areas. IT / ITES companies are the demand generators in suburbs
having huge expansion plans, owing to which leasing/ pre leasing of large floor
plates is taking place. In Delhi, the vacancy levels remained as low as 3% to 5%.
Vacancy levels in Gurgaon also plummeted with ever increasing demand,
however the vacancy levels in NOIDA were slightly better ranging from 15% to
20%.
Trend Analysis:
In Delhi NCR rentals have gone up by 25%-30% from H2 of 2005 to end
of H1 of 2006. The CBD market witnessed dramatic increase in rentals as a
result of negligible supply. Capital values have almost doubled whereas rental
values increased by almost 50%. Encouraged by the lack of supply even Grade
B buildings are now charging a monthly rental in excess of INR 100 per sq ft per
month. The Delhi high court asked the Municipal Corporation of Delhi (MCD) to
demolish all illegal structures across the city. This included commercial
establishments operating out of residential area, construction not complying with
the norms, etc. The demolition drive has created an immediate demand for legal
commercial complexes in NCR.
Grade A – Office – Rent (Rs/SF)
Place 2004 2005 Q1-06 Q2-06 Q3-06 Q4-06
Nehru Place 92 98 130 159 200 250
Connaught Place 104 120 146 200 250 275
Gurgoan 36 36 47 54 70 74
Noida 32 32 45 48 50 50
Jasola N/A N/A 83 108 132 174
Saket N/A N/A 90 115 158 190

Delhi - Grade A Office

300
2004
Rent (Rs/SF/Mo)

250
2005
200
Q1-06
150
Q2-06
100
Q3-06
50
Q4-06
0
Nehru Place Connaught Gurgoan Noida Jasola Saket
Place
Location

Grade B – Office – Rent (Rs/SF)

Place Q1-06 Q2-06 Q3-06 Q4-06
Nehru Place 43 56 92 120
Connaught Place 76 87 118 170
Noida 31 30 28 30
 Delhi - Grade B Office

180
160
Rent (Rs/SF/Mo) 140
Q1-06
120
100 Q2-06
80 Q3-06
60
Q4-06
40
20
0
Nehru Place Connaught Place Noida
Location

With escalating demand and low supply for office spaces in H2-06, the
rentals in Delhi and suburbs of Gurgaon and Noida are mounting up day by day.
With no supply in CBD, the rentals in CBD and Nehru Place increased by a
whopping 25% from last quarter. In the suburbs - Gurgaon, Jasola and Saket,
increase in rentals was quite huge ranging from 11% to 30%.
With IT/ITES sector supporting the demand and with sealing drive hitting
hard on illegal and non - confirming use spaces, H2-06 witnessed a profuse
demand for legal commercial space. Owing to this, the rentals & capital values in
Delhi & Gurgaon rose by 20-30% within a fortnight. With no supply in CBD, the
rentals in CBD and Nehru Place increased by 15%- 25% HoH. While as, in the
suburbs - Gurgaon, Saket and Jasola, rentals shot up by 15% - 35%.

TREND ANALYSIS FOR DELHI GRADE A OFFICE

Place 2006 2007 2008 2009 2010 2011 2012 2013
Nehru Place 130 149.5 171.925 197.7138 227.3708 261.4764 300.6979 345.8026
Noida 47 54.05 62.1575 71.48113 82.20329 94.53379 108.7139 125.0209
Jasola 83 95.45 109.7675 126.2326 145.1675 166.9426 191.984 220.7817
Saket 90 103.5 119.025 136.8788 157.4106 181.0221 208.1755 239.4018

TREND ANALYSIS FOR DELHI GRADE B OFFICE

Place 2006 2007 2008 2009 2010 2011 2012 2013
Nehru Place 43 49.45 56.8675 65.39763 75.20727 86.48836 99.46161 114.3809
Connaught
Place 76 87.4 100.51 115.5865 132.9245 152.8631 175.7926 202.1615
Noida 31 35.65 40.9975 47.14713 54.21919 62.35207 71.70488 82.46062
 In this research trend analysis is used to forecast 7 years rent in
Bangalore City. Here the forecast is done on the basis of the assumption that
there should be a 3% inflation and 12% market growth rate
The latest commercial market prices as on Mar-07 are listed below.

Delhi Mar-07
Location Commercial
Minimum Maximum
1 Karol Bagh 9000 23000
2 Rajendra Nagar 9000 14000
3 Gole Market 10000 32000
4 Chanakyapuri 7000 12000
5 South Extension 7000 11000
6 Defense Colony 7000 9000
7 Greater Kailash 4000 8000
8 Hauz Khas 6000 8000
9 Kalkaji 3000 5000
10 Saket 3000 4500
11 Vasant Vihar 3000 5000
12 Mayur Vihar 4000 7000
13 Malviya Nagar 3200 4500
14 Noida 2400 7000
15 Shastri Nagar 3000 4000
16 Sadar Bazar 3000 4000
17 Kamla Nagar 2000 3000
18 Vaishalli 3500 6500
19 IFCI Colony 3000 5000
20 Rajouri Garden 3000 4000
21 Janakpuri 3500 4500
22 Dwarka 2500 4500
23 Suryavihar 2000 3200
24 Palam Gurgaon 3000 5500
25 Gurgaon (Smaller) 4000 6000
Average 4404 8008
 Fiscal 07 is expected to witness an influx of around 11 million sq ft of
space in NCR some of which will be ready only by 2008. In Q1 of 2007, the rental
& capital values are expected to rise by 15-20% due to the lack of new supply in
Delhi except for Jasola. The expected increase in rentals is also attributed to the
fact that new supply coming in suburbs like Gurgaon is already leased out.
Emergence of IT and ITES sector and organized retail are the major
growth drivers of Delhi real estate. Growth of IT and ITES created vast demand
of office space and appearance of malls all over the country tendered huge
scope for land development.

Interpretation:
 Delhi is the second highest earning city in India with Per Capita
Income of Rs 53,976.
 Average Commercial Price per SF at present in Delhi ranges from
Rs 4400 to Rs 8000 with an average increase of 20% to 30% pa.
 The costliest commercial areas in Delhi are Gole Market, Karol
Bagh, Rajendra Nagar, South Extension and Chanakyapuri with an
average price per SF of Rs 20,450.
  The moderate commercial areas in Delhi are Defense Colony,
Greater Kailash, Vasant Vihar, Noida and Mayur Vihar with an average
price per SF of Rs 8400.
 The cheapest commercial areas in Delhi are Gurgoan, Palam
Gurgoan, IFCI Colony and Janakpuri with an average price per SF of Rs
4600.
 In Delhi, the demand for commercial spaces is on a high due to the
existing supply crunch and also because number of companies are
relocating from residential to commercial areas. IT / ITES companies are
the demand generators in suburbs having huge expansion plans, owing to
which leasing/ pre leasing of large floor plates is taking place. In Delhi, the
vacancy levels remained as low as 3% to 5% due to huge demand and
quick absorption.
 Fiscal 07 is expected to witness a supply of around 11 million SF of
space in NCR some of which will be ready only by 2008. This huge supply
will meet the demand for commercial spaces and thereby the prices and
rents are expected to increase moderately in 2007.
 The CBD market witnessed dramatic increase in rentals as a result
of negligible supply. Capital values have almost doubled whereas rental
values increased by almost 50%. The recent demolition of illegal
commercial building in residential area has created an immediate demand
for legal commercial complexes in NCR.
 Noida and Gurgoan are fast growing suburbs for commercial
market as well as residential market in Delhi NCR.

4.2.2. India - Mumbai

Mumbai, the Gateway to India, is a bustling city, which is full of
action and life. Day by day Mumbai real estate is expanding as a number of
builders and developers are investing in residential as well as commercial
projects.
 Mumbai is presently on a fast track growth. Investments are pouring in
from different parts of the world. Mumbai is the business mascot of India.It has
been observed that owing to the paucity of developable land in Mumbai, Housing
Companies in Mumbai are undertaking the latest housing projects on land that is
purchased at exclusively high rates. This has led to the increase in appreciation
of land values and the investment in Mumbai property has been giving rich
dividends to owners of property, apartments or Flats in Mumbai property prices,
with an equal possibility of the rates staying at current levels. This insufficiency of
housing opportunities has been very crucial in the development of suburban
properties in Mumbai.
Demand – Supply Analysis:
The major business locations in Mumbai are the CBD (Nariman Point, Fort
and Ballard Estate), Central Mumbai (Worli, Lower Parel), the Bandra Kurla
Complex and commercial hub along the Andheri Kurla stretch. Lately, Powai,
Malad and Vashi have also emerged as the preferred IT and ITES destinations.
In the last half of 2005, approximately 1 million sq ft of A Grade space was
added to the commercial market in Mumbai and another 1.5 million sq ft is
expected to be added in the second quarter. No supply was however added in
the CBD. With approx 80% of the supply, the Andheri – Kutch stretch emerged
as a high activity zone. Banks, financial institutions and corporate offices
continue to bolster demand in the CBD, the Andheri Kurla stretch and Bandra
Kurla Complex. The shift of demand to Andheri, Malad and Powai has become
quite evident with these areas offering large floor plates, proximity to manpower
pockets and higher efficiencies at lower rentals.
H2-06 did not witness any major addition in the Grade A stock of Mumbai.
Approximately 0.075 million sq ft space was added in BKC & Worli/ Prabhadevi
area. No supply was added in CBD. However, Airoli a new market in Northeast
received a fresh supply and is seeing a very rapid absorption of Grade A space.
About 0.5 million sq ft space has been leased out prior to possession of these
buildings. However, fourth quarter is expected to see a substantial supply of
approximately 1.7 million sq ft space, majority concentrated in BKC, Andheri
Kurla stretch and Powai which might bring some relief to the supply crunch. The
commercial market has been firm with corporate offices & financial institutions
bolstering the demand in CBD, BKC and Andheri Kurla stretch. In Malad and
Powai, IT/ITES companies continue to support the demand amidst the restricted
supply levels. A slight demand shift from CBD to north of Mumbai is being
observed owing to supply crunch.
Mumbai office market did not witness any major supply addition in Q2 &
Q3_06. However Q4 witnessed an addition of around 1 million sq ft of Grade A
space. BKC & Andheri together contributed more than 60% of total fresh supply.
The remaining supply came from Worli/Prabhadevi & Lower Parel while CBD did
not see any new stock addition.
In H1-07, a supply of around 0 .4 million sqft of Grade A space is expected
to come in Mumbai from which majority will be concentrated in BKC & Andheri
while, by H2-07 a substantial supply is expected to come in Lower parel &
Central suburb locations, which might bring a relief to supply crunch.

Trend Analysis:
In H1 of 2006, lack of adequate supply and fresh corporate demand in the
CBD led to vacancy levels which went down to an all time low of 5% - 7%.
Financial institutions and MNC’s continued to support demand in the Bandra
Kurla Complex. Capital and rental values in the CBD remained stable with no
new supply and a shift in demand to Andheri Kurla stretch and Bandra Kurla
Complex. The demand shift has led a slight upward pressure on the rentals in
these areas. In Malad and Powai, rental and capital values went up by
approximately 7% to 10% with limited supply catering to the demand. Activity in
BKC was also low due to limited supply and rentals increased by 20% to 25%.
Incidentally, the Badra-Kurla Complex recently witnessed the most expensive
deal when MukeskAmbani’s RIL paid INR 1,104 crore for a 7.5-hectare plot. The
Supreme Court of India overtuned the judgement of the Mumbai High Court,
which had stayed the sale of surplus mill land in the city. As a result of this
judgement, the market is expected to see about 20-25 million sq ft of
development coming on line in the next 3 to 4 years. Out of this, 3-4 million sq ft
would constitute A Grade office space. This is expected to flatten the rental and
capital value curve to some extent. However the impact might not be immediate
or long lasting as this might be quickly taken up as a result of buoyant demand.

Grade A Office – Rent (Rs/SF)

Place 2004 2005 Q1-06 Q2-06 Q3-06 Q4-06
CBD 102 124 178 230 247 247
Anderi East 66 66 90 92 92 93
Bandra Kurla
Comp 105 105 217 233 292 292
Lower Parel 65 80 140 175 205 205
Malad 40 40 48 50 64 64
Navi Mumbai N/A N/A 50 59 59 59
Powai 40 40 55 55 55 61

Mumbai - Grade A Office

350
Rent (Rs/SF/Mo)

300
250
200 2004
150 2005
100 Q1-06
50
Q2-06
0
Q3-06
CBD Anderi Bandra Lower Malad Navi Powai
East Kurla Parel Mumbai Q4-06
Comp
Location

Due to the lack of supply of Grade A space in all micro markets in H2-06,
most tenants prefer renewal of their existing leases to relocation. This has
brought down the vacancy levels to all time low in all the sub markets. The
vacancy levels in CBD are also down to mere 1% -2%. Owing to ever increasing
demand there has been further hardening of rentals in all micro markets. The
capital and rental values increased by 20-30% in Bandra Kurla Complex and
Lower Parel. However the other sub markets like Andheri, Worli/Prabhadevi, and
Malad witnessed an increase of 15% in rentals. Due to low supply levels in CBD
areas, a passive market like Ballard Estate has suddenly become very active and
rentals there along with the surrounding areas have gone up to INR 185-200 per
Sq ft. In IT/ITES driven markets of Malad and Powai, rentals have climbed up to
INR - 55-60 per Sq ft per month.

Grade B Office – Rent (Rs/SF)

Place Q1-06 Q2-06 Q3-06 Q4-06
CBD 180 194 220 175
Anderi East 62 76 90 80
Bandra Kurla
Comp 142 165 200 180
Lower Parel 133 154 200 200
Malad N/A N/A 50 50
Navi Mumbai N/A N/A 28 28

Mumbai - Grade B Office

250
Rent (Rs/SF/Mo)

200 Q1-06
150 Q2-06
100 Q3-06
50 Q4-06

0
CBD Anderi Bandra Lower Malad Navi
East Kurla Parel Mumbai
Comp
Location
 In H2-06, the demand from IT/ITES sector, MNC's & financial institutions
continues to dominate the market especially in Malad and Powai, where IT/ITES
companies continue to support the demand amidst zero fresh supply. Owing to
supply crunch, slight demand shift from CBD to north of Mumbai & newly
emerging markets like Navi Mumbai & Thane is being observed. The vacancy
levels have dipped to all time lows especially in markets like AKC, Malad &
Powai. The vacancy levels in CBD are also down to mere 1% -2%. The capital
and rental values have increased by 5-12% in prime commercial locations like
Andheri, Worli/Prabhadevi & Kalina since last quarter. Moreover the office rentals
saw a rise of 19% HoH in Lower parel on the account of strong demand & less
supply. However, with the expected launch of several projects in Lower parel, lot
of activity is going to be seen in near future.

TREND ANALYSIS FOR MUMBAI GRADE OFFICE A

Place 2006 2007 2008 2009 2010 2011 2012 2013

CBD 178 204.7 235.405 270.7158 311.3231 358.0216 411.7248 473.4835
Anderi East 90 103.5 119.025 136.8788 157.4106 181.0221 208.1755 239.4018
Lower Parel 140 161 185.15 212.9225 244.8609 281.59 323.8285 372.4028
Powai 55 63.25 72.7375 83.64813 96.19534 110.6246 127.2183 146.3011

TREND ANALYSIS FOR MUMBAI GRADE OFFICE B

Place 2006 2007 2008 2009 2010 2011 2012 2013

CBD 180 207 238.05 273.7575 314.8211 362.0443 416.3509 478.8036
Anderi East 62 71.3 81.995 94.29425 108.4384 124.7041 143.4098 164.9212
Lower Parel 133 152.95 175.8925 202.2764 232.6178 267.5105 307.6371 353.7826

In this research trend analysis is used to forecast 7 years rent in

Bangalore City. Here the forecast is done on the basis of the assumption that
there should be a 3% inflation and 12% market growth rate
The latest Mumbai commercial prices as on Mar-07 are listed below.

Mumbai Mar-07
Location Commercial
Minimum Maximum
1 Colaba 11000 45000
2 Cuffe Parade 21000 55000
3 Nariman Point 7000 14000
4 Church gate 11000 16000
5 Marine Lines 9000 18000
6 Fountain Area 5500 9000
7 Ballard Estate 8000 14000
8 Kalbadevi 4000 7500
9 Bandra - East 5000 22000
10 Bandra - West 6000 22000
11 Khar - East 5000 18000
12 Khar - West 9000 19000
13 Santa Cruz - East 3000 10500
14 Santa Cruz - West 7000 26000
15 Vile Parle - East 5000 19000
16 Vile Parle - West 8000 14000
17 Wadala 3000 4200
18 Kings Circle 4000 5000
19 Sion 3500 5000
 20 Kurla 2000 3000
21 Chembur 4500 6000
22 Ghatkopar 5000 9000
23 Vikhroli 3500 4500
24 Bhandup 3000 4500
25 Vashi 2800 4800
26 Kopar Khairane 2000 3400
27 Airoli 1600 3900
28 Sanpada 1500 3400
29 Nerul 1500 3200
30 Konkan Bhavan 1200 3600
31 Kharghar 1200 3200
32 Kalamboli 900 2400

The year 2007 is expected to witness lot of activity in Mumbai office

market. With the expected launch of large projects in the central suburbs by
developers like Lodha Group, Nirmal Group, Runwal Developers, Oberoi Group,
the entire belt between Bhandup to Mulund will witness a sea change in the real
estate profile. Due to it, a lot of fresh supply will also be added in a short-supply
market. Meanwhile, Navi Mumbai and Thane are emerging as potential
alternative locations especially for back office operations and ITES sector.
Interpretation:
 Mumbai is the third highest earning city in India with Per Capita
Income of Rs 48,954.
 Average Commercial Price per SF at present in Delhi ranges from
Rs 4400 to Rs 8000 with an average increase of 20% to 30% pa.
 The costliest commercial areas in Mumbai are Colaba, Cuffe
Parade, Church Gate, Nariman Point and Marine Lines with an average
price per SF of Rs 24,750.
 The moderate commercial areas in Mumbai are Bandra, Santa
Cruz, Khar and Vile Parle with an average price per SF of Rs 15,700.
 The cheapest commercial areas in Mumbai are Wadala, Kurla,
Ghatkopar, and Airoli with an average price per SF of Rs 4400.
 The demand from IT/ITES sector, MNC's & financial institutions
continues to dominate the market especially in Malad and Powai, where
IT/ITES companies continue to support the demand amidst zero fresh
supply. Owing to supply crunch, slight demand shift from CBD to north of
Mumbai & newly emerging markets like Navi Mumbai & Thane is being
observed. The vacancy levels have dipped to all time lows especially in
markets like AKC, Malad & Powai. The vacancy levels in CBD are also
down to mere 1% -2%. So the capital price and rent is expected to
increase sharply.
 Fiscal 2007 is expected to witness lot of activity in Mumbai office
market. With the expected launch of large projects in the central suburbs
by developers like Lodha Group, Nirmal Group, Runwal Developers,
Oberoi Group, the entire belt between Bhandup to Mulund will witness a
sea change in the real estate profile. Due to it, a lot of fresh supply will
also be added in a short-supply market.
 In 2007, several IT & commercial projects in the central belt of
Mumbai (Lal Bahadur Shastri (LBS Marg) are expected to hit the market.
Due to huge availability of land & its connectivity with airport, railway
 stations, LBS Marg is the going to be most preferred and upcoming IT
destination of Mumbai.
 Navi Mumbai is fast growing suburbs for commercial market as well
as residential market in Mumbai.

3.2.3. US – Phoenix
Phoenix is the top market in National Retail Index (NRI). The
substantial amount of construction occurring throughout the Valley is not
expected to slow the Phoenix retail market in 2007. Developers continue to
deliver large retail centers, such as the Tempe Marketplace, to more densely
populated areas. Fortunately, Phoenix will once again boast one of the strongest
economies in the nation in 2007. Despite the cooling housing market and
corresponding decline in cash-out refinancing activity forecast for this year, the
Valley’s tremendous employment and population growth are expected to result in
an 8 percent increase in retail sales in 2007, the highest in the nation.
Trend Analysis:
Despite moderate job growth and elevated energy prices, consumers have
continued to spend at a risk pace. Retail sales growth reached approximately 6.3
percent in 2006, following an advance of more than 7 percent the previous year.
High levels of spending did not come without a price, however, as U.S.
households have consistently spent more than they earned every quarter since
early 2005. Low interest rates and robust home price appreciation led to
unprecedented cash-out refinancing activity, which pumped an estimated $500
billion into the economy over the past two years alone.
While accelerating stronger growth bodes well for the retail sector, it could
also translate into higher production costs and ultimately consumer prices.
Overall, however, most signs suggest inflation will fall back into the Fed’s comfort
zone in 2007, with core prices expected to rise by slightly more than 2 percent,
down from 2.6 percent in 2006. In the near term, the Fed is expected to maintain
its wait-and-see approach, closely monitoring indicators for signs of heightened
inflation or a greater-than-expected deceleration in growth. While unemployment
is forecast to rise in 2007, it is expected to remain below 5 percent. The tight
labor market and slower productivity gains are likely to lead to accelerated wage
growth. Overall, retail sales are anticipated to rise approximately 4.0 percent to
4.5 percent.
Retail market fundamentals are expected to remain relatively stable in
2007 despite forecasts for slowing economic growth. Development has been
largely tenant-driven over the past several years, and forecasts for reduced retail
sales growth are expected to translate into in a slowdown in construction. At the
start of 2007, the number of retail projects under way was still below levels
reported both one and two years earlier. A handful of big-box chains have
announced reduced expansion plans for this year, with Wal-Mart among the
latest to hit the list.
Retail prices and cap rates have become more reflective of property
quality, location and tenant-credit, a trend we anticipate will become more
apparent through 2007. Over the past year, the gap between buyer and seller
expectations has widened, leading to a 20 percent decline in sales velocity. The
return to more normalized conditions, however, is to the benefit of the market’s
long-term health. The risk premium was nearly erased from the retail market in
the first half of 2006, as rising interest rates caused the spread between cap
rates and the 10-year Treasury yield to narrow dramatically. Interest rates have
since subsided, and both the lending environment and retail fundamentals
remain healthy, but there are risks emerging.

The majority of neighborhood and community centers are being

constructed in the northwest and southeast areas of the Phoenix, where home
building has been booming in recent years. These projects, coupled with regional
and power center development, will push completions to more than 7 million
square feet this year. Fortunately, Phoenix will once again boast one of the
strongest economies in the nation in 2007. Despite the cooling housing market
and corresponding decline in cash-out refinancing activity forecast for this year,
the Valley’s tremendous employment and population growth are expected to
result in an 8 percent increase in retail sales in 2007, the highest in the nation.
This will generate substantial tenant demand, which will help offset new
construction and keep vacancy under 5 percent in 2007. The dynamic local
economy and cap rates in the low-7 percent range will continue to attract buyers.
Out-of-state investor interest remains elevated as evidenced last year when
California buyers purchased more properties than local investors, resulting in an
8 percent increase in the median price of multi-tenant assets.

Household
Asking Rent Completion Income Vacancy Rate Unemployment
Phoenix (In Million
Retail (In $) SF) (In '000) (In %) (In %)
2004 17.23 4.1 52.708 4.7% 4.40%
2005 17.88 5.9 54.525 4.5% 4.10%
2006 18.50 8.8 57.288 4.6% 3.50%
2007** 19.20 7.2 58.839 4.9% 3.30%

TREND ANALYSIS FOR PHOENIX

Place 2006 2007 2008 2009 2010 2011 2012 2013

retail 17.23 19.8145 22.78668 26.20468 30.13538 34.65568 39.85404 45.83214

In this research trend analysis is used to forecast 7 years rent in

Bangalore City. Here the forecast is done on the basis of the assumption that
there should be a 3% inflation and 12% market growth rate
Cap rates for high-quality properties remain in the low-6 percent range but
are expected to begin to inch up this year. Institutional activity will continue to be
strong and keep cap rates from growing at an accelerated pace. If cap rates
begin to rise, local investors, who had exchanged into higher yielding properties
in other metros, may begin to reinvest 1031 money back into the Phoenix market
in 2007.
Interpretations:
 Robust development will be met by healthy retailer demand, while
an expanding population and strong retail sales help Phoenix gain top spot in
2006 National Retail Index.
 Phoenix, the only non-coastal market in the top five, inched up two
positions on the strength of its high-ranking employment and household
growth forecasts.
 For US retail market, Employment growth is expected to slow to 0.9
percent in 2007, or 1.2 million jobs, down from 1.4 percent in 2006.
Expansion is forecast to remain concentrated in the professional and
business, and educational and health services sectors, with weaker
conditions expected to persist in manufacturing and construction. But in
Phoenix retail market, employment growth will remain robust. Local
employers are expected to expand payrolls by 2.8 percent, adding 53,600
new jobs. Last year, Phoenix led the nation with the addition of 89,000 jobs.
 For US retail market, while unemployment is forecast to rise in
2007, it is expected to remain below 5 percent. The tight labor market and
slower productivity gains are likely to lead to accelerated wage growth.
Overall, retail sales are anticipated to rise approximately 4.0 percent to 4.5
percent. For Phoenix retail market, the unemployment rate is expected to
remain below 4 percent, which is very low when compared to other markets.
 In US retail market, Curtailed construction will help to offset the
effects of slower economic and retail sales growth. Overall, vacancy is
forecast to increase only 10 basis points to 8.9 percent. In Phoenix retail
market, due to heavy construction, vacancy is expected to finish the year at
4.9 percent, up 30 basis points from year-end 2006. Last year, vacancy
inched up 10 basis points.
  In US, Retail owners are expected to achieve asking and effective
rent growth of 3.4 percent in 2007. Concessions are forecast to hold steady at
just over 9 percent of asking rents. In Phoenix, a healthy rate of rent growth
will persist this year, with asking rents expected to advance 3.8 percent to
$27.96 per square foot and effective rents forecast to rise 3.9 percent to
$26.13 per square foot.

5. Findings and Suggestion

5.1. Findings
5.1.1. Residential Markets
US
  From the interpretation given for New York Market in US, the
researcher conclude the factors that drive the residential markets and their prices
and rents are
 Increasing Household Income
 Declining Long term Interest Rate
 Low Inflation Rate of below 2.5%
 Increasing Employment Rate
 Perfect Demand – Supply match

• New York remains the tightest residential market in US with

strongest household income with CAGR 0f 5.8%.
• Asking rent increases sharply with CAGR of 5.65%.
• The average median price is increasing with CAGR of
9.85%.
• Unemployment rate is decreasing with CAGR of -8.6%.
• Low inflation and decreasing interest rate supports the
residential markets.
• The supply is perfectly matches the demand and hence the
US residential market is well structured.
India
 From the interpretation given for Chennai and Bangalore in India, the
researcher conclude the factors that drive the residential markets and their prices
and rents are
 Increasing Per capita Income
 Declining interest rate over the period of 5 years
 Steady inflation rate of 4% – 5%
 Demand – Supply mismatch
• Bangalore remains the highest spending city
with highest per capita income.
 • Per Capita Income of the Bangalore city is
growing with CAGR of 12.8%.
• Chennai is the fourth highest city of Per Capita
income with CAGR of 7.6%.
• Unemployment Rate of Bangalore is decreases
from 4.2% in 2000 to 4% in 2005 with CAGR of -0.97%.
• Unemployment Rate of Chennai is decreases
from 9.2% in 2000 to 6.4% in 2005 with CAGR of -7%.
• Loans are getting costlier in India because of
recent hike in home loan and PLR by RBI due to recent inflation issue.
• Demand and Supply mismatch is the major
issue in Indian cities and hence the Indian residential markets are
unstructured.
5.1.2. Commercial Office/Retail Markets
US
 From the interpretation given for Phoenix Office Market in US, the
researcher conclude the factors that drive the residential markets and their prices
and rents are
 Increasing Employment Rate
 Decreasing Vacancy Rate with perfect Demand – Supply match
 Declining Long term Interest Rate
 Low Inflation Rate of below 2.5%
• New York remains the tightest office market in US with
strongest employment growth.
• Vacancy rate is decreasing with CAGR of 10.9%.
• Asking rent increases sharply with CAGR of 5.06%.
• The average median price is increasing with CAGR of
24.4%.
• Unemployment rate is decreasing with CAGR of -8.6%.
 • Low inflation and decreasing interest rate supports the Office
markets.
• The supply is perfectly matches the demand and hence the
US Office market is well structured.
 From the interpretation given for Phoenix Retail Market in US, the
researcher conclude the factors that drive the residential markets and their prices
and rents are
 Increasing Employment Rate
 Decreasing Vacancy Rate with perfect Demand – Supply match
 Declining Long term Interest Rate
 Low Inflation Rate of below 2.5%

• Phoenix remains the tightest retail market in US with

strongest employment growth.
• Vacancy rate is decreasing with CAGR of 2.1%.
• Asking rent increases sharply with CAGR of 3.6%.
• Unemployment rate is decreasing with CAGR of -10.8%.
• Low inflation and decreasing interest rate supports the retail
markets.
• The supply is perfectly matches the demand and hence the
US retail market is well structured.
India
 From the interpretation given for Delhi and Mumbai in India, the
researcher conclude the factors that drive the residential markets and their prices
and rents are
 Increasing Per capita Income
 Declining interest rate over the period of 5 years
 Steady inflation rate of 4% – 5%
 Demand – Supply mismatch
 • Delhi remains the second highest spending city
with highest per capita income.
• Per Capita Income of the Delhi is growing with
CAGR of 10.2%.
• Mumbai is the third highest city of Per Capita
income with CAGR of 6.8%.
• Unemployment Rate of Delhi is decreases from
4.4% in 2000 to 3.4% in 2005 with CAGR of -5.02%.
• Unemployment Rate of Mumbai is decreases
from 8.5% in 2000 to 7.5% in 2005 with CAGR of -2.47%.
• Loans are getting costlier because of recent
hike in PLR by RBI due to recent inflation issue.
• Even though unemployment rate is good,
Demand and Supply mismatch of office spaces is the major issue in Indian
cities and hence the Indian residential markets are unstructured.

5.2. Suggestions
For Investors in India
 For short term perspective, the investors need to consider the
current demand and supply and CAGR of appreciation price and rents for
investing in real property in India.
 For long term perspective, the investors need to consider the
factors like household income, unemployment rate, vacancy rate,
absorption rate, CAGR of median price and rents which are currently
driving the US market for investing in real property in India, because the
factors which are driving the current US markets will be the factors for
Indian market in 20 years down the line.
For Investors in US
 In US, the investors need to consider the same factors which are given
above for investing in real property.
5.3. Conclusion
 Real Estate is one of the fast growing industries in India while in US, real
estate is structured as well as developed one. In US, real estate investments are
comprises of large number of investment with smallholdings. But in India, low
number of investment with large holdings. At present in India, generally real
estate investment with right decision gives high return. Because of the fact that
the real estate is un-developed and unstructured in India, there is a possibility for
investors to invest in wrong realty investment. And the scope and opportunity of
the investments in India is very low when compared to US. GRO is a company
that services only to the US Real Estate Industry. GRO need to know the best
market and the opportunity of both residential and commercial realty investment
in the markets.
This research met all secondary objectives and covers the need which
specified in the need for the study. This research analyses the current markets
based on the demand and supply curve and past price and rent movement curve.
From this analysis, this research forecasts the future movement of prices and
rents. This research also suggests the investors about the investment
opportunities in short term as well as long term perspective for both India and
US.
Place 2006 2007 2008 2009 2010 2011 2012 2013
Central 9200 10580 12167 13992.05 16090.86 18504.49 21280.16 24472.18
cooke place 5000 5750 6612.5 7604.375 8745.031 10056.79 11565.3 13300.1
palace orchard 6500 7475 8596.25 9885.688 11368.54 13073.82 15034.89 17290.13
indra nagar 6000 6900 7935 9125.25 10494.04 12068.14 13878.36 15960.12
white field 2300 2645 3041.75 3498.013 4022.714 4626.122 5320.04 6118.046

TREND ANALYSIS FOR BANGLORE

Trend Analysis - Banglore

30000
25000 Place
Central
20000
RENT

cooke place
15000
palace orchard
10000
indra nagar
5000 white field
0
1 2 3 4 5 6 7 8
YEAR

TREND ANALYSIS FOR CHENNAI

Place 2006 2007 2008 2009 2010 2011 2012 2013

Nungabakkam 3000 3450 3967.5 4562.625 5247.019 6034.072 6939.182 7980.06
Anna Nagar 4100 4715 5422.25 6235.588 7170.926 8246.564 9483.549 10906.08
Adayar 4400 5060 5819 6691.85 7695.628 8849.972 10177.47 11704.09
T nagar 4000 4600 5290 6083.5 6996.025 8045.429 9252.243 10640.08

Trent Chart- Chennai

14000
12000
Nungabakkam
10000
Anna Nagar
RENT

8000
Adayar
6000
T nagar
4000
2000
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR
 TREND ANALYSIS FOR DELHI

Place 2006 2007 2008 2009 2010 2011 2012 2013

Nehru Place 130 149.5 171.925 197.7138 227.3708 261.4764 300.6979 345.8026
Noida 47 54.05 62.1575 71.48113 82.20329 94.53379 108.7139 125.0209
Jasola 83 95.45 109.7675 126.2326 145.1675 166.9426 191.984 220.7817
Saket 90 103.5 119.025 136.8788 157.4106 181.0221 208.1755 239.4018

Trend Chart - Delhi

400
350
300 Nehru Place
250
Noida
RENT

200
Jasola
150
100 Saket
50
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR

TREND ANALYSIS FOR DELHI

Place 2006 2007 2008 2009 2010 2011 2012 2013

Nehru Place 43 49.45 56.8675 65.39763 75.20727 86.48836 99.46161 114.3809
Connaught
Place 76 87.4 100.51 115.5865 132.9245 152.8631 175.7926 202.1615
Noida 31 35.65 40.9975 47.14713 54.21919 62.35207 71.70488 82.46062

Trend Chart - Delhi

400
350
300 Nehru Place
250
Noida
RENT

200
Jasola
150
100 Saket
50
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR
 TREND ANALYSIS FOR MUMBAI

Place 2006 2007 2008 2009 2010 2011 2012 2013

CBD 178 204.7 235.405 270.7158 311.3231 358.0216 411.7248 473.4835
Anderi East 90 103.5 119.025 136.8788 157.4106 181.0221 208.1755 239.4018
Lower Parel 140 161 185.15 212.9225 244.8609 281.59 323.8285 372.4028
Powai 55 63.25 72.7375 83.64813 96.19534 110.6246 127.2183 146.3011
Trend Analysis Mumbai

500

400
CBD
300
RENT

Anderi East
200 Lower Parel
Powai
100

0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR

TREND ANALYSIS FOR MUMBAI

Place 2006 2007 2008 2009 2010 2011 2012 2013

CBD 180 207 238.05 273.7575 314.8211 362.0443 416.3509 478.8036
Anderi East 62 71.3 81.995 94.29425 108.4384 124.7041 143.4098 164.9212
Lower Parel 133 152.95 175.8925 202.2764 232.6178 267.5105 307.6371 353.7826
 Trend Analysis

600
500
400 CBD
Rent

300 Anderi East

200 Lower Parel

100
0
2006 2007 2008 2009 2010 2011 2012 2013
Year

TREND ANALYSIS FOR PHOENIX

Place 2006 2007 2008 2009 2010 2011 2012 2013

retail 17.23 19.8145 22.78668 26.20468 30.13538 34.65568 39.85404 45.83214

Trend Analysis-Phoenix

50

40

30
Rent

retail
20

10

0
2006 2007 2008 2009 2010 2011 2012 2013
Year
6.1 BIBILOGRAPHY

1. C. K. Kothari Research Methodology

2. Garmaise Confronting Information Asymmetries.
3. Ball, Dermond, Suitable Piece of Real Estate.
4. Mark Lee Levine, International Real Estate
5. BOB Deutsch,The Real Estate Agent’s Action Guide to Listings & Sales
Success.

Websites

www.google.com
www.costar.com
www.cushwake.com
www.colliers.com
www.census.gov