SURVIVAL TO

REVIVAL
Indian Realty Sector on the path to recovery
Table of Contents
1 EXECUTIVE SUMMARY

DEMAND FORECAST 3
ATTRACTIVE LOCATIONS
7
22 INVESTMENT SCENARIO

SIGNIFICANT REAL ESTATE

REGULATIONS 27
THE ROAD AHEAD
FOR REALTY 28
Executive Summary
Prevalent market sentiments indicate that the
real estate sector around the world (with a few
exceptions such as Europe) has begun to bottom
out. Attracted by correcting values, investors
and end-users have begun to cash in on good
bargain buys, bringing momentum to the
activities in this sector. Asian economies, with
strong fundamentals to cope with the ongoing
economic crisis, have performed better than
their North American and European
counterparts. Over the second quarter of 2009,
the Asia Consensus Economics1 Forecasts on
principal macroeconomic indicators, improved
for large Asian countries (although a few
smaller nations continued to remain
pressurised).
1. Based on recent Asia 2009 report of Consensus Economics
There is no doubt that the fiscal stimulus
packages, which were offered as remedial
measures by various Asian governments, have
started to show results. The forecasted
improvement is based on an upward revisions of
the first quarter GDP estimates. Despite
divergent views amongst large international
institutions, Asia is believed to be better placed
economically because of its low levels of debt
exposure at the government, corporate and
consumer levels, which has aided an early
recovery process, now underway.
It has been observed that in certain mature
Asian markets, positive sentiments have
translated into higher occupier confidence. A
few major locations in India too have seen a
significant turnaround in the number of
viewings/enquiries for commercial spaces in 2Q
2009, indicating rising interest and growth in
activities. Despite weaker demand in 2009, the
rise of activities in the sector can be taken as a
positive indication for the country's realty
sector, which is expected to revive by mid-2010.
Coinciding with the return of buyer interest in
select locations, land deals too have begun to
stage a slow recovery. Land, being the key
requisite for all real estate activities, is also the
component which usually lags in the recovery
cycle and hence a revival in this segment can be
considered as an indication of gradual revival of
the market. The window of opportunity in
investments now lies in entering or reinvesting
before the market bottom shifts out.
The real estate sector in India is now on a
gradual improvement curve with new projects
being launched and the liquidity position of
developers improving on the back of Qualified
Institutional Placement (QIP) issues and
proposed public offers. Despite a lack of any
serious announcements made during the interim
and final Union Budget for India's realty sector,
there has been an increased emphasis on the
1
 infrastructure sector with higher allocation of with a cumulative influx of about USD 1,382
funds. The Reserve Bank of India (RBI) has also million for the first 5 months of the year. Our
directed the banking sector to reconsider analysis indicates that Maharashtra continues
lending to the realty sector. to be the most favoured location for
investment amongst the institutional
India's economic performance vis-à-vis other investors followed by the National Capital
economies over the past year has encouraged
Region (NCR) and Karnataka, which have
many global investment firms to reconsider
also attracted substantial investments.
India as a potential investment destination. The role of FIIs and FDI in the country's real
According to the Indian Brand Equity
estate sector has been exponential in its
Foundation (IBEF), the quantum of investments
growth and development. For the period
by Foreign Institutional Investors (FIIs) in
under consideration (August 2008 - August
domestic equities crossed the USD 60 billion,
2009), an asset class-wise analysis of total
for the first time since the recent economic
foreign investments indicates that the
slowdown from mid 2008. The net
residential sector has been the highest
investment position of FIIs increased from
investment grosser followed by the township
USD 53.3 billion on March 9, 2009 to over
sector. The table below indicates the quantum
USD 60.3 billion till June 10, 2009. Foreign
of FDI inflows into the realty and
Direct Investment (FDI) inflows in the first
construction sectors.
six months of 2009 began on a good note too,

FDI Inflow in Real Estate & Construction (in USD million)

2006 - 07 2007 - 08 2008 - 09 2009-10 (F) Cumulative inflow
(Apr'00 to Jun'09)

Housing & Real Estate 467 2,179 2,801 1,181 6,693

Construction
(Including roads & highways) 985 1,743 2,028 603 5,874
Source : Department of Industrial Policy & Promotion

At this juncture of the country's economy, Cushman & Wakefield Research has further
Cushman & Wakefield Research revisits its attempted to identify and examine select
real estate demand estimates. The forecasts locations with high potential that may be
for pan-India commercial office space demand viable investment opportunities.
for the period 2009-2013 stands at
Demand Projection (2009-2013)
approximately 196 million sq.ft., while retail
Over 690,000 Room Nights
space demand for the same period across India Hospitality
Over 7.5 million units
is estimated to be about 43 million sq.ft. Residential
Demand for hospitality and residential Over 43 million sq.ft.
Retail
segments are likely to be over 690,000 room Over 196 million sq.ft.
Office
nights and 7.5 million units, respectively.
0% 20% 40% 60% 80% 100%
Over the next 3-5 year period, a fair amount
2009 2010 2011
of investments would be required for slaking 2012 2013
this anticipated demand. In this report Source : Cushman & Wakefield Research

2
Demand Forecast
The Indian real estate sector has undergone a
rapid transformation during 2008-09 due to
the global economic crisis. The high growth
trajectory of the previous years saw a setback
during this period. Inherently strong
economic fundamentals, low exposure to debt
and state intervention, however, have helped
the sector to gradually return to the path of
recovery.
Cushman & Wakefield Research revisits the
demand estimates post the economic crisis
which resulted in weakening business
sentiments and demand contraction. The pan
India cumulative demand during 2009-2013
is estimated to be 196 million sq. ft. for office
and 43 million sq.ft. for retail. While
demand for the hospitality segment is likely
to be over 690,000 rooms nights, that for the
residential segment is expected to be 7.5
million units for the period under
consideration.
The estimates for various asset classes were
arrived at by considering variables which
form the primary demand drivers or major
influential factors of that particular asset
class:
Office: The variables considered for demand
forecast are the Gross Domestic Product
(GDP), historical demand trend in the real
estate sector and anticipated future
commitments.
Retail: Factors influencing the demand for
retail segment are the occupancy levels in
existing markets which were analysed in sync
with the growth of the Indian retail sector
and the growth of consumerism.
Residential: The growth in income, increase
in the number of urban households, and the
growth in loan disbursement were some of the
considerations for residential demand forecast.
Hospitality: The demand estimate for the
hospitality segment, referred to as
“Accommodated Demand”, is computed
based on the estimated supply and anticipated
occupancy levels during the years under
consideration.
3
 Commercial Market
The pan India demand for office space is
estimated to be 196 million sq. ft. by 2013,
with seven major cities2 accounting for
approximately 80% of the total demand.
Hyderabad, Pune and Kolkata are expected to
witness the highest compounded annual
growth of approximately 28% during 2009-
2013, highlighting the growing prominence
of tier 2 cities in the India growth story.
However, Bangalore is likely to have the
highest cumulative demand of
34 million sq. ft. through the period under
consideration, followed by Chennai, owing to
renewed interest from the corporate sector,
post the economic crisis.
Established commercial centres, however, are
expected to remain slower in growth than their
tier 2 counterparts. Cumulative demand
among the tier 1 cities of Mumbai, NCR and
Bangalore will account for 42% of total
demand, with Mumbai and NCR accounting
for 24 and 25 million sq.ft. of office space
demand through 2009-2013, respectively.

Office Demand (Pan India) Office Demand (Million Sq.ft., 2009-2013)

60 Bangalore
35
50 30
25
Mumbai Chennai
Million Sq.ft.

40 20
15
10
30
5
0
20
Pune NCR
10

0
2009E 2010E 2011E 2012E 2013E
Hyderabad Kolkata

Source : Cushman & Wakefield Research Source : Cushman & Wakefield Research

Residential Market
The pan India residential demand is estimated
to be over 7.5 million units by 2013 across all
categories including Economically Weaker
Sections (EWS), affordable, mid and luxury
segments. The residential demand for top
seven cities is estimated to be 4.5 million units
by 2013. Of the total expected demand across
India, 43% is likely to be generated in tier 1
cities, i.e., Bangalore, Mumbai and NCR.
Mumbai is likely to witness the highest
Residential Demand (Pan India, 2009-2013)
cumulative demand of 1.6 million units by
2013 due to various development projects and
increasing urbanization in the city.
Hyderabad and Bangalore are likely to have
the highest compounded annual growth of
14% in the next five years. The affordable and
mid segment category, likely to constitute
85% of the total residential demand, will be
the primary focus of most developers.
Residential Demand (in units, 2009-2013)

2,000,000 Bangalore
1,800,000
1,800,000
1,500,000
1,600,000
Mumbai 1,200,000 Chennai
1,400,000
Units

900,000
1,200,000
600,000
1,000,000
300,000
800,000 0
600,000 Pune NCR
400,000
200,000
0
2009E 2010E 2011E 2012E 2013E
Hyderabad Kolkata

Source : Cushman & Wakefield Research Source : Cushman & Wakefield Research

2. The seven major cities referred to in this report are Bangalore,

Chennai, Hyderabad, Kolkata, Mumbai, NCR and Pune
4
Retail Market
Cumulative retail demand across India is
estimated to be 43 million sq.ft. by 2013 of
which, demand in the top seven cities is
estimated to be nearly 34.6 million sq.ft. The
demand is expected to be concentrated in the
tier 1 cities constituting nearly 46% of the
total estimated pan India demand during the
period under consideration. Pune is expected
to record the highest compounded annual
growth of 51% due to the current limited
stock of operational malls and favourable
demographic profile which cites potential for
the growth of organised retail segment within
the city.

Bangalore, Mumbai and NCR are all expected

to see the highest demand, together
comprising approximately 20 million sq.ft.
The anticipated increase in the share of
organised retail is expected to grow from 5%
to 15.5% by 2016, according to the
Investment Commission of India, highlighting
the potential for retailers to expand pan India.

Retail Demand (Million Sq.ft., 2009-2013)

Bangalore
7
6
Mumbai 5
Chennai
4
3
2
1
0

Pune NCR

Hyderabad Kolkata

Retail Demand (Pan India, 2009-2013)

14
12
10
Million Sq.ft.

8
6
4
2
0
2009E 2010E 2011E 2012E 2013E
Source : Cushman & Wakefield Research

5
 Hospitality Market
The increasing contribution of in bound and
domestic travel and tourism to the Gross
Domestic Product (GDP) of India has
provided the necessary impetus for the
growth of the hospitality industry. According
to the Travel & Tourism Competitiveness
Report 2009 by World Economic Forum, the
contribution of travel and tourism to GDP is
expected to be approximately 6% in 2009
and the real GDP growth for travel and
tourism economy is expected to be at 0.2% in
2009 with a potential of increase to an
average 7.7% per annum over the next 10
years. The pan India accommodated demand
for the hospitality sector is estimated to be
over 690,000 room nights by 2013. Tier 1
cities are likely to drive the demand in the
hospitality segment led by NCR which is
estimated to constitute 15% of the total
demand by 2013, followed closely by
Mumbai at 14%. The upcoming
Commonwealth Games in 2010 is one of the
main demand drivers of room nights in the
NCR. Bangalore, however, is expected to
register the highest compounded annual
growth of about 26% in demand, followed by
NCR at 24% and Pune at 23%.

Tier 2 and 3 cities are also likely to generate

demand for 242,000 room nights by 2013
owing to various initiatives taken by the
Indian government to promote commercial
and tourism activity in these locations.

Hospitality Demand (Pan India, 2009-2013)

200,000

150,000
Room Nights

100,000

50,000

0
2009E 2010E 2011E 2012E 2013E

Accomodated Demand
(Room Nights, 2009-2013)
Bangalore
120,000
100,000
Mumbai 80,000 Chennai
60,000
40,000
20,000
0

Pune NCR

Hyderabad Kolkata

Source : Cushman & Wakefield Research

6
Attractive Locations
With signs of economic stabilisation and
moderate global economic growth forecasted
for 2009-10, the property markets in Asia
Pacific, have begun to exhibit signs of revival
in the second quarter of 2009 as hope for a
wider economic recovery continues to grow.
With the country's economic outlook
beginning to improve, foreign institutions are
finding a way to buck the downward trend by
investing in India.
According to Indian Brand Equity
Foundation, in 2009 alone, India received
approximately USD 5.5 billion of FIIs out of
a total of USD 23 billion that flowed into
emerging markets. India also received close to
25% of the portfolio funds coming into
markets in Asia, Africa and Latin America.
This is significant in the light of the fact that
till 2007, India had received less than 15% of
the funds flowing into these emerging
markets.
Even though the overall demand for real
estate space saw a decline in 2009 over the
previous years, the sector is expecting to see a
demand growth in the next five years backed
by inherently strong economic fundamentals.
In this section, Cushman & Wakefield
Research highlights a few high potential
micro-markets, among many others spread
across the country, investing into
development projects across various asset
classes. These locations have been evaluated
on existing base, expected demand, current
and future infrastructure, end user
attractiveness, potential in growth of rental
and capital values, investor interest,
performance of existing projects, expected
investment returns and availability of viable
investment options.
7
 Commercial Office Market
With many corporate firms shifting to registered a growth in excess of 65% over the
alternative locations, with better cost previous quarter (January – March 2009) to
advantages, commercial office space in the settle at 5.66 million sq.ft. This increase in
country has been showing slow but steady demand was largely due to improving
signs of recovery at present. Having said that, economic conditions, positive market
investment in commercial space requires sentiments and growing corporate confidence.
multiple considerations since the risks Bangalore saw the highest demand of
involved are greater, as are the returns. approximately 1.29 million sq. ft . Notably,
Factors such as legal issues, demand-supply in 2Q 2009, enquiries for office space
dynamics and relevant feasibility studies are increased over the previous quarter, even
of primary importance in order to minimise while actual transactions remained low.
losses.
In 1H 2009, commercial office space supply
The demand for corporate office space in the across the major cities was approximately 24
second quarter of 2009 (April-June 2009) million sq.ft. NCR received the highest
infusion of fresh supply estimated at 5.80
Office : Tier 1 CBD Rental Growth Index million sq.ft. followed by Pune (4.50 million
300 sq.ft.) and Mumbai (4.33 million sq.ft.).
250 Overall commercial office space absorption
200
across the major cities for 1H 2009 stood at
150
100
11.30 million sq.ft. largely driven by sectors
50 like IT/ITeS, Banking, Financial Services &
0 Insurance (BFSI) and Telecom. With modest
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

fresh supply expected to enter the market in

Bangalore Mumbai NCR
2010-11 and a healthier demand forecast of
approximately 56 million sq.ft for 2010-11
Office : Tier 2 CBD Rental Growth Index
across the major cities, the commercial office
200
market in India is likely to head towards a
180
160 more balanced demand and supply situation.
140 We have identified key micro-markets which
120
on evaluation, demonstrate strong
100
80 fundamentals making attractive options for
60
investment in development projects.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Chennai Hyderabad Kolkata Pune

Source : Cushman & Wakefield Research

Investment Opportunities in Development Projects

City Location Investment Equity Internal Rate of
term Return (IRR) - Post Tax
Bangalore Outer Ring Road – Hebbal to Sarjapur 3-5 years 22-24%
NCR Golf Course Road 3-5 years 23-25%
Mumbai Thane – Navi Mumbai 3-5 years 21-22%
Source : Cushman & Wakefield Research

8
Bangalore
Outer Ring Road – Hebbal Sarjapur
The Outer Ring Road (ORR) stretch from
Hebbal to Sarjapur is an established
commercial destination with key IT
clientele (IBM, Intel, Accenture, CISCO
etc). In the last 3-4 years, this stretch has
witnessed significant growth in commercial
and residential developments. Besides good
physical infrastructure, this micro market
has other added advantages like consistent
growth in office demand, better
connectivity to CBD/off - CBD and
suburban locations and good social
infrastructure. One of the key infrastructure
initiatives underway in this micro market
is the underpass at Hennur Banaswadi Ring
Road by the Jawaharlal Nehru National
Urban Renewal Mission (JNNURM).
The current quantum of leased stock in this
micro market is approximately 15 million
sq.ft. There has been an increasing share of
absorption in this micro market since 2006
with an average annual growth rate of 12%.
As previously indicated, demand for office
space in Bangalore in the next five years
will be approximately 34 million sq.ft. in
spite of weak demand in 2009-10 the city
is likely to see healthy activity thereafter. In
the year 2008, ORR micro market
witnessed approximately 48% share of the
city’s total absorption and would continue
to attract interest from corporate. Most of
the prominent developers have their land
banks in this stretch and approximately 8 -
10 million sq.ft of commercial office space
has been planned over the next 3 – 5 years.
Current warm shell rentals in this micro
market are in the range of INR 40-45 per
sq.ft per month, which is higher than other
peripheral micro markets like Whitefield
and Electronics City which command
rentals in the range of INR 20 - 25 per
sq.ft per month. Despite having higher
rental values, parameters such as low
vacancy rates (10%), proximity to several
residential catchments and improved
connectivity have worked in favour of this
micro market.
Outer Ring Road – Hebbal to
Sarjapur, Bangalore
?Demand of 34 million sq.ft.
expected in Bangalore in 5 years
?Established commercial
destination with key IT clienteles
?Underpass at Hennur Banaswadi
Ring Road
?Expected investment returns
from development projects 22-
24%
The land along the Marathalli-Hebbal
stretch has undergone a price correction of
approximately 10-15% over the previous
year and is currently valued in the range of
INR 120-180 million per acre, which
enhances the affordability of this location.
Keeping all of the above parameters into
consideration, investments in development
projects within this micro-market are likely
to realize an Equity IRR (post tax) of 22-
24% in the medium term.
National Capital Region (NCR)
Golf Course Road, Gurgaon
Gurgaon has evolved as the alternate
business destination with influx of
corporate across diverse sectors. Majority of
the real estate activity in NCR has been
concentrated in this location leading to an
increase in the total demand of office space
in this location from 59% in 2007 to 72%
in 2008. According to the estimates,
demand for commercial office space in
Gurgaon is likely to be approximately 12-
15 million sq.ft. by 2013.
Golf Course Road has established itself as
an attractive office location in the past few
years. This stretch constitutes of a diverse
occupier mix spanning across IT/ITeS, BFSI
and pharmaceutical companies. The rental
values have corrected to the prevailing rates
of INR 70-80 per sq.ft. per month from
their peak values of INR 120-130 per sq.ft.
per month in early 2008. It is anticipated
that demand for office space in this location
will double in the next few years with the
rental values appreciating to their peak
values, highlighting the potential of
healthy returns. To cater to the growing
demand of the location, approximately 3.5
million sq.ft. of commercial office space
supply is planned over the next few years.
Commercial developments in this location
are likely to realize an equity IRR (post tax)
of 23-25% in the medium term.
The infrastructural developments have
already helped this location to gain
prominence along with its proximity to the
airport and proposed connectivity to Delhi
through the metro network. The extension
of the road also offers lucrative
opportunities for Greenfield projects where
land has been amassed by several developers
and can be potentially exploited for future
commercial real estate developments.
Golf Course Road, Gurgaon
?Demand likely to double in next
few years
?Diverse occupier mix
?Upcoming Metro connectivity
and proximity to airport
?Expected investment returns
from development projects 23-
25%
For investors looking at commercial real
estate options in North India, may take a
closer look at this micro-market.
Mumbai
Navi Mumbai (Vashi and Thane Belapur Road)
Navi Mumbai has emerged as a preferred
destination for the IT/ITeS companies due
to existing talent pool in the vicinity and
robust connectivity through rail and road
network. The availability of large land
parcels in this location, has been more
suitable for such companies. In order to
further support the growing office and
residential developments in the region,
several infrastructure projects such as metro
rail, Navi Mumbai airport and inter-state
bus terminal are being planned by City and
Industrial Development Corporation of
Maharashtra (CIDCO).
As the IT/ITeS sector regains its previous
growth rate post the recession, the demand
for office space in Navi Mumbai is also
expected to increasing proportionately. The
micro market possesses a potential of
adding approximately 8 -9 million sq. ft. of
fresh supply in short to mid term.
However, the supply will be intrinsically
linked to the demand pattern of the IT/ITeS
sector and is expected to enter the market
gradually in an effort to balance the supply
demand dynamics.
From December 2006 to December 2008,
rental values for IT space in Navi Mumbai
have appreciated at a Compounded Annual
Growth Rate (CAGR) of 15%. This growth
in rental values has been at par with
established micro markets like Andheri,
Lower Parel and Worli. Additionally, the
slowdown in real estate sector over the last
12 months has resulted in only a marginal
softening of rental values in the range of
11-13% compared to other markets which
witnessed corrections of about 20% to
40%.
Navi Mumbai
?Extensive land parcels with
quality developments
?Potential IT/ITeS hub
?Connectivity through rail and
road networks
?Expected investment returns
from development projects 21-
22%
Based on the above, investors in Navi
Mumbai can expect an Equity IRR (post
tax) of 21-22% for commercial
developments in short to medium.
 Retail Market
Retail real estate had, till recent years,
attracted investors’ attention due to the
exponential growth in the organised retail
sector. However, with the economic
slowdown, the retail sector witnessed
constrained leasing activities and high
vacancy rates, thus adding to the segment’s
current low ‘investment worthy’ status.
While the current market upheaval has
temporarily decelerated investment activities
in the sector, it is expected that the country’s
organised retail market would be back on its
growth trajectory in the next 3-4 quarters
(mid-2010), following which demand for
quality retail space would also begin to
improve, as retailers would begin to
restructure their portfolio with reviving
consumer sentiments.
With market demand recovering, there would
be a substantial requirement for quality retail
real estate over the next 3 to 5 years. As per
Cushman & Wakefield Research's estimates,
the future demand for fresh mall space in the
top seven cities is estimated to be about 35
million sq.ft in the next five years. Our
research estimates also indicate that
Retail : Mall Rental Growth Index
250
200
150
100
50
0
2006 2007 2008
Hyderabad (Banjara Hills) Mumbai (Lower Parel)
Bangalore (Koramangala) Chennai (Central)
Kolkata (Elgin Road)
Source : Cushman & Wakefield Research
12
approximately 60 million sq.ft of fresh mall
space is likely to come up across 40 cities in
the next three years.
Till recently the market saw the creation of
low quality spaces commanding unrealistic/
inflated prices, thus in situations of over-
supply and hyper-demand, many brands and
retailers were chasing a few good properties.
For retail, we have refrained from focusing on
any particular micro-markets for investments
as most locations still continue to hold the
potential for offering good quality mall
spaces; and that a quality product would
continue to remain profitable and
‘investment-worthy’ even in an over supplied
micro-market. However, most locations across
the country, are yet to fully exploit the
potential of the existing catchment through a
quality product.
Creating a successful mall is all about getting
the right mix of elements from the very
beginning. More centralised mall operations
and efficient management will be favoured in
the long-term for sustainability. The emphasis
will be on long-term perspective and
unrealistic valuations will have no takers.
Matching operational costs with revenue
generation is also likely to take dominance.
Continued focus on customer and retailer
needs together with innovative approach to
design and commercial viability will pave the
way forward. But above all, extensive research
and professional consultancy regarding each
2009 aspect of mall operations is likely to gain
Pune (MG Road)
NCR (Gurgaon) prominence to ensure project sustainability.
Residential Market
independent floors mostly in the suburban
and peripheral locations across the country.

However, due to the economic slowdown and

the ensuing credit crunch, many of the major
developers were forced to revisit their
portfolio. High-end luxury apartments and
villas, which had been the key focus areas in
recent times, were replaced by mid-scale
developments targeting the middle income
group. Since the beginning of 2009, the
housing segment has generated an increased
interest amongst end-users for affordable to
mid-end products and has resulted in an
increase in sales volumes in the residential
sector.

Cushman & Wakefield Research evaluated the

investment potential within the residential
market for a mid to long term horizon. It has
identified key micro-markets which on
evaluation against others, demonstrate
stronger fundamentals, making them viable
investment opportunities:
Over the past couple of years the residential
Residential : Capital Values Growth Index
segment in India has witnessed varied sizes
800
and product mix, targeted towards a wide 700
range of buyers. The bouquet of offerings 600
500
have included apartments, villas, row houses, 400
300
builder floors, plotted developments and even
200
townships by major developers across the 100
0
country. The period of heightened real estate 2001 2002 2003 2004 2005 2006 2007 2008 2009
activities also witnessed the entry of many Bangalore (Brunton Road, Lavalle Road) Chennai (Boat Club)
Hyderabad (Banjara Hills) Kolkata (Ballygunge)
first time or relatively new developers who Mumbai (South)
Pune (Koregaon Park)
NCR (Satya Niketan
Anand Niketan)
concentrated on creating apartments or Source : Cushman & Wakefield Research

Investment Opportunities in Development Projects

City Location Investment Equity Internal Rate of
term Return (IRR) - Post Tax
Bangalore North & North East Bangalore 3-5 years 30-32%
NCR Golf Course Road Extension 3-5 years 33-35%
Mumbai Lower Parel 3-5 years 37-38%
Source : Cushman & Wakefield Research

13
Bangalore
North & North East Bangalore
Locations in North and North East
Bangalore (comprising of Hebbal,
Yelahanka, Sahakarnagar, Jakkur, Coffee
Board Layout, HRBR and HBR Layout,
Banaswadi, Off Kempapura Road,
Amruthahalli, Hennur Road, Thanisandra
Road, etc) are considered to be favourable
investment options in the mid term.
Among the key attractions of the location
are good connectivity, improved social
infrastructure, proximity to destinations
like ORR (Hebbal-Sarjapur) and
equidistant from CBD/Off CBD micro
markets.
With growing commercial development in
the ORR stretch, there is an increasing
demand for residential development in the
above mentioned residential catchments.
The total residential stock in these micro
markets is approximately 6,500 units,
with majority of them purchased; while
approximately 7,000-8,000 units are
expected to be added to the stock over the
next 3-4 years, the majority being in the
mid-range category. The residential
demand for Bangalore is expected to be
approximately 500,000 units in the next
few years and a significant share is likely to
be catered in the above mentioned micro
markets.
3. We have considered high-end apartments/villas with an area of approximately 2,500-5,000 sq.ft.
The values for mid range properties are for apartments with an approximate area of 1,200-2,000 sq.ft
The physical infrastructure and the
connectivity in this region are favourable,
including proximity to the airport. There
are many educational institutions and
hospitals in and around these micro
markets. Approximately 1.5 million sq ft.
of the retail mall supply is also planned for
the next 3-5 years. Additionally other
organised retail in the form of supermarkets
and standalone stores also have an active
presence in a few of these locations.
North & North East, Bangalore
?Residential Demand for
Bangalore estimated at 500,000
units in five years
?Preferred location for Mid range
developments
?Expected investment returns
from development projects 30-
32%
The average current capital values3 for the
mid-end sector is INR 2,800-4,000 per
sq.ft; while that for the high-end properties
(Jakkur and Hebbal) are in the range of
INR 5,500-7,000 per sq.ft. From a
medium term perspective, investment in
north and north east micro markets
mentioned above are likely to have an
Equity IRR (post tax) of 30-32%.
National Capital Region
Golf Course Road Extension, Gurgaon
Within NCR, Gurgaon's Golf Course
Extension (the stretch from the end of Golf
Course Road to Sohna Road) offers large
land parcels which have the potential to be
developed as prime real estate property in
medium term. There are currently only two
residential projects in this location, both of
which have been rapidly absorbed and are
now commanding premium in the
secondary market. The location is currently
witnessing strong interest from both end
users and investors, so while the location is
attractive, the right product mix, project
design and implementation will also be
essential for the success of the project.
Adjacent to this corridor there is also a
proposed commercial development zone (in
Sectors 62, 64 and 65) as per the master
plan which will ensure commercial activity
in the future and would support potential
buoyancy in capital values. There is also the
proposed metro route along this road in
addition to the existing 4 - laned road
ensuring smoother traffic movement and
connectivity if the planned infrastructural
projects are completed in time. The Delhi
Airport is about 15-18 km, while the
nearest Metro terminal at City Center is
approximately 7 km. The National
Highway - 8 (Jaipur Expressway) and
4. We have considered high-end apartments/villas with an area of approximately 2,000-4,000sq.ft.
The values for mid range properties are for apartments with an approximate area of 1,000-2,000 sq.ft
Mehrauli – Gurgaon Road – the two
existing links to Delhi – are both in close
proximity. The existing and proposed
infrastructure would ensure a potential
upside on the capital values as these
infrastructural projects get completed.
Golf Course Road Extension,
Gurgaon
?Proximity to International
Airport and upcoming Metro
terminal
?Preferred location for Mid range
projects
?Expected investment returns
from development projects 33-
35%
Golf Course Extension currently will feed
off Golf Course Road and Sohna Road
infrastructure. However, in the near future,
various hotels, malls, hospitals and schools
are expected to become operational, with
more proposed to come up in the next 3-5
4
years. The average current capital values
for the mid-end sector are in the range of
INR 3,000-4,000 per sq.ft; while that for
the high-end properties are in the range of
INR 4,500-5,000 per sq.ft. The expected
equity IRR (post tax) from residential
development projects would be in the range
of 33-35%.
Mumbai
Lower Parel & Parel
Equidistant from the northern suburbs
(Bandra – Andheri) and South Mumbai
(established CBD) the micro markets of
Lower Parel and Parel are emerging as one
of most attractive investment destinations
in the residential sector in Mumbai. When
compared to south Mumbai and even
Bandra, where there are limited
opportunities for further development
owing to non availability of land parcels,
Lower Parel and Parel offer large tracts of
land for development in the heart of the
space starved city, largely due to opening
up of mill land for redevelopment .
Lower Parel and Parel micro markets lie in
proximity to key commercial hubs like
Nariman Point and Bandra Kurla Complex
(BKC) and has good connectivity to other
locations across the city through rail and
road networks. Additionally, the presence of
existing retail hubs (Phoenix High Street
and other retail projects on the anvil) along
with several hotels give this location the
right mix for a successful residential
precinct. Another major factor favouring
this location is its transformation into an
alternate business district. Having the
above advantages, the location is also an
attractive end user residential market as
currently mid range residential apartments
are priced approximately 30% - 40% lower
than south and south Central Mumbai.
5. We have considered high-end apartments/villas with an area of approximately 3,000-5,000 sq.ft.
The values for mid range properties are for apartments with an approximate area of 1,700–2,500 sq.ft
Thus demand for residential space in this
location is expected to be bullish from both
end – users and individual investors'
perspective.
The average current capital values5 for the
mid-end sector are in the range of INR
13,000-25,000 per sq.ft; while that for the
high-end properties are in the range of
INR 34,500-55,000 per sq.ft per. The
expected equity IRR (post tax) from
residential development projects would be
in the range of 37-38%. The residential
demand for Mumbai, as mentioned earlier,
is approximately 1.6 million units in 5
years; and a significant share of this
demand is likely to come up in the above
mentioned micro market.
Lower Parel & Parel
?Availability of large tracts of mill
land
?Preferred location for high end
and mid end projects
?Expected investment returns
from development projects 37-
38%
The location boasts of good connectivity
through rail (both central and western
railway stations are about 1-2 km away)
and road networks. The micro market is
about 11 km from the domestic airport and
about 14 km from the international airport.
Hospitality Market
The Indian hospitality sector witnessed
unprecedented growth over the last few years.
In the next 3-5 years too, new hotel
developments are expected in various
categories across different cities in the
country. The quantum of new supply entering
the market against the current demand has
initiated a new trend amongst investors,
where innovative concepts are viewed to have
potential based on the extended value
proposition derived from the product to
achieve a development model that is
perceived to be profitable.

The last few years witnessed a series of mixed-

use developments designed to help hedge
future cash flow risks, providing the investor
with the ability to absorb the initial years of
low profitability from a hotel product.
However, it has been noted that the demand
environment over the last three years has been
conducive to provide reasonably short
stabilisation and payback on hotel
developments.

Going forward, it is likely that incremental

and new hotel developments (in addition to
the inventory proposed to enter the market)
will be based on new and innovative models
with investors seeking to achieve stable
returns. Based on our experience of the
market, we have identified the following
micro-markets for investment in the
hospitality segment for the next 3-5 years:

Investment Opportunities in Development Projects

City Category Investment term

Mumbai Mid Scale 3-5 years

Gurgaon Mid Scale 3-5 years

Hyderabad Mid Scale 3-5 years

Kumarakom (Kerala) Luxury 3-5 years

Source : Cushman & Wakefield Research

17
Mumbai
Mid-Scale
The main demand driver for the growth Although Average Room Rate (ARR) has
and sustenance of the hospitality industry undergone a correction of 4% in the last
in Mumbai is the steady flow of leisure and two years, occupancy levels have remained
business travelers from across the globe. strong. The current stock of approximately
Being the financial capital and a near
essential stop over for travelers, demand for
hospitality in the city has historically Mumbai
grown faster than most other tier 1 cities in ?Good potential for Mid-scale
hotels
the country. The rising demand for office
space has also been instrumental in ?Hospitality demand backed by
demand for commercial space
strengthening the need for additional room
?Average occupancy rate 58-60%
nights, especially keeping on the anvil the
?Healthy return of 18-20%
year-on-year growth of domestic and
international business travelers. The
development of suburban locations as
2,100 mid-scale rooms with an average
alternate commercial micro-markets to
occupancy level of approximately 70%
Nariman Point, has also seen substantial
seems to be inadequate for the projected
growth in the branded star category hotels
demand in spite of the 1,400 rooms that
in the locations around Andheri, Bandra-
are likely to be added in the next 2-3 years.
Kurla Complex, Juhu
Despite high land and input costs,
and Santa Cruz.
investments in this segment are likely to
generate returns of approximately 18-20%
in the medium term.
Gurgaon - National Capital Region
Mid-Scale
Development of business districts and
IT/ITeS clusters in Gurgaon has
contributed to the incremental rise of
business travelers in this region. Till a few
years back there were only a few branded
operators, in this location with the
hospitality scene being dominated by local
players. The increasd interest in developing
the hospitality sector in the location
coincided with the commercial office space
boom in Gurgaon which led to the rise in
demand for room nights, triggering the
development of mid-scale hotels for
business and Meeting, Incentive,
Conference and Exhibition (MICE) travelers
to the city.
The existing stock of mid-scale rooms in
Gurgaon is approximately 1,000-1,200
with an average occupancy rate of 58-60%.
Average room rates for the city in the mid-
scale category are in the range of INR
5,500-6,000. Upcoming supply in this
category over the next 3-5 years is expected
to add another 1,000-1,050 rooms to the
city.
Backed by the demand estimation for
commercial office developments in
Gurgaon for the next 3-5 years, the city is
expected to grow as a healthy market for
the mid-scale hotel category, generating
enough demand for room nights. Given
that land is usually acquired in lead time of
4-5 years at the then prevalent prices, new
project developed in proximity to office
locations can generate upto 20-21% return
on investment.
Gurgaon
?Good potential for Mid-scale
hotels
?Hospitality demand is backed by
demand for commercial space
?Average occupancy rate 58-60%
?Healthy return of 20-21%
Upcoming locations that hold potential for
investments in the mid-scale category in
Gurgaon include the stretches along Golf
Course Road and NH 8 (Gurgaon to
Manesar).
Hyderabad
Mid-Scale
Traditionally Hyderabad has had multiple
business districts spread across the city,
including locations of Somajiguda,
Ameerpet, Nampally, Banjara Hills,
Kukatpally and the Charminar. This led to
the hotels being established in proximity to
these business districts. Indian Hotels
Company Ltd (IHCL) with a room
inventory of over 500 had the longest
presence in the city. ITC Hotel The
Kakatiya, The Green Park, Hampshire
Plaza and the Marriott Hyderabad Hotel &
Convention Centre, were other prominent
city hotels. The average occupancy in
Hyderabad is estimated to be 58-62%. Till
the emergence of the IT/ITeS and Biotech
sectors, the city saw no new branded hotels.
However, boosted by the demand for room
nights generated by the growth of new
commercial office spaces, Hyderabad began
to see a host of new brands come up in the
periphery, especially in and around
Madhapur, the city's IT hub.
The development and establishment of
HITEC City has had a number of
implications on the city's hotel market in
the creation of a new captive micro-market,
resulted by a shift in demand centres. Our
research indicates that a considerable
amount of demand for city hotels in the
mid-scale category is generated in this new
region. The development and operational
commencement of mid-scale hotels in the
HITEC City (e.g. Trident, Westin, Lemon
Tree, Quality Inn, etc.), including those
that are currently in planning or
development stage are all likely to result in
Hyderabad
?Good potential for Mid-scale
hotels
?Hospitality demand is
concentrated in HITEC City
backed by IT/ITeS demand
?Average occupancy rate 58-62%
a self sufficient market, with only the spill-
over demand from the area being
accommodated by other city hotels. The
total supply in this new market is currently
top-heavy, with a large proportion of hotel
supply being in the upper mid-market,
upscale or luxury segments with negligible
mid- scale options, therefore a good
opportunity for the mid-scale category
exists.
Kumarakom, Kerala
Luxury
Kumarakom, as a leisure destination, is
increasingly being viewed as an
international spa retreat, focusing on
Ayurveda whilst providing a unique
backwater leisure experience matched only
by a few other destinations worldwide.
Kumarakom was historically considered as
an international leisure destination,
however as per Cushman & Wakefield's
research, the destination is also
experiencing considerable demand from the
individual and group domestic leisure
market, as well as from MICE travellers for
Indian and multi national corporates.
Kumarakom has performed reasonably well
over the past three years, achieving average
occupancies and rates of between 60% and
65% and INR 7,800 and INR 8,000 in
2006 and 2007, respectively. Despite the
decline since mid-2008, there are
expectations of a market revival by 2009-
10, initiating greater sales and marketing
efforts for target segments.
Kumarakom
?Good potential for luxury hotels
?Demand driven by leisure and
MICE travellers
?Average occupancy 60-65%
?Viewed as international Spa
Retreat focusing on Ayurveda
Kumarakom provides a unique cultural and
environmental experience matched only by
a few other markets and therefore is likely
to be able to retain its market share
compared to other competitive leisure
destinations. It is also likely that leisure
travel will experience a quicker revival
compared to corporate travel, encouraging
leisure travelers to this destination.
 Investment Scenario
The first quarter of the current year and the
second half of 2008 witnessed significant
decrease in investments owing to the
prevailing recessionary conditions. Being a
synchronised recession, the severity or
aftermath defied most forecasts. However, as
the global recession softens to give way to the
much anticipated green shoots in the
economy, industrial sectors in India have
witnessed a positive growth, thereby
22
impacting the GDP growth outlook. Indian
realty market is also showing signs of recovery
which is expected to continue presenting
opportune times for investors to take medium
to long term possessions. In addition to this,
yield expectations, which were experiencing
upward pressure, are gradually stabilising and
are likely to see a marginal decline in the
coming months.
Foreign Direct Investment in India
The overall FDI equity inflow has gained
some momentum in the last two quarters
accruing to a total of INR 646,600 million
from January 2009 - August 2009. There was
also an increase of nearly 28% in the FDI
inflows since the second half of 2008. Fiscal
stimulus packages and increased
regulations/policies to improve the economy
have had a positive impact on the FDI inflow
too.
Maharashtra continues to be the most
attractive investment location for
Institutional Investors. This location
attracted a cumulative FDI inflow of INR
FDI Equity Inflows
500,000
400,000
INR million
300,000
200,000
100,000
0
Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209
Source : Department of Industrial Policy & Promotion
and Cushman & Wakefield Research
FDI in Real Estate & Housing Sector
The inflows into real estate and housing
sector dropped by a huge margin during the
last two quarters of 2008 accounting for a
FDI Equity Inflows (RE & Housing Sector)
100,000
80,000
INR million
60,000
40,000
20,000
0 apart from scope for good/moderate yields and
-20,000 Q307 Q407 Q108 Q208 Q308
-40,000
Source : Department of Industrial Policy & Promotion
and Cushman & Wakefield Research
563,721 million from third quarter of 2008
to second quarter of 2009 with a steep hike in
January 2009.
While NCR, despite receiving low
investment to the tune of approximately INR
16,517 million in last two quarters of 2008
and the first quarter of 2009, ranked second
due to substantial quantum of investment in
the second quarter of 2009. Karnataka on the
other hand has continued to witness slow and
gradual cumulative FDI equity inflow of INR
67,179 million from third quarter of 2008 –
second quarter of 2009.
FDI Equity Inflows in Prominent States
Q209
Q109
Q408
Q308
Q208
Q108
Q407
Q307
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000
INR million
Maharashtra, Dadra & Nagar Haveli, Daman & Diu
Delhi, Parts of UP and Haryana Karnataka
Source : Department of Industrial Policy & Promotion
and Cushman & Wakefield Research
total quantum of INR 34,360 million. While
2009 started on a good note, there was a
significant equity inflow of INR 97,880
million in the first half of 2009, an increase
by 1.8 times. The slowdown in the real estate
sector has had adverse impact with one of the
key fallouts being that of investors closely
scrutinizing the projects/developer profile
(debt position) before investing in any project
Q408 Q109 Q209 easy exit.
23
 Private Equity
The number of Private Equity deals
announced during August 2008 – August
2009 has reduced significantly as compared
to the same period in the previous year,
largely due to the slowdown in global and
domestic economies. With declining interest
from PE funds, developers were forced to look
at new avenues to raise funds and one of the
recent developments in the last 6-8 months
has been the Qualified Institutional
Placement (QIP) route and disposal of excess
land banks to improve their debt situation..

Qualified Institutional Placements

Given the earlier credit crunch and restricted
lending from institutions like banks, a few
developers turned towards QIPs as an
alternate route of raising funds. The funds
from the QIP are utilised for completion of
ongoing projects, retiring expensive debts
and restructure balance sheet. However, a
prior approval from Securities and Exchange
Board of India (SEBI) is required before
resorting to QIPs.
Riding on the success story of listed
developers which have raised significant
funds through the QIP route; some privately
held development companies are also
evaluating this mechanism. However, only a
few private real estate firms that are armed
with good track records of successful project
execution within the defined schedule, having
high level of transparency and corporate
governance are likely to emerge as attractive
bets to the institutional investors.
Few of the major advantages for QIP are:
?Meets the immediate needs of developers
due to fast processes
?QIPs are cost efficient compared to
American Depository Receipt (ADR)/
Global Depository Receipt (GDR) or
Foreign Currency Convertible Bonds
(FCCB) due to lesser legal and listing fees
?QIP provides exposure at the entity level
and limit the risks associated with
individual projects
?QIP norms as prescribed by SEBI that
emphasise on fixing the floor price of a
QIP, based on just a two-week average of
the stock price instead of six months
earlier

Significant QIP Deals in 2009

Investor/Fund SPV Parent Company Stake (%) Investment Quantum
Reliance Capital Asset Management Sobha Developers 5.09% INR 1,047 million
Capital International and Albis. Enam and
Sobha Developers 22% INR 5,376 million
Morgan Stanley
HSBC's unit Halbis Capital Management, Texas Pacific
Group, Prudential, Nomura Securities, Farallon
Capital Management, D E Shaw, Sansar Capital, Unitech Ltd. 15% INR 27,600 million
Sandstone Capital, Amiya Capital, Duquesne Capital,
DWS, Mirae, George Soros's company
6% by
Macquarie Bank, Prudential, KKR and Fidelity HDIL Macquarie alone; INR 16,884 million
others not known
Capital One International, HSBC, Symphony DLF Ltd 10% INR 39,800 million
Capital and 27 other investors
Fidelity, HSBC, TPG and Moor Capital & Indiabulls NA INR 25,850 million
Morgan Stanley Real Estate
Source: Complied by Cushman & Wakefield Research based on publicly available information through media and other sources.
Conversion rate 1USD = INR 48
24
Current Investment Scenario
An analysis of investment6 in the real estate
sector shows that 36 deals have taken place
between August 2008 - August 2009, which
suggests that similar to last year, Special
Purpose Vehicle (SPV) accounted for the
highest number of deals at approximately 42%,
Distribution of PE deals announced
in the RE sector (36)
22%
28% 8%
SPV Portfolio Entity
Distribution of PE deals announced
in the RE Sector (INR 203,000 million)
14%
60%
SPV Portfolio Entity
Source : Compiled by Cushman & Wakefield Research
6. Indicative sample of announced deals from mid-August 2008 to mid-August 2009 in the Indian real estate sector. This does not include
infrastructure and proposed deals.
as it caters to a single project, where the risk
is low with quick returns and easier exit
option. This is followed by the Entity level
deals estimated at 28%. QIPs, a more recently
considered alternate investment type,
accounted for 22% of the total deals in this
period while Portfolio level investments made
up the remaining 8%. However, unlike last
year where most of the investment was in the
SPV level, there has been a more equitable
distribution amongst all PE deals.
The total quantum of PE deals announced
during the time frame under consideration is
approximately INR 203,000 million of which
QIPs account for majority share of 60% at
approximately INR 122,000 million. The
average size of QIP level deals is
approximately INR 15,300 million. Both
SPV Level and Entity level deals saw similar
quantum of investment of INR 29,000
million and INR 28,000 million with an
average deal size of approximately INR 1921
million and INR 2813 million respectively.
42% Portfolio level investments accounted for INR
24,000 million, subjugated largely by a
single deal of INR 20,000 million invested
by IREO – III in Orange Realty.
QIP Announced PE deals in the RE sector
160,000 80
Equity Inflow (INR million)
Announced Deals (number)
140,000
120,000 60
100,000
80,000 40
60,000
12%
40,000 20
20,000
0 0
SPV Entity Portfolio
14% Quantum of announced deals (Aug 15 2007 - Aug 15 2008)
Quantum of announced deals including QIP (Aug 15 2008 - Aug 15 2009)
Number of announced deals (Aug 15 2007 - Aug 15 2008)
QIP Number of announced deals including QIP (Aug 15 2008 - Aug 15 2009)
Source : Compiled by Cushman & Wakefield Research
25
 It is noteworthy to state that investment is
lower by 24% over last year. The total
number of deals (including QIPs) reduced by
a significant 46% year-on-year. Investors have
been cautious and selective about the asset
classes, location, developer profile (debt
position) while deciding on the project for
investment leading to a significant drop in
the numbers as well as the volume of deals.
The asset class - wise distribution shows
preference towards the residential sector
which grossed up the highest share (17%)
followed by township (5%). Commercial,
retail and hospitality sectors witnessed a
major decline in investments over the
previous year, grossing only marginal share of
1 - 2%. These sectors are expected to remain
under par till the demand gains significant
momentum.
Distribution of PE deals across asset classes
in RE Sector (INR 203,000 million)
17.0%
0.9%
1.8%
0.7%
5.0%
0.7%
73.9%
Residential Hospitality Mixed Use
Township Office Entity
Source : Compiled by Cushman & Wakefield Research
Representative Private Equity Deals
?IREO Investment Holding III invested
INR 20,000 million in Orange Realty
for setting up of SEZ, IT/BPO Parks,
and development of real estate projects.
?Och-Ziff Invested INR 270 Croroes in
Marvel Realtors on the residential and
commercial projects in Pune.
Source: Complied by Cushman & Wakefield Research based on publicly available information through media and other sources
Note: The study has been conducted on an indicative sample of announced deals from mid-August 2008 to mid-August 2009 in the Indian
real estate sector. This does not include infrastructure and proposed deals.
26
Region-wise distribution of PE deals during
the period under consideration indicates a
clear drift in investment towards the north
region (48%). This can be largely attributed
to two huge QIP's raised by Unitech and DLF
during the first half of 2009. Western region
(37%) saw a huge inflow of investment across
all categories - SPV, Portfolio and Entity level
deals.
With signs of steady economic recovery like
strengthening stock market, growth in trade
and industrial production, backed by
inherently strong fundamentals of the Indian
economy, the interest amongst investors in
the Indian real estate market is also reviving.
This can be inferred from the fact that
majority of both PE deals and FDI's in the
realty sector took place between April –
August 2009.
Distribution of PE deals across region
(INR 203,000 million)
37%
48%
15%
Retail North South West
Source : Compiled by Cushman & Wakefield Research
?Kotak Realty has picked up 50%
holding in an integrated township of 5
million sq.ft at Kapra by Janapriya
Projects for INR 10,000 million.
?Swiss-German Fund MPC Synergy
invests USD 296 million in Phoenix
Mills for its various special purpose
vehicles.
Significant Real Estate Regulations
Measures & Initiatives
Priority sector status for housing
loans in the range of INR 0.5 – 2.0
million
Restructuring of loans for commercial
RE projects
Excise duty cuts on steel and cement
External Commercial Borrowing
(ECB) Policy Review (relaxation of
norms applicable to infrastructure
and RE sector - specific to townships
and hotels).
Home loans of up to INR 1.0 million
to receive one percent subsidy on the
interest rates for the first year
Expectations Fallout/Impact
Priority sector status coupled with Major real estate projects across the
decreasing interest rates will country failed to gain as their projects
expedite residential demand were priced much higher than the
priority status bracket of INR 0.5 – 2
million. Rather, industry experts opined
that the package would have been more
effective if the bracket included projects
upto the range of INR 5 million.
Restructuring of loans will Banks have rescheduled or deferred
facilitate realtors as it will enhance their ascertainment of loans as Non
credit flows and disbursals Performing Assets (NPA) thus granting
major relief to the realtors
The cut on excise duty will lower Duty cuts did not yield results as
the basic construction costs expected as the prices of steel and
cement soon increased thus raising the
costs.
Help in mobilizing long term Substantial amount has been raised by
funds for infrastructure and Indian real estate majors through QIPs
expedite land development and and Private Placements
allied infrastructure facilities both
at the city and regional level.
Further will help in assessing the
extent to which Indian corporate
groups can secure credit from the
international markets in the wake
of lenders trimming down their
investments in emerging markets.
Home loans will become more Enquiries have picked up significantly
accessible to the lower and middle but the actual effects are yet to be
income families. Real estate sector ascertained
in the Tier II and Tier III cities
will be the major gainers as these
cities comprise of a significant
home loan borrowings below INR
2.0 Million category. Moreover, the
metros are likely to witness project
launches specifically in the
segment.
Note: These are some of the significant regulations in 2008-09
This is not a comprehensive list
27
 The Road Ahead
for Realty
The initial impact of the global recession was
limited in India, with a marginal deceleration
in the GDP to 7.8% in April-September
2008 as against 9% in fiscal year 2007-08.
However, it was only after September 2008,
with the Wall Street collapse that the
country's economy began to feel the
repercussions in true earnest and the growth
rate plunged to around 5.8-6.1% for the next
three quarters. Although this was a
considerable drop from the earlier 9%, it was
still higher than the World Bank's forecast of
4% for India in 2009. A year later, the Indian
economy has managed to fare better than
many of its global counterparts, and is
steadily on the road to recovery.
With signs of economic stabilisation and
moderate global economic growth forecasted
for 2009-10, property markets in India have
begun to exhibit signs of a revival from the
second quarter of 2009. Attracted by
correcting values, investors and end-users
alike have begun to reconsider the market,
accelerating activity in the Indian realty
sector. With the return of liquidity in recent
months – via FDI, QIPs, non-core asset sales
and banks reconsidering lending to the realty
sector – cash flows of realty players have also
improved.
Though the Net Asset Values (NAV) of major
real estate developers across Asia are still
below the levels they were a year ago, India is
currently witnessing the most significant
downward revisions. This also means that
India will have the best prospects, amongst
7. Union ministry for Housing and Urban Poverty Alleviation
28
other Asian nations, for NAV upgradation –
including a positive NAV revisions potential
for the next four quarters, should the
economic improvement continue at the same
pace. Even though the overall demand for real
estate saw a decline in 2009, an improving
economy, backed by strong fundamentals,
suggests that the sector is likely to see a
demand growth in the long-term.
India's large domestic market is one of its
biggest economic assets, accounting for the
largest share of the demand pie. India, for
instance, has an unmet housing shortage of
approximately 25 million units7, which alone
offers a huge growth potential for the realty
sector in India; besides a growing acceptance
for low-cost and affordable housing projects
even in a downtrend. India's sizeable pool of
technically qualified manpower is yet another
domestic strength, together with a stable
internal policy framework that has withstood
turbulent times.
Factors, such as the above, make India an
attractive investment destination. According
to the favourable outlook of the Ministry of
Commerce & Industry, FDI into India is
expected to be at least USD 40 billion in the
fiscal year ending in March 2010. It is
noteworthy that even under strained
circumstances, India managed to attract FDI
inflows of approximately USD 10.53 billion
in the period from April-July 2009, higher
than other emerging economies. With the
economy inching towards recovery,
investments into the country are expected to
see regular quarterly increments.
 The GRI is a global club of senior real estate investors, developers and lenders. Its
mission is to help its members build personal relationships and work together in
creating better places as a legacy to our children. Founded in 1998, its core
constituency consists the world's leading real estate players.

The GRI runs its activities through a series of Annual Meetings focused on
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Cushman & Wakefield commenced its India operations in 1997 and today has
grown to over 1,200 employees working from the firm's New Delhi, Gurgaon,
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To find out more about Cushman & Wakefield, visit www.cushmanwakefield.com

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www.cushmanwakefield.com

The GRI welcomes industry leaders who find it useful For further information on the report, please
to chair a discussion at a future GRI event to contact: contact:
©2009 Cushman & Wakefield

HenriAlster Sitara Achreja

Chairman, GRI Director
GRI-Global Real Estate Institute Marketing & Communications, India
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