Bangalore Commercial Real Estate Market 2009 - PDF

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India Real Estate Report Q4 2010
Published on August 2010

                                                                                                                Report Summary

Of all the countries whose real estate sectors are reviewed by BMI, few are experiencing economic conditions quite as promising for
real estate companies as India. Thanks in part to a favourable monsoon, economic growth is accelerating. Lending by banks is
increasing. Investment in infrastructure will, or at least should, facilitate urban development.
We interviewed in-country sources at the beginning of 2010 and again in the middle of the year. In early 2010 ' in spite of widespread
optimism about the prospects for 2011-2012 ' it was clear that India's developers faced difficulties. Across the five cities where we
interviewed in-country sources ' Mumbai, Gurgaon, Chennai, Hyderabad and Bangalore ' rentals slumped in 2009. In some cases this
was because of the perceived risk of a recession in India (or, in the case of Bangalore, a real recession in the export markets served
by businesses in that city). In other cases, contradictory government policies posed additional problems.
Further, it was clear that, for the office and retail sub-sectors especially, there was a massive over-supply of new commercial
property. Our sources suggested that this problem may be less serious in new suburbs of Hyderabad and the National Capital
Region, where new residential 'colonies' are attracting commercial developments.
A major finding from our interviews in mid-2010 is that the process of adjustment has already begun. Rents have continued to soften
through the first half of this year. A slight increase in yields ' across most of the sub-sectors ' suggests that capital values have slipped
by a little more than rents. However, there is no evidence of distress selling by market participants.
We had previously expected that yields would start rising gradually from 2012. Given that the process of adjustment ' in response to
the over-supply of commercial property ' is well under way, we now look for general stability in yields over the coming years. Rents
and capital values should, in general, move in tandem.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate
sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets.
The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real
estate development in the country concerned, over both the long and the short term' What are the main constraints that they face'
What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers'
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us
by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the
balance between demand and supply in each of three main sub-sectors ' office, retail and industrial. We have also introduced a new
approach to the forecasting of rental yields, which is discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of
interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make
significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We
explain their answers in the Forecast Scenarios.




                                                                                                                Table of Content

Executive Summary                    .5
SWOT Analysis                  ......... 7
India Real Estate/Construction SWOT                     ............ 7
India Economic SWOT                          ...... 8



India Real Estate Report Q4 2010                                                                                                    Page 1/4
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India Business Environment SWOT                                   .9
Regional Real Estate Overview                           ............ 10
Table: Asia Pacific's Office Markets At A Glance ' Rents, 2009-2011 (US$ per square metre per month)                                             ........... 10
Table: Asia Pacific's Retail Markets At A Glance ' Rents, 2009-2011 (US$ per square metre per month)                                             ............ 12
Table: Asia Pacific's Industrial Markets At A Glance ' Rents, 2009-2011 (US$ per square metre per month) ...... 14
Real Estate Market Overview                           16
Table: India Real Estate Markets ' Rentals, 2008 And 2009 (INR, m²/month)                                                        .......... 17
Table: India's Real Estate Market ' Net Yield, 2008 And 2009 (%)                                              ........... 18
Table: India's Real Estate Market ' Terms Of Contract/Lease                                              ... 19
Table: India's Real Estate Market ' Available And Vacant Space (mn ft²)                                                  . 20
Forecast Scenario                    .. 21
Real Estate Outlook                         ........ 21
Table: India Real Estate Markets ' Rentals, 2009-2011 (INR, m²/month)                                                   .. 23
Table: India Real Estate Markets ' Net Yield (%)                                       ....... 24
Construction And Infrastructure Outlook                                   ..... 24
Table: Construction And Infrastructure Industry, 2007-2015                                             ...... 26
India's Macroeconomic Outlook                                .... 26
Table: India ' GDP By Expenditure, % Of GDP                                      ......... 28
Business Environment                        ......... 30
Real Estate/Construction Business Environment Ratings                                               ........... 30
Table: Asia Real Estate/Construction Business Environment Ratings                                                    ........ 30
Project Finance Ratings For Asia Pacific                                  ..... 32
Table: Design And Construction Rating                                    ....... 34
Table: Commissioning And Operating Rating                                      ............. 35
Table: Overall Project Finance Rating                                  ......... 36
India's Business Environment                               ........ 37
Table: BMI Business And Operational Risk Ratings                                           .... 37
Table: BMI Legal Framework Ratings                                  ......... 39
Table: Annual FDI Inflows Into Asia, 2006-2008                                        ........ 46
Table: India's Top Export Destinations, 2002-2008 (US$mn)                                               ..... 47
Table: BMI Trade Ratings                           ............. 47
Company Monitor                     ... 50
Ambuja Cements Ltd                           ....... 50
DLF                .. 52
Parsvnath Developers Ltd                           .............. 54
Sobha Developers Ltd                           ..... 56
BMI Methodology                     ... 58
How We Generate Our Industry Forecasts                                       ... 58
Construction Industry                        ..... 59
Bank Lending                       ... 60
Real Estate/Construction Business Environment Rating                                            ............. 60
Table: Weighting Of Indicators                              ..... 61
Project Finance Ratings Indicators                              .............. 63
Table: Design And Construction Phase                                     ........ 63
Table: Commissioning And Operating Phase ' Commercial Construction                                                        64
Table: Commissioning And Operating Phase ' Energy And Utilities                                                   ......... 65
Table: Commissioning And Operating Phase ' Transport                                            .......... 66
Sources                 ............ 67




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