Proposed New Banks in India Opportunity for Multisector Real Estate Growth

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1 Proposed New Banks in India Opportunity for Multisector Real Estate Growth When the Reserve Bank of India (RBI) recently announced that it would issue new banking licenses, 26 companies applied. The list included not only the famous names of corporates in India such as Tata and Birla, but also the public sector entities such as the India Post, nonbanking financial companies and specialised infrastructure finance and microfinance organisations. Based on the cues given at the beginning of September 2013 by the newly appointed RBI Governor, Dr Raghuram Rajan, the RBI will target to complete this process of issuing licenses around January The real estate sector will be an immediate beneficiary because of the new banks requirement for office space and retailing branches, with many of the facilities needed in a short time span. Most retail branches of banks in India operate with a space of around 3,000 sq ft. We expect that the new banks might open around 25 branches each by end-2014, with a foray targeted toward Tier I cities and supported by subsequent expansion in Tier II and Tier III cities. Therefore, even if only five of the applicants get licenses by January 2014, there will be a requirement for half a million sq ft of retail banking spaces. These spaces will be mostly on the high streets of the cities, boosting the demand for retail real estate. In addition, registered offices, corporate offices and regional headquarters could mean another million sq ft of office space per bank, and the back office locations would require another half a million sq ft. As a result, million sq ft is likely to be taken up in the short term. Moreover, the banks are likely to open up more retail and office transaction opportunities in the long term, as observed in the case of the not-so-old private banks such as Yes Bank, which has increased its operation to more than 430 branches by 1H13 from a meagre 30 branches in Meanwhile, Tier II and Tier III cities, especially those in states offering better taxation benefits, will come into focus for corporate office locations. Grade B office space could be in demand, at least during the beginning, on the back of its wider availability and lower cost. Hence, the overall transaction scene, while experiencing an increase in the gross leasing volume, may not bring down the vacancy rate in the Grade A office space by much. There will certainly be more built-to-suit office RFPs over the next 12 s, and in the long run, these banks are expected to shift to Grade A office space, benefitting the investor grade speculative office market of India. Interestingly, in the event that some of the organisations seeking banking licences have long-owned captive space, this should not keep them from searching for office space with better location advantage and business potential. Apart from that, the licences would result in competitive business planning, expansion and strategic relocation by the older banking players, as well as the creation of not only more jobs in the subdued economy, but also a boost to the office markets of India over the next two years and beyond. Grade A Rental Value Capital Value Office Retail Residential Delhi NCR Mumbai Bangalore Chennai Pune Hyderabad Kolkata What s New!! The Land Acquisition Bill, passed by the Parliament during the Monsoon Session to replace a 119-year-old legislation, became a law in this Deal of the Month US-based Aon Hewitt signed an INR 8 billion leasing deal with Unitech for an 800,000 sq ft plot at Gurgaon Infocity Tikri SEZ Green Wall The NHB (National Housing Bank) has recently entered into an MoU with ADaRSH (Association for Development and Research of Sustainable Habitats), with respect to promoting energy-efficient homes, sharing information and networking in events and meetings

2 Bangalore Transaction activity in the Bangalore office market declined during September. Continued demand and limited supply kept the city s overall vacancy rate lower than 10% during the. Meanwhile, the IT/ITES sector accounted for the majority of leasing, with major companies such as MathWorks, HARMAN International, Atlas Copco, Gziel Global Solutions and Microland taking up spaces. Rents continued to remain stable across the city. Interestingly, capital values continued to witness marginal appreciation on the back of steady demand and investor sentiments. The Bangalore retail market witnessed sluggish demand during September. However, moderate absorption decreased the vacancy in organised malls. Some of the major transactions during the included leasing by Smoke House Delhi, Latak Italy and Pantaloons. Rents continued to remain unaltered over the. Meanwhile, poor investor sentiments toward buying retail assets stagnated the capital values. The Bangalore residential market witnessed modest absorption during September. The city witnessed a moderate number of launches in the. The landmark projects launched during the included Salarpuria Sattva Clarinet by a JV of Salarpuria and Sattva groups, Nitesh British Columbia by Nitesh Estates and Century Koruna by Century Developers. In addition, the Prestige Group launched Prestige Jade Pavilion. Capital values appreciated marginally across various submarkets in September because of an increase in sales volumes and prices at most projects that are nearing completion. In addition, rents also increased marginally over the. per CBD ,000 20,000 Old Airport Road ,000 10,000 Outer Ring Road (Eastern) ,500 6,500 Old Madras Road ,000 6,500 Electronic City ,800 3,200 Retail Rents Capital Value per Koramangala ,000 16,000 Indiranagar ,000 16,000 New BEL Road ,000 10,000 Commercial Street ,000 20,000 Jayanagar ,000 15,000 INR per for a 1,000 sq ft 2BHK apartment Old Madras Road 15,000 25,000 5,000 6,000 Indiranagar 20,000 30,000 10,000 25,000 Bellary Road 12,000 18,000 4,500 9,000 Hosur Road 10,000 14,000 3,000 6,500 Whitefield 18,000 25,000 4,500 8,000 Tumkur Road 8,000 12,000 3,000 5,000 Kanakapura Road 8,000 12,000 3,000 5,500 Mysore Road 8,000 10,000 3,000 4,000 >> The Bangalore Metro Rail Corporation Limited (BMRCL) is looking to raise INR 1 billion through private placement of bonds. It is planning to tap financial institutions, but would not like to do it now as the interest rates are high, said new Managing Director Pradeep Singh Kharola. The corporation, in which the governments of India and Karnataka hold equal partnership, has been implementing the metro rail project with the equity and debt raised from many financial institutions, including the Japan International Cooperation Agency (JICA).

3 Chennai Office absorption in Chennai marginally improved during September. SBD locations such as Guindy, MPR and pre-toll OMR continued to see increased absorption, while the CBD and peripheries saw limited absorption. Accordingly, SBD locations saw steady rent growth while other locations saw rents remained stable. Major transactions during the included L&T Infotech leasing space in MPR, Royal Sundaram renting office space in post-toll OMR and IQ BackOffice taking space in the Ambattur Industrial Estate. Both high streets and malls saw healthy retail activity during September. Some prominent retail absorption included Reliance Digital opening its new store in Thiruvanmiyur; Girias, a consumer durable retailer, expanding its presence in LB Road; and Khadims and Woodland opening their new stores on ECR, Thiruvanmiyur. In addition, Khazana Jewellery expanded its presence in Velachery and Nilgiris Supermarket opened a new store in Keelkatalai. Rents and capital values continued to witness marginal growth. The demand for residential units improved in select locations such as the GST Road and the link roads of GST and OMR. However, residential prices continued to be under pressure during the of September. Chennai s residential market witnessed a slew of new launches during the with Blue Bells by Shri Janani Homes in Padur near OMR, Color Gates by Color Homes in Perumbakkam and Optima Upgrade by Optima Homes in Avadi. In addition, Prestige launched Silver Springs on the ECR Link Road, and Mahidhara launched Supreme at Oragadam. Rents and capital values both remained stagnant during the. per Mount Road ,000 15,000 RK Salai ,000 15,000 Pre-toll OMR ,000 6,500 Post-toll OMR ,500 5,000 Guindy ,000 9,000 Ambattur ,250 4,300 Retail Rents (High Streets) Capital Value per T. Nagar ,000 15,000 Nungambakkam ,000 16,000 Velachery ,000 12,000 Pre-toll OMR ,000 11,000 Anna Nagar ,000 13,000 LB Road (Adyar) ,500 13,500 INR per for a 1,000 sq ft two-bhk apartment Adyar 20,000 30,000 12,000 17,000 Medavakkam 7,000 14,000 3,600 5,250 Tambaram 6,000 12,000 3,500 4,500 Anna Nagar 15,000 25,000 9,000 14,000 Porur 5,000 10,000 3,800 6,200 Sholinganallur 9,000 12,000 4,250 5,800 >> The state government introduced an additional registration formality. Apartment buyers, who previously registered only their undivided share of the land (UDS), now have to register their construction agreement and pay 1% of the remaining value after UDS for stamp duty and 1% as registration fee.

4 Delhi After the slow activity observed in the last few s, the demand for office spaces started to increase in September, primarily driven by relocation and consolidation as the corporates means for cost control measures. The vacancy in the city increased during the on the back of a large number of new completions, including JMD Corporate Suites, Realtech IT Tower, Logix Technova Tower A, Advant Navis Business Park Tower 2, Carnoustie 19A and Unitech Infospace Phase II Tower 9. Other than Unitech Infospace, all these new projects commenced with low occupancy. The major transactions during the included CB&I leasing space in NH 8 Cybercity Gurgaon, Aon Hewitt and Michelin both renting space in Sohna Road Gurgaon and BHEL taking space in Noida Expressway. Rents and capital values both continued to remain stable across all the submarkets of Delhi. The demand continued to remain slow in September because of constraints in the availability of good space. Meanwhile, brands are now more cautious to relocate to good location, resulting in nonperforming malls operation with high vacancy. In addition, retailers are active in pre-committing to space in the upcoming malls that offer the promise of good location and design, along with branding and business potential. Some of the major transactions in September included Fitness First and Forever New both leasing space in the Gurgaon suburbs; Reliance Footprint, Reliance Sports and Go Mart all renting space in Prime Others; and Superdry and Chili s taking space in the Prime South. Rents witnessed marginal increase in select projects in the Prime South during September. Meanwhile, capital values observed marginal increase in a range-bound manner. Residential sales continued to be slow during the ; hence, developers were seen resorting to innovative schemes and freebies to offload the high inventory. Notable launches during September included The Corridors by Ireo in Golf Course Extension Road, Novena Green by DSD Homes in Greater Noida (west) and Bluenoon by LR Infrahomes in Raj Nagar Extension. In addition, SVP Group launched Gulmohar Vatika and SAVFAB Group launched Jasmine Grove, both on NH 24. During the, rents decreased slightly in the high condominiums within the given range. per Barakhamba Road ,000-35,000 Jasola ,000-21,000 DLF Cybercity NA MG Road ,000-19,000 Golf Course Road ,500-15,000 Sohna Road ,500-8,000 Retail Rents Capital Value per South Delhi ,000-32,000 West and North Delhi ,000-23,000 Gurgaon-MG Road ,500-23,000 Rest of Gurgaon ,000-14,000 Noida ,000-25,000 Ghaziabad ,500-16,000 INR per for a 1000 sq ft 2BHK apartment Golf Course Road 22,000-32,000 12,000-16,000 Sohna Road 15,000-20,000 5,800-7,500 Golf Course Extension Road 16,000-22,000 8,000-9,500 NH 8 14,000-19,000 4,500-6,500 Dwarka Expressway NA 5,500-7,500 Noida- Greater Noida Expressway 12,000-14,000 4,000-6,100 Noida City 12,000-14,500 4,700-6,000 Indirapuram 10,000-12,000 4,200-5,000 NH 24 7,000-9,000 2,400-3,200 >> The civil construction on the Dwarka Najafgarh Metro corridor finally began. This section will be of 4.4 km with three stations Dwarka, Najafgarh Depot and Municipal Corporation, the first two being elevated and the last one underground. >> The Noida Authority approved the design of the city s first 4.8 km six-lane elevated road that will start from Vishwa Bharti Public School in Sector 28 and will end at Flex Crossing near the Sector 61/58 roundabout. >> An ISBT has been proposed at Rajiv Chowk, near NH 8 and Mini Secretariat, while a modern AC bus stand will be constructed in Sector 29. >> The UP Government cabinet has approved the construction of the Noida Greater Noida Metro Link.

5 Hyderabad Leasing volumes remained subdued in September. Leasing activity was evenly distributed among the CBD, SBD and Hitec City. Few of the key transactions in September included Kony Labs, Kore and John Deere leasing space in Hitec City and FTD (group company of UOL Juno Online), Softronics Inc and GoodHope securing space in the SBD. Average market rents and capital values remained stable over the. Leasing activity on the high streets of Hyderabad remained stable. Airtel leased space on the high streets of Malakpet and Kukatpally, and Reliance Trends and Reliance Digital leased space at Uppal over the. On the suburban high streets, Kalamandir opened stores in Dr AS Rao Nagar. Rents and capital values remained stable over the. Residential sales continued to remain sluggish in September. New launches also remained subdued. The projects launched were a villa in Shamshabad by Suchirindia and an apartment near APPA Junction by SMR Holdings, called SMR Vinay Harmony. Rents and capital values remained stable across all the submarkets. per Begumpet ,500 6,500 Banjara Hills ,500 7,500 Hitec City ,000 5,200 Gachibowli ,000 5,000 Uppal ,000 4,000 Shamshabad ,000 4,000 Retail Rents Capital Value per Banjara Hills ,000 13,000 Jubilee Hills ,000 14,000 Secunderabad ,000 10,000 Hitec City ,000 13,000 Kukatpally ,000 12,000 Dilsukhnagar ,000 12,000 INR per for a 1,000 sq ft 2BHK apartment Banjara Hills 20,000 25,000 7,500 14,000 Begumpet 12,000 16,000 4,000 5,500 Kondapur 8,000 16,000 3,200 5,000 Tellapur 6,000 12,000 2,800 3,500 Kukatpally 7,000 10,000 3,500 3,800 Miyapur 5,000 8,000 2,400 3,500 >> Hyderabad Metro Rail (HMR) released INR 2 billion to Greater Hyderabad Municipal Corporation (GHMC) for road widening.

6 Kolkata The Kolkata office market continued to remain subdued during the of September. The overall vacancy in the city decreased marginally with the absence of new completions. The major transaction in the was BT Group leasing space in Rajarhat. The large vacancy in the city s office stocks continued to create pressure on the rents in the peripheral submarkets, resulting in the correction of rents in Salt Lake. However, capital values remained flat over the. Retail activity in the malls of the city improved with an increasing number of transactions. It is noteworthy to mention that Quest Mall on Syed Amir Ali Avenue near Park Circus was soft-launched on 30 September, and would likely commence operation in the coming s with a foray of luxury retailers. The major transactions during the included Adrija Jewellers leasing space in Avani Riverside Mall; Brand Factory taking up space in Hometown Mall; and Meena Bazaar, Jashn Sarees, AND and Vero Moda precommitting space in the upcoming Quest Mall. Rents increased in select precincts on the back of increased retailer activity. Meanwhile, capital values remained unaltered across all the submarkets in the city, but had a marginal increase in select precincts. The residential demand in the city lowered during September in the high-end and upper mid-end units. Developers were seen offering discounts and cashback schemes over the quoted price to do away with unsold inventories of all classes. The notable launches during the included Siddha Waterfront Phase I by Siddha Group in Khardah and Eternia by a JV of Unimark Realty and Concast Group in EM Bypass. Meanwhile, rents and capital values remained flat across the city. per Park Street ,500 22,000 Topsia ,000 11,000 Kasba ,000 11,500 Salt Lake Sector V ,400 5,400 Rajarhat & New Town ,500 4,800 Retail Rents Capital Value per Elgin Road ,000 30,000 Park Street (high street) ,000 34,000 Salt Lake ,000 20,000 Prince Anwar Shah Road ,000 15,000 Rajarhat & New Town ,000 8,000 Gariahat (high street) ,000 22,000 INR per for a 1,000 sq ft 2BHK apartment Alipore 43,000 50,000 14,000 22,000 Prince Anwar Shah Road 18,000 30,000 7,000 14,000 EM Bypass 15,000 25,000 5,000 11,000 Lake Town 11,000 17,000 3,500 7,500 Behala 8,000 14,000 3,000 5,500 Howrah 7,000 9,500 2,500 5,000 New Town (AA I, II & III) 10,000 16,000 3,300 6,000 Rajarhat 8,000 14,000 2,500 4,700 >> The state government has allotted more than INR 1.5 billion for repairing roads in Calcutta and 126 other urban pockets. Of this fund, INR 0.7 billion came from the Municipal Area Development Fund Office, INR 0.6 billion was shelled out by the State Finance Corporation and the rest was contributed by the Municipal Affairs Department from the vehicle and trade taxes. >> New Town is set to get its first permanent fairground. Work is on full swing on a 4.15-acre plot in Action Area 1B on the Major Arterial Road. New Town Kolkata Development Authority (NKDA) has planned and is executing the project. At present, a pathway is being constructed around the fairground; it would house about 70 temporary stalls. There would be a 500-seater open-air auditorium along with a restaurant. It would have three gates. The parking lot inside the grounds would accommodate 60 cars.

7 Mumbai The office demand continued to be moderate in the of September. Nevertheless, it remained polarised to the western suburbs where healthy transactions were recorded. Meanwhile, the major deal closures were from the BFSI tenants who wanted to set up their back office functions. Vacancy rates were stable across the submarkets, except for a minimal decrease in the western suburbs and a minor appreciation in the eastern suburbs. It is important to mention that the projects that became operational in the witnessed lukewarm pre-commitments. The major transactions in September included Bharatiya Mahila Bank leasing space in the CBD and CMA CGM taking up space in the western suburbs. Damji Shamji Business Galleria in the eastern suburbs was the lone completion during the. Meanwhile, rents and capital values both remained stable across the city. Retail demand on the high streets of Mumbai continued to grow. However, occupiers were seen considering the quality options in malls and standalone mixed-use projects. Select categories such as fashion and accessories were seen expanding in select pockets of the city. Vacancy in malls remained stable during the of September. Major transactions in the included Bombay Dyeing renting space in R City Mall at in the eastern suburbs and Jashn taking up space on the high streets at Colaba. Rents and capital values both remained unaltered across all the submarkets during the. In the of September, the residential market in Mumbai continued to see sluggish demand on the back of gloomy market conditions along with budgetary constaints from home buyers. Also, uncertainty in the job market and the rising inflation were the reasons for the slowdown in the residential sales. In response to the poor demand from home buyers, the developers started cashing on to the festive season by offering freebies or limited period discounts on each booking of an apartment. The witnessed new launches such as Omkar Ananta at Goregaon, Legranz at Chembur and Wadhwa Solitaire in Thane. Rents continued to remain stable, except in select precincts such as Andheri, Wadala and Chembur, where rents inched up marginally. Meanwhile, capital values remained unmoved in September on the back of slowing demand because of the gloomy market conditions. per Lower Parel ,000 23,000 BKC ,000 35,000 Andheri ,000 15,000 Goregaon-Malad ,100 10,000 Wagle Estate ,000 6,000 Thane-Belapur Road ,100 6,000 Retail Rents (mall space) Capital Value per Lower Parel ,000 32,000 Malad ,500 20,000 Ghatkopar ,100 18,000 Mulund ,000 16,000 Thane ,000 14,000 Navi Mumbai ,000 12,000 INR per for a 1,000 sq ft 2BHK apartment Lower Parel 87,000 95,000 24,000 35,000 Wadala 40,000 55,000 15,000 19,500 Andheri 35,000 54,000 12,000 21,000 Ghatkopar 35,000 48,000 9,800 15,000 Ghodbunder Road 12,000 25,000 5,500 9,000 Kharghar 12,000 20,000 4,800 8,000 >> According to the state government, the Navi Mumbai International Airport (NMIA) project is set to take off in three s. The state administration recently informed the Centre that the contentious issue pertaining to the compensation package of those whose land need to be acquired for the project will be resolved within three s.

8 Pune The transaction activity in the Pune office market continued to remain moderate during September. However, the continued demand and restricted ready supply collaboratively decreased the vacancy levels. The major transactions during September included Capstone leasing space in Yerwada, Flextronics renting space on Nagar Road and AXA taking up space in SP Infocity, Fursungi. Meanwhile, Kapila Matrix became operational during the. Rents and capital values continued to remain unaltered across all the submarkets during the. The malls in Pune witnessed continued slow activity during September. Seasons Mall, which opened last in Hadapsar, now houses prominent brands such as Shoppers Stop, Westside, Croma, Max and Star Bazaar. Pune's retail stock remained stable with no completion in the current. However, Prime Mall, which is located in Pimpri, is ready for fit-outs and would likely become operational in the coming two to three s. Pune continued to witness stable demand for residential sales. Major launches during the included Panchshil s Panchshil Towers in Kharadi Annexe, VTP Group s Urban Sole in Wagholi and Gera Developers Gera Isle in Kharadi. Rents and capital values both remained stable in the city during September. per Hinjewadi ,000 5,500 Hadapsar ,000 6,000 Bund Garden Road ,500 7,500 Viman Nagar ,000 7,000 S.B. Road ,500 7,500 Koregaon Park ,500 7,500 Retail Rents (High Streets) Capital Value per MG Road ,000 15,000 Bund Garden Road ,000 13,000 F.C. Road ,000 15,000 J.M. Road ,000 15,000 D.P. Road ,000 11,000 S.B. Road ,000 11,000 INR per for a 1,000 sq ft two- BHK apartment Wakad 10,000 12,000 4,500 5,500 Kharadi 11,000 15,000 5,000 6,000 Hadapsar 12,000 16,000 5,000 6,300 Hinjewadi 9,000 11, ,500 Undri 9,000 12,000 3,800 4,800 Pimpri-Chinchwad 8,000 12,000 4,000 5,000 >> The Maharashtra government has approved a metro rail project in Pune on 30 September. The project is estimated to cost about INR 100 billion and is expected to be completed by % of the funds for the project will come from the Pune Municipal Corporation (PMC) and the Pimpri-Chinchwad Municipal Corporation (PCMC), 40% will come from the state and the central governments (20% each) and the remaining 50% will be raised from private companies.

9 About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company s investment management business, is one of the world s largest and most diverse in real estate with $47 billion of assets under management. Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 22,200 employees operating in 79 offices in 14 countries across the region. The firm was named the Best Property Consultancy in Asia Pacific at The Asia Pacific Property Awards 2012 in association with Bloomberg Television. For further information, please visit our website, About Jones Lang LaSalle India Jones Lang LaSalle is India s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across eleven cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 5400, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, Industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. For further information, please visit For more information about our research Ashutosh Limaye Trivita Roy Head, Research and REIS Assistant Vice President, Research ashutosh.limaye@ap.jll.com trivita.roy@ap.jll.com About Bajaj Finserv Lending Bajaj Finserv Lending is one of the most diversified NBFCs in the Indian market catering to more than 5 million customers across the country. Headquartered in Pune, the company s product offering includes Consumer Durable Loans, Personal Loans, Loan against Property, Small Business Loans, Home loans, Credit Cards, Two-wheeler and Three-wheeler Loans, Construction Equipment Loans, Loan against Securities and the recently introduced Lifestyle Finance. Bajaj Finserv Lending prides itself for holding the highest credit rating of FAAA/Stable for any NBFC in the country today. To know more please visit or send an to pss@bajajfinserv.in Research Dynamics 2013 Pulse reports from Jones Lang LaSalle are frequent updates on real estatemarket dynamics. COPYRIGHT JONES LANG LASALLE IP, INC All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.