Onion Tears in the Indian Residential Sector

Transcription

1 Onion Tears in the Indian Residential Sector The whole country was recently abuzz when the price of onions (one of the most essential staples of the Indian diet) rose above the price limit of INR 100 per kg (that s nearly USD 0.75 per pound) in the country s capital and surrounding areas. The reasons for this were a crop affected by unseasonal rains and hoarding by suppliers and a few large farmers to create an artificial supply shortfall. This story finds a parallel in the country s residential sector. This sector is characterised by delays in project possession and healthy interest by investors who are not end-users but speculators looking for capital appreciation. There is a certain similarity between onions and the housing sector because both are commodities that fulfil an important need providing food and shelter. In , when housing demand was adversely impacted by the Global Financial Crisis and investors and end-users deserted the residential market, prices tumbled by over 30% across different markets. The subsequent revival in demand took place in 2010 and it was accompanied by a revival in price as well. Prices have risen by nearly 50% from the market trough seen in 2009 and are trending at newer market peaks in most residential markets. The healthy buyer interest during was the prime factor to drive the prices upwards but this is not the case in A major factor in the demand revival has been the active investor interest in the residential sector. In fact, in select cities and corridors such as Gurgaon in the National Capital Region, the investor momentum has managed to marginalise end-users, who are relatively risk-averse. By investing in projects which have partial approvals, the investors have taken away a large chunk of the upcoming residential supply and this has been motivation for developers to offer their thus limited stock to end-users at higher prices. This has started to happen more regularly and has made many residential corridors more speculation-driven. Back to the onion analogy, over the years, onions have seen stable prices (prices have remained at INR per kg) as supply has been synchronised with demand. The wholesale market which hoards the commodity can be equated with the investors who keep end-users away from the market for short-term gains. Farmers the onion producers who make a healthy profit in a short-supply scenario by selling at higher prices are analogous to developers who look to book returns from their projects by ensuring that buyer demand is always chasing lower availability. The difference lies in the fact that the government intervened in the essential commodities market by importing onions to control price rises. No such method of control currently exists in the housing sector. Perhaps, beyond the normal income tax payable on house rent income (payable even for non-rented accommodation), some more punitive measures can be implemented to achieve better price discovery in the housing sector. Grade A Rental Value Capital Value Office Retail Residential Delhi NCR Mumbai Bangalore Chennai Pune Hyderabad Kolkata What s New!! The Government of Punjab has reserved 1,700 acres of land at Mohali for development of an Information Technology knowledge park. 40 acres in the park has been earmarked for Electronics System Design Manufacturing (ESDM) cluster. Deal of the Month The iconic building Express Towers at Nariman Point, South Mumbai is to be bought by PE Fund Blackstone in partnership with Pune-based Panchshil Realty for INR 9 billion. Green Wall Virtusa Corporation a global IT services company achieved a LEED Gold certification for their campus in Hyderabad

2 Bangalore Transaction activity in the Bangalore office market declined during November in comparison with the previous, with modest absorption during the. The combination of stable demand and restricted supply was instrumental in keeping the city s overall vacancy rate very low during November. Meanwhile, the major transactions of the included Fiberlink, Continuous Computing, UHG and Novo Nordisk. continued to remain stable across the city, while capital values witnessed marginal appreciation on the back of demand and investor sentiment. The Bangalore retail market witnessed sluggish demand in organised malls. However, modest absorption decreased the vacancy rate marginally in the malls. Major transactions during the included leasing by Allen Solly, Bombay Dyeing, Airtel and Madura Fashion & Lifestyle. continued to remain unaltered over the. Meanwhile, capital values remained stagnant on the back of poor investor sentiment towards the buying of retail assets. Absorption was modest in the Bangalore residential market during November. The city witnessed a modest number of launches in the, including Orchids Lake, SJR Oxigen, MJR Clique and Ajmera Stone Park. increased marginally over the. Capital values appreciated marginally across various sub-markets in November due to an increase in sales volumes and prices at most projects that are nearing completion. Office Capital Values 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 Capital Values 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 >> Travelling on the Namma Metro between MG Road and Baiyapannahalli is set to become dearer with Bangalore Metro Rail Corporation Limited (BMRCL) working on hiking fares. The hike is imminent even though Reach 3 and 3A, between Swastik- Yeshwanthpur-Peenya, is yet to begin commercial operations. Incidentally, a study is underway on the fare hike and its effects ahead of the commissioning of the 9.9-km stretch of Reach 3 and 3A, which has ten stations. BMRCL officials said the Fare Fixation Committee has been working on the issue for some time and is going to pass an order soon. BMRCL is also seeking assistance from the Institute for Social and Economic Change to decide the fares.

3 Chennai The Chennai office market saw a steady improvement in demand. In November, major transactions included Access Health and Virtusa both taking up space on Mount-Poonamallee Road, as well as Amazon expanding in pre-toll OMR. Meanwhile, CRISIL relocated from T Nagar and consolidated its operations in MRC Nagar. In addition, Sodexo, the Korean Consulate and ICICI Bank took space in different CBD locations. continued to grow along the pre-toll OMR locations, while remaining restricted in other locations. Chennai continued to see buoyant retail activity in both malls and on high streets during November. During the, Arvind Store opened its new showroom on TTK Road & Bounce and Oryza opened outlets on ECR. In addition, fine dining restaurants Anjappar and Sigree opened in Adyar. The city s retail rents recorded marginal growth during the. Residential sales remained tepid during November. However, developers continued to increase housing options for homebuyers by launching new projects during the. Major launches included Love by Vijay Shanti in Mambakkam, Lanterns Court by Casa Grande in Thoraipakkam and Peru's by StepsStone Builders in Perumbakkam. In addition, the Alliance Group launched Villa Belvedere in Oragadam. Meanwhile, capital values remained stable amid strained sales. Office Capital Values 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 (High Streets) Capital Values 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 22,000 Medavakkam 7,000 14,000 3,600 5,500 Tambaram 6,000 12,000 3,500 4,500 Anna Nagar 15,000 25,000 9,000 15,000 Porur 5,000 10,000 3,800 6,200 Sholinganallur 9,000 12,000 4,250 5,800 >> The Tamil Nadu Government sanctioned INR 50 million for preparing a detailed project report for the proposed 55-km-long elevated corridor from Taramani to Mamallapuram on OMR.

4 Delhi Demand continued to remain stable and primarily driven by relocation and consolidation as a means for cost control. The vacancy rates in the city remained stable. Major transactions in November included Panasonic leasing space in NH 8-Gurgaon, PVR and Fluor Daniel both renting space in Cybercity-Gurgaon and Delhi Film Council taking up space in Greater Noida. Meanwhile, Paras Trade Centre commenced operations in Golf Course Road-Gurgaon with very low occupancy. and capital values both continued to remain stable across all the sub-markets of the city. Demand remained weak due to constraints in the availability of good space, with brands being more cautious to relocate to a good location; consequently, non-performing malls witnessed high vacancy rates. Retailers continued to remain active in precommitting spaces in upcoming malls that offer the promise of good location, design, branding and business potential. Major transactions in November included Pink and Crocs both leasing space in Gurgaon Suburbs, and Indian Terrain, Gini & Jony and Lotto all taking up space in Noida Suburbs. and capital values both continued to remain stable over the of November. Demand for residential units in Delhi was weak in November. Major launches during the included Aakriti Vastus by the Aakriti Group in Dwarka Expressway, Mahagun Mantra Phase I by the Mahagun Group in Greater Noida and Shubhkamna Sublime by Shubhkamna-Advert in Yamuna Expressway. In addition, Deepsons launched Atulya Heights in Vaishali-Ghaziabad. and capital values remained stable during the. Office Capital Values 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 Capital Values 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 Noida authority is likely to start construction in January 2014 on an underpass project near Sector 94 to ease traffic congestion at the Mahamaya flyover. The 200-metre underpass, which will be constructed at a cost of INR 350 million between the Kalindi Kunj Bridge and the Mahamaya Flyover, will connect commuters to Sector 94/95 and ensure a signal-free ride for about 70,000 daily commuters. >> After missing several deadlines over the past few years, the country s first private metro service Rapid Metro finally rolled on track in Millennium City Gurgaon on 14 November POLICY UPDATE >> In a move that will aid buyers in choosing legally sound projects, the Noida, Greater Noida and Yamuna authorities are planning to upload on their official websites the details of all builders constructing housing projects.

5 Hyderabad Leasing volumes remained moderate in November. Occupiers continued to prefer Hitec City submarket. Few of the key transactions in November included CSSI and People Tech taking space at Hitec City,BNP Paribas leasing space at Banjara Hills and Infotech Technologies leasing space at Uppal. Average market rents and capital values remained stable over the. Leasing activity remained stable both in upcoming malls and high streets in November. However the focus remained on high streets. VOI Jeans, Samsung, Vinegar and Hazzel Ice Cream leased space at Jubilee Hills, Tanishq opened store at Kukatpally, Toy Globe opened store at Begumpet. and capital values remained stable over the. Residential sales continued to remain sluggish in November. New launches also remained subdued. The projects launched were SMR Vinay Harmony County by SMR Holdings at Banlaguda near APPA Junction and Armsburg My Space by Armsburg Properties at Suchitra Junction. and capital values remained stable across all the submarkets due to sluggish demand. Office Capital Value 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 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 Residential Capital Value 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 Gachibowli 8,000-16,000 3,500-4,200 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 >> L&T Metro Rail Hyderabad Ltd has begun laying rails on the metro viaduct between Nagole and Mettuguda which is a stretch of 8 kms in November.

6 Kolkata The Kolkata office market witnessed slow activity during November. The overall vacancy rate in the city remained stable in the absence of large transactions. KPMG taking up space in Salt Lake was the major transaction of the. Large vacancy rates in the city s office stock continued to create pressure on rents. However, except for a few sub-markets, capital values and rents remained flattish over the across the city. Retail activity in the malls of the city was buoyant during November. Lifestyle opened its first store in Kolkata in Quest Mall. In addition, other major transactions during the included Just Cex leasing space in the Avani Riverside Mall, Bata expanding its outlet in Mani Square and Yoforia taking up space in the Forum Mall. marginally increased in select sub-markets on the back of increased retailer activity. Meanwhile, capital values remained unaltered across all the sub-markets in the city. Residential demand in the city continued to be low in high-end and upper-mid-end units. Developers continued to offer discounts and cash back schemes along with freebies over the quoted price to do away with unsold inventory of all classes. Notable launches during the included North Grande by Mounthill Realty in Dum Dum, and Magnolia Skyview and Magnolia Prestige, both by Magnolia Infrastructure at Rajarhat. Meanwhile, rents and capital values remained flattish across the city. Office Capital Values per Park Street ,500 22,000 Topsia ,000 11,000 Kasba ,000 11,500 Salt Lake Sector V ,400 5,400 Rajarhat and New Town ,500 4,800 Retail Capital Values 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 and 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 and III) 10,000 16,000 3,300 6,000 Rajarhat 8,000 14,000 2,500 4,700 >> The Kolkata Metro railway fares went up by around 25% - 100% for various distances from 7 November The total railway route has been divided into six zones, based on distance, in computing the raised fares; previously, there were five zones. The new zone is for distances between 25 and 30 km; previously, any distance above 20 km was considered one single zone.

7 Monthly Real Estate Monitor - December 2013 Monthly Real Estate Monitor December 2013 Mumbai November saw moderate demand for office space in Mumbai. Healthy pre-commitments were recorded in select projects nearing completion. Meanwhile, the trend of office space consolidation continued during November. Other than SBD Central, where vacancy rates Office per (mall space) per Capital Values ,500 20, ,100 18, ,000 16, INR per for a 1,000 sq ft 2BHK apartment 60, ,000 8,000 14,000 7,000 12,000 Capital Value 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 45,000 9,800 15,000 Ghodbunder Road 12,000 25,000 5,500 9,000 Kharghar 12,000 18,000 4,800 8,000 Lower Parel BKC Andheri Goregaon-Malad Wagle Estate Thane-Belapur Road Retail decreased marginally, vacancy levels remained stable across the sub-markets. Projects that became operational in November witnessed notable pre-commitments. Major transactions in November included Kraft Foods leasing space in SBD Central and LexisNexis taking up space in the SBD North sub-market. Lodha Supremus was the lone project that became operational in SBD Central. Meanwhile, rents and capital values remained stable during the. Demand for retail space in Mumbai remained low in November. There were only a few deal closures. Retailers were cautious towards expansion because of the weak economic conditions. Meanwhile, select retailers were seen consolidating operations by shutting down underperforming outlets in the Suburbs sub-market, causing vacancy rates in suburban malls to increase slightly during the. Major transactions during the included GAS renting space in the Suburbs sub-market and Chroma taking up space in the Prime South sub-market. and capital values remained stable during November. Demand for residential units remained subdued in November. Projects with smaller configurations were preferred by buyers over high-end projects. New launches in November included BBJ Roma by BBJ Worldwide at Andheri, Aman Hills by the Amann Group at Andheri and Evergreen Heights by the Wadhwa Group at Kalwa. Meanwhile, there was no change over the previous in rents and capital values. Lower Parel Malad Ghatkopar Mulund Thane Navi Mumbai Residential Lower Parel 19,000 23,000 25,000 35,000 9,000 15,000 8,100 10,000 5,100 6,000 5,100 6,000 Capital Values 22,000 32,000 >> The Mumbai Metropolitan Region Development Authority (MMRDA) is now looking at a 15 January 2014 deadline to begin commercial operations of Metro services on the Versova-AndheriGhatkopar (VAG) corridor.

8 Pune The Pune office market witnessed moderate transaction activity in November. Vacancy rates increased marginally with the completion of Eon Cluster A located at Kharadi. Major transactions in November included Infostrech leasing space at Blue Ridge in Hinjewadi and i Place renting space at WTC in Kharadi. In addition, a multinational bank has pre-committed to space in a ready for fitout building located at Yerwada. ITTP Phase I is ready for fit-outs and it is likely to be operational in the coming 1-2 s. and capital values remained stable across all the sub-markets during the. Pune's stock of retail space increased with the completion of the Prime Mall located at Pimpri. The mall commenced operation with a high level of occupancy and houses prominent brands such as Men's Avenue and Mainland China. Croma taking up space in Geo Square located in Wakad was a major transaction in November. and capital values remained stable in the city over the. Demand for residential units continued to remain stable during the. Major launches included Spectrum Tower by Bhujbal Brothers at Kharadi, 24K Glamore by Kolte Patil at NIBM and Signature Meadows by KPDL at Kharadi. and capital values remained stable in the city during the. Office Capital Values 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 (High Streets) Capital Values 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 2BHK apartment Wakad 10,000 12,000 4,500 5,500 Kharadi 11,000 15,000 4,800 5,800 Hadapsar 12,000 16,000 5,000 7,300 Hinjewadi 9,000 11, ,300 Undri 9,000 12,000 3,800 4,800 Pimpri-Chinchwad 8,000 12,000 4,000 5,200 >> In the Pune metropolitan area, an alternative road in Pimple Saudagar will be built by the Pimpri Chinchwad Municipal Corporation (PCMC) to link the area to the Sangvi-Kiwale bus rapid transit route in the city. The existing 2-km road from Planet Millenium to Rakshak chowk passes through defence areas. The road is the easiest route for residents of Pimple Saudagar to reach Aundh, Baner and other areas.

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.