SECTOR UPDATE

16 JAN 2014

Mumbai Ready Reckoner Rates 2014

Rates continue upward spiral
The Ready Reckoner Rates for CY14 in Mumbai city and suburbs (up to Dahisar in western suburbs and Mulund in eastern suburbs) reveal that rates have seen a YoY increase of 5-20% across micromarkets. This comes on the back of similar increases in CY12 and CY13 due to continued increase in residential prices across Mumbai. The fresh round of rate hikes will have a dual impact of increasing outgo on fungible FSI for developers and stamp duty for buyers. Combined with the recent spate of adverse regulatory developments in Dec-13, costs for developers are likely to rise on account of higher cost for fungible FSI, further delay in approvals and liaisoning with multiple authorities. As a result, developers may be inclined to pass on the higher costs to buyers. However, in a scenario where buyers are unwilling to purchase at the current elevated prices, the Mumbai property market may continue to see weak sales volumes in 1HCY14. Among listed Mumbai developers, we prefer Oberoi Realty (CMP Rs 210, TP Rs 289, BUY) due to its low gearing levels and clear land bank. Rates see fresh increase of 5-20%in CY14 With a hike of 5-20% in ready reckoner rates in
CY14, homes in Mumbai are set to become costlier. Although rates in certain pockets have increased by over 50% over CY11-14, this is in keeping with the rise in saleable rates for Mumbai city/suburbs. With the introduction of the amended DCR in Mumbai, loading on carpet to saleable area has increased to ~67% from 50% over the last 24 months. Our analysis reveals that market rates are still higher by 30-100% over the ready reckoner rates.

Rate hike to impact developers as well as buyers With the hike in ready reckoner rates, developers

will require to shell out additional money for fungible FSI, a cost which they will look to pass on to buyers. Buyers who currently pay stamp duty of ~5% on the agreement value will need to shell out an additional 0.5-1% of agreement value. Although the impact may appear marginal, buyers already pay ~10-11% of agreement value in form of multiple levies such as 5% stamp duty, 1% registration, 1% VAT and 3-3.5% service tax. Also, the buyer pays another 5-10% of the agreement value to developers on possession for various amenities. As a result, a buyer requires to pay ~20% of the agreement value through his/her own savings, as housing loans do not include these payments.

Luxury projects may attract additional stamp duty CY14 onwards, there is a proposal wherein

Adhidev Chattopadhyay adhidev.chattopadhyay@hdfcsec.com +91-22-6171-7317

residential projects on plots larger than 4,000 sq.m. (~1 acre) having either a clubhouse, swimming pool or gym would attract stamp duty at 115% of the residential rate for the zone. Also, for residential flats having attached swimming pools, 125% of the residential rate of the zone would be charged. Although this proposal is yet to be finalised, it would result in marginally higher stamp duty for buyers over and above the fresh increase in ready reckoner rates.

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

MUMBAI READY RECKONER RATES 2014 DETAILS OF READY RECKONER RATES IN SELECT MICRO-MARKETS OF MUMBAI CITY AND SUBURBS
Rate of Open Land/FSI (Rs/sq ft) S.NO. Division (Locality) Mumbai City: Colaba Malabar Hill Parel-Sewri Mahalaxmi Worli Lower Parel 1 Lower Parel 2 Prabhadevi Dadar Mahim Western Suburbs: Bandra (W) Santacruz (W) BKC Andheri (W) Oshiwara (W) Goregaon (E) Malad (W) Kandivali (E) Borivali (E) Dahisar (E) Eastern Suburbs: Kurla (W) Ghatkopar (W) Chembur (E) Powai Kanjur Marg (E) Bhandup (W) Mulund (W) Overall Average Zone No. CY14 CY13 YoY % Inc./(Dec.) 10.0 10.0 20.1 15.0 15.0 5.0 5.1 5.0 20.1 15.0 20.0 15.0 15.0 5.1 15.1 10.1 15.1 20.0 15.1 15.2 20.0 5.1 10.1 20.1 10.1 5.1 15.1 13.0 Rate of Residential Building (Rs/sq ft) CY14 CY13 YoY % Inc./(Dec.) 10.0 10.0 20.0 15.0 15.0 5.0 5.0 5.0 20.0 15.0 20.0 15.0 15.0 5.0 15.1 10.0 15.0 20.0 15.1 15.1 20.0 5.0 10.0 20.0 10.1 5.0 15.0 13.0

Residential Market Rate (Rs/ sq ft)** 1.2x Carpet Rate 86,667 125,250 43,750 55,667 69,583 79,325 41,750 41,750 34,792 27,833 41,750 34,792 48,708 23,658 27,833 20,875 20,875 17,396 16,700 11,133 20,875 20,875 20,875 23,658 17,396 13,917 16,700

Mark-up Market Rate over Ready Reckoner (%) 59.8 82.4 141.3 125.0 115.5 111.9 166.1 76.4 18.1 33.7 37.3 35.1 123.1 29.3 54.9 60.3 59.5 19.6 38.6 19.0 64.3 55.8 51.5 31.6 63.0 46.3 52.6 65.6

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

1/2 7/61 11/81A 12/91A 13/98 12/88 12/90 12/89 14/102D 17/117 22/140A 26/158 31/173A 39/198A 50/242A 58/270 63/297A 78/351A 86/393 89/415 104/503 102/486A 98/448 114/541 120/549A 120/548A 123/569

29,376 37,180 10,888 11,232 14,576 16,908 7,079 10,665 13,285 9,383 21,869 15,450 13,090 10,972 10,786 7,832 6,670 8,696 6,503 4,218 8,240 8,045 8,947 6,438 5,361 5,128 6,568

26,700 33,798 9,067 9,764 12,672 16,100 6,735 10,154 11,065 8,157 18,218 13,434 11,381 10,442 9,374 7,116 5,797 7,246 5,649 3,660 6,866 7,655 8,129 5,361 4,868 4,877 5,704

54,246 68,674 18,135 24,740 32,293 37,440 15,691 23,672 29,450 20,810 30,398 25,743 21,832 18,302 17,967 13,025 13,090 14,539 12,050 9,355 12,709 13,397 13,778 17,977 10,675 9,513 10,944

49,313 62,431 15,106 21,507 28,075 35,656 14,939 22,538 24,536 18,088 25,325 22,380 18,980 17,429 15,617 11,836 11,381 12,115 10,470 8,129 10,591 12,756 12,523 14,976 9,699 9,058 9,513

Source : IGR Maharashtra, Industry Sources, HDFC sec Inst Research, **Saleable rate has been converted to carpet area and comparable market rate is calculated as 1/1.2x Carpet Rate

Page | 2

MUMBAI READY RECKONER RATES 2014

Rating Definitions BUY NEUTRAL SELL : : : Where the stock is expected to deliver more than 10% returns over the next 12 month period Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HDFC Securities Ltd or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purposes with out prior written approval of HDFC Securities Ltd . Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HDFC Securities Ltd may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HDFC Securities and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HDFC Securities Ltd, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HDFC Securities Ltd and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organisations described in this report.

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013 Board : +91-22-6171 7330 www.hdfcsec.com

Page | 3