Anda di halaman 1dari 27

Asia Pacific Equity Research

09 August 2010

Realty Check India


Residential volumes are stabilizing, office absorption
is gaining traction

• Divergent YTD performance in a beta sector –source of opportunity?- India


YTD stock returns within the property space have been fairly disparate, a India Property
trend that is new in the relatively short history of the listed sector. Against AC
Saurabh Kumar
the aggregate index BSE Realty that is YTD down 10%, UT is up 3.3% (91-22) 6157-3590
whereas DLF is down 15%. Mumbai developers, HDIL/IBREL, are down saurabh.s.kumar@jpmorgan.com
~25% each whereas Bangalore developers, Sobha/Puravankara are up Gunjan Prithyani
38%/25%. Looking at this performance, while an overweight Bangalore (91-22) 6157-3593
real estate strategy has largely worked, a buy commercial exposure gunjan.x.prithyani@jpmorgan.com
(DLF/IBREL/Brigade) is as yet not yielding results. Going ahead we would J.P. Morgan India Private Limited
expect catch up in underperformance on some of these names vs. the better
performing ones. BSE Realty vs. Sensex
• Key trends in the physical market: 110
o 2QCY10 residential volumes move up by 5% Q/Q – This is quite
105
encouraging post a 10-15% volume decline in 1QCY10. While
Gurgaon continued to witness healthy absorption (up 13% Q/Q), 100
volumes in Mumbai/Bangalore remained largely stable. However, 6/9/2010 6/23/2010 7/7/2010
anecdotal evidence suggests that volumes in Mumbai have come off by
Sensex BSE Realty
15-20% in July due to uncertainty over imposition of sales tax/VAT.
Prices across key markets (with the exception of Mumbai suburbs)
strengthened during the quarter driven by positive absorption trends. Source: Bloomberg.
o Office absorption +16% up Q/Q to 7.3 msf an encouraging trend
Overall JLL expects office absorption to grow at 30% CAGR over
2009-12. Recently, there has been a noticeable shift in lease enquiries
towards SEZ projects vs. IT Parks given imminent expiry of STPI tax
benefits by Mar-11; however, conversions remain low due to prevailing
uncertainty on SEZ regulations in the proposed DTC. Clarity on these
regulations could provide a boost to SEZ absorption in the near term.
o Retail leasing is improving at the margin– Underlying fundamental
for retailing seems to be turning positive with most retailers reporting
positive sales trends and looking favorably at space expansion.
However, supply remains a challenge. Against a total 13.9 msf of
expected completions, demand this year is likely to be only 7 msf,
which should push vacancies up to 24-25% levels.
o Please see the report for a detailed outlook and movement in
physical real estate trends across key markets and overview of
recent land deals.
Indian developer valuations
Market Cap P/E P/B ROE
US$MM FY11E FY12E FY11E FY12E FY11E FY12E
DLF 11,255 25.7 19.2 1.9 1.7 8% 10%
Unitech 4,487 20.8 14.3 1.8 1.6 10% 12%
IBREL 1,464 22.9 11.3 0.7 0.8 3% 7%
HDIL 2,091 11.8 6.4 1.2 1.0 11% 18%
Puravankara 533 15.5 11.7 1.5 1.3 10% 12%
Sobha 750 19.9 12.5 1.7 1.5 9% 13%
Brigade 319 12.6 9.4 1.3 1.2 11% 13%
AIT 532 15.7 13.0 1.1 1.1 9% 9%
Source: Bloomberg, J.P. Morgan estimates. Prices as of Aug 5, 2010

See page 24 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Share price performance


Over the past month (July 6 – Aug 6), the BSE Realty Index gained by 11% over the
last month outperforming Sensex by meaningful 7%. Key outperformers over the
month include Ansal Housing (+18% M/M), Unitech (+14% M/M) and Sobha
(+12% M/M). AIM listed developer UCP too was up 15% M/M after Unitech
proposed to make an offer to buy out the company from existing shareholders.

Table 1: Stock price performance


US$MM Absolute (%) Relative (%)
Mcap 1 week 1 month 3 month 1 week 1 month 3 month
DLF 11,225 1 10 4 (0) 6 (2)
Unitech 4,487 2 14 9 1 10 3
HDIL 2,091 2 11 7 1 7 1
Indiabulls Real Estate 1,464 3 9 5 2 5 (1)
Akruti 792 2 8 1 1 3 (6)
Annat Raj 750 2 - (3) 1 (4) (9)
Sobha 697 1 12 13 (0) 8 7
Parsvnath 550 1 7 9 (0) 2 3
Puravankara 533 6 7 12 5 3 5
Mahindra Lifespaces 421 3 1 11 2 (3) 4
Peninsula Land 407 (1) (7) (5) (2) (11) (11)
Brigade 319 (0) 0 (4) (1) (4) (10)
Orbit 293 (1) (5) (14) (2) (9) (20)
Ansal Properties 227 12 12 5 11 8 (1)
Ansal Housing 28 13 18 2 12 14 (4)
SENSEX Index NA 1 4 6 - - -
BSEREAL Index NA 1.24 11 4 0 7 (2)
AIM Developers
Trinity 221 1 15 8 0 11 2
Unitech Corporate Parks 165 1 15 (3) (0) 10 (10)
Ishaan 146 (2) (1) 1 (3) (5) (6)
Hirco 129 (6) (15) (20) (7) (19) (27)
Source: Bloomberg, Prices as of Aug 5, 2010.

Figure 1: BSE Realty vs. Sensex


114
112
110
108
106
104
102
100
7/7/10 7/10/10 7/13/10 7/16/10 7/19/10 7/22/10 7/25/10 7/28/10 7/31/10 8/3/10

Sensex BSE Realty

Source: Bloomberg. Prices as of August 5, 2010

2
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Table 2: India: Comparative Valuations


Market Cap P/E P/B ROE
US$MM FY11E FY12E FY11E FY12E FY11E FY12E
DLF 11,255 25.7 19.2 1.9 1.7 8% 10%
Unitech 4,487 20.8 14.3 1.8 1.6 10% 12%
IBREL 1,464 22.9 11.3 0.7 0.8 3% 7%
HDIL 2,091 11.8 6.4 1.2 1.0 11% 18%
Puravankara 533 15.5 11.7 1.5 1.3 10% 12%
Sobha 750 19.9 12.5 1.7 1.5 9% 13%
Brigade 319 12.6 9.4 1.3 1.2 11% 13%
AIT 532 15.7 13.0 1.1 1.1 9% 9%
Source: Company reports and J.P. Morgan estimates. Prices as of Aug 5, 2010

Sector performance
14,000 Volumes pick up in the mass
residential launces (at 20-25% Prov isioning
Volumes keep dry ing up
discunt to peak). norms for
dev elopers adopt w ait and
12,000 commercial real
w atch attitude
Price show ing signs of estate raised to
Financing costs start
stabilization and ev en start to 1% from 0.4%
rising sharply .
10,000 increase in Mumbai/NCR
RBI disallow ed
Dev eloper financing completely
resttructuring of loans
halts. Incremental sales at a Equity raisings start
8,000 standstill. Asset liability mismatch Lev erage concerns allay
Introduction of serv ice
on balance sheet w orsens
Prices & v olumes tax on residential sales
Policy breather- RBI permitted real estate SBI, HDFC
6,000 continue to fall.
loan restructuring comes as a breather. ex tends
Lending contraction
Home loan rate cuts announced. teaser home
begins.
4,000 Financing costs loans

start rising

- Residential v olumes start to taper off


2,000 Stocks fell 50-70% ev en from these
esp in Mumbai as prices increase.
lev els ev en as they traded on discounts
Signs of rev iv al in office market - Pick up in transactions in land market
to NAVs estimated at that point
w ith lease enquiries picking up. - Incidence of serv ice tax reduced
-
M 8

No 8

M 09

No 9

M 10
Fe 8

08

Fe 9

09

Fe 0

10
Au 8

Au 9

Au 0
Ja 7

M 8
8

Se 8

Oc 8

Ja 8

M 9

Ap 9

Se 9

Oc 9

Ja 9

M 0

Ap 0

10
De 8

De 9
8

0
r-0

t-0
t-0
0

1
l-0

l-0

l-1
c-0

0
-0

0
0

c-0

0
-0

0
0

c-0

1
-1
v-0

v-0
-0

-0

-1
r-

r-
n-

n-

n-

n-

n-

n-
b-

g-
p-

b-

g-
p-

b-

g-
ar

ar

ar
ay

ay

ay
Ju

Ju

Ju
Ap
De

Ju

Ju

Ju

Source: Bloomberg, J.P. Morgan estimates

3
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Affordability levels remain healthy across markets ex


Mumbai
Residential prices in Mumbai have increased by 30-50% over the last few quarters
and are now even above their peak levels of 2007-08. This has started to constrain
the affordability thereby adversely impacting the volumes in the market.
Affordability in other cities (ex Mumbai), however, remains sound given prices in
these markets have remained flat or have witnessed marginal increase of 5-10%.

Figure 2: NCR Affordability (EMI/Monthly Income) Figure 3: Mumbai Affordability (EMI/Monthly Income)
100% 70%
65%
80% 60%
55%
60% 50%
45%
40% 40%

99 Y 00 Y 01 Y 02 Y 03 Y 04 Y 05 Y 06 Y 07 Y 08 Y 09 Y 10 11E

E
99

01

03

05

07

09
FY

11
F F F F F F F F F F F FY
FY

FY

FY

FY

FY

FY

FY
Source: Residex, J.P. Morgan estimates Source: Residex, J.P. Morgan estimates

Figure 4: Bangalore Affordability (EMI/Monthly Income) Figure 5: Chennai Affordability (EMI/Monthly income)
70% 70%
65% 65%
60% 60%
55%
55%
50%
50%
45%
40% 45%
35% 40%
30% 35%
E
99

01

03

05

07

09

E
99

01

03

05

07

09
11

11
FY

FY

FY

FY

FY

FY
FY

FY

FY

FY

FY

FY

FY
FY

Source: Residex, J.P. Morgan estimates Source: Residex, J.P. Morgan estimates

4
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Land market in Mumbai is heating up…


Land market in Mumbai has started to heat up with US$2B of land deals being
concluded over the last one year. Clearly, developers' appetite for land has increased
significantly over the last one year on the back of sharp revival in residential demand
and improved financing. Further, most of these land parcels are fairly prime in nature
either located in Western Mumbai suburbs (Andheri, Vile Parle) or Central Mumbai.
Land prices playing a catch up…
Looking at the most recent transactions, the acquisition price seems to be at a
significant premium to the transactions concluded in 2HFY09. While these
transactions are not strictly comparable, the land prices seem have appreciated by
over 50% over the last one year. Further, the acquisitions made under the recent
public auctions have been done at 100% premium to the reserve price. We note that
the increase in land prices is not in sharp contrast to increase in end unit prices,
which are now back to their 2008 peak levels.
Is the pricing reasonable?
While the FSI details on these transactions are not available, it seems developers in
most cases are looking to avail higher FSI under the parking scheme. Assuming the
developers are able to avail high FSI (2.5—4x), most of these transactions seem to
make economic sense (for 30-40% margin) if the pricing continues to hold at current
levels in Mumbai.
How are developers going to finance it?
While most of these acquisitions require substantial initial outlay (over US$100MM),
developers seem to be confident of getting financing from non-banking sources
(banks in India do not lend for land financing) to secure these projects. Typically
land financing is done from non-banking sources at a 15-20% interest rate (bridge
loan for a year) which is then taken out by a lower cost bank loan for construction
(11-13% rate) which is secured once the approvals come through.
Oversupply risks building up?
Following the success of recent land auctions, various other government agencies
and private companies (RLDA, MMRDA, RCF, NTC) have revived their land
auction plans for the city. While NTC mill auctions in Central Mumbai concluded
recently, further supply is expected to come from other government agencies
(MMRDA/Railways) in BKC over the next few months.
Based on our estimates, upcoming land auctions coupled with recently concluded
land transactions should augment the supply in the suburbs by over 20msf (almost
15-20K units on an average). The new planned supply is 1.3x of last year’s
absorption levels of 16 msf. Further, all new supply will take 4-5 years to build out
and may not put a very huge immediate pressure on built up asset pricing, in our
view.

5
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Table 3: Key Land deals in Mumbai over the last one year
Buyer Date Location Area (acre) Price (Rs B) Price per Seller
acre (Rs MM)

Indiabulls Real Estate Aug-10 Upper Worli, Mumbai 8.4 acre 15.1 1,800 NTC

Indiabulls Real estate Aug-10 Upper Worli, Mumbai 2.4 acre 4.74 1,983 NTC

Sheth developer Aug-10 Andheri (E), Mumbai 18 acre 8.8 489 Borosil Glass works

Sunteck July-10 Goregaon, Munbai 6 acre 1.5 250 NA

Private developer May-10 Wadala, Mumbai 6 acre 40.5 6,750 MMRDA

Sheth developer Feb-10 Vile Parle, Mumbai 14 acre 5.9 421 GTC

Private developer Feb-10 Goregaon, Mumbai 5 acre 2.7 540 Lupin

Wadhwa developer Dec-09 LBS Marg, Mumbai 18 acre 5.7 317 Hind. Composite

Private developer Jul-09 Lower, Parel 10.3 acre 7100 689 NTC
Source: News reports (Economic Times)

Table 4: Bid price vs. reserve price in auction deals concluded over the last one year
Date Developer Location Bid Price (Rs MM) Reserve price (Rs MM) % premium

Aug-10 Indiabulls Real estate Upper Worli, Mumbai 15,050 750 100%

Aug-10 Indiabulls Real estate Upper Worli, Mumbai 4740 2500 90%

May-10 Private developer Wadala, Mumbai 40,500 19,800 105%

Jul-09 Private developer Finlay Mills, Lower Parel 7,100 7,080 0%


Source: News reports (Economic Times)

6
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Residential: Volumes remain healthy; however peak maybe


behind us
2009 was a year of record volumes for a number of developers; however, the peak in
terms of residential bookings now seems to be behind us as volumes stabilize across
markets.
Overall, unit absorption across key markets (Gurgaon, NCR, Bangalore) has
increased by 6% in 2QCY10 after witnessing a 10-15% volume decline in 1Q10.
While Gurgaon continues to witness healthy volume growth with 2Q10 units sales
increasing by 13% Q/Q, volumes in Mumbai (MMR) and Bangalore remained
largely stable over the last quarter. Anecdotal evidence suggests that volumes in
Mumbai have come off by 15-20% in July due to uncertainty over imposition of
sales tax (came into effect in July) and VAT.
Noida/Greater Noida market stood out over the last quarter registering a twofold
increase in absorption run rate. This was driven by strong offtake in few big
launches. These include Supertech’s Ecovillage in Greater Noida and Jaypee’s
Kensington project in Noida.
Capital values took a breather in Mumbai given sharp appreciation witnessed over
the last one year. Prices in other markets (Gurgaon/Chennai/Bangalore) however
strengthened further driven by positive absorption trends.
Unsold inventory across markets has been declining over the last one year with
Mumbai/NCR reaching their two year lows over the last quarter.
Months of unsold inventory in Mumbai / NCR is at 8-10 months; while it is still high
at 12-15 months of inventory in South India markets (Chennai and Bangalore). This
in part explains the muted price increase in Bangalore/Chennai markets as yet.
Mumbai/NCR had been leading the launch activity over the last one year accounting
for over 75% of the new launches. Going ahead, new launches are expected to gain
traction in Bangalore with number of key players firming up their plans for big
launches in FY11 on the back of positive hiring/salary trends in the IT sector.
Figure 6: Pan India Residential absorption trends

Source: JLL

7
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Table 5: Average monthly absorption trends across key markets


YTD CY10 2QCY10
Units/month average CY09 average % ch average 1QCY10 average % ch Q/Q
MMR (including Thane and Navi Mumbai) 4,758 5,121 -7% 4,816 4,700 2%
Gurgaon 2,114 2,092 1% 2,242 1,985 13%
Bangalore 1,752 1,723 2% 1,725 1,779 -3%
Chennai 1,160 1,197 -3% 1,307 1,062 23%
Total (ex Noida/G Noida) 9,784 10,133 -3% 10,090 9,526 6%
Noida/Greater Noida 8,626 2,296 276% 12,715 4,536 180%
Source: Prop Equity. Note that 2QCY10 data for Chennai is available for Apr/May only

Residential market update: Key market trends as of 2Q 2010

Cushman Comments
NCR - Residential market in NCR continued to witness robust transaction activity for both mid income as well as high end
properties. This led to further strengthening of capital values especially in prime Gurgaon. Prices in Noida however remained
stable at last Q levels.

- NCR continues to witness heightened launch activity with number of mid range projects being launched in Gurgaon and
Noida. Key projects launched in 2Q include Victory Valley by IREO, Tulip Purple by Tulip Infratech Pvt. Ltd., Harmony
Nirvana Country by Unitech Ltd., Jaypee Kensington Boulevard, Kasa Isles, and Knight’s Court by Jaypee Developers.

Mumbai - Mumbai has witnessed strong pick up in demand from both investors as well as end users over the last one year. However
with prices surpassing the 2008 peaks, volumes have now started to moderate in the market. Further, capital values too took
a breather over the last quarter.

- A number of premium projects were launched this quarter in Mumbai including Ahuja Towers by Ahuja Builders, Kumar
Cortue by Kumar Builders, Oberoi Exquiite by Oberoi Builders, Aqua Marine & Hill Roof by Kamla Group. Most of these
projects were concentrated in Lower Parel, Prabhadevi, Goregaon and Bandra.

Bangalore - Bangalore market continues to witness healthy pick up in absorption. Driven by improved absorption trends, both launch as
well as construction activity has picked up meaningfully over the last quarter. Number of projects across all segments were
launched in 2Q including Melody and Purva Atria Platina by Salarpuria Group and Purvankara, respectively.

-Capital values across markets too have started to appreciate over the last quarter. Price increase was registered primarily in
ready to move/near completion premium properties; however appreciation in mid income segment was marginal. As per
C&W, ~ 15,000 mid segment units are likely to be added in Bangalore in 2010.

Chennai - Chennai residential market has witnessed a noticeable pick up in sales over the last 6 months. While the end users continue
to dominate the overall demand, investor demand has also started to come back in peripheral locations. Capital values too
have started to increase in select locations with limited supply.

- Launch activity in the city has picked up over the last quarter given improving demand trends. Majority of the launches were
concentrated in the affordable/mid income segment.
Source: Cushman and Wakefield

8
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Supply and Absorption trends


Figure 7: Gurgaon: Absorption trends and months of inventory
Gurgaon recorded average
monthly absorption of 2,242 3,000 60
units/months in 2Q10. This is 2,500 50
13% higher than 1Q average and 2,000 40
largely stable at CY09 average. 1,500 30
Months of unsold inventory (~6 1,000 20
months) continued to decline in 500 10
the market and is currently at its - 0
two year low thereby keeping

09

10
08

09

0
pricing relatively strong.
00

00

00

01
20

20
20

20
c-2

-2

c-2

-2
n-

n-
p-

p-
ar

ar
De

De
Ju

Ju
Se

Se
M

M
Absorption Months of inv entory

Source: Prop Equity, J.P. Morgan

Absorption pick up in
Figure 8: Noida/G Noida: Absorption trends and months of inventory
Noida/Greater Noida has been
astonishing as run rate over 15,000 40
Apr/May tripled from 1Q levels.
New launches by Jaypee 30
10,000
Infratech and local developers
20
have contributed a lot to this.
5,000
10
Key launches Supertech’s
Ecovillage in Greater Noida and - 0
Jaypee’s Kensington project in
Noida.
09

10
08

09

0
00

00

00

01
20

20
20

20
c-2

-2

c-2

-2
n-

n-
p-

p-
ar

ar
De

De
Ju

Ju
Se

Se
M

M
Absorption Months of inv entory

Source: Prop Equity, J.P. Morgan

Figure 9: Mumbai (including Thane & Navi Mumbai): Absorption trends and months of inventory
Average monthly sale run rate
(4,816 units/month) in Mumbai
(including Navi Mumbai and 10,000 25
Thane) in 2Q stabilized (up 2%
8,000 20
Q/Q) after witnessing a 13%
volume decline in 4Q10. 6,000 15
4,000 10
Months of unsold inventory
continued to decline in the 2,000 5
market and is currently at its two - 0
year low of 9 months.
09

10
9
08

09

0
8

9
9

0
00
00

01
00

00
00

01
20

20
20

20
l-2
-2

-2
v-2

v-2
-2

-2
n-

n-
p-

p-
ar

ar
ay

ay
Ju
Ja

Ja
Se

Se
No

No
M

M
M

Absorption Months of inv entory

Source: Prop Equity, JP Morgan

9
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Figure 10: Bangalore: Absorption trends and months of inventory


Average monthly sales run rate
(1,725 units) over 2QCY10 in 2,500 40
Bangalore were largely flat after 2,000 30
witnessing 13% decline in 1Q.
1,500
Decline in 1Q was primarily on 20
account of seasonal weakness. 1,000
500 10
Months of unsold inventory has
been coming down over the last - 0
one year; however it still

09

10
08

09

0
00

00

00

01
remains high at 15 months

20

20
20

20
c-2

-2

c-2

-2
n-

n-
p-

p-
ar

ar
thereby keeping the prices under

De

De
Ju

Ju
Se

Se
M

M
check.
Absorption Months of inv entory

Source: Prop Equity, J.P. Morgan

Figure 11: Chennai: Absorption trends and months of inventory


2,500 35
Chennai is witnessing steady 30
pick up in absorption with 2,000
25
average sales run rate (1,307
1,500 20
units) over Apr/May increasing
by 23% from 1Q10 levels. 1,000 15
Months of unsold inventory has 10
been declining over the last one 500
5
year.
- 0
Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010

Absorption Months of inv entory

Source: Prop Equity, J.P. Morgan

10
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Capital value trends


Table 6: NCR Capital value trends
Rs psf Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) % ch (Y/Y)
South East (New Friends Colony, Kalindi Colony, Ishwar Nagar) 14,000 15,000 15,500 16,250 16,500 2% 18%
South Central (Safdarjung Enclave, Sarvapriya Vihar, Panchsheel) 19,000 19,000 19,500 19,500 20,000 3% 5%
Gurgaon 4,400 5,250 5,250 5,600 5,900 5% 34%
Noida 3,750 4,350 4,350 4,450 4,450 0% 19%
Source: Cushman & Wakefield

Table 7: Mumbai capital value trends


Rs psf % ch % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 (Q/Q) bottom
South Central (Altamount Rd., Malabar Hill, Napeansea etc) 38,500 38,500 40,000 41,000 44,000 7% 14%
Central (Worli, Prabhadevi, Lower Parel / Parel) 18,000 19,000 20,500 21,250 22,750 7% 26%
North (Bandra (W), Khar (W), Santacruz (W), Juhu) 14,500 18,000 20,000 20,000 20,000 0% 38%
Far North (Andheri (W), Malad, Goregaon) 6,500 8,500 10,000 10,500 10,500 0% 62%
North East (Powai) 4,500 7,100 7,450 7,500 7,500 0% 67%
Source: Cushman and Wakefield

Table 8: Bangalore Mid income capital value trends


Rs psf % ch % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 (Q/Q) bottom
Central (Brunton Road, Artillery Road, Ali Askar Road,
Cunningham Road) 5,800 5,500 5,500 5,750 5,900 3% 7%
East (Marathalli, Whitefield, Airport Road) 2,550 2,550 2,550 2,650 2,850 8% 12%
South East (Koramangala, Jakkasandra) 3,000 2,950 2,850 3,000 3,250 8% 14%
Off Central (Vasanth Nagar, Richmond Town, Indiranagar) 4,800 4,400 4,400 4,600 4,750 3% 8%
North West (Malleshwaram, Rajajinagar) 4,700 4,500 4,350 4,300 4,600 7% 7%
Source: Cushman and Wakefield

Table 9: Chennai Mid Income Residential Capital Values


Rs psf % ch % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 (Q/Q) bottom
Rajiv Gandhi Salai 2,650 2,650 2,650 2,875 3,500 22% 32%
Velachery 3,900 3,750 3,750 4,000 4,250 6% 13%
Poes Garden 12,000 12,000 12,000 12,000 12,000 0% 0%
T Nagar 5,250 5,250 5,250 5,750 7,750 35% 48%
Nungambakkam 7,500 7,500 7,500 8,000 10,250 28% 37%
Anna Nagar 6,250 6,250 6,250 6,500 6,750 4% 8%
Source: Cushman and Wakefield

11
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Figure 12: Regulatory/Policy action over the last three years


Date Comments
Jul-10 - HDFC extends the teaser home loan scheme to Mar-11
May-10 - SBI has extended its offer on teaser rate schemes till end June (by 2 months). Now followed by other private sector banks
Apr-10 - Incidence on service tax on home purchase reduced to 2.5% from 3.5% earlier (proposed on the budget). Additionally for low cost housing projects
funded under special govt initiatives (JNUURM / RYA) have been exempted from imposition of these taxes

Feb-10 -Withdrawal of teaser home loan rates by a number of banks ICICI, HDFC, BOI etc
Feb-10 -Budget proposes imposition of service tax on sales/rentals and increases input costs (excise hike).
Feb-10 -RBI disallowed restructuring of loans for real estate developers.
Oct-09 - Increase in provisioning requirements for commercial real estate loans from 0.4% to 1%

Sep 09 - RBI eases lending norms for SEZs (classified as infrastructure lending)
Jul 09 -Extension of 80IB(B) scheme by one year and interest subsidy of 1 %

Jul 09 -Norms relaxation for SEZ development


Jan-09 - ECB norms for overseas lending relaxed
Dec-08 - Home loan rates on below Rs 20L segment to be cut by about 200bps
Dec-08 - Rs40B credit line to National Housing Bank to to kick start lending in the Rs 2MM category (priority sector lending)
Dec-08 - Permitted real estate loan restructuring upto Jun-09 as standard loans without requiring banks to classify these as NPAs
Nov-08 - HFCs allowed to raise short term foreign currency borrowings under the approval route
Nov-08 - Reduction in provisioning requirements on advances to the commercial real estate sector and home loans beyond Rs 2MM to 0.4%
Nov-08 - RBI reduced risk weightings on banks' exposures to commercial real estate to 100% from 150% earlier
May-08 -Lower risk weight (50%) on home loans upto 30L (20L earlier)

May-07 -Ban on ECB's for township projects. Likely to hit the development plans of large developers
Jan-07 -Increase in provisioning requirements for real estate loans
Sep-06 - RBI asks banks to treat loans to SEZs as real estate loans
May-06 - RBI increases risk weightings on banks' exposures to commercial real estate to 150% from 125%
May-06 - Increase risk weightings and general provisioning of residential housing/commercial loans above Rs 2MM
Apr-06 - FII entry into real estate IPOs comes under scanner with RBI trying to classify it as FDI

Source: RBI, J.P. Morgan

12
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Office recovery gaining traction; however, rentals to remain


under pressure given sizeable supply pipeline
Demand for office segment continues to improve with most micro markets
witnessing increased transaction activity over the last quarter. Number of companies
that had earlier put their expansion plans on hold are now looking to take up space
given affordable rentals (post 30-35% decline from peak levels), flexible lease terms
and improving economic outlook. Even while a large amount of supply is expected
across most micro markets, improving demand trends auger well for the overall
office market in 2010.

Leasing activity has picked up primarily for projects nearing completion; while
demand for under construction projects still remains low. Overall absorption for
2Q10 stood at 7.3msf against 6.3msf absorption in 1Q10. Further, construction
activity too seems to be gaining momentum as demand has shown visible signs of
improvement. This is quite encouraging given construction on most of the office
projects had been on hold in 2008/09 on account of slowdown in leasing demand.
There has been a noticeable shift in lease enquiries towards SEZ projects vs. IT parks
over the last quarter as STPI tax benefits are set to expire by Mar-11. However, the
SEZ lease decisions are being deferred due to prevailing uncertainty over SEZ
regulations in the proposed DTC code (all SEZ units set up after 31 March 2011
would not be eligible for any tax breaks). Clarity on these proposed regulations can
likely boost the SEZ demand in the near term.
Despite improving absorption trends, rentals have remained largely stable and are
likely to remain under check in the near term as supply continues to outpace the
demand across most markets. Overall for 2010, JLL expects office supply of 52msf
against the estimated absorption of 29msf. This will further push the vacancy levels
higher to >20% by 2010 end from ~18% currently. CBDs however will be an
exception to this trend given limited supply addition in these micro markets. CBD
rental values increased marginally by 3-5% during the quarter.
Capital values, however, might start to increase given the decline in yields.
Investment yields across markets have declined by 50-100bps over the last year and
the trend is expected to continue on the back improving demand environment and of
reduced risk aversion.
In terms of markets, Mumbai and NCR have been leading the demand revival on the
back of improving demand financial institutions and IT companies. Going ahead, we
expect that Bangalore market to outperform on the back of encouraging results
(increased hiring activity) posted by most IT companies and improving offhsoring
outlook. Further, the market has healthy pre lease commitments in place. Chennai
however has been underperforming with current vacancies at ~24%. While there has
been some pick up in demand in Chennai, overall sentiment is not as buoyant as
other metros.

13
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Figure 13: Office absorption trends

Leasing activity picked up


during the quarter with 7.3msf of
office space being absorbed in
2Q10 vs. 6.3msf in 1Q10.

Source: JLL State of nation 2Q

Figure 14: Pan India Demand Supply Trends


2010 is expected to witness
52msf of office supply as against
estimates absorption of 29msf.
This will further push the
vacancy levels higher to over
20% from 18% currently.

Source: JLL State of nation 2Q

Figure 15: Construction status of future supply

Majority of the supply expected


to be added in 2010/2011 is at
advanced stages of construction.

Source: JLLM State of nation 2Q

14
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Figure 16: Relative position of key micro markets Figure 17: Office Investment yield trends in key cities
12.0%
11.5%
11.0%
10.5%
10.0%
9.5%

0
07

08

09

9
r-0

r-0

r-0

r-1
c-0

c-0

c-0
g-

g-

g-
Ap
Ap

Ap

Ap
De

De

De
Au

Au

Au
NCR Mumbai Bangalore Chennai

Source: JLL, J.P. Morgan

Figure 18: NCR Office: Supply Absorption trends Figure 19: Mumbai Office: Supply Absorption trends

20 35% 16.0 30%


30% 25%
15 12.0
25% 20%
20% 8.0 15%
10
15%
10%
5 10% 4.0
5% 5%
0 0% - 0%

2005 2006 2007 2008 2009 2010E 2011E 2005 2006 2007 2008 2009 2010E 2011E

Absorption (msf) Supply (msf) Vacancy (%) Absorption (msf) Supply (msf) Vacancy (%)

Source: JLL, J.P. Morgan estimates Source: JLL, J.P. Morgan estimates

Figure 20: Bangalore office: Supply Absorption trends (msf) Figure 21: Chennai Office: Supply Absorption trends (msf)

14.0 20% 10.0 35%


12.0 8.0 30%
10.0 15% 25%
6.0
8.0 20%
10% 4.0
6.0 15%
2.0
4.0 10%
5%
2.0 - 5%
- 0% (2.0) 0%

2005 2006 2007 2008 2009 2010E 2011E 2005 2006 2007 2008 2009 2010E 2011E

Absorption (msf) Supply (msf) Vacancy (%) Absorption (msf) Supply (msf) Vacancy (%)

Source: JLL, J.P. Morgan estimates Source: JLL, J.P. Morgan estimates

15
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Office market update: 2Q10


Market Comments

NCR - 2Q10 witnessed increased level of transaction activity especially in Gurgaon & Noida given availability of quality supply at affordable
rentals and flexible lease terms. Overall 2Q10 absorption stood at 2.2msf (up 126% Q/Q) with SEZ accounting for 50% of the total.

- Supply for 2Q10 stood at 1.5msf (vs.0.8msf in 4Q) on account of completion of significant projects during the quarter. The entire
supply was concentrated in the suburban locations. 3.3msf of supply is expected to be added in 3Q.

- While the overall market vacancy levels remained stable at 13-14%; Gurgaon (12.2%) and CBD (2.2%) witnessed marginal decline in
vacancy rates over the quarter. Rentals remained largely stable across most markets. C&W expects rentals across majority of the
markets to strengthen in the medium term.

Mumbai - Mumbai witnessed absorption of 1.7msf in 2Q10 with fresh leasing picking up meaningfully during the quarter. SEZs in Thane Belapur
accounted for >20% of total absorption for the quarter.

- Overall vacancy rate remained stable at 14-15% in 2Q 2010 as supply continues to outstrip demand especially in the Andheri, Malad
and Thane Belapur micro markets. CBD vacancy levels however increased on account of tenant movement to new buildings in
suburban locations (Lower Parel/BKC).

- Rentals remained largely stable across most micro markets and the trend is likely to continue given sizeable supply addition expected
in suburban Mumbai (7msf primarily coming in Andheri, Lower Parel).

- Navi Mumbai has emerged as a preferred location for tenants looking for SEZ space. Companies like Wipro, Syntel, Accenture, L&T
Infotech, etc. have committed large quantum of space in the Raheja Mindspace project in Airoli.

Bangalore - 2Q10 witnessed absorption of 2.4msf primarily coming from earlier pre-commitments in buildings which were delivered during the
quarter. Avg. transaction sizes also increased (>70,000sq ft) as compared to last quarter.

- Bangalore witnessed 6.2msf of completion in 2Q10 with Whitefield accounting for ~77% of the total supply. 3Q is expected to witness
4.2msf of office supply.

- Overall vacancy levels for the city increased marginally to 16% (vs. 15% in 1Q) primarily on account of significant space additions in
Whitefield. Vacancy rate in Whitefield currently stands at 35%.

- Rentals have largely remained stable over the last quarter with the exception of CBD/off CBD location given limited supply addition in
the micro market. C&W expects the rentals to start strengthening in select micro markets over the next 2-3 quarters.

Chennai - Demand has started to pick up in the market (1.2msf in 2Q10); however, the sentiment is not as buoyant as in other metros. This
coupled with existing high vacancy levels and expiry of STPI tax benefits has led to deferment of supply substantially. Landlords are
offering preferential rent pricing, higher rent free period to secure big leases.

- Overall vacancy levels remain high at ~22% and rentals remained largely stable despite improving demand trends. Key projects
including DLF IT Park and RMZ Millennia witnessing strong leasing interest saw some rental appreciation.

- Peripheral Business District (PBD) of Perungalathur, Sholinganallur,Siruseri, Ambattur and GST Road continue to remain under
pressure even as rentals seem to have bottomed out. Vacancy level continued to remain high at 18% – 20%.
Source: Cushman and Wakefield

16
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Rental trends in key cities


Table 10: NCR Grade A Office rental trends
% ch from
Rs psf pm Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) bottom
Connaught Place 220 230 230 240 240 0% 9%
Nehru Place 160 160 160 150 150 0% 0%
Jasola 110 105 105 100 100 0% 0%
Saket 140 135 135 133 133 0% 0%
Gurgaon 60 65 65 65 65 0% 8%
Noida 30 30 30 30 30 0% 0%
Source: CBRE, J.P. Morgan

Table 11: Mumbai Grade A Office rental trends


Rs psf pm % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) bottom
Nariman Point, Fort, Cuff Parade 300 300 290 290 290 0% 0%
Worli, Lower Parel,Prabhadevi 225 225 250 250 250 0% 11%
Bandra Kurla Complex 250 250 265 275 275 0% 10%
Andheri 125 125 115 115 115 0% 0%
Malad 70 70 65 65 65 0% 0%
Thane, Navi Mumbai 37 37 40 40 40 0% 8%
Source: CBRE, J.P. Morgan

Table 12: Bangalore Grade A office rental trends


Rs psf pm % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) bottom
CBD (MG Road, Residency Road) 73 73 73 70 72 3% 3%
Koramangala, Indira Nagar 48 48 48 48 48 0% 0%
Outer ring road 40 40 40 38 38 0% 0%
Whitefield, electronic city 25 25 25 24 24 0% 0%
South Bangalore 35 35 35 35 35 0% 0%
North Bangalore 42 42 42 42 42 0% 0%
Source: CBRE, J.P. Morgan

Table 13: Chennai Grade A Office rental trends


Rs psf pm % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) bottom
CBD (Anna Salai,Nungambakkam, RK Salai) 68 64 62 62 62 0% 0%
Off CBD (Alwarpet,Egmore,Guindy,Adyar) 49 47 45 45 44 -2% 0%
SBD (Valachery, Taramani, Perungudi) 38 37 35 35 35 0% 0%
SBD (Ambattur,Siruseri etc) 25 25 24 24 24 0% 0%
Source: CBRE, J.P. Morgan

17
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Table 14: Significant recent office lease transaction – 2Q10


Project Location Area sq ft Tenant
NCR
Oxygen Noida 250,000 EXL
DLF Building 10C Gurgaon 50,000 Initto
Vatika Business Park Gurgaon 100,000 Stryker India
Unitech Infospace Noida 250,000 Accenture
Express Tradw Towers II Noida 200,000 Net Ambit
DLF Building 5 Gurgaon 50,000 BMR Advisors
Park Centra Gurgaon 50,000 Bharti Infra
Mumbai
Mindspace Airoli 300,000 L&T Infotech
Supreme Business Park Powai 70,000 Fullerton
The Ruby Dadar 27,000 ARCIL
Natraj Andheri Kurla 22,500 Canon
Bangalore
Kalyani Platina Whitefield 110000 Mu Sigma
Vrindavan Tech Village Outer ring road 100000 Altisource
Vrindavan Tech Village Outer ring road 90000 Brocade
Salarpuria Supreme Outer ring road 56891 Deloitte
JP Techno Park Miller Road 100000 Samsung
Kalyani Magna Whitefield 100000 MU Sigma
Embassy Golf Links Domlur 120,000 NetApp
RMZ NXT Whitefield 65,000 Schneider
Kalyani Platina Whitefield 110000 Mu Sigma
Chennai
DLF IT Park Mannapakkam 423,000 CTS, TCS
Alpha City Navallur 25,000 Daksh IBM
SP Infocity Perungudi 20,000 Lister Technologies
RMZ Millenia Perungudi 60,000 Flextronics
Independent building Guindy 65,000 HOV Services
Source: CBRE, Cushman and Wakefield

Table 15: Key projects under construction – 2Q10


Property Location Area Leased (sq ft) Completion Date
NCR
Orient Bestech Business Park Gurgaon 540,000 3Q10
Techno Touch Noida 240,000 3Q10
Mumbai
Indiabulls Finance Center Lower Parel 540000 3Q10
Kaledonia Andheri 565,000 3Q10
Nirlon Knowledge Center Malad 325,000 4Q10
Bangalore
Prestige Exora Outer Ring Road 674,429 3Q10
Divyasree Technopark Whitefield 625,000 4Q10
Vasawani Centropolis Langford road 144,000 3Q10
Chennai
ASV Chandilya Thoraipakkam 500,000 3Q10
Ascendas ITPC Taramani 750,000 3Q10
Leela IT Park Santhome 250,000 3Q10
Source: Cushman and Wakefield

18
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Retail segment showing signs of improvement as rentals


bottom out
Retail market has witnessed meaningful improvement in lease enquiries over the last
quarter as developers become more accommodative in terms of asking rents and
lease terms to ensure higher occupancy. Rentals across markets have corrected by
30-40% from their peak levels. Minimum guarantee coupled with revenue sharing
has emerged as a favored model amongst the retailers over the past one year.
Most retailers (Pantaloons, Shoppers Stop) have reported healthy sales trends over
the last 6 months driven by improved consumer spending and now seem to have
resumed back their expansion plans. High street seems to be leading the demand
recovery with domestic players resuming their expansion plans and entry of new
international brands.
While there has been a noticeable increase in leasing activity, retailers have become
cautious in their choice of micro markets. There has been a visible shift in demand
towards prime high street locations or quality mall developments. This has resulted
in appreciation in rentals in select markets, while non prime developments continue
to witness corrections.
2010 is expected to witness completion of 14msf of retail space vs. an estimated
absorption of ~7msf (Source: JLL). Of the total expected supply, over 50% is at
advanced stage of construction and is therefore certain to become operational by
2010 end. This would keep the vacancy levels elevated (currently at 24%) and rentals
under check.
Figure 22: Pan India Retail Demand Supply Trends

2010 is expected to witness


completion of 14msf of retail
space vs. an estimated
absorption of ~7msf. This will
keep the vacancy levels elevated
across markets.

Source: JLL REIS

Figure 23: Status of construction of future retail supply

All of the expected future supply


in 2010 is at advanced stages of
construction with more than 50%
of the structure ready.

Nearly 4.4 million sq ft of retail


space in 2010 is already ready
for fit-outs.

Source: JLL REIS

19
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Table 16: Revenue sharing model


Percentage of revenue as rent (%)
Hypermarket 3%-4%
Departmental Stores 7%-8%
Apparel 12%-18%
Footwear 15%-18%
Jewellery 2%-2.5%
Health and Beauty 10%-12%
Food 15%-20%
Entertainment 8%-10%
Source: ET

Figure 24: Retail Investment Yields in key cities (%)

12.0%

11.0%

10.0%

9.0%

8.0%
5

9
6

0
5

9
l-0

l-0
l-0

l-0

l-0
-0

-0

-0

-0

-1
v-0

v-0

v-0

v-0

v-0
ar

ar

ar

ar

ar
Ju

Ju

Ju

Ju

Ju
No

No

No

No

No
M

M
NCR Mumbai Bangalore Chennai

Source: JLL

Table 17: Key Mall Lease Transactions: 2Q10


Project Location Area (sq ft) Rent psf pm
DLF Place Saket, Delhi 18,000 Zara
Standalone Connaught Place 8,000 Croma
Standalone Koramangala, Bangalore 14,000 Croma
Palladium Lower Parel, Mumbai 45000 Landmark, Deisel
Express Avenue Whites Road, Chennai 51,000 Westside, Odyssey
Source: Cushman and Wakefield

Table 18: Key projects under construction – 2Q10


Property Location Area (sq ft) Completion Date
Metropolis MG Road, Gurgaon 800,000 3Q10
South Court District Center, Saket 400,000 3Q10
Magnet Bhandup, Mumbai 650,000 3Q10
Infinity 2 Malad, Mumbai 550,000 4Q10
Kohinoor Mall Kurla,Mumbai 500,000 3Q10
Gopalan Innovation Bannerghatta Road 180,000 3Q10
Ramee Mall Mount Road 200,000 4Q10
Coromandel Mall Rajiv Gandhi Salai 250,000 1Q11
Source: Cushman and Wakefield

20
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Figure 25: NCR Retail: Supply Absorption trends Figure 26: Mumbai Retail: Supply Absorption trends
6.0 0.4 6 40%
5.0 0.3 5
0.3 30%
4.0 4
0.2
3.0 3 20%
0.2
2.0 2
0.1 10%
1.0 0.1 1
- - 0 0%
2005 2006 2007 2008 2009 2010E 2011E 2005 2006 2007 2008 2009 2010E 2011E

Absorption (msf) Supply (msf) Vacancy (%) Absorption (msf) Supply (msf) Vacancy (%)

Source: JLL, J.P. Morgan estimates Source: JLL, J.P. Morgan estimates

Figure 27: Bangalore Retail: Supply Absorption trends Figure 28: Chennai Retail: Supply Absorption trends
3.5 25% 2.5 35%
3.0 30%
20% 2.0
2.5 25%
2.0 15% 1.5 20%
1.5 10% 1.0 15%
1.0 10%
5% 0.5
0.5 5%
0.0 0% 0.0 0%
2005 2006 2007 2008 2009 2010E 2011E 2005 2006 2007 2008 2009 2010E 2011E

Absorption (msf) Supply (msf) Vacancy (%) Absorption (msf) Supply (msf) Vacancy (%)

Source: JLL, J.P. Morgan estimates Source: JLL, J.P. Morgan estimates

21
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Retail market update: 2Q10


Market Comments
NCR - 2Q10 witnessed resumption of expansion plans by domestic retailers as well as arrival of new retailers in NCR. Rentals improved
marginally over the quarter especially in prime Gurgaon malls and prime high street locations; while non prime markets continue to
witness rental corrections.

- Vacancy is expected to increase marginally as under construction malls (in West Delhi and South Delhi) become operational.
Further, developers are now looking to revive their projects that had been stalled in 2008/09 due to slowdown in leasing demand.

Mumbai - 2Q10 witnessed improved leasing activity across markets in Mumbai; while there was no supply addition during the quarter. This
led to a marginal decline in vacancy levels.

- Rentals remained largely stable across micro markets with the exception of Thane and high street of Linking road which witnessed
marginal rent appreciation on account of improved leasing and low vacancy levels.

- While huge supply is expected to come up in 2010, majority of this is expected to be concentrated in new emerging locations like
Bhandup, Kurla. Rental values in existing retail locations could see some appreciation in coming quarters given the demand
improvement and restrained supply.

Bangalore - Leasing activity picked up in the city during the quarter with number of new retailers entering the market like Reliance Living, Men
and Boys and Howards Storage world. However, no new supply was added during the quarter.

- High streets seem to be leading the recovery with F&B players (like Mc Donalds, Costa Coffee, CCD, etc) and hyper markets
(Bharti, Star Bazaar) dominating the incremental demand.

- On the organized retail front, Royal Meenakshi Mall (expected to be operational by Oct) on Bannerghatta road has witnessed
heightened activity. Key tenants include Cinepolis, Star Bazaar, Landmark, Westside, Madura, Barista etc.

Chennai - Chennai has witnessed a visible pick up in absorption post the sharp decline in rentals. This is evident from the high occupancy in
the recently opened mall - Express Avenue (which is the largest mall in Chennai). Over 85% of the mall is already occupied and the
enquiries are picking up steadily. Further, high streets continue to witness healthy leasing and rentals in select micro markets have
witnessed marginal appreciation due to lack of supply in these locations.

- Enquiries by retailers for malls along Rajiv Gandhi Salai and GST Road are witnessing significant revival. This has led to increased
pace of construction in these peripheries. Other large developments in the city include Phoenix market city (1msf in Valanchery) and
Junction mall (0.8msf) in OMR.
Source: Cushman and Wakefield

22
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Table 19: NCR Prime Mall Rental trends


Rs psf pm Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) % ch from bottom
South Delhi 475 450 450 425 430 1% 1%
West Delhi 240 225 225 225 233 4% 4%
Noida 310 300 275 275 275 0% 0%
Gurgaon 230 225 225 215 225 5% 5%
Source: Cushman & Wakefield

Table 20: Mumbai Prime Mall Rental trends


Rs psf pm Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) % ch from bottom
Malad 525 510 480 480 480 0% 0%
Lower Parel 480 480 480 480 480 0% 0%
Link Road Andheri (W) 400 400 400 400 400 0% 0%
Mulund 260 260 260 260 260 0% 0%
Goregaon 275 280 280 280 280 0% 2%
Vashi 185 185 185 185 185 0% 0%
Ghatkopar 220 220 220 220 220 0% 2%
Source: Cushman and Wakefield

Table 21: Bangalore Prime Mall Rental Trends


Rs psf pm % ch from
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) bottom
Koramangala 400 400 400 400 400 0% 0%
Magrath Road 315 315 315 315 315 0% 0%
Cunnigham Road 200 200 200 200 200 0% 0%
Mysore Road 150 150 150 150 140 -7% 0%
Source: Cushman and Wakefield

Table 22: Chennai Prime Mall Rental trends


Rs psf pm Mar-09 Jun-09 Sep-09 Dec-09 Jun-10 % ch (Q/Q) % ch from bottom
Chennai CBD 220 180 180 180 140 0% 0%
Chennai Suburbs 145 140 140 140 180 0% 0%
Source: Cushman and Wakefield

23
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

Companies Recommended in This Report (all prices in this report as of market close on 06 August 2010)
Ascendas India Trust (AINT.SI/S$0.97/Overweight), Brigade Enterprises (BRIG.BO/Rs132.60/Neutral), DLF Limited
(DLF.BO/Rs307.70/Overweight), Housing Development and Infrastructure Ltd. (HDIL) (HDIL.BO/Rs265.15/Overweight),
Indiabulls Real Estate (INRL.BO/Rs169.75/Overweight), Puravankara Projects Ltd (PPRO.BO/Rs115.70/Overweight),
Sobha Developers (SOBH.BO/Rs340.10/Overweight), Unitech Ltd (UNTE.BO/Rs85.00/Overweight)
Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures

• Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for
Housing Development and Infrastructure Ltd. (HDIL) within the past 12 months.
• Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares of
Indiabulls Real Estate: Bijay Kumar. The following analysts (and/or their associates or household members) own a long position in
the shares of Sobha Developers: Bijay Kumar.
• Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of
Housing Development and Infrastructure Ltd. (HDIL), Indiabulls Real Estate, Unitech Ltd.
• Client of the Firm: Ascendas India Trust is or was in the past 12 months a client of JPMSI. Brigade Enterprises is or was in the past
12 months a client of JPMSI. DLF Limited is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI
provided to the company investment banking services and non-investment banking securities-related services. Housing Development
and Infrastructure Ltd. (HDIL) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the
company investment banking services. Unitech Ltd is or was in the past 12 months a client of JPMSI.
• Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking
services from DLF Limited, Housing Development and Infrastructure Ltd. (HDIL).
• Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment
banking services in the next three months from DLF Limited, Housing Development and Infrastructure Ltd. (HDIL).
• Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other
than investment banking from DLF Limited.

Important Disclosures for Equity Research Compendium Reports: Important disclosures, including price charts for all companies
under coverage for at least one year, are available through the search function on J.P. Morgan’s website
https://mm.jpmorgan.com/disclosures/company or by calling this U.S. toll-free number (1-800-477-0406)

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:


J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] J.P. Morgan Cazenove’s UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stock’s expected total return is compared to the expected total return of the FTSE
All Share Index, not to those analysts’ coverage universe. A list of these analysts is available on request. The analyst or analyst’s team’s
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying
analyst(s) coverage universe.

Coverage Universe: Saurabh Kumar: Ascendas India Trust (AINT.SI), DLF Limited (DLF.BO), Housing Development
and Infrastructure Ltd. (HDIL) (HDIL.BO), Indiabulls Real Estate (INRL.BO), Indian Hotels (IHTL.BO), Ishaan Real
Estate Plc (ISH.L), Puravankara Projects Ltd (PPRO.BO), Sobha Developers (SOBH.BO), Unitech Ltd (UNTE.BO)

24
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010


Overweight Neutral Underweight
(buy) (hold) (sell)
JPM Global Equity Research Coverage 46% 42% 12%
IB clients* 49% 46% 31%
JPMSI Equity Research Coverage 44% 48% 9%
IB clients* 68% 61% 53%
*Percentage of investment banking clients in each rating category.
For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on
any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on
the front of this note or your J.P. Morgan representative.

Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon
various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which
include revenues from, among other business units, Institutional Equities and Investment Banking.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of JPMSI, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMSI,
and may not be subject to NASD Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan is the global brand name for J.P. Morgan Securities Inc. (JPMSI) and its non-US affiliates worldwide. J.P. Morgan Cazenove is a
brand name for equity research produced by J.P. Morgan Securities Ltd.; J.P. Morgan Equities Limited; JPMorgan Chase Bank, N.A., Dubai
Branch; and J.P. Morgan Bank International LLC.
Options related research: If the information contained herein regards options related research, such information is available only to persons who
have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation’s Characteristics and Risks of
Standardized Options, please contact your J.P. Morgan Representative or visit the OCC’s website at
http://www.optionsclearing.com/publications/risks/riskstoc.pdf.
Legal Entities Disclosures
U.S.: JPMSI is a member of NYSE, FINRA and SIPC. J.P. Morgan Futures Inc. is a member of the NFA. JPMorgan Chase Bank, N.A. is a
member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a
member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority. Registered in England & Wales No.
2711006. Registered Office 125 London Wall, London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg
Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated
by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd,
Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS
Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a
Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock
Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited is a member of
the National Stock Exchange of India Limited and Bombay Stock Exchange Limited and is regulated by the Securities and Exchange Board of
India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of
Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock
Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock
Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores
Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a
member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission.
Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P)
020/01/2010 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the
Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the
MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a
Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in
Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and
Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorised by the Capital Market Authority of the Kingdom
of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number

25
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi
Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered
address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.
Country and Region Specific Disclosures
U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by
JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising
as a result of publication and distribution of investment research. Many European regulators require that a firm to establish, implement and
maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must
not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only
available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons
regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in
Australia to “wholesale clients” only. JPMSAL does not issue or distribute this material to “retail clients.” The recipient of this material must not
distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms
“wholesale client” and “retail client” have the meanings given to them in section 761G of the Corporations Act 2001. Germany: This material is
distributed in Germany by J.P. Morgan Securities Ltd., Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are
regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end
satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities
and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from
two months’ prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider for derivative warrants issued by J.P. Morgan Structured
Products B.V. and listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website:
http://www.hkex.com.hk/prod/dw/Lp.htm. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of
share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan
Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the
commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments
Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers
Association, The Financial Futures Association of Japan. Korea: This report may have been edited or contributed to from time to time by
affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the
securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures
section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This
material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the
course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the
public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third
party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no
circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of
an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in
Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only
by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement
in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to
be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the
information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory
of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory
authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the
securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as
professional clients as defined under the DFSA rules.
General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan
Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any
disclosures relative to JPMSI and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is as
of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this
material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or
solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual
client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to
particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments
mentioned herein. JPMSI distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic
updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other
publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home
jurisdiction unless governing law permits otherwise.
“Other Disclosures” last revised March 1, 2010.

Copyright 2010 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan.

26
Saurabh Kumar Asia Pacific Equity Research
(91-22) 6157-3590 09 August 2010
saurabh.s.kumar@jpmorgan.com

27