Today, it is one of the hottest real estate destinations in India’s Silicon Valley. “I would kill to get a place in Koramangala,” said MR Jagannathan jokingly. The 60-year-old retired employee stays very close to Koramangala. “It used to be in the outskirts of the city when I could afford it. Now, unfortunately I cannot buy a place there.” This is just a glimpse of how much the landscape and aspiration for Koramangala has changed over the years.

“You won’t believe it. I once had an offer to buy a plot in Koramangala for a few lakhs in the 90s. That time if I would have stretched a bit I could have actually owned something in Koramangala, but it was not so good then. This is one decision I regret to have made,” added Mr Jagannathan.

The Rahejas, real estate developers, are often credited with changing the landscape of Koramangala when they come up with mixed-use project called Raheja Arcade. Many companies those days shifted from other parts of Bangalore to Raheja Arcade. Then Forum Mall, which further increased the value of the locality. In fact Forum is one of the earliest malls in the country, which was constructed to meet international standards. Even to this day, it is one of most successful malls in the country.

At present, the rentals for mid-segment residential properties are expected to grow by 5-10 per cent in the Koramangala locality over the next few months. “This is due to good social as well as physical infrastructure, good connectivity to various business districts and availability of premium developments,” said Naveen Nadwani, director South India, for Cushman & Wakefield, a real estate consulting firm.

“Rentals for residential properties in the high-end segment are expected to remain stable while mid-segment are expected to witness further increases on account of persistent demand. While in the commercial office market space as well as in the retail segment, rentals may remain stable in the short to medium term,” added Mr Nadwani

While the rate for land parcels range between Rs 13,000-15,000 per square feet, not much of commercial space is available for sale. “At present, no major land parcels suitable for developers are available in Koramangala. Only a few scattered small plots ranging up to a size of 3,500 sq ft owned by individuals are available,” added Mr Nadwani. The residents of Koramangala are buying whatever is available. Recently, a well-known local businessman bought two adjacent plots in the vicinity. 

Today the racecourse has been moved out of the city—a former chief minister’s dream of erecting a 100-story commercial tower à la Singapore in the course’s place was foiled by public outcry—and Bangalore throbs through the year with no concern for the seasons. Its roads are chock block with traffic, and its hotels crammed.

Bangalore started its life as a cantonment built by the British to keep a watchful eye on the nearby princely city of Mysore. It was European in its orientation, with wide roads, bungalows with pillared porticoes, and spired churches where everyone spoke English. And nearby was its “native twin,” Bengaluru, congested and cowed, where the lingua franca was the South Indian language of Kannada.

In 1956 the administrative map of India was redrawn on a linguistic basis with each of its nearly 20 languages defining a separate state. And Bangalore found itself the capital of a new Kannada state, at the mercy of political and economic forces it was unprepared for. The first to pour in were bureaucrats who needed offices, houses, and roads to run the new state, their numbers swelled by the philosophy of a socialist economy that led to the setting-up of government-sponsored enterprises, like the telephone and the aeronautical industries. Ancillary enterprises followed, leading to an influx of migrant workers.

Unity Infraprojects stands to gain by unlocking the value in its real estate projects. It was not able to monetise any of its real estate projects due to delays in execution by over a year. However, it is now in an advanced stage of securing approvals for launching its Bangalore residential project. Unity has a total saleable area of nearly 3 million square feet in this project, which it intends to launch in another three months.

After this it will focus on monetising its real estate in other cities. The current order book of the company in its construction business stands at Rs 4,700 crore, which are 2.75 times its FY11 revenues. These orders are to be executed over the next three years. The company has been increasing its exposure to the roads segment in the last few years. Although the roads segment is highly competitive, Unity’s backward integration in terms of owns machinery has allowed the company to garner better operating margins than its peers.

In the nine months ending December 2011, the company has maintained an operating margin of 15.5%. Another factor that augurs well for the company is its strong balance sheet. As of September 2011, the company had a debt-equity ratio of 1.1, which is one of the best among its peers. Unity Infraprojects’ stock is trading at a P/E of 3.9 while similar-sized rivals like Pratibha Industries and Supreme Infrastructure India are trading at a P/E of 5.9 and 5.2, respectively. Considering its growth potential and the relative discount to its peers, the stock looks attractive at this level.

The market for commercial space is estimated at 50 mil sq. ft. across the country. The average yearly absorption rates in Bangalore and NCR are about nine mil sq. ft. While six mil sq. ft. is absorbed in Mumbai, the rates are 4 to 5 mil sq. ft. each in Chennai and Hyderabad.

However, last year, Bangalore topped the list with the highest absorption of more than 13 mil sq. ft. of non-captive office space, about 2 mil sq. ft. more than the levels seen in 2010. About 80% of this came from the IT & ITES sector.

“Consolidation of real estate portfolios by Indian and MNC IT companies has boosted the real estate market in Bangalore,” said Karun Varma, MD (Bangalore and Kochi), and Jones Lang LaSalle India. “Demand for back offices and contact centres has resulted in continued strong growth in suburban real estate development, with IT companies lining up their investments for setting up new facilities in the city,” he added.

Experts predict demand for 16 mil sq. ft. of office space in 2012 in India’s Silicon Valley, which will be the highest ever in the country. This will be mostly due to the new SEZ norms and direct tax code (DTC) that will come into play.

About 75% of the 16 mil sq. ft. office space will be in upcoming SEZ regions. Recently, global investment banking firm Goldman Sachs took up 1 mil sq. ft. of office space developed by Kalyani Developers on the outer ring road. “Companies see an opportunity from a tax break perspective; so, many are planning to migrate their future work to SEZ parks,” said Shrinivas Rao, CEO (Asia Pacific), Vestian Global Workplace Services.

In the next three years, an additional 28.8 mil sq. ft. of office space will be available in the region, for which projects are already under way. “We are expecting to see about 6 to 7 mil sq. ft. of this to come up in 2012,” said Rao.

Real Capital, which tracks and analyses real estate deals worth over $10 million across apartments, hotels, retail, industrial, office and development projects over the world, has also named Noida as a top site for sales in the development site category for a deal with the Wave Group for a mega mixed-use project. Mumbai and Bangalore also figure among the active office markets in Asia. In apartments, Delhi and Mumbai are part of the top league in the year ended March 31, 2012.

The Leela Kovalam deal, pegged at about Rs 500 crore, was the 10th in the Asia-list of largest hotel sellers during the one-year period. The Kovalam beach property was sold to Saudi Arabia-based industrialist Ravi Pillai last August.

The other big hotel players in Asia which sold properties at high value include Japan Hotel, LaSalle, Kingdom Holding, Hines and Shui On Group.

Even as Indian entities don’t figure anywhere in the top 10 global list vis-à-vis high value real estate deals in the financial year that just gone by, many of them have made it to the Asian hall of fame.

Noida, the industrial development area next to Delhi, is fifth in the development site sellers’ list in Asia. This was for a deal with industrialist Ponty Chadha-promoted Wave Group for the mixed-use project, Wave Mega City Centre, at an estimated price of $1.4 billion (about Rs 7,140 crore at the current forex rate), according to Doug Murphy, director (analytics) at Real Capital.

In the office space, Bangalore and Mumbai have been named among the most active Asian markets. “There were a number of locations for office sales in Bangalore and Mumbai, the largest being the Embassy Manyata Business Park transaction in Bangalore for about $537 million (Rs 2,738 crore) and Citibank building in Mumbai for about $224 million (Rs 1,142 crore),” Murphy said. Both transactions took place in August 2011.

Delhi and Mumbai are part of the most active Asian apartment markets. While Delhi is ranked sixth, Mumbai is eighth. Tokyo tops the list in high value apartment deals, followed by Singapore, Hong Kong, Osaka, Beijing, Delhi, Fukuoka, Mumbai, Nagoya and Kuala Lumpur.

India is nowhere in the retail top league where deals in Asia are concerned. Among hotels, Chennai is seen as an active market in the eighth position. Singapore leads as the most active hotel market in Asia, followed by Hong Kong, Shanghai, Tokyo, Beijing, Seoul, Osaka, Chennai, Kuala Lumpur and Suzhou.

The CPI is a measure of a standard basket of items, including food, clothing and transport, across cities. In the price race, Delhi is comfortably placed very low in the table, deriving its cushion from the subsidies galore it receives from the Centre. Take, for instance, LPG cylinders, which is a must-have in middle-class families.

According to Bharat Petroleum’s latest figures, Bangalore currently pays Rs 415 for a 14.5-kg refill, Kolkata Rs 405, Mumbai Rs 402 (expected to go up after budget), Delhi Rs 399 and Chennai Rs 393.50. Bangalore’s CPI peaks in the national chart at a whopping 200, followed closely by Mumbai at 199, Kolkata 184 and Delhi a distant 181. The national CPI average is 198.

For homemakers like Koramangala resident Aditi Rao, life in Bangalore is becoming tougher with each passing day. “Frequent hikes in the prices of basic items put our home budget out of sync every month,” said Rao, 34.

Budget analyst Ravi Duggal, who has lived in Mumbai and Delhi, observed that the high cost of living in Bangalore has come about as a result of the IT industry. He said there were different reasons for differential living costs among cities, including the aspiration of people. Talking of India’s two leading cities, he said, “Where education is concerned, for instance, Delhi has more public education facilities than Mumbai.”

What makes Mumbai equally expensive? “There are many factors, the chief being high rentals. Over 40% of the salary of an average Mumbaikar goes into paying rent,” pointed out economist Vibhuti Patel of SNDT University.

Orion mall is developed and managed by Brigade Group and located in the Brigade Gateway Enclave that also includes the World Trade Centre, Sheraton Bangalore hotel, 1,200+ residences, Columbia Asia Hospital, The Brigade School, and Galaxy Club. The mall overlooks a two-acre manmade lake and has open-air children’s play area and amphitheatre.

Foley Designs and DSP Design are the interior designers, while HOK from New York has developed the main design of the mall. The mall has LED lighting solutions, automatic sensor controlled car parking, over 225 closed-circuit security cameras apart from 42 lifts and escalators.

Speaking on the occasion, Jaishankar, CMD, Brigade Group, said: “Orion mall will undoubtedly be the most sought-after destination amongst discerning shoppers and for brands of repute as well. With the launch of Orion, it truly transforms the Brigade Gateway Enclave into an exclusive integrated lifestyle enclave and marks the Brigade Group’s foray into the highly competitive retail segment.”

Orion has a hypermarket (Star Bazaar). Its food court (Sauce Pan) spreads over 55,000 sq. ft. Housing brands like Mc Donald’s, Subway, Sbarro, Rajdhani, Kailash Parbat, Empire, Empire Fresh Fruit Juice Centre, Indian Tadka, Mad about China, Mad over Donuts, Tiger bay, and Up south. The mall also houses a Reliance Digital store for electronics need.
For entertainment, Orion will house the largest PVR multiplex of the country – with 11 screens and over 2,800 seats. BluO, a 27-lane bowling centre will also open its first centre in the city. The lounge will offer entertainment options like Karaoke bar. The mall will also house Time Zone, an 8,000 sq. ft. gaming centre.

Brigade Group has completed over 100 projects, developing over 20 million sq. ft. of area since 1986.

According to sources, Accenture has committed to take 8 lacs square feet in Pritech Park on the Outer Ring Road in Bangalore. HP and Wipro are said to have recently taken 2.5 lacs square feet and 1.2 lacs square feet respectively in Pritech.

The east and south of Bangalore has been the traditional IT belt, but now the north too is buzzing. IBM, Cognizant, Accenture and HP will be renting space in the second phase of Manyata Embassy Business Park near Hebbal. IBM has committed to 5 lacs square feet of office space in Manyata phase II. The Big Blue has already occupied 3 lacs square feet in the first phase of the park.

There is a lot of demand from IT sector as it continues to expand at the highest rate in Bangalore. Real estate consultancy CBRE estimates that Bangalore has seen absorption of 6.8 million square feet of office space this year. Experts predict that the pan-India office space demand over the next five years is estimated to be about 240 million square feet.  Tier I cities such as, Bangalore, NCR and Mumbai are expected to account for 46% of the total demand. Kolkata and Chennai are likely to see higher growth rates though, with suburban locations having attractive price points, according to a Cushman & Wakefield report.

The company also has future plans for several cities, including NCR, Mumbai, Bangalore, Pune, Chennai and Chandigarh for development of residential projects in line to cash in on the growing demand for housing from urban sector.

“We are looking to develop a residential project in Mohali with a minimum land of 20-25 acres…we are in talks with certain land owners here for (entering into a) joint venture in this project,” stated the company’s MD Milind Korde.

GPL is already in the process of developing its first Rs 400 crore commercial project in Chandigarh, going to be completed by September next year. Company’s focus towards growing in the real estate sector of northern region can be realized from the fact that it has set up a 3,500 square feet office which will take care of its projects in northern region.

GPL, has presence in 11 cities across country, and plans to develop 83 million square feet of area in the span of next 8 to 10 years. It seems Godrej Properties is also keen on redevelopment of real estate projects particularly in Mumbai as they revealed their plans to go into redevelopment of areas like old buildings, cooperatives society houses and slum area in Mumbai. The company’s has other ongoing projects in Gujarat, Mangalore, Kochi, Chennai, Gurgaon, Pune, Bangalore, and Hyderabad.

Photo by nancyarora2020The nationwide poll named ‘Realty Trends 2010’ for metros and Tier II cities across the country, which saw participation from over 4,800 property seekers consisted of Majority of the respondents belonging to the age group of 26- 35 years.

The country capital topped the charts with 34 per cent while Mumbai got 28 percent votes. Bangalore received 11 per cent votes in its favor with particularly south Bangalore being preferred the most.

With the introduction of budget 2010 the economy is improving and property prices are stabilizing, this is attracting the investors who restrained from investing last year to jump into the market with full swing.

The survey showed a large number of people looking to purchase a house want it for self-consumption. The figures tell that 67 per cent of the national property seekers want to buy a house for themselves while only 23 per cent are looking for property options from a long-term investment perspective. Short-term investors have only 10 per cent survey takers.

Surely the Indian Real Estate sector is on a roll.

As researched by Boston Analytics, the Indian realty sector has undergone an increased supply and pace of development activity which brought an improvement in pessimism associated with the realty prices. A low interest rate on home loans driven by Government’s impetus packages have also catalysed the Indian consumers to buy homes.

“Increased supply, improvement in pessimism related to realty sector rates, and low rates of interest on home loans seems to be encouraging Indian consumers to firm up their home purchase decisions” as said by Shirin Bagga, Economist, Boston Analytics.

The data was collected by conducting a monthly survey that targets 10,000 respondents cross 15 Indian cities—Delhi, Mumbai, Hyderabad, Kolkata, Chennai, Bangalore, Chandigarh, Nagpur , Ahmedabad , Kochi, Jaipur, Lucknow, Bhubaneswar, Patna, and Vishakhapatnam.

According to the recent reports the conviction concerned to speed of construction activity conveys more anticipation with regards to observed change in construction activity in Tier II and Tier III cities relative to Tier I cities.

The real estate projects which are in different phases of completion in all levels of towns and cities appear to be introducing optimism about the expected change in construction activity among respondents across Tiers,” the report said.

As brought into light by Economic Survey of 2009-10, the need of the construction and real estate sector in creation of both financial and physical assets has been amplifying over the years. The construction sector now accounts for 8% of GDP at constant prices, hiked from 7.7% in 2004-05.Equivalently, the share of real estate ownership of dwelling and business services in overall GDP as hiked to 9.2% in 2008-09 from 8.9% in 2004-05.

The company has raised Rs 16,750 million as private equity in eight projects in November 2007.

According to sources, DLF Home Developers, the wholly-owned arm of DLF, would develop about 40,000 housing units in the mid-income category.

Despite slump in the housing demand for the last six months, the company has witnessed marvelous response for its mid-income housing projects and sold over 7,000 flats so far in the current fiscal.

DLF has unveiled mid-income housing projects in Bangalore, Gurgaon, Hyderabad, Indore, Kochi, Kolkata and Pune.

* The hotels would be located in the national capital region (NCR), Kolkata, Chennai, Goa, Mysore, Bangalore, Hyderabad, Chandigarh, Siliguri and Assam.

* Of the total planned hotels, about 50 per cent would be located in Kolkata and the NCR, Chandra said.

They were assessed on eight parameters necessary for a metro city, such as social infrastructure, infrastructure availability, real estate cost and availability, transportation facility (connectivity), presence of quality educational institutes, employment opportunity, facility of financial services and business environment.

According to the analysis, Pune occupies the first position, though it needs to improve on transportation, social infrastructure and financial services. Ahmedabad is the second city with most potential to be a metro, as it provides good infrastructure facilities and connectivity. The study puts Lucknow in the third place as it needs to pick up on infrastructure, business environment and social infrastructure.
Chandigarh, the smallest of the four in terms of area and population, ranks fourth though it fares well in real estate prices, financial services and business environment. At 9.21%, it is the least employment-generating city among the four emerging metros.

M Murali, managing director of Shriram Properties, said the company would develop 15 shopping malls and 70-80 budget hotels in the next 3-4 years period. Each mall would absorb an investment of Rs 250 crore while Rs 30-40 crore would be pumped in for each budget hotel.

Initially, the company would develop malls covering two million sq ft with a combined investment of Rs 700 crore in the cities like Chennai, Vizag and Kolkata.

He said, “we are looking at strategic partners who can also bring value to promote mall and hospitality projects.”

SS Asokan, executive director of Shriram Properties, said the company is in talks with global players to promote mall and hotel projects. Without disclosing identities, he said the company held talks with retail and hospitality giants in the US, Europe and Japan. The budget hotels would be promoted both in Tier I and Tier II cities.

In addition, Murali said the company also has plans foray into low-cost affordable housing segment in the near future. For the cities like Bangalore, he said the company would launch projects with housing units in the range of Rs 15 lakh per unit. For Tier II cities, budget homes would be in the range of Rs 10 lakh per unit.

He said the real estate market has already witnessd around 20% dip and it would decline by another 5-10% in the next 6-9 months, but it would pick up once election in the US and India were over in the next year. In the long term, he said the Indian real estate market is reliable. The company, which currently owns a land bank of 1,520 acres across the country, is developing projects covering 73 million sq ft.

After the bomb blasts on July 25 and 26th in Bangalore and Ahmedabad, a number of questions have been raised on how terrorist attacks could have an impact on the real estate markets in India. With worries looming large over similar attacks in other cities, it is time to reflect on some of the short-term global real estate trends which were seen after 9/11 terrorist attacks on the World Trade Centre.

There are two mediums through which terrorism impacts economies. Firstly, terrorist attacks have a direct impact on our economy because they destroy productive physical and human capital. Secondly, terrorism increases the level of fear and uncertainty which could have a larger impact on the overall economy.

After 9/11, office properties in landmark buildings in the proximity had experienced increases in vacancy rates than office properties not located in the nearby areas. The attacks have also drastically increased the perceived risk of large-scale terrorist attacks in Central Business Districts (CBD) and in turn, placed particularly large pressures on major financial centers world over.

In the post 9/11 era, vacancy rates had increased more for buildings with a high perceived vulnerability to large scale terrorist attacks than for buildings that are not perceived as preferred targets. After the WTC attacks, it was anticipated that there would be a flight of occupiers and capital from the CBD areas. Even though this did not happen, new demand was stronger in suburban markets than in CBDs in many cities around the world.
From a short-term perspective, in the face of uncertainty, corporations have delayed their realty decisions. Many companies have only renewed their leases than move to new business premises. Global corporate real estate expansion was slow during the gulf war. Premiums paid for prestigious buildings and the highest floors have also marginally declined.
Many major firms adopted a multi-premises strategy facilitated by technology and favored decentralization. Global firms even considered a greater regional and international dispersal of headquarters activities to avoid business damage. Demand has accelerated for teleconferencing facilities and broadband connections as a substitute for frequent business travel.
Building management costs also increased due to enhanced security measures and higher insurance premiums. Many new projects at that time which were under development were reviewed in terms of building specification and configuration.
The security aspect has also become a differentiating factor for Grade A versus Grade B space. Buildings across the world started following the extensive security practices which were in place only in a few developed countries.

Company’s director Mr. P Surya Prakash said that besides private equity, SatyaVani Projects is looking at raising cash through a combination of internal accruals and private placement. He declined to name the potential investors.

A 5 million square feet medical tourism project in Hyderabad will be the biggest, costing $120 million and consisting of two hospitals, a health resort and service apartments.

In Bangalore, it will establish an eco resort and a housing project at an investment of $50 million. The company will spend another $20 million on residential projects in Vizag.

These include two Ahmedabad-based and one from Baroda. The initiative has been taken by the company to market and sell its international properties to Indian buyers.

“We are proud to have appointed agents in India. Apart from three in Gujarat, we have signed agents in important cities like Mumbai, Delhi, Chennai, Bangalore and Gurgaon. As the potential is high here, we wanted to touch each corner of of the country through a network of experienced agents,” said founder & chairman, DAMAC Holding, Hussain Sajwani. “We will provide our agents all the necessary information and training to sell our properties.”

The company is also considering investment options in the subcontinent along with marketing its current projects. “We are looking at all the major cities in India and we will earmark investments as soon as the feasibility study is over,” said the CEO of DAMAC Properties.

Delhi and Mumbai hotel industries charged highest room rates in the country. Customer paid more than ten thousand for a night. Bangalore finally saw a marginal correction in room rates. Mumbai performed the best as far as hotel occupancy is concerned. While branded hotels in Mumbai registered an average occupancy of 80 percent, Delhi was at 78 percent and Kolkata at 77.4 percent.