India Real Estate Outlook January – June 2014

Launches (units)

Absorption (units)

Jan – June 2014 142,983 -32% Y-o-Y July – Dec 2014 (E) 169,602 5% Y-o-Y 2014 Year End (E) 312,585 -16% Y-o-Y

Jan – June 2014 119,282 -27% Y-o-Y July – Dec 2014 (E) 152,764 26% Y-o-Y 2014 Year End (E) 272,046 -4% Y-o-Y

Residential

Market Overview

New Completions (mn. sq.ft.)

Absorption (mn. sq.ft.)

Vacancy %

Jan - June 2014 16.4 -4% Y-o-Y July – Dec 2014 (E) 20.9 9% Y-o-Y 2014 Year End (E) 37.5 3% Y-o-Y

Jan - June 2014 17.9 -4% Y-o-Y July – Dec 2014 (E) 18.7 22%Y-o-Y 2014 Year End (E) 36.5 8% Y-o-Y

2013 Year End 20% June 2014 19% 2014 Year End (E) 18%

Office

Market Overview

Residential

Mumbai

Pune

NCR

Bengaluru

Chennai

Hyderabad

DEMAND AND SUPPLY TREND Extreme volatility in demand and supply over the last 2 years across NCR, Mumbai, Pune, Bengaluru, Chennai and Hyderabad

Slow economic growth, rising interest rates, high inflation and weak rupee have led to negative sentiments but we see a revival in launches and

absorption, which will be far less than the peak of H1 2013

Half-yearly Launches and Absorption (Top Six Cities)

100,000

120,000

140,000

160,000

180,000

200,000

220,000

Num

ber o

f uni

ts

Launches Absorption

Residential Market

H1 2014 - New launches fell by 32% compared to H1 2013

H1 2014 - Sales volume dropped by 27%

Sales volume: H1 2014 - 119,282 H1 2013 - 164,000

CITY-WISE LAUNCHES: H1 Trend

Residential Market

Steep fall in launches during H1 2014 across all cities in comparison to H1 2013 NCR witnessed the steepest fall of 43% in H1 2014 compared to H1 2013, followed by Mumbai at 38% while Bengaluru fell by 16%

(units)

67,

948

45,

326

30,

537

31,

458

20,

332

10,

704

57,

007

62,

252

42,

155

20,

720

16,

832

11,

266

35,

512

35,

767

35,

545

16,

883

11,

377

7,8

99

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Mumbai NCR Bengaluru Pune Chennai Hyderabad

H1 2012 H1 2013 H1 2014

CITY-WISE ABSORPTION: H1 Trend

Residential Market

All markets witnessed shrinkage in demand with NCR at 37%, followed by Pune 30% in H1 2014 over H1 2013 Bengaluru witnessed a lowest de-growth of 14%

44,

609

35,

302

22,

935

23,

122

14,

461

9,1

67

41,

377

45,

302

31,

844

20,

937

14,

020

10,

009

31,

210

28,

500

27,

256

14,

719

10,

315

7,2

82

-

10,000

20,000

30,000

40,000

50,000

Mumbai NCR Bengaluru Pune Chennai Hyderabad

H1 2012 H1 2013 H1 2014(units)

CITY-WISE LAUNCHES: H2 Trend

Residential Market

Projection of an improved scenario in H2 2014 in comparison to H2 2013 Chennai leading by 31%,followed by Hyderabad at 25% in H2 2014 over H2 2013 Pune is the only market which is expected to witness a significant de-growth at 23%

53,

667

54,

804

37,

236

24,

513

16,

747

12,

022

52,

222

33,

516

36,

145

24,

652

8,0

15

7,3

76

57,

333

37,

000

36,

568

18,

960

10,

488

9,2

52

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Mumbai NCR Bengaluru Pune Chennai Hyderabad

H2 2012 H2 2013 H2 2014 E

(units)

CITY-WISE ABSORPTION: H2 Trend

Residential Market

All markets expected to improve in H2 2014 with Mumbai at 49% followed by Bengaluru at 26% over H2 2013 At 11% growth, Pune will be the lowest among the 6 cities

41,

369

45,

464

27,

757

24,

895

14,

961

9,8

84

32,

717

26,

119

25,

522

17,

858

10,

424

8,4

19

48,

812

30,

500

32,

044

19,

808

11,

929

9,6

72

-

10,000

20,000

30,000

40,000

50,000

60,000

Mumbai NCR Bengaluru Pune Chennai Hyderabad

H2 2012 H2 2013 H2 2014 E(units)

WEIGHTED AVERAGE PRICE INDEX

Residential Market

Price appreciation in Bengaluru fastest at 11% followed by Hyderabad at 9% in H1 2014 compared to H1 2013

Going forward, Mumbai expected to lead in price appreciation during H2 2014 at 10% compared to H2 2013, on the back of a strong revival in

absorption

90

100

110

120

130

Inde

x va

lue

(Bas

e:H

1 20

12=1

00)

Mumbai NCR Bengaluru Pune Chennai Hyderabad

TICKET SIZE SPLIT OF LAUNCHED UNITS January to June 2014

Residential Market

Pune emerged as the most affordable city during H1 2014 with 83% of new launches below the ticket size of `5 mn

0%

20%

40%

60%

80%

100%

Mumbai NCR Bengaluru Pune Chennai Hyderabad

Mumbai remains the most premium market, with 34% of total launches during H1 2014 being priced above the ` 10 mn price bracket

<2.5 mn. 2.5-5 mn. 5-7.5 mn. 7.5-10 mn.

10-20 mn. > 20 mn.

83%

34%

RESIDENTIAL MARKET HEALTH Age of Inventory compared to QTS

Residential Market

Mumbai’s health is the poorest with the highest QTS and maximum number of unsold inventories from previous years

Note: Size of the bubble indicates the quantum of unsold inventory QTS – Time period taken to liquidate the unsold inventory at the sales velocity of last 8 quarters

6

7

8

9

10

11

12

13

6 8 10 12 14

Age

of u

nsol

d in

vent

ory

in q

uarte

rs

QTS

Mumbai

NCR

Hyderabad

Bengaluru

Pune

Chennai

Bengaluru among the healthiest

Office

Mumbai

Pune

NCR

Bengaluru

Chennai

Hyderabad

VACANCY TREND New Completion, Absorption and Vacancy Level (Top Six Cities)

Office Market

Steady recovery over the last two years in the office markets, with vacancy levels falling from 21% in H2 2012 to 19% in H1 2014

16%

18%

20%

22%

-

5

10

15

20

25

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014E

Mn

sq ft

New Completion Absorption Vacancy (RHS)

H1 2014 has seen a turnaround which is expected to sustain for the next 6 months as a result vacancy levels to further drop to 18% by the end of 2014

NEW COMPLETION & ABSORPTION New Completion, Absorption and Vacancy Level (Top Six Cities)

Office Market

Absorption in 2014 to touch 36.5 mn sq ft – an 8% jump from the 33.9 mn sq ft reported in 2013

New completions will grow by 3% to 37.4 mn.sq.ft in 2014, compared to 36.4 mn sq ft in 2013

20

23

17.

1

19.

2

16.

4 2

0.9

17.

5

14.

7 18.

5

15.

3

17.

9

18.

7

-

5

10

15

20

25

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014E

Mn

sq ft

New Completion Absorption

CITY-WISE NEW COMPLETION – H1 Trend

Office Market

Bengaluru witnessed new project completion growth of 76% in H1 2014 over H1 2013 All other markets witnessed de-growth with Mumbai and Hyderabad being the highest at 25%

5.9

3.6 4.

1

0.9

3.1

2.4

3.8

3.5

1.7

2.4

1.7

4.0

2.9

4.0

3.0

2.0

1.5

3.0

-

1

2

3

4

5

6

7

Mumbai NCR Bengaluru Pune Chennai Hyderabad

Mn

sq ft

H1 2012 H1 2013 H1 2014

CITY-WISE ABSORPTION – H1 Trend

Office Market

3.4

3.4

6.0

1.4

1.2

2.1

3.8

3.4

4.7

2.8

1.2

2.6

2.5

3.5

6.0

2.1

1.8 1.9

-

1

2

3

4

5

6

7

Mumbai NCR Bengaluru Pune Chennai Hyderabad

Mn

sq ft

H1 2012 H1 2013 H1 2014

Mumbai witnessed a maximum fall of 34% in H1 2014 compared to H1 2013, followed by Pune and Hyderabad Chennai, Bengaluru and NCR witnessed a positive growth at 47%, 29% and 3% respectively

CITY-WISE VACANCY – H1 Trend

Office Market

Bengaluru, Pune and Chennai witnessed fall in vacancy from H1 2013 to H1 2014 Hyderabad saw an increase, Mumbai and NCR were stagnant

21%

20%

18%

25%

23%

13%

22%

21%

14%

22%

24%

16%

22%

21%

11%

20%

22%

19%

0%

5%

10%

15%

20%

25%

30%

Mumbai NCR Bengaluru Pune Chennai Hyderabad

H1 2012 H1 2013 H1 2014

CITY-WISE NEW COMPLETION – H2 Trend

Office Market

6.0

6.0

3.3

1.3

3.8

2.7

3.8

3.5

5.5

1.2

2.5 2.7

6.6

4.0 4.

5

2.6

1.1

2.1

-

1

2

3

4

5

6

7

Mumbai NCR Bengaluru Pune Chennai Hyderabad

Mn

sq ft

H2 2012 H2 2013 H2 2014 EPune and Mumbai expected to grow the fastest at 125% and 73% respectively in H2 2014 over H2 2013 South markets projected to plunge with Chennai at 58%, followed by Hyderabad and Bengaluru

CITY-WISE ABSORPTION – H2 Trend

Office Market

2.6 3.

0 3.4

1.6

2.1

2.0 2.

4

3.2

4.9

1.2

2.5

1.2

4.2

4.0

3.8

2.2 2.2

2.3

-

1

2

3

4

5

6

Mumbai NCR Bengaluru Pune Chennai Hyderabad

Mn

sq ft

H2 2012 H2 2013 H2 2014 E At 96%, Hyderabad will lead in absorption growth followed by Pune and Mumbai in H2 2014 over H2 2013 Bengaluru and Chennai to witness a decline

CITY-WISE VACANCY – H2 Trend

Office Market

Other than Mumbai and Hyderabad where vacancy levels will remain stagnant, all other markets will witness a decline in H2 2014 over H2 2013

23%

22%

17%

23%

24%

14%

23%

21%

14%

21%

23%

18%

23%

20%

11%

20%

20%

18%

0%

5%

10%

15%

20%

25%

30%

Mumbai NCR Bengaluru Pune Chennai Hyderabad

H2 2012 H2 2013 H2 2014 E

SECTOR-WISE ABSORPTION SPLIT January – June 2014

Office Market

IT/ITeS continues to hold the maximum share in total absorption across all cities, except Mumbai The share of IT/ITeS ranges between 39-78%

The share of the other services sector (consulting, retail, eCommerce, infrastructure and real estate) has been increasing steadily over the last few years

0%

20%

40%

60%

80%

100%

Mumbai NCR Bengaluru Pune Chennai Hyderabad

IT/ITeS BFSI (Including support service) Manufacturing Other Services

IT / ITeS

Manufacturing (excl factory)

BFSI (including support services)

Other Services

DEAL SIZE ANALYSIS

Office Market

The total number of deals has increased from 542 in H1 2013 to 623 in H1 2014 An increase in the number of deals indicates a wider participation in transaction by occupiers

However, the average deal size has reduced in all the cities except Bengaluru

-

20,000

40,000

60,000

80,000

Sq ft

H1 2013 H1 2014

RENTAL INDEX MOVEMENT

Office Market

Growth in office rentals has been relatively constrained across the 6 cities, unlike residential

The weighted average rentals in Mumbai has been going down since 2012 due to PBD and SBD shares increasing steadily compared to CBD & off-CBD markets 80

100

120

140

Inde

x va

lue

(Bas

e:H

1 20

12=1

00)

Mumbai NCR Bengaluru Pune Chennai Hyderabad

In contrast, Pune has higher demand of CBD and SBD markets compared to the PBD ones

Contact KnightFrank.India@in.knightfrank.com

Mumbai I Bengaluru I NCR I Pune I

Hyderabad I Chennai I Kolkata