Monthly Real Estate Monitor June 2012

Clouded Value of Green Real Estate

The ever rising cost of natural resources along with the growing concern for the environment is gradually strengthening the need for developing green buildings. However, the concern over additional capital cost and uncertainty over returns are daunting investment sentiments in green buildings. In empirical terms, it has been observed that green buildings turn out to be profitable ventures due to savings in energy & other operational costs, trading & earning of carbon credits and other benefits. However, the challenge is to translate intangible benefits to cash flow that can be used to assess the value of buildings or project viability. For example, better working conditions cannot be translated directly into money and so there is always the risk that green aspects or sustainability measures will be over or undervalued. Every method of valuing buildings has its own challenges in valuing the green or sustainable aspect of a building. Hereunder we highlight the most popular methods of valuation such as Direct Comparison Method, Rent Cap Method and Discounted Cash Flow (DCF) Method. In direct comparison method of valuing a green building, the challenge is to find a similar building that has been transacted. If we value it against any conventional building the sustainable aspect of the building cannot be valued. Therefore we have to use proxy measures to derive value. The rent cap method of valuation, which uses the cap rate driven by market dynamics to find the value of a building based on total earned rents, neglects the green aspects of the building. This method can only be successful if the rent also reflects sustainable aspects. The discounted cash flow method, which is one of the most accepted methods of valuation, considers cash inflow and outflow. Thus, for a green building, the sustainable aspects of the building can be considered to a large extent in this method of valuation. There are few standard mechanisms to assess energy and water savings of green buildings. However, DCF method has challenges of translating all benefits in terms of cash flows. For instance, there

may not always be a rent premium for green buildings as rents in most cases are driven by demand-supply dynamics. Sustainability is not the most important factor governing rent amongst several other factors. So there are many uncertainties regarding the valuation of green buildings due to lack of data and information. However, it is just a matter of time before this changes. The growing demand from occupiers, due to increased energy cost is putting pressure on developers to develop green buildings. An increase in the number of green buildings will automatically increase awareness and as the market matures there will be benchmarks and databases to value green aspects of buildings. This will bring in more clarity and transparency in valuation of green buildings, thus improving investor confidence. Figure 1: Financial Indicators
Grade A Delhi NCR Mumbai Bangalore Chennai Pune Hyderabad Kolkata Rental Value Office

Capital Value Residential

Retail

Source: Jones Lang LaSalle Research

Currency risk due to depreciation of Rupee is posing challenges for exit of private equity firms who invested in Indian real estate prior to 2008.

Think about It!!

Confederation of Indian Industries (CII) is promoting sustainable landscaping which will be water efficient, low maintenance and blend with local environment

Green Wall

Peninsula Land sold office space for INR 1.7 billion in Peninsula Business Park at Lower Parel, Mumbai to multiple financial services firms.

Deal of the month

Monthly Real Estate Monitor June 2012

Bangalore
The Bangalore office market witnessed healthy transaction activity in May. Key transactions included Axis Aerospace & Technologies leasing space in Vaswani Centropolis, Longford Road, KPMG leasing space in Salarpuria Hallmark 1 and Ericsson leasing in Umiya Business Bay. Vacancy rates declined nominally due to stable demand amidst limited fresh supply. Marginal appreciation of rents and capital values were recorded along the Outer Ring Road and SBD locations such as Inner Ring Road, Old Airport Road and Koramangala.

Office Key Precincts Outer Ring Road (North) Old Airport Road Outer Ring Road (Eastern) Old Madras Road Electronic City Retail Key Precincts Koramangala Indiranagar New BEL Road Commercial Street Jayanagar Residential

Rents INR per sq ft per month 48-52 60-65 46-48 30-34 26-28 Rents INR per sq ft per month 80-150 90-180 50-80 175-250 80-120 Rents INR per month for a 1,000 sq ft 2BHK apartment 10,000-15,000 18,000-20,000 8,000-10,000 10,000-12,000 10,000-15,000 7,000-10,000 7,000-10,000 6,000-10,000

Capital Value INR per sq ft 5,000-6,000 6,000-7,000 4,500-5,000 3,000-3,500 2,400-2,800 Capital Value INR per sq ft 9,000-16,000 12,000-18,000 6,000-10,000 16,000-20,000 7,000-15,000 Capital Value

Demand remained stable in May, with no major retailers leasing space during the period. With no new malls coming on stream, vacancy rates in the existing malls remained stable. Rents and capital values of city malls have remained stable over the past two years.

Demand for residential apartments increased marginally in May. Most of the new residential projects launched were on and along Hosur and Bellary Roads. Rents increased in the month due to the influx of people, mainly IT/ITES employees, into the city with the increase in employment in the sector. Capital values appreciated marginally across various sub-markets due to increases in sales volumes and also due to new projects being launched at prices above the market average.

Key Precincts Old Madras Road Indiranagar Bellary Road Hosur Road Whitefield Tumkur Road Kanakapura Road Mysore Road

INR per sq ft 5,000-6,000 10,000-20,000 3,000-4,000 3,000-4,500 3,000-5,000 3,000-5,000 3,000-4,500 2,500-3,500

INFRASTRUCTURE ONGOING
The 22.12 km long elevated six-lane expressway project is part of the Hyderabad-Bangalore section under Phase VII of the National Highway Development Project. Estimated to be built at a cost of INR 6.8 billion on a BOT basis, the construction is expected to get completed by 2013.

Monthly Real Estate Monitor June 2012

Chennai
Office leasing gained traction, with strong demand from IT/ITES players during the month. OMR continued to be the preferred location for IT/ITES players, while Mount Poonamallee Road emerged the second preferred destination for these tenants. Amazon, Citibank, Beroe and Bank of New York were some of the key occupiers who leased space during the month.

Office Key Precincts Mount Road RK Salai Pre-toll OMR Post-toll OMR Guindy Ambattur Retail Key Precincts T.Nagar Nungambakkam Velachery Pre-toll OMR Anna Nagar LB Road (Adyar) Residential Key Precincts Adyar Medavakkam Tambaram Anna Nagar Porur Sholinganallur

The Chennai mall market continued to remain dormant during the month, while high streets witnessed mixed activity. Prominent eat-out outlets such as Caf Coffee Day, Sri Krishna Sweets, Grand Sweets and Thalapakkatti expanded their networks in the city. Naidu Hall, a family store, expanded its presence to Arcot Road. On the other hand, Ezone and LG Electronics closed their showrooms in OMR and Kilpauk respectively over the month. Rents in malls remained stable while rents in prime high streets increased.

Rents INR per sq ft per month 60-90 70-100 35-55 25-35 40-55 25-35 Rents INR per sq ft per month 120 - 180 130 - 150 80 - 100 50 - 70 110 - 140 130 - 150 Rents INR per month for a 1,000 sq ft 2BHK apartment 16,000 25,000 7,000-14,000 6,000-15,000 15,000 25,000 5,000-10,000 9,000-12,000

Capital Value INR per sq ft 9,000-15,000 10,000-15,000 5,000-6,500 3,500-5,000 6,000-8,500 3,250-4,500 Capital Value INR per sq ft 12,000-15,000 13,000-16,000 10,000-12,000 8,000-11,000 11,000-13,000 12,500-14,000 Capital Value INR per sq ft 9,500 16,500 3,600 4,800 3,500 4,500 9,000 14,000 3,600 4,300 4,000 5,000

INFRASTRUCTURE ONGOING
Residential sales dropped during the peak summer season, referred to as agni nakshatram in the Indian calendar, a period that is considered in Chennai to be inauspicious for the buying of assets. However, given the citys demand potential, the residential sector is poised for a rebound in the coming weeks. ASVs Alexandriea, Lancors Lumina and Artha Propertys Artha Meadows were some notable launches during the month. Rents increased, due to the strong demand for housing and the improved office leasing, which, in turn, are increasing employment opportunities in and immigration into Chennai. >> State Government announced an INR 5 billion metropolitan development scheme for Chennai and its suburbs, INR 7.50 billion for other corporations and municipalities and INR 2 billion for improving roads. >> Ascendas and a Japanese consortium will set up a 1,500 acre integrated industrial township at a cost of around INR 35 billion near Chennai.

Monthly Real Estate Monitor June 2012

Delhi
Demand picked pace in Delhi NCR in May, particularly in Gurgaon and Noida. There was a slight increase in the number of enquiries for office space; pre-commitments in SEZs remained healthy and the vacancy rate decreased marginally with an increase in demand and limited supply. Key transactions included Flipkart leasing space in DLF Cybercity at Gurgaon, Corbus leasing space in Noida City and Naukri.com leasing an entire project on the NoidaGreater Noida Expressway. The DLF Multi-Level Car Park, a commercial block in the CBD, commenced operations with about 55-60% occupancy. Rents and capital values remained stable. Select properties in select precincts of Gurgaon quoted rents above the market average in May.

Office Key Precincts Barakhamba Road Jasola DLF Cybercity MG Road Golf Course Road Sohna Road Retail Key Precincts South Delhi West and North Delhi Gurgaon-MG Road Rest of Gurgaon Noida Ghaziabad Residential Key Precincts Golf Course Road Sohna Road Golf Course Extension Road Noida-Greater Noida Expressway Noida City Indirapuram

Rents INR per sq ft per month 140-380 110-170 65-70 110-125 85-95 45-55 Rents INR per sq ft per month 180-240 140-220 140-230 60-100 130-220 90-150 Rents INR per month for a 1,000 sq ft 2BHK apartment 18,000-21,000 10,000-11,500 10,000-13,000 11,000-13,000 12,000-14,000 10,000-11,000

Capital Value INR per sq ft 24,000-32,000 16,000-21,000 NA 14,000-17,000 11,000-13,000 6,500-8,000 Capital Value INR per sq ft 21,000-30,000 14,000-22,000 15,000-20,000 8,000-14,000 14,000-25,000 10,500-16,000 Capital Value INR per sq ft 10,000-16,000 5,000-7,500 6,200-7,700 4,000-5,500 4,200-6,000 3,300-4,000

Leasing remained sluggish as quality space in malls remained a constraint. Vacancy rates in prominent malls were in single digits in May. One of the key retail transactions was done by Cinepolis precommitting space on the Noida-Greater Noida Expressway. The retail component of Delhi Airport Metro Express-Shivaji Marg Station commenced operations with about 45-50% occupancy. Rents and capital values remained stable over the month.

INFRASTRUCTURE ONGOING
>> Announcement of signal-free road link from NH-8 to Golf Course Road. >> Proposed Airport in Jevar, Greater Noida cancelled. This might adversely impact residential prices in surrounding areas. >> Yamuna Expressway to be opened by July-August 2012.

Residential sales remained stable in Delhi NCR during May. Projects launched in May included Assotech Blith located at sector 99 on Dwarka Expressway, Paras Irene located at Sector 70 A, Gurgaon and Shubhkamna Legend, located at Sector 150, Noida. There was a nominal increase in rents in few completed projects. Capital values remained stable across all sub-markets.

Monthly Real Estate Monitor June 2012

Hyderabad
Demand remained stable with good leasing and preleasing activity. Vacancy rate decreased marginally as there was no new office space supply in the city. A few key transactions in May include Callidus leasing SEZ space in Mindspace, AT & T leasing space at The V and JDA leasing space in Meenakshi Tech Park, all of which are located in the Hitec City sub-market. After a steep rise (over last two quarters) due to depletion of quality leasable space, rents and capital values remained stable across all sub-markets over the month.

Office Key Precincts Begumpet Banjara Hills Hitec City Gachibowli Uppal Shamshabad Retail Key Precincts Banjara Hills Jubilee Hills Secunderabad Hitec City Kukatpally Dilshuknagar Residential Key Precincts Banjara Hills Begumpet Kondapur Tellapur Kukatpally Miyapur

Rents INR per sq ft per month 45-55 50-60 34-42 34-38 25-35 20-25 Rents INR per sq ft per month 100-120 110-140 80-100 100-120 80-100 60-80 Rents INR per month for a 1,000 sq ft 2BHK apartment 13,000-20,000 10,000-15,000 10,000-15,000 8,000-12,000 7,000-10,000 5,000-6,000

Capital Value INR per sq ft 4,500-6,500 4,500-7,500 4,000-5,200 4,000-5,000 3,000-4,000 3,000-4,000 Capital Value INR per sq ft 10,000-12,000 11,000-14,000 8,000-10,000 10,000-12,000 8,000-10,000 6,000-8,000 Capital Value INR per sq ft 5,500-10,000 3,500-4,000 2,800-4,500 2,200-2,800 3,300-3,500 1,800-3,300

Retail demand remained stable in prime as well as sub-urban high streets of Hyderabad as there was limited mall space available for leasing. Upcoming malls such as Prestiges Forum Crystal, Manjeera Trinity and Manjeera Majestic continued to witness stable preleasing activity. Zamini pre-committed space in Manjeera Trinity Mall. Vacancy rates remained stable in existing malls. Overall mall rents remained unchanged across all sub-markets. However, a few select good quality properties along prime high streets such as Banjara Hills and Jubilee Hills continued to quote rents higher than the market average.

INFRASTRUCTURE ONGOING
>> Hyderabad Metropolitan Development Authority (HMDA) approved an inter-city bus terminal at Miyapur. >> 71.6-km-long Hyderabad metro rail project is almost ready for implementation. The phase I of the project will cover two tracks - 8 kms between Nagole and Mettuguda and 12 kms between Miyapur and Ameerpet which are expected to be complete by end of 2014.

Residential sales picked up pace in select projects but market sentiment continued to remain reserved. Major launches in May were Vasavi Bhuvana at Srinagar Colony and West Metro at Chandanagar. Capital values of selected projects in prime locations increased due to good sales volume, but overall capital values remained stable due to moderate sales. .

Monthly Real Estate Monitor June 2012

Kolkata
Demand remained buoyant given an increase in the number of enquiries. Vacancy rates witnessed a marginal dip in May with no new buildings commencing operations. Schneider leased space in Rajarhat. Rents and capital values remained stable across all submarkets.

Office Key Precincts Park Street Topsia Salt Lake Rajarhat Retail Key Precincts Elgin Road Park street (high street) Prince Anwar Shah Road Salt Lake Residential

Rents INR per sq ft per month 90-120 55-65 40-50 25-35 Rents INR per sq ft per month 120 - 180 130 - 150 80 - 100 50 - 70 Rents INR per month for a 1,000 sq ft 2BHK apartment 35,000 40,000 18,000 20,000 14,000 16,000 10,000-12,000 9,000-12,000 5,000-7,000

Capital Value INR per sq ft 9,000-11,000 5,000-7,000 4,000-5,000 3,000-3,500 Capital Value INR per sq ft 12,000-15,000 13,000-16,000 10,000-12,000 8,000-11,000 Capital Value

Demand maintained momentum. High streets witnessed more activity in comparison to malls this month. Vacancy rates in malls witnessed a marginal dip. Swatch, Lavi and Jashn leased space in Forum Mall. There was no completion of malls in the month. Rents and capital values of malls remained stable due to less activity.

Demand for residential units remained stable over the month. Arihant Garden by Arihant Group located at New town, Rajarhat was launched in May. Rents and capital values remained stable across all submarkets in May.

Key Precincts Alipore PA Shah Road EM Bypass Lake Town Behala Howrah

INR per sq ft 10,000 15,000 3,500 4,500 3,000 3,500 2,000 3,000 2,500 4,000 1,700 1,900

INFRASTRUCTURE ONGOING
A new metro line is proposed on the East-west Metro corridor. This new metro line is expected to enhance intra-city connectivity manifold. The East-West Metro project stretch covers 13.77 kms of underground and elevated tracks from Salt Lake to Howrah, with an investment of INR 46.8 billion.

Monthly Real Estate Monitor June 2012

Mumbai
May witnessed moderate leasing activity on the back of stable demand for office space in Mumbai. Tower 3 of Indiabulls Finance Center, located in the SBD Central sub-market, commenced operations in May with about 30-40% occupancy. Vacancy levels recorded a marginal increase during the month. German Remedies and UBM leased space in Times Square and Mot McDonalds leased space in Skyline Icon, both at Andheri (East). Rents remained stable during the month on the back of cautious sentiment prevailing amongst office occupiers. Capital values also remained stable during the month, mirroring the rental value trend and thereby retaining yield at previous month's levels.

Office Key Precincts Lower Parel BKC Andheri Goregaon-Malad Wagle Estate Thane-Belapur Road Retail Key Precincts Lower Parel Malad Ghatkopar Mulund Thane Navi Mumbai Residential Key Precincts

Rents INR per sq ft per month 150-180 250 - 350 100 - 150 80 - 100 45 - 60 40 - 55 Rents INR per sq ft per month 250 - 350 160 - 250 140 - 220 120 - 200 100 - 160 70 - 150 Rents INR per month for a 1,000 sq ft 2BHK apartment 75,000 - 90,000 40,000 - 55,000 35,000 50,000 35,000 45,000 12,000-25,000 10,000-15,000

Capital Value INR per sq ft 19,000 -23,000 25,000 -35,000 9,000 15,000 8,000 -10,000 5,000 6,000 5,000 6,000 Capital Value INR per sq ft 22,000 32,000 12,000 20,000 10,000 - 18,000 10,000 16,000 8,000 14,000 7,000 12,000 Capital Value INR per sq ft 23,000 30,000 14,500 16,000 10,000 16,000 9,500 11,000 5,500 7,000 4,500 6,000

Leasing activity was moderate during the month but was more directed towards good quality malls. With marginal leasing activity and limited fresh supply of malls, vacancy levels declined marginally in May. There was no new completion in the month. Rents in the malls remained stable at the previous months level due to moderate demand from retailers. Capital values also remained stable at the previous months level due to the uncertain business climate and modest investor sentiment.

Lower Parel Wadala Andheri Ghatkopar Ghodbunder Road Kharghar

INFRASTRUCTURE ONGOING >> Santacruz Chembur Link Road (SCLR): This arterial
road (6.45 km) will connect the Western Express Highway and Eastern Express Highway. The project is expected to be completed by end-2012. >> Mumbai Metro Rail: The 12 Km stretch of Phase 1 from Versova to Ghatkopar is expected to become operational by early 2013, improving east-west connectivity and providing impetus to Andheri.

Sales of residential units in Mumbai remained constrained during the month. Indiabulls Blu, located at Worli, and the new tower in the Runwal Greens project located at Mulund, were launched in May. With a sustained increase in capital values keeping most potential buyers at bay, rents continued to record a marginal rise during the month. Capital values in Mumbai have witnessed a sustained rising trend on the back of new amendments to the Development Control Regulation Act.

Monthly Real Estate Monitor June 2012

Pune
Office space leasing in Pune continued to remain strong in May. Majority of leasing deals were contributed by IT/ ITES companies which leased large-format space. Rents and capital values remained stagnant across sub-markets. SMS Concast leased space in Magarpatta SEZ, Hadapsar in the eastern part of Pune.

Office Key Precincts Hinjewadi Hadapsar Bund Garden Road Viman Nagar S.B Road Koregaon Park Retail Key Precincts MG Road Bund Garden Road FC Road JM Road DP Road SB Road Residential Key Precincts Wakad Kharadi Hadapsar Hinjewadi Kondhwa Pimpri-Chinchwad

Demand from retailers was mostly concentrated in existing malls located in prime sub-markets because of their good residential catchment and availability of quality space. No new malls commenced operations in May. The last mall to open in Pune was The Plaza centre located in Koregaon Park Annexe. International brands such as Loccainte and Mac have set up their stores for the first time in Pune. Rents and capital values remained stable across sub-markets in May.

Rents INR per sq ft per month 32-35 45-50 55-60 50-55 55-60 60-65 Rents INR per sq ft per month 100-150 90-130 100-150 100-150 90-110 80-120 Rents INR per month for a 1,000 sq ft 2BHK apartment 10,000-12,000 11,000-15,000 12,000-16,000 9,000-11,000 9,000-12,000 8,000-12,000

Capital Value INR per sq ft 3,000-3,500 4,000-5,000 5,500-6,000 5,000-5,500 5,000-5,500 6,000-7,000 Capital Value INR per sq ft 10,000-15,000 9,000-13,000 10,000-15,000 10,000-15,000 9,000-11,000 8,000-11,000 Capital Value INR per sq ft 3,200-3,500 4,200-4,500 4,000-4,500 3,200-3,500 3,700-4,000 3,200-3,700

Demand for housing in the city is mainly driven by IT/ITeS developments which are primarily in the eastern and western corridors .Overall absorption rate remained stable during May. Amongst the newly launched projects this month Renaissance at Wakad by Monarch Developer and Greens Phase III at Chinchwad enjoyed healthy sales numbers. The city saw marginal appreciation in capital values in select sub-markets over the month.

INFRASTRUCTURE ONGOING
>> To mitigate traffic congestion in the city, local municipal authorities in city have planned an outer ring road for Pune. The work is in progress. >> The outer ring road is a considerable length of 169 kms, with the project being divided into 4 parts. Part I of 39.89 kms to cover Theurphata NH-9, Kesnand, Wagholi, Bhavdi, Tulapur, Alandi, Kelgaon, Chimbli and NH-50.

About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of more than USD 3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the companys investment management business, is one of the worlds largest and most diverse in real estate with USD 47.9 billion of assets under management. Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 20,800 employees operating in 77 offices in 13 countries across the region. The firm was named the Best Property Consultancy in Asia Pacific at The Asia Pacific Property Awards 2011 in association with Bloomberg Television. For further information, please visit our website, www.ap.joneslanglasalle.com About Jones Lang LaSalle India Jones Lang LaSalle is Indias premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across eleven cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 4800, the firm provides investors, developers, local corporate and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, Industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. For further information, please visit www.joneslanglasalle.co.in For more information about our research Ashutosh Limaye Head, Research and REIS ashutosh.limaye@ap.jll.com +91 98211 07054 Trivita Roy Manager, Research trivita.roy@ap.jll.com +91 40 4040 9100 Research Dynamics 2012 Pulse reports from Jones Lang LaSalle are frequent updates on real estate market dynamics.

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