The India Real Estate Outlook (H1 2014) our half yearly, flagship report which analyses the real estate market - office & residential; across top 6 cities in India. This version is a comprehensive one, specific to the Bengaluru market.

1. BENGALURU
INDIA REAL ESTATE OUTLOOK REPORT (January – June 2014)
For queries on data, contact Sangeeta Sharma Dutta, Research For any other query, contact Bertilda Fernandes, Marketing

2. Launches (units)
Absorption (units)
Weighted Avg Price (`per sq.ft.)
Jan-June 2014 35,545 -16% Y-o-Y July – Dec 2014 (E) 36,568 1% Y-o-Y
2014 Year End (E) 72,113 -8% Y-o-Y
Jan-June 2014 27,256 -14% Y-o-Y July – Dec 2014 (E) 32,044 26% Y-o-Y 2014 Year End 59,300 3% Y-o-Y
June 2014 4,473 11% Y-o-Y 2014 Year End (E) 4,540 6% Y-o-Y
Residential
Market Overview

3. New Completions (mn. sq.ft.)
Absorption (mn. sq.ft.)
Vacancy %
Jan-June 2014 3.0 76% Y-o-Y July – Dec 2014 (E) 4.5 -18% Y-o-Y 2014 Year End (E) 7.5 4% Y-o-Y
Jan-June 2014 6.0 29% Y-o-Y July – Dec 2014 (E) 3.8 -22% Y-o-Y
2014 Year End (E) 9.8 3% Y-o-Y
June 2014 11% Y-o-Y 2014 Year End (E) 11% Y-o-Y
Office
Weighted Average Rent (` per sq.ft. per month)
Jan-June 2014 47 -4% Y-o-Y
2014 Year End (E) 48 1% Y-o-Y
Market Overview

4. Residential

5. Launches
Absorption
Bengaluru has been witnessing a steady upward trend in absorption and launches since 2012
While the demand for homes increased by 13% in 2013, it is expected to rise by a marginal 3% in 2014
The total number of units to be absorbed is expected to increase from 57,366 in 2013 to 59,300 in 2014
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
No. of units
Demand & Supply Trend - 2014
Residential Market

6. Unsold Inventory Level - QTS
105,359 units remain unsold as of June 2014 which will take approximately 7 quarters to absorb
Developers have tried to adjust new launches, thus reflecting a 14% decline during H2 2013 compared to H1 2013, and a further 2% decline in H1 2014 as compared to H2 2013
3
4
5
6
7
8
9
No. of Quarters
Long term
The QTS ratio moved up by one notch since Sept 2013, signifying a slight weakening of buyer sentiments in the market
Residential Market

7. H2 2014 Forecast
Half-yearly Launches and Absorption Trend
Election results, revival of manufacturing, higher salary growth in IT/ITeS and various measures announced in the Union Budget seem to have induced a positive change in the home buyer sentiment
Sales volume to increase by 18% in H2 2014 compared to H1 2014
30,537
37,236
42,155
36,145
35,545
36,568
22,935
27,757
31,844
25,522
27,256
32,044
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
No. of units
Launches
Absorption
Sales volume expected to recover in H2 2014
Residential Market

8. Weighted Average Price Trend
Half-yearly Weighted Average Trend
` 4,020/ sq ft
The weighted average price has increased by 11%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
INR/sq.ft.
The weighted average prices are forecasted to increase nominally by 1.5 % in H2 2014 to INR 4,540/ sq. ft. on the back of a moderate recovery in sales volume
` 4,473/ sq ft
Price levels in the city continue to move upwards, albeit at a controlled pace
Residential Market

9. N
Central
M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road
East
Whitefield, Old Airport Road, Old Madras Road, K.R. Puram, Marathahalli
West
Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar
North
Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur, Yelahanka, Banaswadi
South
Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, Electronics City, Kanakapura Road, Bannerghatta Road
EAST
SOUTH
NORTH
WEST
CENTRAL

10. New Launch Analysis
Micro-Market Split of Units Launched
East and West witnessed an increase in the share of new launches in H1 2014
0%
19%
25%
47%
9%
H1 2013
0%
23%
20%
45%
12%
H1 2014
Central
M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road
East
Whitefield, Old Airport Road, Old Madras Road, K.R. Puram, Marathahalli
West
Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar
North
Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur, Yelahanka, Banaswadi
South
Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, Electronics City, Kanakapura Road, Bannerghatta Road
South consistently witnessed a majority of new launches in both H1 2013 and H1 2014, although its share decreased slightly in H1 2014
A preferred destination due to the presence of several IT hubs - Electronics City and Sarjapur Outer Ring Road
North saw a decline of 20%
42,155
35,545
Residential Market

11. Ticket Size Analysis
Ticket Size of Launched Units by Micro Markets
Central
East
West
North
South
During H1 2014, 71% of the units launched in South were within `2.5–5.0 mn
0%
20%
40%
60%
80%
100%
<2.5 mn.
2.5-5 mn.
5-7.5 mn.
7.5-10 mn.
>10 mn.
>20 mn.
Majority of the locations in North have already breached the psychological price point of `4,500/sq.ft., thereby bringing down the sales volume
Residential Market

12. Absorption Analysis
Micro Market Split of Units Absorbed
Locations like Whitefield and Electronics City are witnessing renewed traction since H2 2013
Residential projects along the Outer Ring Road continue to do well
North and West observed the steepest fall in absorption due to apprehension among buyers regarding majority of projects being located beyond established areas
0%
23%
25%
42%
10%
H1 2013
0%
26%
19%
48%
7%
H1 2014
Central
M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road, Richmond Road
East
Whitefield, Old Airport Road, Old Madras Road, K.R. Puram, Marathahalli
West
Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road, Vijayanagar
North
Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur, Yelahanka, Banaswadi
South
Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, Electronics City, Kanakapura Road, Bannerghatta Road
31,844
27,256
Residential Market

13. Micro Market Health
Age of Inventory compared to QTS
Central
East
West
North
South
5
6
7
8
9
10
2
7
12
17
Age of Inventory
QTS
Despite a large unsold inventory, East is the healthiest with one of the lowest QTS and the lowest minimum age of unsold inventory
The health of East is relatively better as the increment in unsold inventory was matched by an increase in absorption
Due to excess unsold inventory from projects launched almost two years ago, South Bengaluru’s health is the poorest
Residential Market

14. Price Movement
Price range in H1 2014 (per sq.ft.)
12-month change
6-month change
CENTRAL
Langford Town
15,000 - 18,000
7%
0%
Lavelle Road
21,000 - 29,000
7%
0%
EAST
KR Puram
4,000 - 6,000
12%
5%
Whitefield
4,500 - 7,500
15%
6%
Marathahalli
4,500 - 6,800
12%
5%
Indiranagar
9,000 - 12,000
8%
0%
WEST
Yeshwanthpur
6,500 - 9,500
12%
5%
Malleshwaram
9,000 - 12,000
8%
5%
Rajajinagar
8,500 - 13,500
15%
6%
Tumkur Road
3,950 - 4,500
9%
6%
Residential Market

15. Price Movement
Price range in H1 2014 (per sq.ft.)
12-month change
6-month change
NORTH
Yelahanka
4,500 - 7,000
13%
6%
Hebbal
5,000 - 9,000
10%
5%
Hennur
4,200 - 5,500
8%
5%
Thanisandra
4,000 - 7,000
10%
7%
SOUTH
Sarjapur Road
4,200 - 7,000
12%
5%
Electronics City
4,000 - 6,000
8%
2%
Kanakapura Road
4,250 - 5,500
10%
3%
Bannerghatta Road
4,200 - 7,000
12%
4%
Residential Market

16. Key Takeaways
Absorption to see a marginal increase with drop in number of new launches by 8% to 72,113 units during 2014
Sales volume to increase by 26% to 32,044 units in H2 2014, compared to H2 2013
The QTS ratio moved from 6 to 7 since September 2013, signifying a slight weakening of buyer sentiment
Bengaluru market to offload its excess unsold inventory in the next 6-9 months
Residential Market

17. Office

18. Vacancy Trend
Office Space Stock and Vacancy Level
Total office stock 109.5 mn.sq.ft.
Occupied 97.9 mn.sq.ft
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
20
40
60
80
100
120
Mn. Sq.ft.
Stock
Occupied Stock
Vacancy (RHS)
Bengaluru has seen consistent absorption over the last 3 years, with vacancy rates dropping steadily every year
This healthy demand in the past years has been responsible for restricting vacancy within 11–18%
The vacancy level during H1 2014 was 11%, down from 14% in H1 2013 and H2 2013
Office Market

19. New Completion and Absorption
Absorption during H1 2014 was around 6 mn. sq.ft. of leased deals, while only 3 mn.sq.ft. of new projects were completed
4.1
3.3
1.7
5.5
3.0
4.5
6.0
3.4
4.7
4.9
6.0
3.8
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Mn. Sq.ft.
New Completion
Absorption
The absorption in H1 2014 reflects a 23% growth over H2 2013, and an increase of 29% over H1 2013
Office Market

20. H2 2014 Forecasts
Office Space Stock and Vacancy Level
The absorption in H2 2014 is expected to slacken - Estimated at around 3.8 mn sq ft.
Total absorption in 2014 to be 9.81 mn sq.ft which will be a 3% increase over the total absorption in 2013
Consistent demand over the next six months will be matched by a higher increase in new completions of 4.5 mn sq ft, thereby ensuring steady rentals
Vacancy to be constricted to 11% by the end of 2014
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
20
40
60
80
100
120
Mn. Sq.ft.
Stock
Occupied Stock
Vacancy (RHS)
Office Market

21. Weighted Average Rents
Weighted average rental in H1 2014 dipped by 4% and 1% compared to H1 2013 and H2 2013 respectively, though an improvement of 7% over H1 2012
Appreciation of 2% projected in H2 2014 with weighted average rentals to increase from `47 per sq.ft. per month in H1 2014 to ` 48 per sq.ft. per month Large quantum of Grade A office space to become operational in the coming months coupled with steady demand
30
35
40
45
50
55
60
INR/sq.ft./month
Office Market

22. Sectoral Analysis of Demand
Share of the IT/ITeS sector has fallen to 54% in H1 2014 from 71% in H2 2013
Other services sector has increased to 24% in H1 2014 from 13% in H1 2013 and can be partly attributed to the rising e-commerce sector
IT/ITeS
Financial Services
Manufacturing
Other Services
H1 2013
64%
1%
22%
13%
H2 2013
71%
3%
12%
14%
H1 2014
54%
6%
15%
24%
Absorption in Manufacturing has increased by 25% in H1 2014 over H2 2013, however it lagged behind H1 2013 by 32%
Office Market

23. Deal Analysis
Average Deal Size and Number of Deals
H1 2014 touched the high of H1 2012 in the number of deals transacted, though H1 2012 had the lowest average deal size
0
40
80
120
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
H1 2012
H2 2012
H1 2013
H2 2013
H1 2014
Number
Sq.ft.
Average Deal Size (Sq.ft.)
Number of Deals (RHS)
H1 2013 and H1 2014 experienced similar deal sizes
H1 2013 saw the lowest number of deals
The average size of transactions has increased to 71,500 sq ft in H1 2014 from 30,035 in H1 2012
30,035
71,500
Office Market

24. Business District-wise Analysis
Micro Market Split of Absorption
CBD and off-CBD office markets are preferred by non-IT companies primarily, who look for smaller office configurations
The dearth of quality space in CBD and SBD have led companies to take up space in PBD markets like Whitefield and the Outer Ring Road (ORR), which have large quantum of new office space
4%
9%
71%
13%
3%
H1 2014
4%
9%
70%
16%
1%
H1 2013
ORR
SBD
PBD East
PBD South
CBD & Off CBD
Office Market
4.7 mn. sq.ft.
6.0 mn. sq.ft.

25. Business District-wise Analysis
The Outer Ring Road (ORR) from Hebbal in the North to Silk Board Junction in the South, has emerged as the leading IT growth corridor in the city
The ORR office market has witnessed transactions of over 5 mn sq ft till June 2014, surpassing the other office markets and maintaining its share at 70% in H1 2013 and 71% in H1 2014
Whitefield continues to remain on the occupiers’ radar with 13% of share of total office space absorption in H1 2014
Office Market

26. Business District-wise Rents
Average rental movement across different micro-markets has been relatively marginal over the last year
Rentals remained constant for most part, witnessing changes between 1–8% during last 6 months, and 3–9% in the last 12 months
The ORR office projects saw the highest appreciation in rentals
Business District
Rental Value Range in H1 2014 (per sq.ft. per month)
12 month change
6 month change
CBD & Off-CBD
72 - 85
- 5%
- 3%
SBD
47 - 78
3%
5%
PBD East
30 - 45
6%
5%
PBD South
30 - 45
3%
1%
ORR
45 - 55
9%
8%
Office Market

27. Key Takeaways
With inventory of around 109.5 mn sq. ft. Bengaluru remains one of the most favoured office space destinations in the country
Healthy demand in the past has restricted vacancy levels within 11–18%
Jan-June 2014 saw demand from eCommerce and manufacturing sectors
Global economic recovery has boosted in the IT/ITeS sector even further and Bengaluru being the IT hub, will reap the benefits
Adequate supply in all markets will ensure steady rentals and consistent demand over the next six months,
Office Market

28. BENGALURU
INDIA REAL ESTATE OUTLOOK REPORT (January – June 2014)
For queries on data, contact Sangeeta Sharma Dutta, Research For any other query, contact Bertilda Fernandes, Marketing