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LIST OF TABLES i
CHAPTER TITLE PAGE NO:
1. INTRODUCTION
1.1 Introduction & Background of the Problem 1
1.2 Objective of the study 4
1.3 Scope of the study 5
1.4 Limitation of the study 5
6. BIBLIOGRAPHY
6.1 Bibliography 61
A STUDY ON REALTY INVESTMENT OPPORTUNITIES IN MAJOR
CITIES AND MARKETS OF INDIA AND US
LIST OF TABLES
1.1. Introduction
In the mid-nineties, the Indian real estate was booming. Projects were
being launched (and sold) across all cities and price points. It turned out that
most of the frenzied buying was being done by investors – both local and
overseas. Towards the end of 1996–97, the party wound up. A bloodbath
followed, investors pulled out and projects were left incomplete. Property prices
halved and in some cases even reached one-third levels vis-à-vis their peaks.
From then on it was a very slow and painful recovery, leaving only the
best men standing, a `going back to the roots’ scenario. A turnaround was
witnessed in 2000 when markets started strengthening; the middle class
consumption (driven by low rates of interest) increased dramatically. Also the off
take by the IT sector has been huge, prices have moved upwards, in some cases
too sharply for comfort. There are opportunities available today for investment
across all types of real estate and across all budgets.
Indian real estate market is roaring thanks to the rapidly growing
economy, soaring stock market, influx of foreign investment and the growing
middle class. Property prices have gone up at least 20 – 25% over the past nine
to twelve months across all segments. While Information Technology (IT) and
Business Process Outsourcing (BPO) companies continue to drive current real
estate growth; the resurgence of manufacturing, organized retail and distribution
warehousing will be the additional drivers in coming years.
According to the Nasscom-McKinsey Report 2006 “The IT industry will
grow at a Compounded Annual Growth Rate (CAGR) of 28% to reach $60 billion
in export revenues by 2010 while the offshore IT solutions business will grow at
25% to touch $35 billion in export revenues, the BPO business will witness a
CAGR of 37% to account for $25 billion of the projected $60 billion”. This will
have a strong influence on the buoyant real estate industry. Much of the current
growth in the real estate sector across India is due to the boom in IT and ITES,
which needs fully-developed properties. This sector is also projected to demand
around 80 million SF of space over the next five years.
Indian property developers are moving to smaller towns and cities due to
faster pace of growth and increase in demand for quality development. Cities like
Ahmedabad, Cochin, Chandigarh, Indore, Jaipur, Mysore and Nagpur are
gaining popularity over the metro cities due to increasing labour, real estate costs
and attrition rates. Many multinationals have unveiled plans for the small cities to
take advantage of the availability of large land parcels at affordable rates,
improving telecom and infrastructure. Software Technology Parks of India (STPI)
will open 12 new software parks across the country targeting primarily tier- II and
III cities. STPI hopes that the proposed parks will generate employment for
around two lakhs people over a couple of years and will have significant impact
on real estate development. Tier- III cities currently provide cost advantages of
15 to 30% over tier I and II cities and will have the effect of prolonging India's
position of global leadership in the off-shoring of IT activities for the next few
years.
The Indian retail sector is set to expand two-fold in the next three years,
with food and apparel segments expected to drive the growth. The UPA- Left
alliance has approved 51% foreign direct investment (FDI) in single brand
retailing however, all FDI proposals will have to be approved by the Foreign
Investment Promotion Board (FIPB). The share of organized retail has gone from
INR 50 billion in 1992 to INR 350 billion in 2005. Around 400 malls, shopping
centers and multiplexes admeasuring to 50 million SF of quality space are under
construction in tier- I and II cities across India.
The overall industries-having a direct bearing on infrastructure and
accounting for 27 per cent weight in the Index of Industrial Production (IIP)-
registered a growth of 8.3 per cent during April-December 2006, which was
higher than the 5.5 per cent registered during the same period in the previous
year. In the first nine months of 2006-07, crude petroleum, refinery products and
electricity generation registered accelerated growth rates.
While its global counterpart may grow a measly 5 per cent, India's
construction equipment sector is growing at a scorching pace of over 30 per cent
annually-driven by huge investments by both the Government and the private
sector in infrastructure development.
With sustained growth in infrastructure, the order book position of the 10
large construction companies in India has gone up by over 50 per cent year-on-
year for the quarter ending June '06. With such bullish prospects in infrastructure,
affiliated industries such as cement are on a high. Cement consumption, for the
first time, is set to exceed the 150-million tonne mark. Reflecting the demand for
the commodity, capacity utilisation rose to over 100 per cent-to touch 102 per
cent in January 2007-with dispatches touching 14.10 million tonnes as against
the production of 14 million tonnes.
As opportunities in the sector continue to come to the fore, foreign direct
investment has been moving northwards. The real estate and construction
sectors received FDI of US$ 289.1 million in the first half of the current fiscal, with
most inflows coming through the popular Mauritius route.
1.2. Objectives and Methodology:
1.2.1. Objectives
To analyze the residential and commercial realty investment opportunities
in India and US.
To find out the real property investment opportunities & prices and rents
prevailing in the major cities of India and in major markets of US.
To analyze the growth reasons of realty investment in each of the major
cities of India and in major markets of US.
To interpret the growth potentials and forecast the investment
opportunities of real property in the major cities and markets.
To suggest the investors to invest in high return and low risk realty
investment available in the major cities and markets based on the
forecasting.
1.3. Scope of the Study:
This analytical research is restricted to four major cities in India and three
major markets in US, because the forecasting, which has to be done, gives
the outlook of the investment opportunities between the major cities in India
and also between the major markets in US. The forecasting is based on long
term perspective on future Indian markets by telling the factors driving the US
markets.
According to Bharat Book Bureau (2005), The rapidly growing real estate
market in India is moving towards maturity with increasing participation from
large local and international players, rising investor interest and a market-friendly
approach. The government’s decisions to allow 100% foreign direct investment
(FDI) and the entry of venture funds in real estate are expected to add to the
growth momentum created by affordable financing options and rising disposable
incomes. Further, there are indications that obstacles such as the absence of
investment instruments in real estate are likely to be removed. Already, real
estate mutual funds have been allowed to be floated in a move industry
observers believe will pave the way for the setting-up of Real Estate Investment
Trust-like structures. Apart from the IT sector, demand for commercial space is
also expected to be driven by the special economic zones, large retail formats
and warehousing.
The real estate market is likely to touch US $xx by 2008, up from US$16
billion in 2004-05.It is estimated that private equity funds would invest about US
$xx in the country’s real estate sector between 2006-2008, attracted by yields
that are among the highest in the region. In mature markets of advanced
countries, developers can at best hope for 5-7% return, but in India, real estate
investment yields are in the range of xx%. The widening demand-supply gap for
international quality real estate space in the A-grade cities like Delhi, Mumbai,
Chennai, Bangalore, Hyderabad and Kolkata has created a spillover demand in
smaller cities. The mounting pressure has raised prices of both residential and
commercial properties in these cities.A look at the demographics and economic
development indices suggest that residential and commercial demand can be
expected to remain high. Increasing disposable incomes, affordable home loans,
urbanization and the emergence of a younger earning age group (aged between
25-45 years) as the largest constituent of population will sustain demand for
housing.
According to India Brand Equity foundation, The real estate story in India
is growing bigger by the day as it continues to receive an ever-increasing influx of
funds. While more than 35 big-ticket foreign funds have already checked in, the
first half of 2007 will see at least 20 more funds making an India entry. Meaning,
US$ 10 billion of foreign direct investment (FDI) will be injected into the real
estate sector.
Merrill Lynch forecasts that the Indian realty sector will grow from US$ 12
billion in 2005 to US$ 90 billion by 2015. Prominent global funds including
Carlyle, Blackstone, Morgan Stanley, Trikona and Warbus Pincus are sitting on a
total corpus of US$ 12-15 billion, say experts.
According to the view of Calvo (2006) The size of the real estate market
has shown a steady growth of approximately 2.3% per annum since 2001. This
growth is fuelled by the increase in the construction of low income residential
homes; commercial space; tourism, oil, hydraulic, electric and industrial
infrastructure.
The main area of growth has been in residential development, not only the
low income segment but also the middle and high-value residential segment.
This is due to the fact that the US government identified and earmarked the
development of residential property and infrastructure as one of the main drivers
in its strategy for economic development.
2.2. Industry Profile
2.2.1. Real Estate
The real estate story in India is growing bigger by the day as it
continues to receive an ever-increasing influx of funds. While more than 35 big-
ticket foreign funds have already checked in, the first half of 2007 will see at least
20 more funds making an India entry. Meaning, US$ 10 billion of foreign direct
investment (FDI) will be injected into the real estate sector.
Merrill Lynch forecasts that the Indian realty sector will grow from US$ 12
billion in 2005 to US$ 90 billion by 2015. Prominent global funds including
Carlyle, Blackstone, Morgan Stanley, Trikona and Warbus Pincus are sitting on a
total corpus of US$ 12-15 billion, say experts.
Retailers in India--the most aggressive in Asia when it comes to
expanding their businesses--are creating a huge demand for real estate. The
Jones Lang LaSalle third annual Retailer Sentiment Survey-Asia revealed that
India topped the chart with 45 per cent expanding rapidly followed by Greater
China at 27 per cent and other South East Asian capitals at 6 per cent.
After IT, it was Real Estate in the pipeline, two years back real estate
showed a beginning of growth, boom and huge profits. This trend followed for
quite long but then came the time for this rosy picture to fade and correction
came into the scene. With the beginning of this correction phase, real estate
turned to be not so attractive, not so profitable and a difficulty for a common man
who desired to own home or one who found himself stuck in the home loan trap.
High profile NRIs are now choosing to come back home, to their own land.
Almost all the major cities, both metros and tier II cities fall on the radar of NRIs
who plan to come back and settle here in India, Bangalore alone has witnessed a
come back of 35000 NRIs. India being an economy that’s growing at a high
pace and seeing innumerable changes in almost every aspect portraits herself to
be a challenge. Thus attracting all those who love to challenge the challenges
and crave to prove themselves all over again by working in a startup. Also, these
high profile NRIs have a lot added to their CVs by their working experience
outside India . Now with India expanding its horizons and with the upcoming of
new and specialized sectors like retail, real estate, financial services, R&D etc it
is the right time for them to gain new experiences and add another feather to
their careers.
With this diaspora real estate is undoubtedly to grow despite of the severe
dip in the domestic demand. NRIs now constitute 20-25% of the total real estate
market and this migration is expected to grow the industry @ 20% annually.
These days all the major upcoming townships, housing complexes etc are being
developed specifically to meet the demands of NRIs. With lavishly done
condominiums, thoughtfully laid out three/four bedroom apartments and
beautifully landscaped villas are few efforts done by realty developers to bag an
amount of 1.5cr to 12cr in a convenient way.
This “Reverse Brain Drain” to what extent will help other sectors and
Indian economy to grow as a whole is still a question, but for sure NRIs coming
back has turned to be a boon for Indian Real Estate Industry.
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Service Line
Domainexpertise/ Analysis
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3.1. Research Design
Research is a process in which the researcher wishes to find out the end
result for a given problem and thus the solution helps in the future course of
action. Redman and Mory defines research as a “systematized effort to gain new
knowledge”
A research design is the arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure. In fact, the research design is the
conceptual structure within which research is conducted; it constitutes the blue
print for the collection, measurement and analysis of data.
Bangalore - Residential
Capital Price (Rs/SF)
12000
10000
8000 H2-05
6000 H1-06
4000
H2-06
2000
0
Cooke Place
Airport Road
Koramangala
Jayanagar
Indranagar
Orchard
Central
Whitefield
Palace
Location
In H1-06, residential market saw uniform rise in prices. The capital values
are increases by a range of 15% to 40% in Cookie town, Palace Orchard and
Indranagar and decreases by almost half in Jayanagar. However, the lease
residential market continued to grow owing to demand from MNC's. The
Bangalore market saw a steady influx of expatriates and regional executives,
which kept the demand high and pressure on supply side.
Bangalore residential market witnessed a significant increase in capital
and rental values since H2 of 2006. Due to less availability of land for new
projects in CBD, the demand has pushed the prices to INR 20,000 PSF in some
locations of CBD. The prime areas like Indiranagar, Airport road & CBD
witnessed an increase of 10-16% in prices while the rentals there increased by
25-35%. In other areas like Cooke town, Jayanagar, koramangala & Whitefield,
the capital values rose by 10% - 18% while the rentals moved up marginally.
Also, progress in the development of International Airport is affecting the prices in
Place 2006 2007 2008 2009 2010 2011 2012 2013
Central 9200 10580 12167 13992.05 16090.86 18504.49 21280.16 24472.18
cooke place 5000 5750 6612.5 7604.375 8745.031 10056.79 11565.3 13300.1
palace orchard 6500 7475 8596.25 9885.688 11368.54 13073.82 15034.89 17290.13
indra nagar 6000 6900 7935 9125.25 10494.04 12068.14 13878.36 15960.12
white field 2300 2645 3041.75 3498.013 4022.714 4626.122 5320.04 6118.046
surrounding areas to some extent.
Rental (Rs/SF/Mo)
60
50
40 H2-05
30 H1-06
20 H2-06
10
0
Jayanagar
Indranagar
Orchard
Airport Road
Cooke Place
Koramangala
Central
Palace
Whitefield
Location
The latest residential market prices in Bangalore as on Mar-07 are listed below.
Bangalore Mar-07
Location Residential
Minimum Maximum
1 M. G Road 2800 4000
2 Cunningham Road 2800 5500
3 Jayanagar 2500 3400
4 Basavangudi 2100 3200
5 Koramangala 1800 2800
6 Ulsoor 1800 3000
7 Langford Road 1600 2800
8 Richmond Road 1600 2800
9 Palace Cross Road 1200 2200
10 Levelle Road 2500 4000
11 Domlur 1500 1800
12 Bannerghetta Road 1100 1600
13 Nagarbhavi 1200 1600
14 R. T. Nagar 1500 1800
15 Cox Town 1800 2500
16 Yelahanka 1150 1600
17 J. P Nagar 1500 2100
18 Augodi 1200 1400
19 Maker Circle 1400 2200
20 Dollars Colony 1600 1800
21 Brigade Road 3000 4500
Interpretation:
Bangalore is the first highest earning city in India with Per Capita
Income of around Rs 2,50,000 which is almost 5 times bigger than Delhi. This
leads to high demand in real estate by appreciating the prices of the real
property.
Average Residential Price per SF at present in Bangalore ranges from Rs
1800 to Rs 2700 with CAGR of minimum 25% and maximum 30% pa.
The costliest residential areas in Bangalore are MG Road, Jayanagar,
Cunningham Road, and Brigade Road with average price per SF of Rs 4100.
The moderate residential areas in Bangalore are Koramangala,
Basavangudi, Ulsoor, Langford Road and Richmond Road with an average
price per SF of Rs 2900.
The cheapest residential areas in Bangalore are Bhannarghatta Road,
Domlur, Palace Cross Road and Nagabhavi with an average price per SF of
Rs 1700.
In 2006, the CBD did not see any major supply, but Outer Ring road and
outer peripheral road witnessed the launch of new projects from well-
established developers like Purvankara, Shobha and Mantri. So, year 2007 is
going to witness substantial supply addition to Bangalore Residential market.
Due to less availability of land for new projects in CBD, the demand has
pushed the prices to INR 20,000 PSF in some locations of CBD.
The high demand for properties on Kanakpura Road has also been
observed due to upcoming NICE Expressway (connecting Hosur Road,
Mysore road & Tumkur Road). Being designed & built on International
Standard, it has made Kanakpura Road the hottest location for builders &
buyers.
4.1.2. India - Chennai
Chennai is the fourth largest metro city in India. It is a major trade center,
being well linked by road, rail and air to important cities besides being a seaport.
Lower operational cost, availability of land and low cost of accommodation
has been the major attracting factors for many domestic and multinational
companies to settle their operations from Chennai.
Chennai is an important base for all the IT majors, including Wipro,
Ascendas, Tata Consultancy Services, Infosys and Polaris. Apart from the Tier I
companies, there are several smaller ones that operate in the IT-Enabled
Services (ITES) and Business Process Outsourcing (BPO) segments. Rising
incomes from the IT, automobiles and electronics sector which form the
backbone of Chennai's business, have been instrumental in pushing up demand
for residential spaces.
On the advent of many multinational corporate houses other than IT and
BPOs, like BMW, Nokia, Hyundai, and St.Gobain setting up their state of the art
production units, real estate business in this Southern Metropolis is on record
growth and apartments which were available at the rate of Rs.75 Lakhs per flat in
2003 has touched the Rs.1 crore level within the last two years period, despite all
odds of lack of infrastructure and all time scarcity in supply of potable water and
electricity. The Tsunami effect brought the prices a bit lower for sometime but it
has again started rocketing up in sea front areas like Mylapore and have seen a
remarkable increase in bookings and the cost of a flat at rate of Rs.50 lakhs and
above depends on the facilities offered.
Demand – Supply Analysis:
The luxury residential areas in Chennai include Adyar, Thiruvanmiyur,
Kotturpuram, Beach Road in South Chennai; Nungambakkam, Chetpet, Poes
Garden, Egmore, Alwarpet, T. Nagar/ Mylapore in Central Chennai; and Anna
Nagar in North West Chennai. South Chennai is a prime residential location with
a good assortment of apartments and independent houses in proximity to the
beach. Central Chennai provides proximity to the central business district. The
North-western Chennai is comparatively a recent development with an
assortment of bungalows and apartments.
As expatriates and MNC executive’s throng the city, demand is shifting to
the central part of city due to its proximity to malls, restaurants and clubs. East
coast road continues to be a preferred location for expatriates looking for Beach
Houses / Independent Bungalows. In H2-05, the demand for independent houses
and apartments reached an all time high with number of queries coming in from
expatriates and MNC executives. The supply was however unable to keep pace
with the steep demand hike and a demand shift was observed towards centrally
located properties.
In H1-06, the demand from expatriates continues to rise in Central and
South Chennai supplemented by the entry of new Multi Nationals such as Nokia,
BMW, Caterpillar etc. However, a demand shift has now been observed towards
the suburbs due to restricted availability of land. The 22-km stretch of Old
Mahabalipuram Road which runs parallel to the East Cost Road (IT Corridor) is
buzzing with real estate development. Huge demand for residential apartments is
being generated by the IT corridor and development of large IT Parks on OMR
Road.
With people getting more familiar to “Apartment culture” in H2-06, a
demand shift from independent bungalows to High- end residential apartments is
currently being observed. The unabated growth of Indian IT and ITES sector is
responsible for increasing demand for residential spaces in Chennai. The influx
of expatriates has also affected real estate market remarkably. In 2006, the city
witnessed a spurt in high-end premium residential projects offering amenities and
social infrastructure to make a complete package of an urban, up market living
for the buyers. Supplementing this, the Government is promoting the area
between Tidel Park and Kelambakkam as software corridor. This area is
emerging as the most preferred location by expatriates as a result of which the
demand & real estate prices have increased substantially.
Trend Analysis:
As a result of the demand shift towards central locations (Boat club,
Besant Nagar, T.Nagar and R.A.Puram) in H2-05, a rise of 16% to 18% in rentals
and 10% to 33% in capital values has been witnessed in these areas. This
demand shift has also led to decreasing capital values in Adyar.
In H1-06, the residential property prices witnessed a substantial increase
in most of the micro markets. The increasing demand led 10% to 20% rise in
capital values in Adyar, Anna Nagar and other sub markets. While the rental
values increased by 10% in most of the central Chennai residential areas except
for T Nagar, which saw an increase of almost 40% from H1. However the rentals
in other areas remained almost stable.
Chennai - Residential
Capital Price (Rs/SF)
16000
14000
12000 H2-05
10000
8000 H1-06
6000
4000 H2-06
2000
0
T Nagar
Adyar
Anna Nagar
Besant Nagar
Nungabakkam
Alwarpet / RA
Velachery
Boat Club
Puram
Location
Chennai - Residential
Rental (Rs/SF/Mo)
60
50
40 H2-05
30 H1-06
20 H2-06
10
0
T Nagar
Anna Nagar
Adyar
Besant Nagar
Nungabakkam
Alwarpet / RA
Velachery
Boat Club
Puram
Location
In Chennai places like T. Nagar, Mylapore, Abhiramapuram, and Adayar
are the most attracted places by the investors for housing since they have good
proximity to schools, hospitals and industrial areas. Also, establishment of more
IT Companies, higher education institutions and hospitals have brought out
tremendous developmental scope to suburban areas such as Old
Mahabalipuram Road, where unlike other places in Chennai have good
availability of water and land area and unpolluted surroundings. Chennai
witnessed a steep price increase in 2005 with an average of 10% increase in
capital and rental values. Residential land and Apartment prices have surged
with prices in the city ranging from Rs.3,000 - Rs.8,000 PSF and areas like Boat
Club have even higher prices. Also, the NRI investment also saw considerable
improvement in the last 4-5 years. Apartments in range between 8 to 20 lakhs
were in good demand and more and more developers engaged in the
construction of luxury apartment business due to higher demands from the
relocating executives and other professionals. Residential plot sale and steep
increase in prices expected even in city outskirts like Kulathur, Teachers Colony,
Britania Nagar, and Vinayaka Puram where prices were at the rate of Rs.65 PSF
to Rs.100 PSF in 2000 have surged up to Rs.250 or more PSF. It is expected to
further increase due to the establishment of a large number of educational
institutions like the one from the famous Velammal Educational Society
Engineering College and schools as well as churches and unpolluted
atmosphere-attracting people to these areas.
Though, the land and real estate prices have gone through the roof for
some Chennai natives but in comparison to other metro cities, Chennai prices
are still sustainable. According to survey conducted in 2005, the average price
for the premium end of the residential market is about Rs 3,000 per sq ft and the
price is likely to go up further. In comparison to this are the top end residential
market in Delhi and Mumbai, ranging between Rs 12,000 sq ft and Rs 15,000 per
sq ft. The IT and ITES drive the lease rentals. In Delhi and Mumbai rent ranges
between Rs 32 to Rs 35 per sq ft, while in Chennai it is Rs 23 to Rs 25 per sq ft.
In retail space, the rental rates in Chennai ranges about Rs 50 to Rs 55 per sq ft
while in Mumbai and Delhi the rates are about Rs 80 to Rs 85 per sq ft.
With the high expansion and face-lifting plans taking place in Chennai the
prices are said to be rising further. The old Mahabalipuram IT corridor is also
seeing a new face. This six-lane highway stretching 20 kms is home to many
MNCs who are setting up operations here. This has resulted in property prices
shooting up in this area. Prices of lands in the Guindy and Ambattur are also
shooting up. A ground costs is anywhere between Rs. 40 - 50 lakhs in Guindy.
Residential property prices have also seen an upswing owing to increased
demand for premium housing apartments as well as budget flats. Typical prices
in Sholinganallur are about Rs 2.5 crores an acre. Even the current residential
market has grown from 30% to that of 35% in one year, within the city suburbs.
Velachery, Mogappair, Gowriwakkam and Koyambedu are good places for
buying property as investments as home rentals have amplified considerably.
2BHK prices start from Rs.10 lakhs and can reach up to Rs 32 lakhs for a luxury
house in these areas. Rents of Rs. 8,000 to Rs. 14,000 can be expected for a
2BHK apartment for a month.
The latest residential market prices in Chennai as on Mar-07 are listed below.
Chennai Mar-07
Location Residential
Minimum Maximum
1 Adyar 1800 2800
2 Alwarpet 2400 2900
3 Besant Road 2200 2900
4 Chetpur / Kilpauk 2100 2700
5 K. K Nagar 1200 1700
6 Tiruvanmiyur 1700 2200
7 Mylapore 2200 3000
8 Nugabakkam 2000 2900
9 T. Nagar 1400 2400
10 Kodambakkam 1500 1800
11 Chamiers Road 2200 3000
Raja
12 1800 3050
Annamalipuram
13 Royapettah 1800 2450
14 Egmore 2400 3000
15 Valasaravakkam 1100 1400
16 Anna Nagar East 1450 2200
17 Guindy 1200 1700
18 Velacherry 800 1100
19 Shastrinagar 1400 2200
20 Ashok Nagar 1200 2200
21 Lloyds Road 1500 2200
Radhakrishnan
22 1500 2000
Road
23 Mount Road 2000 4500
The residential market in Chennai has been growing steadily in the lower
and middle segment. Although the demand for the high-end properties is not as
strong as lower segments, still the developers have started large-scale projects
with improved amenities. With the advent of Myriad software companies, several
foreign banks & booming retail market, capital values and rentals are expected to
rise further in 2007. Also with the relaxation of Foreign Direct Investment (FDI)
norms, some global funds like Government Investment Corporation of Singapore
has invested in Chennai residential market which is going to boost the real estate
scenario in a big way.
Interpretation:
Chennai is the fourth highest earning city with Per Capita Income of
Rs 46,746 in India. This reflects mostly in the prices of the real property.
Average Residential Price per SF at present in Chennai ranges
from Rs 1690 to Rs 2450 with an average increase of 30% pa.
The costliest residential areas in Chennai Metropolitan are Mount
Road (Anna Salai), Adyar, Anna Nagar, Besant Nagar, Mylapore and Raja
Annamalai Puram with an average price per SF of Rs 3450.
The moderate residential areas in Chennai Metropolitan are
T.Nagar, Thiruvanmiyur, KK Nagar, Anna Nagar, and Radha Krishnan
Road with an average price per SF of Rs 2100.
The cheapest residential areas in Chennai Metropolitan are Guindy,
Valasaravakkam, Kodambakkam, and Velacherry with an average price
per SF of Rs 1800.
With people getting more familiar to “Apartment culture”, a demand
shift from independent bungalows to high-end residential apartments is
currently being observed. The unabated growth of Indian IT and ITES
sector is responsible for increasing demand for residential spaces in
Chennai. But the inadequate supply increases the residential prices in
Chennai.
As demand increases and supply decreases in Metro areas, the
peoples are shifting towards suburbs. Residential plot sale and steep
increase in prices expected even in city outskirts like Kulathur, Teachers
Colony, Britania Nagar, and Vinayaka Puram where prices were at the
rate of Rs.65 PSF to Rs.100 PSF in 2000 have surged up to Rs.250 or
more PSF at present.
The average price for the premium end of the residential market in
Chennai is about Rs 3,000 per SF and the price is likely to go up further.
In comparison to this, are the top end residential market in Delhi and
Mumbai, ranging between Rs 12,000 per SF and Rs 15,000 per SF.
The land prices are shooting up. Due to that, residential property
prices have also seen an upswing owing to increased demand for
premium housing apartments as well as budget flats in Metro areas.
In IT highway, the land prices are appreciated like anything due to
high demand from IT Companies. Typical prices in Sholinganallur are
about Rs 2.5 crores an acre, which is appreciated 150% in just one year.
This highway is recorded as fastest growing area in the Chennai city.
As hiring picks up later in the year and more individuals actively seek
work, the unemployment rate is likely to rise modestly to the high-4 percent
range. In 2007, employers are expected to add jobs for the fourth consecutive
year, though growth is forecast to moderate to 0.9 percent, down from 1.2
percent in 2006.
The apartment market is well positioned to stage another strong
performance in 2007. Vacancy will continue to decline, allowing owners to again
raise rents and cut concessions. The pace of improvement will moderate from
2005 and 2006, however, when the condo conversion frenzy led to significant
apartment supply reductions. Based on the current rate of construction, it would
take developers more than three years to replenish stock lost to conversions
since 2004. While the housing market slowdown will lead to the return of
additional condos to the rental market, a temporary increase in competition is not
expected to have a significant or prolonged effect on vacancy. On the demand
side, the renter pool is set to expand dramatically over the next several years.
The homeownership rate in the less-than-25 age group increased approximately
600 basis points to 27 percent between 2000 and late 2005, but has since edged
down to around 25 percent. A large share of new jobs in 2007 will be in higher-
paying industries, which combined with limited housing affordability lends support
to the Class A outlook. Furthermore, the disparity that exists between the
average rent and typical mortgage payment is at its widest point in 25 years, and
even a moderate correction in home prices would have a minimal impact on
apartment demand. The Class B/C sector is again expected to record steady
growth in 2007. Market-wide, vacancy in the sector is forecast to fall below 5
percent by year-end due to the relatively stable pool of renters seeking more
affordable apartments.
Availability of capital has remained elevated over the past year. A wide
pool of mortgage providers, particularly conduits and portfolio lenders, remain
aggressive in financing apartment transactions, which is resulting in attractive
pricing for buyers. Loans of $3 million and more are currently being priced at 95
basis points to 110 basis points above the 10-year Treasury, with debt-service
coverage (DSC) of 1.15x to 1.20x. For smaller loans, the spreads widen to a
range of 115 basis points to 150 basis points, though the DSC falls to 1.10x or
less. In markets with strong rent growth forecasts, it is not uncommon for deals to
be done at a break even DSC.
Apartment investors remain highly optimistic about the market’s future,
and for good reason. Demand-side drivers remain firmly in place, and capital
flows into the sector are holding at high levels. Cap rates softened temporarily in
mid-2006 due to rising long-term rates and a falloff in conversion sales, but the
average has since declined modestly. Market-wide, there is a growing willingness
on the part of private investors to look outside of their home state to achieve
higher yields. Over the past year, private-out-state activity accounted for
approximately 20 percent of total dollar volume in the $5 million-plus segment of
the market, compared with less than 10 percent over the previous 12-month
period. Still-low interest rates, strong capital flows and improving fundamentals
are expected to result in relatively stable cap rates in 2007. At this point in the
cycle, investors are focusing on the potential for growth, placing more weight on
total return than going-in cap rates. Over the past few years, total returns have
come in well above average, driven in large part by price appreciation. While
prices gains will be more tempered in 2007, favorable renter demographics and a
healthy supply-demand balance will support stronger revenue growth and price
appreciation in the years ahead. Cap rates will ultimately tick up as NOIs rise
faster than prices but are not expected to return to long-term averages over the
foreseeable future.
With the local economy growing at a healthy pace in New York, rental
demand in all boroughs of New York City will increase in 2007. Vacancy fell to
less than 4 percent in each of Manhattan’s submarkets last year and will continue
to edge up modestly in 2007. Properties in the Upper West Side and Upper East
Side will maintain a history of low vacancy and consistently strong rent growth.
Additionally, prospective residents are increasingly warming to outer boroughs
such as Brooklyn and Queens, where vacancy is projected to reside in the mid-3
percent range. Apartment properties near transportation hubs in Brooklyn and
Queens seem positioned to perform extremely well in the quarters ahead. On the
development front, completions are projected to rise this year, led by a 50
percent increase in new supply in the borough of Manhattan. Last year, the
median price of properties in the borough of Manhattan rose 19 percent to
$200,000 per unit, an amount that is likely less than replacement cost. Investors
remain willing to accept initial returns ranging from 4.5 percent to 5.8 percent. In
the outer boroughs, meanwhile, deal flow is expected to accelerate as more
owners realize that properties listed for sale draw an expanding number of
interested buyers.
Interpretation:
GDP is expected to increase by 2.7 percent in 2007, after
registering growth of an estimated 3.2 percent in 2006. A spike in oil prices or
steeper-than-expected declines in the housing market are among the key
risks to the outlook.
New York City vaults to the top spot of the NAI this year, propelled
by continued strong employment growth along with the lowest vacancy rate in
the index.
Household Income in New York City is $53,553 and is expected to
be $55,976 in 2007. This raises the demand of the residential apartment and
the median prices are expected to rise sharply in 2007.
Total non-farm employment growth is forecast to decelerate to 0.9
percent in 2007, an addition of 1.2 million jobs. Last year, employment grew
by an estimated 1.2 percent. Expansion is forecast to remain concentrated in
the professional and business and educational and health services sectors,
with weaker conditions expected to persist in manufacturing and construction.
In New York, employers are expected to create 61,500 jobs in 2007, a 1.7
percent increase and up from 45,000 positions added last year. By borough,
Manhattan will lead job growth in 2007 with 42,000 new hires, while an
aggregate 14,000 positions will be added in Brooklyn and Queens.
Adjustable-rate mortgages accounted for approximately 25 percent
of originations in recent years. As loans reset, a growing number of
households will find payments unaffordable. In high-priced markets,
homeowners already spend up to 48 percent of incomes on housing.
Long-term interest rates declined during the second half of 2006
after peaking in July. Short-term rates plateau in the latter half of last year as
the Fed held the Federal funds rate stable after consistently increasing the
rate since 2004. The yield on the 10-year U.S. Treasury will likely continue to
trade in the 4.5 percent to 5.0 percent range through the better part of 2007.
Based on current economic conditions, inflationary pressures
should moderate in 2007. Core inflation is expected to come in at less than
2.5 percent this year. The tight employment market does, however, create
some concerns of building wage pressures.
In US, by year-end 2007, vacancy is projected to improve 20 basis
points to 5.1 percent, compared with a 40 basis point decline in 2006. Rent
growth is forecast to slow modestly, with asking rents expected to rise 4.3
percent, while effective rents advance by 4.8 percent. In New York, while the
citywide vacancy rate is projected to increase 10 basis points to 2.8 percent,
New York City will remain the tightest apartment market in the nation. Asking
rents are forecast to climb 6.5 percent to $2,719 per month in 2007, following
a 6.4 percent jump last year. Effective rents across the city are projected to
rise 6.8 percent to $2,668 per month. New York City will remain the tightest
apartment market in the nation.
Developers will add approximately 3,200 rental units to New York
City this year, with 2,700 units are scheduled for delivery in the borough of
Manhattan and another 500 units in Brooklyn. Within the city, there are
approximately 2,000 units under way that are either non-market-rate units or
additions to small commercial buildings.
Properties in the emerging Chelsea section of Manhattan and other
downtown neighborhoods will attract a greater number of investors.
Redevelopment initiatives in Brooklyn will stimulate greater long-term renter
demand and motivate investors to establish local portfolios sooner rather than
later.
4.2. Commercial Market
For commercial office/Retail market, Delhi and Mumbai are the Indian
cities selected for analysis based on the Indian cities Employment Growth, and
New York Office Market and Phoenix Retail Market are the US commercial
markets selected for analysis based on the US market Average Employment
Inc/Dec and Unemployment Rate.
4.2.1. India – Delhi
Delhi is the capital city of India and also known as the heart of
India. Delhi is the prime location for properties since majority of the government
and private buildings are located in this magnificent city. Real estate Delhi was
and is always on a high, and flourishing.
Delhi is considered as one of the popular and important tourist
destinations in India. About 61% of the total international tourist arrivals in India
visit the capital and among them about 22% of them prefer star hotels. The
number of five star hotels in Delhi is 24, of four star is 8 and of three star is 11.
Occupancy levels in Delhi hotels have witnessed a growth of 11% in 2005-06
and the average room rates have registered a growth of 29%. The significant
growth in occupancy and average room rates indicate the rising demand in the
hospitality sector.
Demand – Supply Analysis:
The commercial areas in New Delhi can broadly be classified into CBD &
SBD with CBD referring to Connaught Place area and SBD referring to Nehru
Place and Bhikaji Cama Place in South Delhi. Over the years commercial activity
has also spilled over to the suburbs of Gurgaon and Noida. Apart from these,
Jasola and Saket are the two upcoming areas with a combination of commercial
and retail developments.
In H1 of 2006, fresh A Grade supply of around 0.2 million sq ft was added
in the SBD. The CBD did not see any new supply for the 3rd consecutive year.
The second half is however expected to witness high level of activity with
addition of around 2.5 million sq ft in the NCR. Out of this, more than 3/4 th is
expected in Gurgaon and the remaining in Noida and Saket. Demand was driven
by IT/ITES looking for a large floor plates (25000 sq ft onwards) in Grade A office
spaces, most of which available in Gurgaon and Noida. In the backdrop of
abysmally small supply, the vacancy levels in the CBD plummeted to an all time
low of 3% to 4% with demand supported by financial institutions and corporate
offices.
H2-06 saw an addition of approximately 2.7 million sq ft of Grade A office
space in NCR with 75% of it concentrated in Gurgaon and the rest in Saket. With
this addition, the Grade A stock in Delhi is estimated to exceed 17 million sq ft.
There has however been no addition in CBD and other sub- markets. With this
addition, year 2007 saw fresh supply addition of more than 6 million sq ft into the
commercial market. H1-07 is expected to see some more supply, out of which
more than 80% will be concentrated in Gurgaon and other suburbs. In Delhi, the
demand for commercial spaces is on a high due to the existing supply crunch
and also because number of companies are relocating from residential to
commercial areas. IT / ITES companies are the demand generators in suburbs
having huge expansion plans, owing to which leasing/ pre leasing of large floor
plates is taking place. In Delhi, the vacancy levels remained as low as 3% to 5%.
Vacancy levels in Gurgaon also plummeted with ever increasing demand,
however the vacancy levels in NOIDA were slightly better ranging from 15% to
20%.
Trend Analysis:
In Delhi NCR rentals have gone up by 25%-30% from H2 of 2005 to end
of H1 of 2006. The CBD market witnessed dramatic increase in rentals as a
result of negligible supply. Capital values have almost doubled whereas rental
values increased by almost 50%. Encouraged by the lack of supply even Grade
B buildings are now charging a monthly rental in excess of INR 100 per sq ft per
month. The Delhi high court asked the Municipal Corporation of Delhi (MCD) to
demolish all illegal structures across the city. This included commercial
establishments operating out of residential area, construction not complying with
the norms, etc. The demolition drive has created an immediate demand for legal
commercial complexes in NCR.
Grade A – Office – Rent (Rs/SF)
Place 2004 2005 Q1-06 Q2-06 Q3-06 Q4-06
Nehru Place 92 98 130 159 200 250
Connaught Place 104 120 146 200 250 275
Gurgoan 36 36 47 54 70 74
Noida 32 32 45 48 50 50
Jasola N/A N/A 83 108 132 174
Saket N/A N/A 90 115 158 190
300
2004
Rent (Rs/SF/Mo)
250
2005
200
Q1-06
150
Q2-06
100
Q3-06
50
Q4-06
0
Nehru Place Connaught Gurgoan Noida Jasola Saket
Place
Location
180
160
Rent (Rs/SF/Mo) 140
Q1-06
120
100 Q2-06
80 Q3-06
60
Q4-06
40
20
0
Nehru Place Connaught Place Noida
Location
With escalating demand and low supply for office spaces in H2-06, the
rentals in Delhi and suburbs of Gurgaon and Noida are mounting up day by day.
With no supply in CBD, the rentals in CBD and Nehru Place increased by a
whopping 25% from last quarter. In the suburbs - Gurgaon, Jasola and Saket,
increase in rentals was quite huge ranging from 11% to 30%.
With IT/ITES sector supporting the demand and with sealing drive hitting
hard on illegal and non - confirming use spaces, H2-06 witnessed a profuse
demand for legal commercial space. Owing to this, the rentals & capital values in
Delhi & Gurgaon rose by 20-30% within a fortnight. With no supply in CBD, the
rentals in CBD and Nehru Place increased by 15%- 25% HoH. While as, in the
suburbs - Gurgaon, Saket and Jasola, rentals shot up by 15% - 35%.
Delhi Mar-07
Location Commercial
Minimum Maximum
1 Karol Bagh 9000 23000
2 Rajendra Nagar 9000 14000
3 Gole Market 10000 32000
4 Chanakyapuri 7000 12000
5 South Extension 7000 11000
6 Defense Colony 7000 9000
7 Greater Kailash 4000 8000
8 Hauz Khas 6000 8000
9 Kalkaji 3000 5000
10 Saket 3000 4500
11 Vasant Vihar 3000 5000
12 Mayur Vihar 4000 7000
13 Malviya Nagar 3200 4500
14 Noida 2400 7000
15 Shastri Nagar 3000 4000
16 Sadar Bazar 3000 4000
17 Kamla Nagar 2000 3000
18 Vaishalli 3500 6500
19 IFCI Colony 3000 5000
20 Rajouri Garden 3000 4000
21 Janakpuri 3500 4500
22 Dwarka 2500 4500
23 Suryavihar 2000 3200
24 Palam Gurgaon 3000 5500
25 Gurgaon (Smaller) 4000 6000
Average 4404 8008
Fiscal 07 is expected to witness an influx of around 11 million sq ft of
space in NCR some of which will be ready only by 2008. In Q1 of 2007, the rental
& capital values are expected to rise by 15-20% due to the lack of new supply in
Delhi except for Jasola. The expected increase in rentals is also attributed to the
fact that new supply coming in suburbs like Gurgaon is already leased out.
Emergence of IT and ITES sector and organized retail are the major
growth drivers of Delhi real estate. Growth of IT and ITES created vast demand
of office space and appearance of malls all over the country tendered huge
scope for land development.
Interpretation:
Delhi is the second highest earning city in India with Per Capita
Income of Rs 53,976.
Average Commercial Price per SF at present in Delhi ranges from
Rs 4400 to Rs 8000 with an average increase of 20% to 30% pa.
The costliest commercial areas in Delhi are Gole Market, Karol
Bagh, Rajendra Nagar, South Extension and Chanakyapuri with an
average price per SF of Rs 20,450.
The moderate commercial areas in Delhi are Defense Colony,
Greater Kailash, Vasant Vihar, Noida and Mayur Vihar with an average
price per SF of Rs 8400.
The cheapest commercial areas in Delhi are Gurgoan, Palam
Gurgoan, IFCI Colony and Janakpuri with an average price per SF of Rs
4600.
In Delhi, the demand for commercial spaces is on a high due to the
existing supply crunch and also because number of companies are
relocating from residential to commercial areas. IT / ITES companies are
the demand generators in suburbs having huge expansion plans, owing to
which leasing/ pre leasing of large floor plates is taking place. In Delhi, the
vacancy levels remained as low as 3% to 5% due to huge demand and
quick absorption.
Fiscal 07 is expected to witness a supply of around 11 million SF of
space in NCR some of which will be ready only by 2008. This huge supply
will meet the demand for commercial spaces and thereby the prices and
rents are expected to increase moderately in 2007.
The CBD market witnessed dramatic increase in rentals as a result
of negligible supply. Capital values have almost doubled whereas rental
values increased by almost 50%. The recent demolition of illegal
commercial building in residential area has created an immediate demand
for legal commercial complexes in NCR.
Noida and Gurgoan are fast growing suburbs for commercial
market as well as residential market in Delhi NCR.
Trend Analysis:
In H1 of 2006, lack of adequate supply and fresh corporate demand in the
CBD led to vacancy levels which went down to an all time low of 5% - 7%.
Financial institutions and MNC’s continued to support demand in the Bandra
Kurla Complex. Capital and rental values in the CBD remained stable with no
new supply and a shift in demand to Andheri Kurla stretch and Bandra Kurla
Complex. The demand shift has led a slight upward pressure on the rentals in
these areas. In Malad and Powai, rental and capital values went up by
approximately 7% to 10% with limited supply catering to the demand. Activity in
BKC was also low due to limited supply and rentals increased by 20% to 25%.
Incidentally, the Badra-Kurla Complex recently witnessed the most expensive
deal when MukeskAmbani’s RIL paid INR 1,104 crore for a 7.5-hectare plot. The
Supreme Court of India overtuned the judgement of the Mumbai High Court,
which had stayed the sale of surplus mill land in the city. As a result of this
judgement, the market is expected to see about 20-25 million sq ft of
development coming on line in the next 3 to 4 years. Out of this, 3-4 million sq ft
would constitute A Grade office space. This is expected to flatten the rental and
capital value curve to some extent. However the impact might not be immediate
or long lasting as this might be quickly taken up as a result of buoyant demand.
350
Rent (Rs/SF/Mo)
300
250
200 2004
150 2005
100 Q1-06
50
Q2-06
0
Q3-06
CBD Anderi Bandra Lower Malad Navi Powai
East Kurla Parel Mumbai Q4-06
Comp
Location
Due to the lack of supply of Grade A space in all micro markets in H2-06,
most tenants prefer renewal of their existing leases to relocation. This has
brought down the vacancy levels to all time low in all the sub markets. The
vacancy levels in CBD are also down to mere 1% -2%. Owing to ever increasing
demand there has been further hardening of rentals in all micro markets. The
capital and rental values increased by 20-30% in Bandra Kurla Complex and
Lower Parel. However the other sub markets like Andheri, Worli/Prabhadevi, and
Malad witnessed an increase of 15% in rentals. Due to low supply levels in CBD
areas, a passive market like Ballard Estate has suddenly become very active and
rentals there along with the surrounding areas have gone up to INR 185-200 per
Sq ft. In IT/ITES driven markets of Malad and Powai, rentals have climbed up to
INR - 55-60 per Sq ft per month.
250
Rent (Rs/SF/Mo)
200 Q1-06
150 Q2-06
100 Q3-06
50 Q4-06
0
CBD Anderi Bandra Lower Malad Navi
East Kurla Parel Mumbai
Comp
Location
In H2-06, the demand from IT/ITES sector, MNC's & financial institutions
continues to dominate the market especially in Malad and Powai, where IT/ITES
companies continue to support the demand amidst zero fresh supply. Owing to
supply crunch, slight demand shift from CBD to north of Mumbai & newly
emerging markets like Navi Mumbai & Thane is being observed. The vacancy
levels have dipped to all time lows especially in markets like AKC, Malad &
Powai. The vacancy levels in CBD are also down to mere 1% -2%. The capital
and rental values have increased by 5-12% in prime commercial locations like
Andheri, Worli/Prabhadevi & Kalina since last quarter. Moreover the office rentals
saw a rise of 19% HoH in Lower parel on the account of strong demand & less
supply. However, with the expected launch of several projects in Lower parel, lot
of activity is going to be seen in near future.
Mumbai Mar-07
Location Commercial
Minimum Maximum
1 Colaba 11000 45000
2 Cuffe Parade 21000 55000
3 Nariman Point 7000 14000
4 Church gate 11000 16000
5 Marine Lines 9000 18000
6 Fountain Area 5500 9000
7 Ballard Estate 8000 14000
8 Kalbadevi 4000 7500
9 Bandra - East 5000 22000
10 Bandra - West 6000 22000
11 Khar - East 5000 18000
12 Khar - West 9000 19000
13 Santa Cruz - East 3000 10500
14 Santa Cruz - West 7000 26000
15 Vile Parle - East 5000 19000
16 Vile Parle - West 8000 14000
17 Wadala 3000 4200
18 Kings Circle 4000 5000
19 Sion 3500 5000
20 Kurla 2000 3000
21 Chembur 4500 6000
22 Ghatkopar 5000 9000
23 Vikhroli 3500 4500
24 Bhandup 3000 4500
25 Vashi 2800 4800
26 Kopar Khairane 2000 3400
27 Airoli 1600 3900
28 Sanpada 1500 3400
29 Nerul 1500 3200
30 Konkan Bhavan 1200 3600
31 Kharghar 1200 3200
32 Kalamboli 900 2400
3.2.3. US – Phoenix
Phoenix is the top market in National Retail Index (NRI). The
substantial amount of construction occurring throughout the Valley is not
expected to slow the Phoenix retail market in 2007. Developers continue to
deliver large retail centers, such as the Tempe Marketplace, to more densely
populated areas. Fortunately, Phoenix will once again boast one of the strongest
economies in the nation in 2007. Despite the cooling housing market and
corresponding decline in cash-out refinancing activity forecast for this year, the
Valley’s tremendous employment and population growth are expected to result in
an 8 percent increase in retail sales in 2007, the highest in the nation.
Trend Analysis:
Despite moderate job growth and elevated energy prices, consumers have
continued to spend at a risk pace. Retail sales growth reached approximately 6.3
percent in 2006, following an advance of more than 7 percent the previous year.
High levels of spending did not come without a price, however, as U.S.
households have consistently spent more than they earned every quarter since
early 2005. Low interest rates and robust home price appreciation led to
unprecedented cash-out refinancing activity, which pumped an estimated $500
billion into the economy over the past two years alone.
While accelerating stronger growth bodes well for the retail sector, it could
also translate into higher production costs and ultimately consumer prices.
Overall, however, most signs suggest inflation will fall back into the Fed’s comfort
zone in 2007, with core prices expected to rise by slightly more than 2 percent,
down from 2.6 percent in 2006. In the near term, the Fed is expected to maintain
its wait-and-see approach, closely monitoring indicators for signs of heightened
inflation or a greater-than-expected deceleration in growth. While unemployment
is forecast to rise in 2007, it is expected to remain below 5 percent. The tight
labor market and slower productivity gains are likely to lead to accelerated wage
growth. Overall, retail sales are anticipated to rise approximately 4.0 percent to
4.5 percent.
Retail market fundamentals are expected to remain relatively stable in
2007 despite forecasts for slowing economic growth. Development has been
largely tenant-driven over the past several years, and forecasts for reduced retail
sales growth are expected to translate into in a slowdown in construction. At the
start of 2007, the number of retail projects under way was still below levels
reported both one and two years earlier. A handful of big-box chains have
announced reduced expansion plans for this year, with Wal-Mart among the
latest to hit the list.
Retail prices and cap rates have become more reflective of property
quality, location and tenant-credit, a trend we anticipate will become more
apparent through 2007. Over the past year, the gap between buyer and seller
expectations has widened, leading to a 20 percent decline in sales velocity. The
return to more normalized conditions, however, is to the benefit of the market’s
long-term health. The risk premium was nearly erased from the retail market in
the first half of 2006, as rising interest rates caused the spread between cap
rates and the 10-year Treasury yield to narrow dramatically. Interest rates have
since subsided, and both the lending environment and retail fundamentals
remain healthy, but there are risks emerging.
Household
Asking Rent Completion Income Vacancy Rate Unemployment
Phoenix (In Million
Retail (In $) SF) (In '000) (In %) (In %)
2004 17.23 4.1 52.708 4.7% 4.40%
2005 17.88 5.9 54.525 4.5% 4.10%
2006 18.50 8.8 57.288 4.6% 3.50%
2007** 19.20 7.2 58.839 4.9% 3.30%
5.1. Findings
5.1.1. Residential Markets
US
From the interpretation given for New York Market in US, the
researcher conclude the factors that drive the residential markets and their prices
and rents are
Increasing Household Income
Declining Long term Interest Rate
Low Inflation Rate of below 2.5%
Increasing Employment Rate
Perfect Demand – Supply match
5.2. Suggestions
For Investors in India
For short term perspective, the investors need to consider the
current demand and supply and CAGR of appreciation price and rents for
investing in real property in India.
For long term perspective, the investors need to consider the
factors like household income, unemployment rate, vacancy rate,
absorption rate, CAGR of median price and rents which are currently
driving the US market for investing in real property in India, because the
factors which are driving the current US markets will be the factors for
Indian market in 20 years down the line.
For Investors in US
In US, the investors need to consider the same factors which are given
above for investing in real property.
5.3. Conclusion
Real Estate is one of the fast growing industries in India while in US, real
estate is structured as well as developed one. In US, real estate investments are
comprises of large number of investment with smallholdings. But in India, low
number of investment with large holdings. At present in India, generally real
estate investment with right decision gives high return. Because of the fact that
the real estate is un-developed and unstructured in India, there is a possibility for
investors to invest in wrong realty investment. And the scope and opportunity of
the investments in India is very low when compared to US. GRO is a company
that services only to the US Real Estate Industry. GRO need to know the best
market and the opportunity of both residential and commercial realty investment
in the markets.
This research met all secondary objectives and covers the need which
specified in the need for the study. This research analyses the current markets
based on the demand and supply curve and past price and rent movement curve.
From this analysis, this research forecasts the future movement of prices and
rents. This research also suggests the investors about the investment
opportunities in short term as well as long term perspective for both India and
US.
Place 2006 2007 2008 2009 2010 2011 2012 2013
Central 9200 10580 12167 13992.05 16090.86 18504.49 21280.16 24472.18
cooke place 5000 5750 6612.5 7604.375 8745.031 10056.79 11565.3 13300.1
palace orchard 6500 7475 8596.25 9885.688 11368.54 13073.82 15034.89 17290.13
indra nagar 6000 6900 7935 9125.25 10494.04 12068.14 13878.36 15960.12
white field 2300 2645 3041.75 3498.013 4022.714 4626.122 5320.04 6118.046
30000
25000 Place
Central
20000
RENT
cooke place
15000
palace orchard
10000
indra nagar
5000 white field
0
1 2 3 4 5 6 7 8
YEAR
14000
12000
Nungabakkam
10000
Anna Nagar
RENT
8000
Adayar
6000
T nagar
4000
2000
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR
TREND ANALYSIS FOR DELHI
400
350
300 Nehru Place
250
Noida
RENT
200
Jasola
150
100 Saket
50
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR
400
350
300 Nehru Place
250
Noida
RENT
200
Jasola
150
100 Saket
50
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR
TREND ANALYSIS FOR MUMBAI
500
400
CBD
300
RENT
Anderi East
200 Lower Parel
Powai
100
0
2006 2007 2008 2009 2010 2011 2012 2013
YEAR
600
500
400 CBD
Rent
100
0
2006 2007 2008 2009 2010 2011 2012 2013
Year
Trend Analysis-Phoenix
50
40
30
Rent
retail
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013
Year
6.1 BIBILOGRAPHY
Websites
www.google.com
www.costar.com
www.cushwake.com
www.colliers.com
www.census.gov