Etching a new development path October 2014

Hyderabad 2022

Hyderabad 20222

State of HyderabadDevelopment Milestones and Key Policy Changes

Beginning of the IT Era• IT Driven investments in

the city• Growth in city’s GDP• Hyderabad slowly attracting

investments• IT Incentives Policy -

released• Hitec City Layout 158 acres

- announced• IIIT and ICICI Knowledge

Park established

Policy and infrastructure strengthening to support economic development • Investment sentiments strengthen in

Hyderabad due to announcement of infrastructure projects and policies

• Biotech Policy and ICT Policy 2005-2010 released

• Genome Valley announced• Hyderabad Airport Development

Authority constituted• Microsoft’sfirstcampusinIndiastarts

operations in Hyderabad • CII- Sohrabji Godrej Green Business Centre;India’sfirstLEEDPlatinum Rated building is operational

• Multi Modal Transit System (MMTS) commenced operations

• Hyderabad awarded “Clean and Green city” for four consecutive years.

• IIIT and ICICI Knowledge Park established

State of the art infrastructure developments and beginning of the global financial crisis • IT industry slowed; reduction in

manpower started.• Investments came to a stand still as theglobalfinancialcrisisbegan

• Rajiv Gandhi International Airport commenced operations

• Nehru Outer Ring Road Phase I commenced operations

• Hyderabad Metropolitan Development Authority 7,257sq km constituted

• GVK One Mall and Inorbit Mall commenced operations

• PVNRExpressWayopened

Investments flow in• Hyderabad turned out to be an investor’s

haven with proactive government support and availability of unlimited FSI

• Golden Mile Layout Kokapet Land auctions

• Foreign Direct Investments (FDI) flowinHyderabad.Forexample-JPMorgan invested USD100 million in Aparna Constructions and Trinity Capital invested in Manjeera Constructions.

• GradeAofficestockinHyderabadsurpasses 10 million sq ft

• Greater Hyderabad Municipal Corporation 635 sq km constituted

Development slows • India starts recovering but

Hyderabad does not recover due to political instability

• Development activity slows down in the city

• Investors cautious of their investments and take a wait and watch mode

• GradeAofficestockinHyderabad doubles to 20 million sq ft

• New ICT Policy 2010-2015 released

1990-2000 2008-20092001-2005 2010-20112006-2007

Hyderabad 2022 3

Political instability - Sentiment remain weak • No new companies starting

operations in Hyderabad• Existingcompaniesexpanding

or consolidating• Hyderabad Metro Rail start

construction work for Phase I• Onset of G.O 245 surges

residential launches• Residential sales improved

Beginning of a New Era • Telangana State formed.

New development projects announced

• Political stability along with low property valuations brings Hyderabad again on the investor’s radar

• GradeAofficestockinHyderabad increases to 30 million sq ft

• Manjeera Mall and Forum Sujana Mall start operations

• Residential launches improve in the city

• New Industrial Policy to be announced soon

Pre-Election Era Sentiments slow down • Formation of Telangana State

announced.• Political conditions remain

unstable due to impending elections

• Investments remain slow and cautious as investors take a wait and watch mode before elections

• Residential prices increase marginally due to increase in construction cost and cost of capital

Etching a new development path• New policies• Real estate investments are expectedtoimprove

• Hyderabad Metro Rail to be operational

• GradeAofficespacedoubles• 5 million sq ft of fresh mall space

to be operational• Officespacetodoublefromthat

in 2014 to reach about 65 million sq ft.

• Nehru Outer Ring Road to be fully operational

• MMTS Phase II to be operational

2013 20142012

Legend: Market Sentiment

Favourable Neutral Unfavourable

2014 20142015-2022

Hyderabad 20224

Hyderabad - A Mega City in the Making

Hyderabad 2022 5

Population

million8.6

Annual Growth rate of

Population3.3%

Total Household

million1.9

Working Population

Total Population45.5%

Hyderabad 20226

development. There have been fresh investments from national developers into the city for residential developments. Residential launchesofluxuryvillasandmidandaffordablesegmentapartmentshave increased. Companies such as Amazon, Cognizant and Deloitte expandedinthecityandleasedofficespace.Enquiriesfornewofficespacehavealsoincreasedoverthepastfewmonths.RetailbrandssuchasMarksandSpencer,Max,MegamartandRelianceRetail also increased their footprint in the city. Best Price - the cash andcarryformatbyWalmartalsostartedtheirstoreinHyderabad.WalmarthasalsoleasedspaceinHyderabadtostarttheirEasydayformat. New malls became operational and new retailers entered the Hyderabad market to test the waters. Hyderabad has witnessed a few manufacturing MNCs starting operations in the city. In terms of infrastructure development, the Hyderabad Metro Rail project is ongoing at a fast pace while the Nehru Outer Ring Road project is about to become fully operational. Overall, although things are moving at a slow pace, positive sentiment is slowly seeping into the real estate market. This activity is likely to etch a new path for development of the city by 2022.

Hyderabad is known for its state-of-the-art infrastructure. Hyderabad alsorankedthirdintheLiveabilityIndex2013afterMumbaiandChennai.TheLiveabilityIndexgaugesqualityoflifebasedonmanycritical parameters essential for citizens. The cost of living is also lower in Hyderabad compared to cities such as Pune and Chennai, according to the database of Numbeo. In addition to this as per United Nations Global Compact Cities programme’s sustainability assessment tool “Circles of sustainability”, Hyderabad is seen to be within or above the satisfactory range in most sustainability parameters that were assessed.Moreover,theUnitedNationsreport,WorldUrbanizationProspects - The 2014 Revision, states that Hyderabad is projected to beamegacityby2030alongwithsixothercitiesinIndia.Hyderabadhas all the qualities needed for witnessing strong development. All it needs at this point of time is an improvement in business and investor confidenceinthecity.Assuch,Hyderabadhastobeprepared,withpolicy support from the state government, to attract new business and investment into the city. Proactive support from the state government canbringbacktheinvestorconfidenceintothecityandgiveapushto the development. The Central Government plans to develop 100 smart cities and housing for all by 2022. This is a great opportunity forHyderabad.WiththejointeffortofthegovernmentandpeopleofHyderabad, the city can be brought back to the growth trajectory and it candefinitelybedevelopedintoaSMARTCITYby2022.

Hyderabad is more than 400 year old city with rich cultural heritage and cosmopolitan social structure. Hyderabad is the capital of the newly formed state of Telangana. Andhra Pradesh has been bifurcated into two successor states - Telangana with ten districts and Andhra Pradesh with thirteen districts. Hyderabad will be the joint capital for bothstatesforthenexttenyears,untilanewcapitalcityforAndhraPradesh is formed. Hyderabad has a total population of 8.6 million, accordingtotheUnitedNations-WorldUrbanizationProspects-The2014Revision.However,theinitialfindingsoftherecentlyconductedintegrated household survey by the Government of Telangana revealed that the total population of Hyderabad is more than 12 million. As the findingsofthesurveyhaveyettobereleasedformally,wehaveusedthe population reported by the United Nations for all the estimations in this study. Almost half of the population of Hyderabad form the working population and the population of the city has been witnessing an annual growth rate of 3.3%. Although Hyderabad has faced many challenges that hindered its growth for the past few years due to the globalfinancialcrisisandpoliticaluncertainty,itisnowslowlysettingits path towards growth again. The new state government has great plans for the development of Hyderabad, to improve its brand value andcreateemployment.Withstate-of-the-artinfrastructureandtheimproved business environment, Hyderabad will return to its growth trajectory.

Hyderabad was traditionally a service and manufacturing based economy. In the late 1990s, as the IT revolution started in the country, Hyderabad emerged as one of the key cities for IT growth. This IT development drove the real estate and infrastructure development of the city. The proactive government support and the state-of-the-art infrastructure plan for the city attracted investors and developers from across the globe to move into Hyderabad. Other sectors, such as pharmaceuticals, semiconductor and telecommunications, also started growing in the city, leading to the overall development of the city. This economic activity increased employment opportunities in the city, thereby increasing the demand for housing, retail and hospitality. Hyderabad witnessed development of IT parks and IT specialeconomiczones(SEZs),mallsandlarge-scaleresidentialdevelopments. However, as the political conditions turned unfavourable, the city witnessed a slowdown in investment and construction activity.

The declaration of the new state and political stability came in June2013.Thishasslowlystartedtoinjectnewlifeintothecity’s

Hyderabad 2022 7

Source: United Nations- World Urbanization Prospects-

Source: United Nations- World Urbanization Prospects-The 2014 Revision, JLL Research

Estimated - Population Growth

1990 2014 2022 2030

million4.2

million8.6

million10.5 million

12.8

ECONOMICS

• Production & Resourcing• Exchange&Transfer• Accounting & Regulation• Consumption& Use• Labour&Welfare• Technology & Infrastructure• Wealth&Distribution

POLITICS

• Organisation & Governance• Law&Justice• Communication & Movement• Representation & Negotiation• Security & Accord• Dialogue & Reconciliation• Ethics&Accountability

ECOLOGY

• Materials&Energy• Water&Air• Flora & Fauna• Habitat & Land• Place & Space• Constructions & Settlements• Emission&Waste

CULTURE

• Engagement&Identity• Performance & Creativity• Memory & Projection• Belief & Meaning• Gender & Generations• Enquiry&Learning• Health&Wellbeing

HYDERABAD

CIRCLES OF SUSTAINABILITY

VibrantGoodHighly SatisfactorySatisfactory+SatisfactorySatisfactory-Highly UnsatisfactoryBadCritical

Hyderabad 20228

Housing - On the Road to Revival

The IT driven development caused immense migration in Hyderabad, and this created a surge in the residential real estate demand in the city.Thepopulationinflowfromallincomegroupscreatedasurgeinthedemandforalltypesofhousing,fromtheluxurysegmenttothemid and affordable segment. Traditional residential locations of the city witnessed an increase in rents and capital values, as they were well connected and had established social infrastructure around them. As the city’s road infrastructure gradually improved, new locations opened up for the development of housing in the city. Developers and government housing departments started building housing projects to cater for the rising demand. Most of the development was witnessed in the western part of the city in areas close to Hitec City and Gachibowli. However, the economic recession followed by the political instabilitysignificantlyaffectedtheresidentialrealestatemarket.

The residential sector was one of worst hit realty sectors by political instabilityofthepastfewyears.WhileotherIndianmetrocitieswitnessed improvement in demand and appreciation in residential unit’s prices from 2010 onwards, Hyderabad struggled to recover due to political instability. Despite of low prices and quality infrastructure, demand for residential units in the city from investors totally dried up. Most of the demand for residential units in Hyderabad were from end-users during the past four years. Residential sales were low, and developers were unable to increase prices while the cost of construction was increasing. As developers were already troubled by the increasing cost of capital, there were fewer construction projects launched. Only mid and affordable segment projects witnessed good sales. Another reason for the decrease in sales was the demand-supplymismatch.Whilethelatentdemandinthecityforhousingremained in the mid and affordable segments, the projects launched did not match the affordability level of potential buyers. However, political stability has improved the sentiment of the city this year. Interestingly, developers are entering joint development agreements with landlords to capitalise on the current low property valuations. Capital values, which remained stable for a long time, have slowly

started increasing as new launches have been at prices higher than the market average because of the increased cost of capital, construction, marketing and other miscellaneous costs.

TheWesternZone,whichisthemostactivemarketinthecity,witnessedsignificantpricefluctuationsoverthepastfouryears,accordingtotheNationalHousingBank(NHB)Residexindex.However,theindexclearlyindicatesthatpricesinthiszonehadrecovered by 2012. However, in 2014, after the announcement of the newstate,theindexagaindroppedmarginally.Thisisatemporaryphase, as the new government was only formed a quarter ago and it will take some time for sentiment to improve. This is likely to lead again to an increase in prices going forward. Most of the new projects launched in this zone are priced above the market average.Meanwhile,theEasternZone,whichisdominatedbymiddleand lower middle class housing and has witnessed a consistent increase in prices due to the steady demand for housing in the zone. Hyderabad is still a buyer’s market due to its low pricing. However this opportunity of window is likely to close as the demand is slowly picking up with increase in employment opportunities in the city going forward.

There is immense potential in Hyderabad for affordable and mid segment housing. Hyderabad faces an acute housing shortage, especially in the mid and affordable segments, that is likely to increase further by 2022 if adequate measures are not taken. However, this can only be possible with the focused support from the government to improve infrastructure to open new land parcels or make available unused land parcels . New developments, such as the Information Technology Investment Region (ITIR), Pharma CityandtheEducationHub,arebeingplannedforthecity.Thesedevelopmentsareexpectedtoimprovetheemploymentopportunitiesin the city. Consequently, an increase in employment opportunities in Hyderabad will drive the demand for housing. Moreover, with the increase in demand and the improvement of infrastructure, the prices of residential units in Hyderabad are likely to double by 2022.

Hyderabad 2022 9

Index base: 2007 = 100 Source: NHB Residex

Hyderabad - Localities Pricing Index250

200

150

100

50

01H11 2H11 1H12 1H132H12 2H13 1H14

Index

SouthZone CentralZone EastZoneWestZone NorthZone OtherZone CityIndex

NHB-Zoning of Localities in Hyderabad

Zone Localities

Central Zone

Mehdipatnam, Abids, Kachiguda, Narayanguda, Himayathnagar, Tolichowki, Khairatabad(West),Panjagutta,Ameerpet,SrinagarColony,Somajiguda,JubileeHills

North Zone Qutubullapur, Alwal, Malkajgiri, Begumpet, Marredpally, Tarnaka

South Zone Kanchanbagh, Begumbazaar, Rajendra Nagar

East Zone Kapra, Uppal Kalan, L.B.Nagar

West Zone Serilingampally, Patancheruvu / Ramachandrapuram, Kukatpally

Other Zone ShamshabadHyderabad-LocalitiesPricingIndex

Source: JLL REIS & Research, Slum Free City Plan for Greater Hyderabad Municipal Corporation and Indicus

2011

Estimatedadditional0.7 million houses

along required in 2022Housing

shortage of 0.5 million

2014 2022

1.6 m

illion

1.9 m

illion

2.3 m

illionHo

useh

olds

Comparison of Hyderabad with other Indian Metros

Index base: 2007 = 100 Source: NHB Residex

400

350

300

250

200

150

100

50

01H11 2H11 1H12 1H132H12 2H13 1H14

Index

Ba

se 20

07=1

00

Ahmedabad Bengaluru Chennai Delhi Hyderabad Kolkata Mumbai Pune

Housing Shortage in Hyderabad

Hyderabad 202210

Office Space - Rental Recovery

Hyderabad witnessed strong growth lead by the development of IT industry. The western part of the city was designated for the developmentofofficespace.HitecCityLayout,KnowledgeCityandthe Financial District, etc. were planned to develop the IT hub in Madhapur, Kondapur, Gachibowli, Nanakramguda and surrounding locations. There were developments of IT parks, IT campuses and SEZsinthecitytoaccommodatethecorporateofficedemandinthecity. Major developers, such as L&T, K Raheja Corp and Ascendas, invested in the city to develop IT parks. Hyderabad has several Fortune 500 companies, such as Microsoft, Computer Associates, GE,IBM,Motorola,DelloiteConsulting,Oracle,Google,Dell,FranklinTempleton, Convergys, Bank of America and Verizon. Microsoft has its largest product development centre in Hyderabad and its biggest facility outside its headquarters in Redmond, US. Domestic IT giantssuchasSatyam,Wipro,Infosys,TCS,CognizantTechnologySolutions, Polaris and Infotech have their campuses in the city. To accommodate further growth of the IT industry and decentralise the developmentacrossthecity,ITparksandSEZswereplannedinotherperipheral locations of the city.

Although the city witnessed a slowdown in leasing activity over the past few years, leasing activity improved in 2014 in line with an improvement in the political environment. Many fence-sitting occupiers/tenantsactivelymadedecisionsonexpansionafterthepoliticalenvironment stabilised. The city did not witness any new occupier setting up operations during the period of political instability. However, existingoccupierssuchasCognizant,Google,OracleandAmazonexpandedtheiroperationsinthecityduringthatperiod.Asdemandinthecityimprovedin2014,therentsofofficespaceappreciatedinthecity.ThisisclearlyindicatedintheNaukriJobSpeakIndex,whichindicates a 17% increase in hiring in Hyderabad between August 2013 and August 2014. However, rents and capital values continue to remain lower than their previous peaks in 2008.

Going forward in 2014 and in 2015, rents and capital values are likely to appreciate at a rapid pace, as there is limited supply in the pipeline

forthenext15months.By2015,rentsandcapitalvaluesarelikelytoreachtheirpreviouspeakswitnessedin2008,ormayevenexceedthem. From the second half of 2015 onwards, rents and capital values will continue to appreciate, albeit at a moderate pace. By 2022, the city is likely to witness a further increase in demand

DemandforofficespaceinHyderabadcanbeimprovedbyattractingnew companies in the city by sorting out infrastructure challenges like availability of adequate power supply, improving public transport etc. Also by development of alternate growth drivers like manufacturing, pharma,gamingetc.Thesealternateindustriescansurgeofficespace demand especially in Grade B buildings along the prime high streetsofHyderabadlikeBanjaraHillsandJubileeHillsandstand-alone buildings in Madhapur, Kondapur and Gachibowli etc. which are currently not being much preferred by IT companies. However these buildings face the challenge of not having adequate parking space which can be sorted if Hyderabad Metro Rail can provide parking space for the occupants of these buildings. Once operational, new developments,suchastheITIR,arelikelytoincreaseofficespacedemand and supply in the city by attracting IT investments. Apart from this, Hyderabad is likely to witness another 32 million sq ft of new officespacesupplyby2022.Thisislikelytodoublethecurrentofficestockinthecity,expectedtobe63millionto65millionsqftby2022.Most of this supply is likely to come in the western part of the city. Rents and capital values are also likely to appreciate at the rate of 5% annually.

Hyderabad 2022 11

Grade A Office - Demand Supply and Vacancy rate

Source: JLL Research and REIS

09

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0 0%

4%

8%

12%

16%

20%

10 11 1312 14F

Perce

nt

Thou

sand

sq ft

Take up(net) Completions Future Supply Vacancy Rate

Rents and Capital Values Index

20140

20

40

60

10

30

50

70

GradeAOfficeStockdoubles in 2022

2017 2022

Stoc

k in

millio

n sq f

t

2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 1H12 1H13 1H142H11 2H12 2H13 2H14

110

100

90

80

70

60

50

40

Index

IndexBase:2H

07=100

RentalValueIndex CapitalValueIndex

Grade A Office Stock

Hyderabad 202212

Malls - On the Retailer’s Radar

Hyderabadhasamixofbothtraditionalandcontemporaryretaildestinations.Whiletheoldermarketsinthecityarepopularfortraditional goods such as local fabrics, arts and crafts, the new markets are more organised and have a presence of local, national and international retailers. The development of organised retail in Hyderabad started with the development of IT and the increase in disposable income and increased interest for branded goods. Most of the organised retail development in the city was along the high streets due to the limited availability of mall space. This trend, however, continues today, as the supply of mall space in the city has been limited and many malls delayed operations post 2008 due to the economic slowdown.

Although high streets continue to dominate most of the retail leasing in Hyderabad, malls in Hyderabad also witness good demand. GVK One, Inorbit Mall, Manjeera Mall and the recently operational Forum Mall have a presence of reputed retailers. There is also a presence of local, national and international developers. Hyderabad has strong retail potential and, given the growth in economic activity and employment opportunities, the demand for retail is likely to remain stable. Hyderabad currently has four key malls - GVK One, Inorbit Mall, Manjeera Mall and Forum Mall. These four malls have agoodtenantmixandmallmanagementinplacefortheefficientmanagement of the mall. The malls have a presence of brands such asGucci,SatyaPaul,TommyHilfiger,W,NeeruElite,FabIndia,Pantaloons,Globus,Max,ShoppersStopLifestyle,Zara,Mango,Bose and Promod.

Leasing activity improved in 2014. Business sentiment improved following the election and after the formation of the new government with a majority of seats in parliament. This resulted in fence-sitting retailerstakingpositivedecisionstowardsexpansionoftheirexistingbusiness. Consequently, leasing activity improved. Malls in Prime Central sub-markets such as GVK One and City Centre witnessed a

churn of space. Although the supply of mall space in the city remains limited, Forum Mall recently commenced operations. Although the mall is currently only partially operational, it has introduced many new brands to the city.

Overall rents appreciated marginally in 2014 as demand stabilised. However, retailers have become very cost-sensitive since the global financialcrisis,anddevelopershaverefrainedfromincreasingrents aggressively as this may discourage retailers from taking up space in Hyderabad, although the supply of mall space remained low.However,astheeconomicenvironmentofthecityisexpectedto improve in the years ahead, rents are likely to appreciate further at a rapid pace. Based on the population and economic growth of Hyderabad, by 2022 Hyderabad shall require a mall space of about 8-10 million sq ft out of which about 5 million sq ft of malls are already under planning.

Hyderabad 2022 13

million sq ftGrade A mall

space

2014 2022

million sq ftGrade A mall space needed

million sq ftfresh supply planned

Rents and Capital Values Index

Source : JLL Research and REIS

2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 1H12 1H13 1H142H11 2H12 2H13 2H14

110

100

90

80

70

60

50

40

Index

IndexBase:2H

07=100

120

RentalValueIndex CapitalValueIndex

Retail Mall- Demand and Supply

Hyderabad 202214

Central Hyderabad (Established

Begumpet, Somajiguda, Raj Bhavan Road and Himayat Nagar

Location Advantage: The central business district of Hyderabad housesmajorbanks,hotelsandofficespace. This location is also home to manypremiumandluxury,nationaland international retail brands and experienceslargevolumefootfall.

RE parameters: This location is dominated by high streets and malls such as Hyderabad Central. Prime high streets that house local as well as national and international brands are Begumpet, Somajiguda and Himayat Nagar. This location enjoys good demand from retailers; however, the availability of quality retail space is a challenge. As a result, retail rents are between INR 100 and INR 130 per sq ft per month on the high streets.

Outlook: As there is less scope for new development, the supply of quality retail space is restricted. However, good footfall in this location will be the key attraction to drive retailer demand.

Off Central Hyderabad (Growing)

Banjara Hills and Jubilee Hills

Location Advantage: The premium residential location of Hyderabad housesluxuryresidentialprojects,primehotels and malls. It connects the central part of Hyderabad with the IT hub of the city - Hitec City. Therefore, it witnesses officeandretaildevelopmentsalongitskey high streets.

RE parameters: This location has the GVK One Mall and it houses many premium and luxury,nationalandinternationalbrands.Thehigh streets house designer boutiques and premium lifestyle stores. This location enjoys good demand from retailers because of the surrounding catchment area. Retail rents are between INR 110 and INR 150 per sq ft per month on the high streets and between INR 150 and INR 200 per sq ft per month for vanilla outlets in malls.

Outlook: There is scope of development, as many residential streets are being redeveloped as commercial properties. These developments, along with the development of high-end residential projects,willdriveluxuryretailer demand in this cluster.

West Hyderabad (Growing)

Madhapur, Kondapur, Hitec City and Kukatpally

Location Advantage: This fast emerging retail destination has established IT business development in the cluster. The most preferred IT and residential suburb of Hyderabad. Good connectivity and availability of social infrastructure attracted overalldevelopmentandithasluxuryresidential projects, prime hotels and malls. It witnesses strong demand for retail due to the rising population of IT employees.

RE parameters: This location is home to Inorbit Mall and Forum Sujana mall. Many prominent malls, such as Manjeera Trinity, City Capitol and SLN Terminus, are under construction in this cluster. Prominent high streets are also emerging that have a good brand presence. This location is growing rapidly and enjoys good demand. Retail rents are between INR 150 and INR 180 per sq ft per month in a mall, while high street rent is between INR 100 and INR 120 per sq ft per month.

Outlook: There is scope for new development in this location. There are a few goodmallsexpectedtobeoperational. Development ofofficespaceandresidential projects in this cluster will be the key attraction to drive retailer demand.

North Hyderabad (Emerging)

Vikrampuri, Karkhana Tirumulgiri and Dr A S Rao Nagar

Location Advantage: This cluster is experiencingmorehighstreetretailactivity. Mostly houses the upper-middle-class population. This location has the cantonment area and many residential colonies, and witnesses good demand for retail. Many brands have factory outlets in this cluster.

RE parameters: Predominantly high street developments. Mall supply is a concern in this cluster. Rents in this cluster range between INR 80 and INR 100 per sq ft on the high streets for good quality properties.

Outlook: There is scope for development. Developments of villas are expectedtodrivedemandin the cluster.

South Central Hyderabad (Emerging)

Dilshuknagar and LB Nagar

Location Advantage: This cluster is experiencingmorehighstreetretailactivity. Mostly houses the upper-middle-class and middle-class population. This location has many old residential colonies and witnesses good demand for retail.

RE parameters: Predominantly high street developments. Prajay Princeton Mall is operational in this cluster. However, mall supply remains a concern in this cluster. Rents in this cluster range between INR 80 and INR 100 per sq ft on the high streets for good quality properties.

Outlook: There is scope for development in this cluster, as there are many new residential projects coming up in this cluster.

Key Retail Hubs in Hyderabad

Hyderabad 2022 15

Manufacturing - The Next Growth Driver

Hyderabadisadiversifiedeconomiczonewithvariedindustries,including life sciences, fast moving consumer goods (FMCG) and automobiles. During the 1950s and 1960s, most of India’s premier public enterprises were established in Hyderabad, giving an edge to the traditional manufacturing base and bringing in technological advancements.PublicSectorindustriessuchasBHELandnationalindustrial research institutes such as DRL, CCMB, IICT etc have developed large townships in the city in the yesteryears and drove the economy of the city until the IT revolution started in Hyderabad.

The Telangana Government is planning to announce its industrial policyinthenextcoupleofmonths.Theindustrialpolicyislikelytohave a single window clearance for industries planning to set-up their operationsinthestate,andindustrialprojectsareexpectedtobeableto get all clearances, which currently takes 60 days, within 15 days. The new industrial policy will also focus on infrastructure development to attract investments into the state.

Hyderabadhasgreatlybenefitedfromthesettingupofworld-classinfrastructure that provides connectivity with the areas nearby, promoting industrial corridors along the national highways connecting to Nagpur, Bangalore, Mumbai and Vijayawada. The upcoming new industrial policy will be good for Hyderabad, as more industries would provide a perfect balance to the IT boom in Hyderabad, where IT is still the dominant industry. For sustainable economic development of the city, it is necessary to reduce Hyderabad’s dependency on the IT sector and diversify into other sectors, such as manufacturing, warehousing, logistics and pharmaceuticals. Manufacturing can greatly strengthen and take advantage of the world-class infrastructure developed by the government and would provide employment and opportunities for a larger base of the economy going forward.

Occupier Occupier Type Area (Acres) Location

TATA Advanced Systems Aerospace 50 Adibatla

P&G FMCG 170 Kothur

Augusta Westland Aerospace 10 Shamshabad

Mahindra and Mahindra Automobiles 100 Zaheerabad

Alexandria Biotech Park Biotechnology 300 Shamirpet

ICICI Knowledge Park Biotechnology 200 Shamirpet

Piramal Healthcare Pharmaceuticals 100 Medak

Johnson& Johnson FMCG 60 Kothur

MRF Automobile 165 Medak

Cogent Glass Glass 30 Mahabubnagar

Source: JLL Research & REIS, JLL Industrial Services

Hyderabad 202216

Manufacturing Corridors - Hyderabad

Source: JLL Research & REIS, JLL Industrial Services

Manufacturing Corridor

Major Industries

Mumbai Highway 370-550 9-15

Patancheru, Pashamylaram,

Isnapur, Zaheerabad

Nagpur Highway,

Karimnagar Highway

350-450 10-16Medchal,

Genome Valley, Kallakal, Kompally

Bangalore Highway,

Shamshabad200-750 10-17

Shamshabad Airport, Adibatla, Kothur,

Thimmapur, Jedcherla, Srisailam Highway

Vijayawada Highway 250-500 12-18

Autonagar, Sanghi Nagar, Hayathnagar, Cherlapally

Major Locations

Land Value (INR per sq ft)

Monthly Rent (INR per sq ft

per month)

12-Month Demand Outlook

Pharmaceuticals/Biotechnology

Pharmaceuticals

FMCG

Aerospace

Automobiles

Food Processing

Automobiles

Textiles

Strong/Marginal Decline Marginal/Strong IncreaseStable

Hyderabad 2022 17

Key Infrastructure Developments

Hyderabad 202218

Nehru Outer Ring Road

Key Impacts

• Fast access to the international airport from various locations of the city • Connects major development zones such as Genome Valley and Satellite towns through arterial roads to the airport• Development of new precincts along the Outer Ring Road

EncirclesthecityandConnectsmajornodes-Shamirpet - Cherial- Pocharam-

Pedda Amberpet-Mankhal-Shamshabad - APPA Junction - Gandipet Partiallyoperational.Completeoperationsexpectedtocommenceinend-2014 8lane Ring Road

159Km

P V Narsimha Rao Express Way

Key Impacts

• Fast access of passengers to airport from the heart of the city• It has reduced the travel time by almost 20 minutes and allows uninterrupted travel to the airport

Mehdipatnam to Aramgarh Junction

Connects the core city to the international airport 4 lane elevated corridor

11.6Km

Rajiv Gandhi International Airport

Key Impacts

• International connectivity is critical for fast growing businesses such as IT, biotech and pharmaceuticals, and the airport gives the competitive edge to Hyderabad over other cities in terms of international connectivity.

• SurgedotherinfrastructuraldevelopmentslikeOuterRingRoad,PVNRExpressWayandInnerRingRoad• Increase in employment opportunities leading to overall economic growth of the city • Real estate, social infrastructure and physical infrastructure development of surrounding sub markets supporting the airport activity

Ranked 4thin the world by Airports Council International (ACI) in the 5 million - 15 million passengers category

acres of land area

5,400million sq ft - Terminal 1

Operational since 2008.

1.13million passengers

per annum capacity

12million sq ft of

additionalfloorplateplanned

4.6million passengers

per annum additional capacity planned

40

Hyderabad 2022 19

Multi-Modal Transport System (MMTS)

Key Impacts

• Improved the internal connectivity of the city with the suburbs• Reduce travel time

Rail transit system connecting various parts of the city operated by South Central Railway of Indian Railways

Operational since 2003 Km planned107

covering 7stations

43Km

Hyderabad Metro Rail

Key Impacts

• Reducethetrafficpressurefromthethreehighdensitytrafficcorridorsinthecity• Reduction of commuting time by almost 50-75%• Development of new precincts due to improved connectivity

Elevated Metro Rail• Stage 1-NagoletoMettuguda-8Kms-ExpectedtobeoperationalinMarch2015• Stage 2-MiyapurtoSRNagar-11Kms-ExpectedtobeoperationalinAugust2015• Stage 3-MettugudatoBegumpet-11Kms-ExpectedtobeoperationalinNovember• Stage 4-BegumpettoShilparamam-9.51Kms-ExpectedtobeoperationalinAugust2016• Stage 5-SRNagartoLBNagar-17.87kms-ExpectedtobeoperationalinAugust2016• Stage 6-JBStoFalaknuma-14.78Kms-ExpectedtobeoperationalinJune2017

with 66stations

71Km

Inner Ring Road

Key Impacts

• Improved connectivity within the city. • Signalfreetrafficmovement• Connect to the outer ring road through radial roads to give fast access to airport from various locations in the city

Connects from Mehdipatnam i to Masab Tank, Banjara Hills, Nagarjuna Circle, Begumpet, SP Road, Rail Nilayam, Mettuguda, Tarnaka, Uppal, Nagole, L B Nagar, Santoshnagar crossroads,

Chandrayangutta, Kurnool highway, Rajendranagar bypass road and Rethi Bowli.

JoinsthePVNarsimhaRaoElevatedExpresswayatAramgarh

ofexistingroadtobewidenedto

150ft

50Km

Radial Roads

Key Impacts

• Improved connectivity of the city with peripheral locations.• Connect to outer ring road to give fast access to the airport from various locations in the city

total length of about195km

16radial roads running a

53.27kms completedOther stretches under construction

7stretches covering

Hyderabad 202220

Social Infrastructure - Preparation for 2022

Source: JLL Research, Estimation based on UDPFI Guidelines

million sq ft Built up space needed

54million sq ft Built up

space needed

10.92

Hectares of parks needed

12,600

million sq ft Built up space needed

27

Auditoriums needed6

Schools needed3,838

Hospital beds needed9,100

million estimated population in 202210.5

Hyderabad 2022 21

Development to promote animation and gaming industry by providing required specialised infrastructure such as last mile internet connectivity, high bandwidth broadband, licensed software on visual effects etc.

Focus Industry - Animation and Gaming IndustryAnimation and Gaming - production, distribution, media support services, web designing, marketing, broadcasting, research, music and entertainment and gaming hardware etc.

Game City is expected to provide• Investor friendly environment• State-of-the-art infrastructure required for

promotion of gaming industry• Animation and Gaming Tower - a plug n

play incubation centre at subsidised rates• Training facilities

Chalking New Paths of Development

acres land area around Hyderabad50,000 Integrated cluster development to promote investments in IT industry. The investment region

isplannedtohaveITSEZs,ITparks,industrialparks,warehousesandexportorientedzones

ITIRs are expected to provide• Conducive business environment • Transparent investor friendly

policies and • Excellentinfrastructure

Focus Industry - IT, ITES, EHMInformation Technology (IT), Information Technologyenabledservices(ITES)and electronic hardware

Focus LocationsMadhapur, Gachibowli, Kondapur, Manikonda, Vatinagulapally, Tellapur, Kokapet, Narsingi, Manchirevala, Shamshabad, Maheshwaram, Uppal, Pocaram etc.

million direct jobs

million indirect jobs

1.53.5

Status Approved by Central overnment

• Provide job opportunities• Promote growth of supporting industries• Promote real estate and infrastructure development• Improve investment sentiment

Key Impacts

Key Impacts

Information Technology Investment Region (ITIR)

Game City

30• Promote diverse economic development• Increase job opportunities• Promote real estate and infrastructure development• Improve investment sentiment in gaming industry

land allocated at Raidurg for incubation centre

Hyderabad 202222

• Transit Oriented Development (TOD) along the Hyderabad Metro Route• ThemePark-“Wonderla”sanctionedatAdibatla• Satellite townships to be developed• MakeHyderabadaWi-Fienabledcity• Facilitiesasplannedin6existingmasterplansofHyderabadcity,particularlythegrid/spinalroadsinORRgrowthcorridor.

Other developments planned:

km 300 feet wide288 Ring Road connecting Hyderabad city with surrounding districts and link the national

highways like NH4, NH7, NH9, NH202 which are passing through HyderabadDistricts to be connected - Medak, Nalgonda, Mahabubnagar and Ranga Reddy

• Stretches beyond Outer Ring Road• Decongestthecityandextenddevelopments• Good connectivity will support industrial growth in surrounding districts• Open more land for development in peripheral parts of Hyderabad

Key Impacts

Regional Ring Road

Km City radius to extend65

acres Land earmarked700 Development of educational hub for

educational institutions of various fieldstosetuptheircampuses

Birla Institute of Technology and Sciences (BITS) and Army CollegeofDentalSciencesarealreadypresentatJawaharnagar.XLRI has acquired 100 acres of land to set up their campus

• Promote diverse economic development• Increase job opportunities• Promote real estate and infrastructure development• Attract investments from premier universities and colleges

Key Impacts

Education Hub

Focus Location- Jawaharnagar

Development Pharma City near Hyderabad. Satellite township development of international standard with residential facilities for employees

Focus Industry - Pharmaceuticals and Drugs Pharmaceuticals and Drug manufacturing and research acres Development proposed

7,000

• Promote diverse economic development• Increase job opportunities• Promote real estate and infrastructure development• Improve investment sentiment in pharmaceutical and drug industry• Decongestion of the city

Key Impacts 5 lakh

Pharma City

jobs to be created

Hyderabad 2022 23

Summary of Key space requirements -2022

This does not include other sectors such as hotels, restaurants, club houses, manufacturing and warehousing etc.

million sq ft of auditorium space27

million sq ft hospital space10.92

million sq ft of Grade A office supply32

million sq ft of school space54

hectares of park12,600

million houses0.7

million sq ft of Retail mall space6

Hyderabad 202224

Working Towards Hyderabad 2022Recommendations

Policy support

• TheStateGovernmentofTelanganawillhavetoformulatestatepoliciesthataredevelopmentfriendly.Theexistingbestpractices have to be continued and amendments made. The policies need to be consistent and long term.

• Single window clearance and a transparent approval mechanism along with quick approval systems will encourage investments for real estate development in the city. Fast approval processes will save money and time and hence will attract developers to start projects in Telangana. An online single window system of clearance will be a good move on this front. HMDA‘s green channel has been started to offer a quick approval process for building layouts.

• The need to obtain certain clearances like Land use, airport, irrigation, environment, forest, military, railways etc. can be done away with by marking the areas/limits permissible in each of the survey numbers/clusters in the master plans. In fact the government will do well by giving all such data/information on the websites.

Tax / government Fees

• TheChiefMinisterhasannouncedtowithdrawNon-AgriculturalLand(NALA)taximposedonconversionoflandusefromagricultural to non-agricultural and also VAT on construction activity. This needs to be implemented at once.

• Impact fee, permit fee and other fees levied on building and lay-outs permits in Hyderabad is one of the highest in India and this has to be rationalised.

• PropertyTaxandlibrarycessneedstoberelookedtomakeitmorecompetitive.

• Retrospectivefuelsurchargeneedstobeamendedfordevelopersandofficespaceoccupiers.

• The concept of VAT is to be introduced for registration urban land transactions. Otherwise multiple registrations of land before construction are raised making it unaffordable.

• Seigniorage charges in to be removed on lay-outs development and building construction activity.

Land ownership issues

TherewereseveralinstancesinHyderabadwhereclaimswereraisedonlandparcelstobegovernment/Waqfboard/Endowment/ Boodan/assignedlanddespiteoftheselandparcelshavingclearances/NoObjectionCertificate(NOC)givenbytherevenuedepartment. This resulted in long drawn litigation and delay in land pooling/project completion. Few recommendations to mitigate such problems going forward are as follows:

• GovernmentshouldsurveytheselandsandissueGazettenotificationanditshouldbefinal.

• Governmentshouldcreateanombudsmanlikeorganisation.Noofficerbeallowedtogivenoticestoanypersonclaimingapieceof land as government land etc. without clearance from the ombudsman.

• Ifgovernmentlosescasesinlitigationintwoconsequentcasestheconcernedofficerbemadetopaythecostofsuchlitigation.

• Consequent to amendment to The Hindu succession Act 2005 several claims are raised with respect to ancestral/HUF lands. It is suggested that the amendment to “The Hindu Succession Act 2005” be made prospective only. Also after the sale of HUF property if any claim lies/made it should be on surviving HUF members only and not on Buyers of such property.

Hyderabad 2022 25

Decentralisation of business hubs across Hyderabad

• Unlike Bangalore, Delhi-National Capital Region (NCR) and Mumbai, Hyderabad has only one IT corridor in the western part of the city. This leads to congestion and one-dimensional development of the city. To encourage the integrated development of Hyderabad, developers and corporate clients have to be given incentives to invest in alternative IT corridors such as Uppal and Shamshabad.

Development of Infrastructure in Hyderabad

• ThemetrorailconnectivityinHyderabadneedstobeextendedtotheORRinthewestandsouthofthecitysothattheimproved connectivity can open up more land parcels for development and hence rationalise land values.

• Power and water supply conditions have to be improved to attract all the mentioned investments planned in Hyderabad.

Stabilising investor confidence on “Brand Hyderabad”

• Attract new large-sized investments in Hyderabad by providing business friendly policies.

• The government land auctions of the past attracted many corporates and developers to acquire land in Hyderabad. However, as litigationonthislandbecameknown,theconfidenceofstakeholderswaseroded.Thisconfidencehastobebroughtback.

• EncouragenewcorporatestomovetoTelangana.TherewerenonewbigFortune500corporatesmovingtoHyderabadafter2009. Facebook,JPMCandUHGwerethelastcorporatestocometothecity.Therehasbeenonlyexpansionandconsolidationbyexisting corporates in the city since. This has to be addressed. The government has to market “Brand Hyderabad” by providing roadshows andothereventstoencourageandgiveconfidencetonewcompaniestostarttheiroperationsinHyderabad.

New economic hubs

• The key driver of the economy of Hyderabad is the IT/ ITeS sector. To have an integrated regional development, alternative economic sectors have to be encouraged.

• Newdevelopments,suchasITIR,PharmaCityandtheEducationHub,shouldbemarketedwelltoattractinvestments.Incentives and sops should be provided to attract investment into these projects. Otherwise they may face similar challenges to Fab City and Hardware Park, which were not successful enough.

• Manufacturing - Cities such as Pune and Chennai have been very successful in developing a manufacturing landscape and they have attracted the best multinational automobile and telecom manufacturers. The new government of Telangana needs to formulate a strategy to attract multinational manufacturers to set-up their base in Hyderabad and the surrounding areas.

• Medical Tourism - The major health care brands, such as Apollo Hospitals, Global Hospitals, Care Hospitals and Rainbow Hospitals, haveattractedprivateequityinvestments.Thesehealthcarefirmsareexpandingstronglyacrossthenation.Thestategovernment needs to support the development of a health care hub by these health care majors in Hyderabad to attract medical tourism.

• The development of tourism and tourism facilities in Hyderabad will help improve the quality of life in Hyderabad further.

Master plans implementation

• Government has approved Hyderabad metropolitan development plan 2031 for the development of an area of 5018 sq. kms covering the growth corridor (330 sq. kms covering 1km on both sides of ORR) and all the area outside of ORR in 2013. Another master plan to covertheareainsideofORRexcludinggrowthcorridorisontheanvil.Allthemasterplansneedtobeimplementedwithsincerityandpurpose.

• Government should implement these master plans with the right earnest. The impetus needed for the ORR Growth Corridor, particularly marking and development of grid/spinal roads at intervals of 500 metres needs to be given at once.

Hyderabad 202226

Good Quality of LifeThird best city as per

LivabilityIndex

Low Cost of LivingLower than cities like Chennai

and PuneState of the art Infrastructure

International airport, Outer RingRoad,PVNRExpress

way and Radial Roads

Availability of Talent Pool

Presence of Premier institutions - IIT,ISB, BITS etc. churning quality talent pool Online Single

Window ClearanceGreen Channel by HMDA providing quick approval

of building layouts

E-GovernanceEnabled city

E-sevacentersbuiltacrossthecity.E-Seva

is a online portal for citizen services

ADVANTAGEHYDERABAD

Hyderabad 2022 27

Author ProfileTrivita RoyAssistantVicePresident,Research&REIStrivita.roy@ap.jll.com+91 98850 33850

TrivitaRoyjoinedJLLResearchteamin2007.BasedoutofHyderabad;shecontributestotopicalwhitepapers,propertymarket digest and research deliverables on industrial, commercial, retail and residential real estate markets in India. She is

alsoresponsibleforIndianrealestateintelligenceservice(REIS).TrivitaistrainedasCityPlannerfromIndianInstituteofTechnologyKharagpurbesidesbeinganarchitectandalsoholdsaDiplomainExecutiveGlobalBusinessManagementfromIndianInstituteofManagementCalcutta.Shehasmorethaneightyearsofexperienceinrealestateresearch.

Srinivasa Reddy NS AssociateDirector,ResearchandREIS srinivasa.reddy@ap.jll.com +91 80 4031 4833

SrinivasaReddyjoinedJonesLangLaSalleinMarch2008.BasedoutofBangalore,hecontributestoresearchdeliverablesonoffice,retailandresidentialrealestatemarkets.Heisalsoresponsibleforworkingonbespokeprojects.His

expertiseliesinthefieldsofanalyticalmarketresearch,econometricmodellingandforecasting.Srinivasaholdsamaster’sdegreeineconomicsandhasmorethaneightyearsofindustryresearchandbusinessconsultingexperience.

Ashutosh Limaye Head,ResearchandREIS ashutosh.limaye@ap.jll.com +91 98211 07054

For more information about Research

Sandip PatnaikManaging Director, Hyderabadsandip.patnaik@ap.jll.com+91 98851 84273

For information of Hyderabad

Acknowledgements

WewouldliketheacknowledgethetimelyguidanceandsupportrenderedbyMr.RChalapathiRao–VicePresidentSouth,NAREDCOandsuggestionsgivenbyothermembersofTREDAindevelopingthecontentofthispublication.

About JLLJLL(NYSE:JLL)isaprofessionalservicesandinvestmentmanagementfirmofferingspecializedrealestateservicestoclientsseekingincreasedvaluebyowning,occupyingandinvestinginrealestate.Withannualfeerevenueof$4.0billionandgrossrevenueof$4.5billion,JLLhasmorethan200corporateofficesandoperatesin75countriesandhasaglobalworkforceofapproximately53,000.Onbehalfofitsclients,thefirmprovidesmanagementandrealestateoutsourcingservicesforapropertyportfolioof3.0billionsquarefeet,or280.0millionsquaremeters,andcompleted$99.0billioninsales,acquisitionsandfinancetransactionsin2013.Itsinvestmentmanagementbusiness,LaSalleInvestmentManagement,has$50.0billionofrealestateassetsundermanagement.JLListhebrandname,andaregisteredtrademark,ofJonesLangLaSalleIncorporated.

JLLhasover50yearsofexperienceinAsiaPacific,withover28,453employeesoperatingin80officesin16countriesacrosstheregion.Thefirmwasnamed‘BestPropertyConsultancy’insevenAsiaPacificcountriesattheInternationalPropertyAwardsAsiaPacific2014,andwonnineAsiaPacificawardsintheEuromoneyRealEstateAwards2013.www.jll.com/asiapacific. For further information, please visit our website, www.jll.com.

About JLL IndiaJLLisIndia’spremierandlargestprofessionalservicesfirmspecializinginrealestate.Withanextensivegeographicfootprintacross11cities(Ahmedabad,Delhi,Mumbai,Bangalore,Pune,Chennai,Hyderabad,Kolkata,Kochi,ChandigarhandCoimbatore)andastaffstrengthofover7000,thefirmprovidesinvestors,developers, local corporates 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,seniorliving,educationandretailadvisory.ThefirmwasnamedtheBestPropertyConsultancyinIndiaattheInternationalPropertyAwardsAsiaPacific2014-15. For further information, please visit www.joneslanglasalle.co.in.

JonesLangLaSallePropertyConsultants(India)PvtLtd©2014.Allrightsreserved.Allinformationcontainedhereinisfromsourcesdeemedreliable;however,norepresentationorwarrantyismadetotheaccuracy thereof.

About TREDA TelanganaRealEstateDevelopersAssociation(formerlyAPREDA)interactswiththeGovernmentonbehalfoftheindustrytocoordinatewithpolicymakersinevolvingandimplementingrealestatefriendlypoliciesandservicedeliverysystemsinordertostimulatedevelopment.Incorporatedin1995,TREDAhas250memberswithtopnamesintherealestateindustry.TREDAhasbeenplayingapivotalroleinincreasingtransparency,enhancingcredibilityandbuildingconfidencebetweendevelopersandbuildersandpropertybuyers.

About NAREDCO - TELANGANA NationalRealEstateDevelopmentCouncil(NAREDCO)wasestablishedasanselfregulatorybodyin1998undertheaegisoftheMinistryofHousingandUrban Poverty Alleviation, Government of India. It was formed with the mandate to induce transparency and ethics in the real estate business and transform the unorganised real estate sector into one that is mature and globally competitive.

NAREDCOTELANGANAhasbeenrecentlyformedasthestateunitofNAREDCOandplanstoplayacriticalroleinshapingrealestatepoliciesinpartnershipwith Government of Telangana.