BENGALURU INDIA REAL ESTATE OUTLOOK REPORT

(January – June 2014)

For queries on data, contact Sangeeta Sharma Dutta, Research

For any other query, contact Bertilda Fernandes, Marketing

Launches (units)

Absorption (units)

Weighted Avg Price (`per sq.ft.)

Jan-June 2014 35,545 -16% Y-o-Y

July – Dec 2014 (E) 36,568 1% Y-o-Y

2014 Year End (E) 72,113 -8% Y-o-Y

Jan-June 2014 27,256 -14% Y-o-Y

July – Dec 2014 (E) 32,044 26% Y-o-Y

2014 Year End 59,300 3% Y-o-Y

June 2014 4,473 11% Y-o-Y

2014 Year End (E) 4,540 6% Y-o-Y

Residential

Market Overview

New Completions (mn. sq.ft.)

Absorption (mn. sq.ft.)

Vacancy %

Jan-June 2014 3.0 76% Y-o-Y

July – Dec 2014 (E) 4.5 -18% Y-o-Y

2014 Year End (E) 7.5 4% Y-o-Y

Jan-June 2014 6.0 29% Y-o-Y

July – Dec 2014 (E) 3.8 -22% Y-o-Y

2014 Year End (E) 9.8 3% Y-o-Y

June 2014 11% Y-o-Y

2014 Year End (E) 11% Y-o-Y Office

Weighted Average Rent (` per sq.ft. per month)

Jan-June 2014 47 -4% Y-o-Y

2014 Year End (E) 48 1% Y-o-Y

Market Overview

Residential

Launches

Absorption

Bengaluru has been witnessing a

steady upward trend in absorption

and launches since 2012

While the demand for homes

increased by 13% in 2013, it is

expected to rise by a marginal 3% in

2014

The total number of units to be absorbed is expected to increase from

57,366 in 2013 to 59,300 in 2014

8000

9000

10000

11000

12000

13000

14000

15000

16000

17000

18000

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14

No

. o

f u

nit

s

Demand & Supply Trend - 2014

Residential Market

Unsold Inventory Level - QTS

105,359 units remain unsold as of

June 2014 which will take

approximately 7 quarters to absorb

Developers have tried to adjust new launches, thus reflecting a 14% decline

during H2 2013 compared to H1 2013, and a further 2% decline in H1 2014

as compared to H2 2013

3

4

5

6

7

8

9

No

. o

f Q

uart

ers

Long term

The QTS ratio moved up by one notch since

Sept 2013, signifying a slight weakening of

buyer sentiments in the market

Residential Market

H2 2014 Forecast

Half-yearly Launches and Absorption Trend

Election results, revival of manufacturing, higher salary growth in IT/ITeS and various measures announced in the Union Budget seem to have induced a positive change in the home buyer sentiment

Sales volume to increase by 18% in H2

2014 compared to H1 2014

30

,53

7

37

,23

6

42

,15

5

36

,14

5

35

,54

5

36

,56

8

22

,93

5

27

,75

7

31

,84

4

25

,52

2

27

,25

6

32

,04

4

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

No

. o

f u

nit

s

Launches Absorption

Sales volume expected to recover

in H2 2014

Residential Market

Weighted Average Price Trend

Half-yearly Weighted Average Trend

` 4,020/ sq ft The weighted average price has

increased by 11%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

INR

/sq

.ft.

The weighted average prices are forecasted to increase nominally by

1.5 % in H2 2014 to INR 4,540/ sq. ft. on the back of a moderate recovery

in sales volume

` 4,473/ sq ft

Price levels in the city continue to

move upwards, albeit at a controlled

pace

Residential Market

N

Central M.G. Road, Lavelle Road, Langford Town,

Vittal Mallya Road, Richmond Road

East Whitefield, Old Airport Road, Old Madras

Road, K.R. Puram, Marathahalli

West Malleswaram, Rajajinagar, Yeshwanthpur,

Tumkur Road, Vijayanagar

North Hebbal, Bellary Road, Hennur, Thanisandra,

Jakkur, Yelahanka, Banaswadi

South

Koramangala, Sarjapur Road, Jayanagar, J.P.

Nagar, Electronics City, Kanakapura Road,

Bannerghatta Road

EAST

SOUTH

NORTH

WEST

CENTRAL

New Launch Analysis

Micro-Market Split of Units Launched

East and West witnessed an increase in the

share of new launches in H1 2014

0% 19%

25% 47%

9%

H1 2013

0%

23%

20% 45%

12%

H1 2014

Central M.G. Road, Lavelle Road, Langford Town, Vittal Mallya Road,

Richmond Road

East Whitefield, Old Airport Road, Old Madras Road, K.R. Puram,

Marathahalli

West Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road,

Vijayanagar

North Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur, Yelahanka,

Banaswadi

South Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar, Electronics

City, Kanakapura Road, Bannerghatta Road

South consistently witnessed a

majority of new launches in both H1

2013 and H1 2014, although its share

decreased slightly in H1 2014

A preferred destination due to the

presence of several IT hubs -

Electronics City and Sarjapur Outer

Ring Road

North saw a decline of 20%

42,155 35,545

Residential Market

Ticket Size Analysis

Ticket Size of Launched Units by Micro Markets

Central East

West North

South

During H1 2014, 71% of the units launched in South were within `2.5–5.0 mn

0%

20%

40%

60%

80%

100%

<2.5 mn. 2.5-5 mn. 5-7.5 mn. 7.5-10 mn. >10 mn. >20 mn.

Majority of the locations in North have already breached the psychological price

point of `4,500/sq.ft., thereby bringing down the sales volume

Residential Market

Absorption Analysis

Micro Market Split of Units Absorbed

Locations like Whitefield and Electronics City are witnessing renewed traction since

H2 2013

Residential projects along the Outer Ring Road continue to do well

North and West observed the steepest fall in absorption due to apprehension among

buyers regarding majority of projects being located beyond established areas

0%

23%

25%

42%

10%

H1 2013

0%

26%

19%

48%

7%

H1 2014 Central

M.G. Road, Lavelle Road, Langford Town, Vittal Mallya

Road, Richmond Road

East Whitefield, Old Airport Road, Old Madras Road, K.R.

Puram, Marathahalli

West Malleswaram, Rajajinagar, Yeshwanthpur, Tumkur Road,

Vijayanagar

North Hebbal, Bellary Road, Hennur, Thanisandra, Jakkur,

Yelahanka, Banaswadi

South Koramangala, Sarjapur Road, Jayanagar, J.P. Nagar,

Electronics City, Kanakapura Road, Bannerghatta Road

31,844 27,256

Residential Market

Micro Market Health

Age of Inventory compared to QTS

Central East

West North

South

5

6

7

8

9

10

2 7 12 17

Ag

e o

f In

ve

nto

ry

QTS

Despite a large unsold inventory,

East is the healthiest with one of the

lowest QTS and the lowest minimum

age of unsold inventory

The health of East is relatively better

as the increment in unsold inventory

was matched by an increase in

absorption

Due to excess unsold inventory from projects

launched almost two years ago, South

Bengaluru’s health is the poorest

Residential Market

Price Movement

Price range in H1 2014 (per sq.ft.) 12-month change 6-month change

CENTRAL

Langford Town 15,000 - 18,000 7% 0%

Lavelle Road 21,000 - 29,000 7% 0%

EAST

KR Puram 4,000 - 6,000 12% 5%

Whitefield 4,500 - 7,500 15% 6%

Marathahalli 4,500 - 6,800 12% 5%

Indiranagar 9,000 - 12,000 8% 0%

WEST

Yeshwanthpur 6,500 - 9,500 12% 5%

Malleshwaram 9,000 - 12,000 8% 5%

Rajajinagar 8,500 - 13,500 15% 6%

Tumkur Road 3,950 - 4,500 9% 6%

Residential Market

Price Movement

Price range in H1 2014 (per sq.ft.) 12-month change 6-month change

NORTH

Yelahanka 4,500 - 7,000 13% 6%

Hebbal 5,000 - 9,000 10% 5%

Hennur 4,200 - 5,500 8% 5%

Thanisandra 4,000 - 7,000 10% 7%

SOUTH

Sarjapur Road 4,200 - 7,000 12% 5%

Electronics City 4,000 - 6,000 8% 2%

Kanakapura Road 4,250 - 5,500 10% 3%

Bannerghatta Road 4,200 - 7,000 12% 4%

Residential Market

Key Takeaways

Absorption to see a marginal increase with drop in number of new

launches by 8% to 72,113 units during 2014

Sales volume to increase by 26% to 32,044 units in H2 2014, compared

to H2 2013

The QTS ratio moved from 6 to 7 since September 2013, signifying a

slight weakening of buyer sentiment

Bengaluru market to offload its excess unsold inventory in the next 6-9

months

Residential Market

Office

Vacancy Trend

Office Space Stock and Vacancy Level

Total office stock

109.5 mn.sq.ft. Occupied

97.9 mn.sq.ft

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

20

40

60

80

100

120

Mn

. S

q.f

t.

Stock Occupied Stock Vacancy (RHS)

Bengaluru has seen consistent

absorption over the last 3 years, with

vacancy rates dropping steadily

every year

This healthy demand in the past

years has been responsible for

restricting vacancy within 11–18%

The vacancy level during H1 2014

was 11%, down from 14% in H1

2013 and H2 2013

Office Market

New Completion and Absorption

Absorption during H1 2014

was around 6 mn. sq.ft. of

leased deals, while only

3 mn.sq.ft. of new projects

were completed

4.1

3.3

1.7

5.5

3.0

4.5

6.0

3.4

4.7

4.9

6.0

3.8

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Mn

. S

q.f

t.

New Completion Absorption

The absorption in H1 2014 reflects a 23% growth over H2 2013,

and an increase of 29% over H1 2013

Office Market

H2 2014 Forecasts

Office Space Stock and Vacancy Level

The absorption in H2 2014 is

expected to slacken - Estimated at

around 3.8 mn sq ft.

Total absorption in 2014 to be 9.81

mn sq.ft which will be a 3% increase

over the total absorption in 2013

Consistent demand over the next six months will be matched by a higher increase in new

completions of 4.5 mn sq ft, thereby ensuring steady rentals

Vacancy to be constricted to 11% by the end of 2014

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

20

40

60

80

100

120

Mn

. S

q.f

t.

Stock Occupied Stock Vacancy (RHS)

Office Market

Weighted Average Rents

Weighted average rental in H1 2014

dipped by 4% and 1% compared to

H1 2013 and H2 2013 respectively,

though an improvement of 7% over

H1 2012

Appreciation of 2% projected in H2 2014 with weighted average rentals to increase from

`47 per sq.ft. per month in H1 2014 to ` 48 per sq.ft. per month

Large quantum of Grade A office space to become operational in the coming months

coupled with steady demand

30

35

40

45

50

55

60

INR

/sq

.ft.

/mo

nth

Office Market

Sectoral Analysis of Demand

Share of the IT/ITeS

sector has fallen to 54%

in H1 2014 from 71% in

H2 2013

Other services sector has

increased to 24% in H1 2014

from 13% in H1 2013 and can

be partly attributed to the rising

e-commerce sector

IT/ITeS Financial Services Manufacturing Other Services

H1 2013 64% 1% 22% 13%

H2 2013 71% 3% 12% 14%

H1 2014 54% 6% 15% 24%

Absorption in Manufacturing

has increased by 25% in H1

2014 over H2 2013, however

it lagged behind H1 2013 by

32%

Office Market

Deal Analysis

Average Deal Size and Number of Deals

H1 2014 touched the high of H1 2012 in

the number of deals transacted, though

H1 2012 had the lowest average deal

size

0

40

80

120

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014

Nu

mb

er

Sq

.ft.

Average Deal Size (Sq.ft.) Number of Deals (RHS)

H1 2013 and H1 2014 experienced

similar deal sizes

H1 2013 saw the lowest number of

deals

The average size of transactions has

increased to 71,500 sq ft in H1 2014

from 30,035 in H1 2012

30,035

71,500

Office Market

Business District-wise Analysis

Micro Market Split of Absorption

CBD and off-CBD office markets

are preferred by non-IT

companies primarily, who look for

smaller office configurations

The dearth of quality space in

CBD and SBD have led

companies to take up space in

PBD markets like Whitefield and

the Outer Ring Road (ORR),

which have large quantum of new

office space

4% 9%

71%

13%

3%

H1 2014

4%

9%

70%

16%

1%

H1 2013

ORR

SBD

PBD East

PBD South

CBD & Off CBD

Office Market

4.7 mn.

sq.ft.

6.0 mn.

sq.ft.

Business District-wise Analysis

The Outer Ring Road (ORR) from Hebbal in the North to Silk Board

Junction in the South, has emerged as the leading IT growth corridor in the

city

The ORR office market has witnessed transactions of over 5 mn sq ft till

June 2014, surpassing the other office markets and maintaining its share at

70% in H1 2013 and 71% in H1 2014

Whitefield continues to remain on the occupiers’ radar with 13% of share of

total office space absorption in H1 2014

Office Market

Business District-wise Rents

Average rental movement across different micro-markets has been relatively marginal

over the last year

Rentals remained constant for most part, witnessing changes between 1–8% during

last 6 months, and 3–9% in the last 12 months

The ORR office projects saw the highest appreciation in rentals

Business

District

Rental Value Range in H1

2014

(per sq.ft. per month)

12 month change 6 month change

CBD & Off-CBD 72 - 85 - 5% - 3%

SBD 47 - 78 3% 5%

PBD East 30 - 45 6% 5%

PBD South 30 - 45 3% 1%

ORR 45 - 55 9% 8%

Office Market

Key Takeaways

With inventory of around 109.5 mn sq. ft. Bengaluru remains one of the

most favoured office space destinations in the country

Healthy demand in the past has restricted vacancy levels within

11–18%

Jan-June 2014 saw demand from eCommerce and manufacturing

sectors

Global economic recovery has boosted in the IT/ITeS sector even

further and Bengaluru being the IT hub, will reap the benefits

Adequate supply in all markets will ensure steady rentals and consistent

demand over the next six months,

Office Market

BENGALURU INDIA REAL ESTATE OUTLOOK REPORT

(January – June 2014)

For queries on data, contact Sangeeta Sharma Dutta, Research

For any other query, contact Bertilda Fernandes, Marketing