India Real Estate Report

Published 25 November 2014

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India Real Estate Report

BMI View: There is huge long-term potential in India's commercial real estate market as the country builds on its status as a global IT and outsourcing hub and becomes open to more foreign investment, and as the spending power of the expanding middle class continues to grow. The economy is also beginning to rebound, and although in the short term we see no rise in rental rates, risks are to the upside. 

Growth in India's commercial real estate market will be supported by an uptick in economic growth. Data from the first quarter (April-June) of the 2014/2015 financial year indicate that the economy grew by 5.7% year-on-year (y-o-y) in real terms, and we forecast growth of 5.6% in 2014/2015 (April-March), supported by regulatory improvements and an increase in investment as well as strong growth in exports, industrial output and services output. These improving fundamentals will boost demand for real estate, as businesses expand and their operating environment improves.

Recent Developments

  • A loosening on restrictions on the sale of FDI-manufactured goods should boost demand for industrial real estate.

  • In September 2014, Swedish furniture retailer Ikea said that it was looking to develop its own stores in India.

  • Nitesh Estates is reportedly looking to buy the Plaza Centre Mall in Pune.

  • US-based Blackstone has been making and considering a number of acquisitions in India in recent months. In September 2014, it bought two office properties, in Noida and Pune, from IDFC Alternatives Lt d. Blackstone was also said to be in negotiations to buy an IT special economic zone in Noida from 3C.

Key BMI Forecasts

  • We see no change in rental rates in any of the sub-sectors we cover in 2015 and 2016.

  • Office rental rates will remain highest in Mumbai, at up to USD65 per square metre (sq m) per month.

  • Retail rents are the highest of the three sub-sectors that we cover, with the highest also being in Mumbai, at between USD28 and USD90 per sq m per month.

  • ...

Table of Contents

BMI Industry View
7
SWOT
8
Political
11
Economic
13
Industry Forecast
15
Office
17
Table: Forecast Office Rental Rates, 2015-2015 (USD per square metre per month)
18
Table: Forecast Office Net Yields, 2011-2018 (%)
18
Retail
18
Table: Forecast Retail Rents, 2015-2016 (USD per sq m per month)
19
Table: Forecast Retail Net Yields, 2011-2018 (%)
20
Industrial
20
Table: Forecast Office Rents, 2015-2016 (USD per sq m per month)
21
Table: Forecast Industrial Net Yields, 2011-2018 (%)
21
Construction And Infrastructure Forecast Scenario
22
Table: Construction And Infrastructure Industry Data (India 2012-2017)
22
Table: Construction And Infrastructure Industry Data (India 2018-2023)
23
Macroeconomic Forecasts
33
Economic Analysis
33
Investment Upturn In Good Shape
34
Exports Continue To Recover
35
Risk To Outlook
36
Table: Economic Activity (India 2009-2018)
37
Industry Risk Reward Ratings
38
Asia - Risk/Reward Index
38
Table: Asia - Real Estate Risk/Reward Index
38
India - Risk/Reward Index
39
Rewards
39
Risks
40
Market Overview
41
Mumbai
42
Gurgaon
42
Hyderabad
43
Bangalore
43
Chennai
43
Office
43
Table: Historical Rental Costs, 2013-2014 (USD per square metre per month)
44
Table: Historical Net Yields, 2013-2014 (%)
45
Table: Terms Of Rental Contract/Lease, H114
45
Retail
46
Table: Historical Rental Costs, 2013-2014 (USD per square metre per month)
49
Table: Historical Net Yields, 2012-2014 (%)
49
Table: Terms Of Rental Contract/Lease, H114
50
Industrial
50
Table: Historical Rental Costs, 2013-2014 (USD per square metre per month)
52
Table: Historical Net Yields, 2013-2014 (%)
52
Table: Terms Of Rental Contract/Lease, H114
53
Competitive Landscape
54
Office
55
Retail
57
Industrial
57
Company Profile
59
DLF
59
Sobha Ltd
61
Parsvnath Developers
63
Ambuja Cements
65
Demographic Forecast
67
Table: Population Headline Indicators (India 1990-2025)
68
Table: Key Population Ratios (India 1990-2025)
68
Table: Urban/Rural Population And Life Expectancy (India 1990-2025)
69
Table: Population By Age Group (India 1990-2025)
69
Table: Population By Age Group % (India 1990-2025)
70
Methodology
72
Industry Forecast Methodology
72
Sources
73
Risk/Reward Index Methodology
74
Table: Real Estate Risk/Reward Index Indicators
75
Table: Weighting Of Indicators
76

The India Real Estate Report features Business Monitor International (BMI)'s market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.

BMI's India Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in India.

Key Benefits

  • Benchmark BMI's independent real estate industry forecasts for India to test other views - a key input for successful budgeting and strategic business planning in the Indian real estate market.
  • Target business opportunities and risks in India through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our company profiles (inc. SWOTs, KPIs and latest activity).

Coverage

BMI Industry View

Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.

Industry SWOT Analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.

Industry Forecasts Outlook

Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.

Indicators Include:

  • Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
  • Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
  • economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).

BMI’s Real Estate Risk Reward Index

BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.

Market Overview

Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors

Market Analysis

Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.

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Testimonials

'An essential, multi-faceted research tool. BMI’s thorough understanding of the major market players enables an informed – and informative – review of the sector’s actual performance, together with useful insights into current industry issues, which are topped-off with detailed and invaluable forecasts of industry and macroeconomic trends.’

Senior Research Analyst, ABC International Bank plc