The City of Nawabs: New Governance, New Real Estate Opportunities

We are pleased to present our latest research offering “Hyderabad 2022: Etching a New Development Path”. This report analyses the development potential of Hyderabad – starting from its growth drivers to the projects being planned and an overall requirement analysis for the real estate development in the city. We also share a few recommendations with the government for fulfilling the 2022 objective.

Hyderabsd Report







Click here to download the report Hyderabad 2022: Etching a New Development Path

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Office Space Absorption Up 58% In 3Q 2014

Ramesh Nair PhotoRamesh Nair, COO – Business & International Director, JLL India

The Indian monsoon months are synonymous with low activity in real estate, but this year witnessed considerable amount of activity in the office sector. Compared with last year’s monsoon months of July, August and September (3Q CY 2013), this period in 2014 showed 58% growth in office space demand. A net absorption of 9.3 million sft (or 0.93 crore sft) of office space during 3Q CY 2014 is a good 1.58 times the same seen in 3Q 2013. This performance for a quarter’s net absorption was bettered only once in the year 2011.

Market activity, measured in gross leasing volume (GLV), was also high at 10.62 million sft, clearly indicating that there are better days ahead for commercial realty.

India’s new government led by Mr. Narendra Modi, who became Prime Minister with an absolute majority, has taken the right steps to infuse confidence and faith in the corporate world, which is now once again engaged in pursuing its growth plans.

office table 3q

India’s Grade A office leasing market is dominated by US multi-national companies (accounting for more than 45% of leased space). These companies, along with Europe-based multinational companies accounting for 15% of share in office space leasing, are once again very bullish about growing their businesses in India after the new government took over. Indian companies, accounting for 30% of office space leasing, are slightly behind in executing their growth plans; however, we know that several of them are in various stages of their property hunt.

Bangalore and Delhi NCR led the revival with leasing almost 3 million sft and 2.5 million sft space respectively, spectacularly higher by 90% and 250% respectively that their performance the same time last year. Another city that rose on the office realty map was Kolkata, leasing more than half a million sft, from virtually no leasing same time last year. Mumbai, Chennai, Pune and Hyderabad maintained their quantum of leasing space with minor variation. The actual vibrancy on ground is felt even more, since the GLV is higher than the net absorption by 15-20%.

With a healthy space demand list on hand from various large companies, it is going to be hard for corporates to find the right assets at the right locations. Next year, we expect only 22 million sft of office space to be ready at the right locations against the demand forecast of just under 30 million sft in 2015.

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Indians Buying Properties In The US

Anuj Puri picAnuj Puri, Chairman & Country Head, JLL India

Earlier in October, the US National Association of Realtors published a report which stated that buyers from India purchased residential properties in the US estimated at $5.8 billion in value during the one-year period ending March 2014. This investment magnitude represented an approximate growth of 6% over 2013. It went on to state that Indians spent $459,028 (Rs 2.81 crore) on an average to buy properties across cities like Los Angeles, Las Vegas, Chicago, Dallas, and New York.

This is definitely an interesting finding. Indian HNIs who have obtained American citizenship and are settled there have several reasons for investing in properties in the US. Apart from India’s long-standing love affair with America and all things American, many Indians who have become naturalized US citizens have business interests as well as families in major American cities.

Also, investment into the US property market is once again very favourable. After the steep post-Lehman downturn, countless investors had been able to snap up properties in American cities at unbelievably low prices, and these investments are seeing handsome returns now that the US real estate market is reviving.

american eagle

As for resident Indians, the Reserve Bank of India had earlier drastically curtailed the flight of Indian money by capping outward remittances and rendering investment into foreign properties impossible. It is only recently that the annual investment ceiling for individuals to buy overseas property under the Liberalized Remittances Scheme was increased from $75,000 to $1,25,000.

This enhanced investment limit is a small but important window. For example, a married couple can now together buy a small property in a US suburb if they have the inclination to do so. Previously, real estate as an option was entirely withdrawn from the LRS scheme and the limit purview.

The annual limit of $125,000 – equivalent to Rs. 75 lakhs – broadly means that if a Indian resident wants to buy a house in the US worth $460,000 (the average ticket size of apartments bought by Indians in the US as per the NAR report), he can do so in three or four instalments with a gap of one year between every two instalments.

Since quite a few apartments in the US are currently held by institutional investors who had bought them during crisis from distressed sellers, it is easy for a foreign buyer to make such deals with such institutions rather than with individual US house owners. The NAR report also mentions that of the total worth of apartments bought by Indians, close to 23% had a component of cash, which could either be held by Indians in their US bank accounts. This is particularly applicable to businessmen and exporters. Therefore, it is not necessary for these Indian buyers to bypass the RBI limit on asset purchases for big deals abroad.

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Central Government Approves Proposal To Increase FAR in Delhi

Anuj Puri picAnuj Puri, Chairman & Country Head, JLL India

As per reports, the Central Government has approved the proposal to increase the FAR in Delhi state. This increase in FAR is for residential plots which are 750 square meters or higher, wherein the FAR has been increased to 200 from 150. For plots bigger than 1000 square meters, the FAR has gone up to 200 from 120 and ground coverage has been increased from 40% to 50%. Providing the higher FAR is a good move; that said, it will make the apartments bigger – and with no change in density norms, ticket-sizes may rise as well.

Though no clarity has been given on an increase in the dwelling units allowed on the larger plots, there is a provision in the draft Delhi Master Plan 2021 which allows for an increase in the number of dwelling units. Under this provision, the cost of a concurrent augmentation of associated civic infrastructure has to be borne by the developer and paid to the authority. This provision in the draft master plan can be used to increase the number of dwelling units.

If used judiciously, this provision in conjunction with the increased FAR can be utilised for increasing the housing stock on residential plots going forward. Only then will some movement towards creating more houses and an associated reduction in prices be likely. With height restrictions for individual residential plots not increased from the current 17.5 meters along with stilt parking provisions, developments are likely to remain of same height.

There is also likely be an impact on group housing plots, where ground coverage that was previously 33.3% will now be 50%. This will allow for bigger apartments to be built, though FAR here was already 200 under the master plan. No height restrictions were applicable for group housing plots, and hence there is no  issue for such developments with regards to height provisions.

A sizeable uptick in the stock prices of listed players which are likely to be holding prime lands in Delhi – notably DLF, Unitech and Anant Raj – has been seen. Better valuation for such land on account of increased FAR for residential plotted developments is the likely factor behind this increase in their respective stocks. The impact may be seen in the short-term, but there should be more going forward when the mid-term review of the master plan 2021 is completed and the changes notified by the end of the year.


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JLL India Closes Prime Land Deal In Pune

Massive Land Parcel Earmarked For Joint Prime Residential Development

Pune, November 26, 2014: Leading international property consultancy JLL India has closed a landmark joint development deal between Bangalore-based Puravankara Projects Limited, Pune-based Oxford Group and Mumbai-based EKTA World, who will jointly develop close to 30 acres of prime residential land in Mundhwa, East Pune.

This joint venture arrangement structured by JLL India will yield an expected 2 million square feet of prime residential space.

Anuj Puri, Chairman & Country Head, JLL India says, “In this joint venture, which brings into play the combined capabilities and expertise of three highly reputed real estate developers, the limelight falls squarely on one of Pune’s hottest real estate locations. Mundhwa is an exciting hotspot, thanks to its proximity to Koregaon Park, of which it is now considered an extension. Additional demand drivers in Mundhwa include the EON IT Park in Kharadi, Magarpatta IT/SEZ development and ready access to Pune’s airport and railway station.”

The three developers have expressed their complete satisfaction with the structuring of this joint venture deal. From a residential real estate viewpoint, Mundhwa is now the location of choice for infotech employees from Pune’s Magarpatta, Kharadi and Kalyaninagar IT hubs. Adding to the high strategic value of this micro-market are major malls such as Amanora Town Centre and Seasons Mall on Hadapsar-Kharadi Bypass, and Phoenix Market City and Inorbit on Nagar Road.

This project marks the entry of Puravanakara Projects Limited, one of the most renowned developers of South India, into the thriving West India market. The partnership with established West India players Oxford Group and EKTA World will bring their combined expertise on luxury living to bear in one of Pune’s most promising micro-markets.

About JLL India

JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 7000, the firm provides investors, 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, senior living, education and retail advisory. The firm was named the Best Property Consultancy in India at the International Property Awards Asia Pacific 2014-15.

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