REAL ESTATE SCENARIO

The first quarter of the year 2006 has seen heightened levels of interest from International Banks and Hedge Funds in terms of space take-up in Mumbai, especially in the CBD and Central Mumbai areas.

On the supply side, the Supreme Court ruling in favour of the developers and Mill owners has eased the constriction on Grade-A supply in the micromarket. This is expected to release close to 2.5 million sq. feet into the market by the end of 2008.

Also, the auction of plots by MMRDA in Bandra-Kurla Complex is also expected to release over a million sq. feet of commercial office supply within the same timeframe.
There is also a clear gravitation to the Northern part of Bangalore . Lured by large land parcels, great roads and open Possibilities, companies, equity funds and developers alike are queing up to land bank in the Hebbal-Devanhalli stretch long Bellary road.
Another trend that has been abuzz is Special Economic Zones or SEZs. Corporates and developers alike have been Keenly Following news in this regards; many corporates saying that they would like to consolidate in an SEZ and many Developers Expressing intent of converting their projects into SEzs. Briefly, a Special Economic Zone (SEZ) is a specifically delineated Duty free enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs; the Main objective of an SEZ being promotion of exports & foreign exchange earnings. Although the benefits offered to occupiers In a SEZ look very attractive; it remains to be seen whether the STP benefits that are already being provided to software Companies will cease to exist after FY 2009-10.
Clearly, the strangest current in the Bangalore realty market is the crumbling infrastructure. And the unfulfilled promises by the Administration and Government only fuel the frustration level among corporates and citizens alike.
The Government needs to shake off his drowsiness and take definitive, measurable action to make sure that the charm of This City and sheen of its people is not lost in choked roads and bulging civic amenities.
  

Take up of large quantum of space by the IT/ITES sector continued to fuel the demand for quality real estate. However if the trend were to continue. Mumbai real estate market could potentially in the short term witness an adverse supply demand equation, with an increasing shortage of ready to move into, Grade A premises for this sector.

With the positive corporate sentiment emanating from a buoyant economy, Mumbai has also witnessed quite a few relocation's as a part of an expansion drive, with many MNCs and large Indian companies scouting for space.

Organized retail has been another demand driver for space Large stores like Shoppers Stop, Lifestyle, Big Bazaar, Giants etc, have all expanded their existing number of outlets in the city. Centre One has commenced operations at Vashi, Navi Mumbai. Crossroads at Nariman Point, In Orbit at malad, Atria at Worli etc are concentrating on early completion of the projects.

Developers are aggressively scouting for land in the city. With the ever increasing demand from the corporate and BPO sectors, developers who were wary of proposing built to suit premises for large occupiers, are now confident of providing the same.

The relocation and consolidation of office space northwards, continues to be the reason for increasing vacancy rates in the CBD. The only new development in South Mumbai, the Crossroads Mall with a multiplex signed up by INOX, is nearing completion.
Among the few transactions in the CBD last quarter, UTI Bank leased around 3,500 sq.ft., another approximately 2,400sq.ft was acquired by IFKO TOKYO and PIL leased around 8,000 sq.ft..
 

Suburban locations like Malad, Powai, Andheri etc continue to be the thrust areas for most of the corporates. The primary demand drivers behind this surge in new office leasing activity continued to be IT/ITES, financial services and Retail sectors.

Some of the prominent leasing transactions included TCS acquiring approximately 140,000 sq.ft., Deloitte Consulting approximately 47,200 sq.ft., Shoprite Checkers around 75,000 sq.ft., Daksh eServices approximately 40,000sq.ft. and Sutherland Technologies approximately 32,000 sq.ft.. JM Morgan Stanley and Convergys preferred the built-to suit route and acquired approximately 240,000 sq.ft and 120,000 sq.ft., respectively.

Pune, situated 180 Kms southeast from Mumbai, has emerged as a rapidly developing market for the BPO sector. Notable transactions included acquisition of an approximately 100,000 built to suit facility by Convergys, around 50,000 sq.ft by IBM, around 40,000 sq.ft by Excel, around 30,000 sq.ft by Avaya, approximately 70,000 sq.ft by Satyam and around 80,000 sq.ft. BTS by AXA.

The increase in leasing activity in the suburban locations is expected to continue in the short to medium term. The CBD location is expected to witness slight increase in vacancy levels, which could potentially lead to a marginal decline in capital and rental values in the short-term.