India Real Estate - August 13, 2010 - JP Morgan

Asia Pacific Equity Research
09 August 2010
Realty Check India

Residential volumes are stabilizing, office absorption is gaining traction
Divergent YTD performance in a beta sector source of opportunity?YTD stock returns within the property space have been fairly disparate, a trend that is new in the relatively short history of the listed sector. Against the aggregate index BSE Realty that is YTD down 10%, UT is up 3.3% whereas DLF is down 15%. Mumbai developers, HDIL/IBREL, are down ~25% each whereas Bangalore developers, Sobha/Puravankara are up 38%/25%. Looking at this performance, while an overweight Bangalore real estate strategy has largely worked, a buy commercial exposure (DLF/IBREL/Brigade) is as yet not yielding results. Going ahead we would expect catch up in underperformance on some of these names vs. the better performing ones. Key trends in the physical market: o 2QCY10 residential volumes move up by 5% Q/Q This is quite encouraging post a 10-15% volume decline in 1QCY10. While Gurgaon continued to witness healthy absorption (up 13% Q/Q), volumes in Mumbai/Bangalore remained largely stable. However, anecdotal evidence suggests that volumes in Mumbai have come off by 15-20% in July due to uncertainty over imposition of sales tax/VAT. Prices across key markets (with the exception of Mumbai suburbs) strengthened during the quarter driven by positive absorption trends. o Office absorption +16% up Q/Q to 7.3 msf an encouraging trend Overall JLL expects office absorption to grow at 30% CAGR over 2009-12. Recently, there has been a noticeable shift in lease enquiries towards SEZ projects vs. IT Parks given imminent expiry of STPI tax benefits by Mar-11; however, conversions remain low due to prevailing uncertainty on SEZ regulations in the proposed DTC. Clarity on these regulations could provide a boost to SEZ absorption in the near term. o Retail leasing is improving at the margin Underlying fundamental for retailing seems to be turning positive with most retailers reporting positive sales trends and looking favorably at space expansion. However, supply remains a challenge. Against a total 13.9 msf of expected completions, demand this year is likely to be only 7 msf, which should push vacancies up to 24-25% levels. o Please see the report for a detailed outlook and movement in physical real estate trends across key markets and overview of recent land deals. Indian developer valuations
DLF Unitech IBREL HDIL Puravankara Sobha Brigade AIT Market Cap US$MM 11,255 4,487 1,464 2,091 533 750 319 532 FY11E 25.7 20.8 22.9 11.8 15.5 19.9 12.6 15.7 P/E FY12E 19.2 14.3 11.3 6.4 11.7 12.5 9.4 13.0 FY11E 1.9 1.8 0.7 1.2 1.5 1.7 1.3 1.1 P/B FY12E 1.7 1.6 0.8 1.0 1.3 1.5 1.2 1.1 FY11E 8% 10% 3% 11% 10% 9% 11% 9% ROE FY12E 10% 12% 7% 18% 12% 13% 13% 9%
India India Property Saurabh Kumar

AC
(91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com
Gunjan Prithyani
(91-22) 6157-3593 gunjan.x.prithyani@jpmorgan.com J.P. Morgan India Private Limited
BSE Realty vs. Sensex

110 105 100 6/9/2010 6/23/2010 Sensex 7/7/2010 BSE Realty
Source: Bloomberg.
Source: Bloomberg, J.P. Morgan estimates. Prices as of Aug 5, 2010
See page 24 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com
Asia Pacific Equity Research 09 August 2010
Share price performance

Over the past month (July 6 Aug 6), the BSE Realty Index gained by 11% over the last month outperforming Sensex by meaningful 7%. Key outperformers over the month include Ansal Housing (+18% M/M), Unitech (+14% M/M) and Sobha (+12% M/M). AIM listed developer UCP too was up 15% M/M after Unitech proposed to make an offer to buy out the company from existing shareholders.
Table 1: Stock price performance
DLF Unitech HDIL Indiabulls Real Estate Akruti Annat Raj Sobha Parsvnath Puravankara Mahindra Lifespaces Peninsula Land Brigade Orbit Ansal Properties Ansal Housing SENSEX Index BSEREAL Index AIM Developers Trinity Unitech Corporate Parks Ishaan Hirco US$MM Mcap 11,225 4,487 2,091 1,464 792 750 697 550 533 421 407 319 293 227 28 NA NA 221 165 146 129 1 week 1 2 2 3 2 2 1 1 6 3 (1) (0) (1) 12 13 1 1.24 1 1 (2) (6) Absolute (%) 1 month 10 14 11 9 8 12 7 7 1 (7) 0 (5) 12 18 4 11 15 15 (1) (15) 3 month 4 9 7 5 1 (3) 13 9 12 11 (5) (4) (14) 5 2 6 4 8 (3) 1 (20) 1 week (0) 1 1 2 1 1 (0) (0) 5 2 (2) (1) (2) 11 12 0 0 (0) (3) (7) Relative (%) 1 month 6 10 7 5 3 (4) 8 2 3 (3) (11) (4) (9) 8 14 7 11 10 (5) (19) 3 month (2) 3 1 (1) (6) (9) 7 3 5 4 (11) (10) (20) (1) (4) (2) 2 (10) (6) (27)
Source: Bloomberg, Prices as of Aug 5, 2010.
Figure 1: BSE Realty vs. Sensex

114 112 110 108 106 104 102 100 7/7/10 7/10/10 7/13/10 7/16/10 7/19/10 7/22/10 7/25/10 7/28/10 7/31/10 8/3/10 Sensex
Source: Bloomberg. Prices as of August 5, 2010
BSE Realty
Table 2: India: Comparative Valuations

Market Cap US$MM 11,255 4,487 1,464 2,091 533 750 319 532 P/E FY11E 25.7 20.8 22.9 11.8 15.5 19.9 12.6 15.7 FY12E 19.2 14.3 11.3 6.4 11.7 12.5 9.4 13.0 FY11E 1.9 1.8 0.7 1.2 1.5 1.7 1.3 1.1 P/B FY12E 1.7 1.6 0.8 1.0 1.3 1.5 1.2 1.1 FY11E 8% 10% 3% 11% 10% 9% 11% 9% ROE FY12E 10% 12% 7% 18% 12% 13% 13% 9%
DLF Unitech IBREL HDIL Puravankara Sobha Brigade AIT
Source: Company reports and J.P. Morgan estimates. Prices as of Aug 5, 2010
Sector performance
14,000 Volumes keep dry ing up 12,000 dev elopers adopt w ait and w atch attitude Financing costs start 10,000 rising sharply . Dev eloper financing completely halts. Incremental sales at a 8,000 Prices & v olumes 6,000 continue to fall. Lending contraction begins. 4,000 Financing costs start rising 2,000 Stocks fell 50-70% ev en from these lev els ev en as they traded on discounts to NAVs estimated at that point - Residential v olumes start to taper off esp in Mumbai as prices increase. Signs of rev iv al in office market - Pick up in transactions in land market w ith lease enquiries picking up. - Incidence of serv ice tax reduced standstill. Asset liability mismatch on balance sheet w orsens Policy breather- RBI permitted real estate loan restructuring comes as a breather. Home loan rate cuts announced. Equity raisings start Lev erage concerns allay Volumes pick up in the mass residential launces (at 20-25% discunt to peak). Price show ing signs of stabilization and ev en start to increase in Mumbai/NCR Prov isioning norms for commercial real estate raised to 1% from 0.4% RBI disallow ed resttructuring of loans Introduction of serv ice tax on residential sales SBI, HDFC ex tends teaser home loans
Source: Bloomberg, J.P. Morgan estimates
De c-0 Ja 7 n0 Fe 8 b0 M 8 ar -0 8 Ap r-0 M 8 ay -0 8 Ju n08 Ju l-0 Au 8 g0 Se 8 p0 Oc 8 t-0 No 8 v-0 De 8 c-0 Ja 8 n0 Fe 9 b0 M 9 ar -0 Ap 9 rM 09 ay -0 9 Ju n09 Ju l-0 Au 9 g0 Se 9 p0 Oc 9 t-0 No 9 v-0 De 9 c-0 Ja 9 n1 Fe 0 b1 M 0 ar -1 Ap 0 rM 10 ay -1 0 Ju n10 Ju l-1 Au 0 g10
3
Affordability levels remain healthy across markets ex Mumbai

Residential prices in Mumbai have increased by 30-50% over the last few quarters and are now even above their peak levels of 2007-08. This has started to constrain the affordability thereby adversely impacting the volumes in the market. Affordability in other cities (ex Mumbai), however, remains sound given prices in these markets have remained flat or have witnessed marginal increase of 5-10%.
Figure 2: NCR Affordability (EMI/Monthly Income)
100% 80% 60% 40%
FY 99 Y 00 Y 01 Y 02 Y 03 Y 04 Y 05 Y 06 Y 07 Y 08 Y 09 Y 10 11E F F F F F F F F F F F FY
Figure 3: Mumbai Affordability (EMI/Monthly Income)

70% 65% 60% 55% 50% 45% 40%
FY FY FY FY FY FY 11 E FY 11 E FY 05 07 01 09 FY 09 99 03 03
Source: Residex, J.P. Morgan estimates
Figure 4: Bangalore Affordability (EMI/Monthly Income)

70% 65% 60% 55% 50% 45% 40% 35% 30%
11 E 99 01 03 05 07 09 FY FY FY FY FY FY
Figure 5: Chennai Affordability (EMI/Monthly income)

70% 65% 60% 55% 50% 45% 40% 35%
FY FY FY 05 FY FY 07 99 01
FY
Land market in Mumbai is heating up

Land market in Mumbai has started to heat up with US$2B of land deals being concluded over the last one year. Clearly, developers' appetite for land has increased significantly over the last one year on the back of sharp revival in residential demand and improved financing. Further, most of these land parcels are fairly prime in nature either located in Western Mumbai suburbs (Andheri, Vile Parle) or Central Mumbai. Land prices playing a catch up Looking at the most recent transactions, the acquisition price seems to be at a significant premium to the transactions concluded in 2HFY09. While these transactions are not strictly comparable, the land prices seem have appreciated by over 50% over the last one year. Further, the acquisitions made under the recent public auctions have been done at 100% premium to the reserve price. We note that the increase in land prices is not in sharp contrast to increase in end unit prices, which are now back to their 2008 peak levels. Is the pricing reasonable? While the FSI details on these transactions are not available, it seems developers in most cases are looking to avail higher FSI under the parking scheme. Assuming the developers are able to avail high FSI (2.54x), most of these transactions seem to make economic sense (for 30-40% margin) if the pricing continues to hold at current levels in Mumbai. How are developers going to finance it? While most of these acquisitions require substantial initial outlay (over US$100MM), developers seem to be confident of getting financing from non-banking sources (banks in India do not lend for land financing) to secure these projects. Typically land financing is done from non-banking sources at a 15-20% interest rate (bridge loan for a year) which is then taken out by a lower cost bank loan for construction (11-13% rate) which is secured once the approvals come through. Oversupply risks building up? Following the success of recent land auctions, various other government agencies and private companies (RLDA, MMRDA, RCF, NTC) have revived their land auction plans for the city. While NTC mill auctions in Central Mumbai concluded recently, further supply is expected to come from other government agencies (MMRDA/Railways) in BKC over the next few months. Based on our estimates, upcoming land auctions coupled with recently concluded land transactions should augment the supply in the suburbs by over 20msf (almost 15-20K units on an average). The new planned supply is 1.3x of last years absorption levels of 16 msf. Further, all new supply will take 4-5 years to build out and may not put a very huge immediate pressure on built up asset pricing, in our view.
Table 3: Key Land deals in Mumbai over the last one year
Buyer Indiabulls Real Estate Indiabulls Real estate Sheth developer Sunteck Private developer Sheth developer Private developer Wadhwa developer Private developer
Source: News reports (Economic Times)
Date Aug-10 Aug-10 Aug-10 July-10 May-10 Feb-10 Feb-10 Dec-09 Jul-09
Location Upper Worli, Mumbai Upper Worli, Mumbai Andheri (E), Mumbai Goregaon, Munbai Wadala, Mumbai Vile Parle, Mumbai Goregaon, Mumbai LBS Marg, Mumbai Lower, Parel
Area (acre) 8.4 acre 2.4 acre 18 acre 6 acre 6 acre 14 acre 5 acre 18 acre 10.3 acre
Price (Rs B) 15.1 4.74 8.8 1.5 40.5 5.9 2.7 5.7 7100
Price per acre (Rs MM) 1,800 1,983 489 250 6,750 421 540 317 689
Seller NTC NTC Borosil Glass works NA MMRDA GTC Lupin Hind. Composite NTC
Table 4: Bid price vs. reserve price in auction deals concluded over the last one year
Date Aug-10 Aug-10 May-10 Jul-09 Developer Indiabulls Real estate Indiabulls Real estate Private developer Private developer Location Upper Worli, Mumbai Upper Worli, Mumbai Wadala, Mumbai Finlay Mills, Lower Parel Bid Price (Rs MM) 15,050 4740 40,500 7,100 Reserve price (Rs MM) 750 2500 19,800 7,080 % premium 100% 90% 105% 0%
Source: News reports (Economic Times)
Residential: Volumes remain healthy; however peak maybe behind us

2009 was a year of record volumes for a number of developers; however, the peak in terms of residential bookings now seems to be behind us as volumes stabilize across markets. Overall, unit absorption across key markets (Gurgaon, NCR, Bangalore) has increased by 6% in 2QCY10 after witnessing a 10-15% volume decline in 1Q10. While Gurgaon continues to witness healthy volume growth with 2Q10 units sales increasing by 13% Q/Q, volumes in Mumbai (MMR) and Bangalore remained largely stable over the last quarter. Anecdotal evidence suggests that volumes in Mumbai have come off by 15-20% in July due to uncertainty over imposition of sales tax (came into effect in July) and VAT. Noida/Greater Noida market stood out over the last quarter registering a twofold increase in absorption run rate. This was driven by strong offtake in few big launches. These include Supertechs Ecovillage in Greater Noida and Jaypees Kensington project in Noida. Capital values took a breather in Mumbai given sharp appreciation witnessed over the last one year. Prices in other markets (Gurgaon/Chennai/Bangalore) however strengthened further driven by positive absorption trends. Unsold inventory across markets has been declining over the last one year with Mumbai/NCR reaching their two year lows over the last quarter. Months of unsold inventory in Mumbai / NCR is at 8-10 months; while it is still high at 12-15 months of inventory in South India markets (Chennai and Bangalore). This in part explains the muted price increase in Bangalore/Chennai markets as yet. Mumbai/NCR had been leading the launch activity over the last one year accounting for over 75% of the new launches. Going ahead, new launches are expected to gain traction in Bangalore with number of key players firming up their plans for big launches in FY11 on the back of positive hiring/salary trends in the IT sector.
Figure 6: Pan India Residential absorption trends
Source: JLL
Table 5: Average monthly absorption trends across key markets

Units/month MMR (including Thane and Navi Mumbai) Gurgaon Bangalore Chennai Total (ex Noida/G Noida) Noida/Greater Noida YTD CY10 average 4,758 2,114 1,752 1,160 9,784 8,626 CY09 average 5,121 2,092 1,723 1,197 10,133 2,296 % ch -7% 1% 2% -3% -3% 276% 2QCY10 average 4,816 2,242 1,725 1,307 10,090 12,715 1QCY10 average 4,700 1,985 1,779 1,062 9,526 4,536 % ch Q/Q 2% 13% -3% 23% 6% 180%
Source: Prop Equity. Note that 2QCY10 data for Chennai is available for Apr/May only
Residential market update: Key market trends as of 2Q 2010
NCR
Cushman Comments - Residential market in NCR continued to witness robust transaction activity for both mid income as well as high end properties. This led to further strengthening of capital values especially in prime Gurgaon. Prices in Noida however remained stable at last Q levels. - NCR continues to witness heightened launch activity with number of mid range projects being launched in Gurgaon and Noida. Key projects launched in 2Q include Victory Valley by IREO, Tulip Purple by Tulip Infratech Pvt. Ltd., Harmony Nirvana Country by Unitech Ltd., Jaypee Kensington Boulevard, Kasa Isles, and Knights Court by Jaypee Developers.
Mumbai
- Mumbai has witnessed strong pick up in demand from both investors as well as end users over the last one year. However with prices surpassing the 2008 peaks, volumes have now started to moderate in the market. Further, capital values too took a breather over the last quarter. - A number of premium projects were launched this quarter in Mumbai including Ahuja Towers by Ahuja Builders, Kumar Cortue by Kumar Builders, Oberoi Exquiite by Oberoi Builders, Aqua Marine & Hill Roof by Kamla Group. Most of these projects were concentrated in Lower Parel, Prabhadevi, Goregaon and Bandra.
Bangalore
- Bangalore market continues to witness healthy pick up in absorption. Driven by improved absorption trends, both launch as well as construction activity has picked up meaningfully over the last quarter. Number of projects across all segments were launched in 2Q including Melody and Purva Atria Platina by Salarpuria Group and Purvankara, respectively. -Capital values across markets too have started to appreciate over the last quarter. Price increase was registered primarily in ready to move/near completion premium properties; however appreciation in mid income segment was marginal. As per C&W, ~ 15,000 mid segment units are likely to be added in Bangalore in 2010.
Chennai
- Chennai residential market has witnessed a noticeable pick up in sales over the last 6 months. While the end users continue to dominate the overall demand, investor demand has also started to come back in peripheral locations. Capital values too have started to increase in select locations with limited supply. - Launch activity in the city has picked up over the last quarter given improving demand trends. Majority of the launches were concentrated in the affordable/mid income segment.
Source: Cushman and Wakefield
Supply and Absorption trends

Figure 7: Gurgaon: Absorption trends and months of inventory
Gurgaon recorded average monthly absorption of 2,242 units/months in 2Q10. This is 13% higher than 1Q average and largely stable at CY09 average. Months of unsold inventory (~6 months) continued to decline in the market and is currently at its two year low thereby keeping pricing relatively strong.
3,000 2,500 2,000 1,500 1,000 500 n20 09 De c-2 00 8 Se p20 09 Se p20 08 De c-2 00 9 ar -2 00 9 ar -2 01 0 n20 10 Ju
60 50 40 30 20 10 0
Ju
Absorption
Source: Prop Equity, J.P. Morgan
Months of inv entory
Absorption pick up in Noida/Greater Noida has been astonishing as run rate over Apr/May tripled from 1Q levels. New launches by Jaypee Infratech and local developers have contributed a lot to this. Key launches Supertechs Ecovillage in Greater Noida and Jaypees Kensington project in Noida.
Figure 8: Noida/G Noida: Absorption trends and months of inventory

15,000 10,000 5,000 n20 09 Se p20 09 De c-2 00 8 Se p20 08 De c-2 00 9 ar -2 00 9 ar -2 01 0 n20 10 Ju
40 30 20 10 0
Ju
Absorption
Average monthly sale run rate (4,816 units/month) in Mumbai (including Navi Mumbai and Thane) in 2Q stabilized (up 2% Q/Q) after witnessing a 13% volume decline in 4Q10. Months of unsold inventory continued to decline in the market and is currently at its two year low of 9 months.
Figure 9: Mumbai (including Thane & Navi Mumbai): Absorption trends and months of inventory
10,000 8,000 6,000 4,000 2,000 Se p20 08 No v-2 00 8 Ja n20 09 M ar -2 00 9 M ay -2 00 9 Ju l-2 00 9 Se p20 09 No v-2 00 9 Ja n20 10 M ar -2 01 0 M ay -2 01 0
25 20 15 10 5 0
Absorption
Source: Prop Equity, JP Morgan
Figure 10: Bangalore: Absorption trends and months of inventory

Average monthly sales run rate (1,725 units) over 2QCY10 in Bangalore were largely flat after witnessing 13% decline in 1Q. Decline in 1Q was primarily on account of seasonal weakness. Months of unsold inventory has been coming down over the last one year; however it still remains high at 15 months thereby keeping the prices under check.
2,500 2,000 1,500 1,000 500 n20 09 De c-2 00 8 Se p20 09 Se p20 08 De c-2 00 9 ar -2 01 0 ar -2 00 9 n20 10 Ju
40 30 20 10 0
Ju
Absorption
Figure 11: Chennai: Absorption trends and months of inventory

2,500
Chennai is witnessing steady pick up in absorption with average sales run rate (1,307 units) over Apr/May increasing by 23% from 1Q10 levels. Months of unsold inventory has been declining over the last one year.
2,000 1,500 1,000 500 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010
35 30 25 20 15 10 5 0
Absorption
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Capital value trends

Table 6: NCR Capital value trends
Rs psf South East (New Friends Colony, Kalindi Colony, Ishwar Nagar) South Central (Safdarjung Enclave, Sarvapriya Vihar, Panchsheel) Gurgaon Noida
Source: Cushman & Wakefield
Jun-09 14,000 19,000 4,400 3,750
Sep-09 15,000 19,000 5,250 4,350
Dec-09 15,500 19,500 5,250 4,350
Mar-10 16,250 19,500 5,600 4,450
Jun-10 16,500 20,000 5,900 4,450
% ch (Q/Q) 2% 3% 5% 0%
% ch (Y/Y) 18% 5% 34% 19%
Table 7: Mumbai capital value trends

Rs psf South Central (Altamount Rd., Malabar Hill, Napeansea etc) Central (Worli, Prabhadevi, Lower Parel / Parel) North (Bandra (W), Khar (W), Santacruz (W), Juhu) Far North (Andheri (W), Malad, Goregaon) North East (Powai)
Jun-09 38,500 18,000 14,500 6,500 4,500
Sep-09 38,500 19,000 18,000 8,500 7,100
Dec-09 40,000 20,500 20,000 10,000 7,450
Mar-10 41,000 21,250 20,000 10,500 7,500
Jun-10 44,000 22,750 20,000 10,500 7,500
% ch (Q/Q) 7% 7% 0% 0% 0%
% ch from bottom 14% 26% 38% 62% 67%
Table 8: Bangalore Mid income capital value trends

Rs psf Central (Brunton Road, Artillery Road, Ali Askar Road, Cunningham Road) East (Marathalli, Whitefield, Airport Road) South East (Koramangala, Jakkasandra) Off Central (Vasanth Nagar, Richmond Town, Indiranagar) North West (Malleshwaram, Rajajinagar)
Jun-09 5,800 2,550 3,000 4,800 4,700
Sep-09 5,500 2,550 2,950 4,400 4,500
Dec-09 5,500 2,550 2,850 4,400 4,350
Mar-10 5,750 2,650 3,000 4,600 4,300
Jun-10 5,900 2,850 3,250 4,750 4,600
% ch (Q/Q) 3% 8% 8% 3% 7%
% ch from bottom 7% 12% 14% 8% 7%
Table 9: Chennai Mid Income Residential Capital Values

Rs psf Rajiv Gandhi Salai Velachery Poes Garden T Nagar Nungambakkam Anna Nagar
Jun-09 2,650 3,900 12,000 5,250 7,500 6,250
Sep-09 2,650 3,750 12,000 5,250 7,500 6,250
Dec-09 2,650 3,750 12,000 5,250 7,500 6,250
Mar-10 2,875 4,000 12,000 5,750 8,000 6,500
Jun-10 3,500 4,250 12,000 7,750 10,250 6,750
% ch (Q/Q) 22% 6% 0% 35% 28% 4%
% ch from bottom 32% 13% 0% 48% 37% 8%
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Figure 12: Regulatory/Policy action over the last three years

Date Jul-10 May-10 Apr-10 Comments - HDFC extends the teaser home loan scheme to Mar-11 - SBI has extended its offer on teaser rate schemes till end June (by 2 months). Now followed by other private sector banks - Incidence on service tax on home purchase reduced to 2.5% from 3.5% earlier (proposed on the budget). Additionally for low cost housing projects funded under special govt initiatives (JNUURM / RYA) have been exempted from imposition of these taxes
Feb-10 Feb-10 Feb-10 Oct-09
-Withdrawal of teaser home loan rates by a number of banks ICICI, HDFC, BOI etc -Budget proposes imposition of service tax on sales/rentals and increases input costs (excise hike). -RBI disallowed restructuring of loans for real estate developers. - Increase in provisioning requirements for commercial real estate loans from 0.4% to 1%
Sep 09 Jul 09 Jul 09 Jan-09 Dec-08 Dec-08 Dec-08 Nov-08 Nov-08 Nov-08 May-08
- RBI eases lending norms for SEZs (classified as infrastructure lending) -Extension of 80IB(B) scheme by one year and interest subsidy of 1 % -Norms relaxation for SEZ development - ECB norms for overseas lending relaxed - Home loan rates on below Rs 20L segment to be cut by about 200bps - Rs40B credit line to National Housing Bank to to kick start lending in the Rs 2MM category (priority sector lending) - Permitted real estate loan restructuring upto Jun-09 as standard loans without requiring banks to classify these as NPAs - HFCs allowed to raise short term foreign currency borrowings under the approval route - Reduction in provisioning requirements on advances to the commercial real estate sector and home loans beyond Rs 2MM to 0.4% - RBI reduced risk weightings on banks' exposures to commercial real estate to 100% from 150% earlier -Lower risk weight (50%) on home loans upto 30L (20L earlier)
May-07 Jan-07 Sep-06 May-06 May-06 Apr-06
-Ban on ECB's for township projects. Likely to hit the development plans of large developers -Increase in provisioning requirements for real estate loans - RBI asks banks to treat loans to SEZs as real estate loans - RBI increases risk weightings on banks' exposures to commercial real estate to 150% from 125% - Increase risk weightings and general provisioning of residential housing/commercial loans above Rs 2MM - FII entry into real estate IPOs comes under scanner with RBI trying to classify it as FDI
Source: RBI, J.P. Morgan
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Office recovery gaining traction; however, rentals to remain under pressure given sizeable supply pipeline
Demand for office segment continues to improve with most micro markets witnessing increased transaction activity over the last quarter. Number of companies that had earlier put their expansion plans on hold are now looking to take up space given affordable rentals (post 30-35% decline from peak levels), flexible lease terms and improving economic outlook. Even while a large amount of supply is expected across most micro markets, improving demand trends auger well for the overall office market in 2010. Leasing activity has picked up primarily for projects nearing completion; while demand for under construction projects still remains low. Overall absorption for 2Q10 stood at 7.3msf against 6.3msf absorption in 1Q10. Further, construction activity too seems to be gaining momentum as demand has shown visible signs of improvement. This is quite encouraging given construction on most of the office projects had been on hold in 2008/09 on account of slowdown in leasing demand. There has been a noticeable shift in lease enquiries towards SEZ projects vs. IT parks over the last quarter as STPI tax benefits are set to expire by Mar-11. However, the SEZ lease decisions are being deferred due to prevailing uncertainty over SEZ regulations in the proposed DTC code (all SEZ units set up after 31 March 2011 would not be eligible for any tax breaks). Clarity on these proposed regulations can likely boost the SEZ demand in the near term. Despite improving absorption trends, rentals have remained largely stable and are likely to remain under check in the near term as supply continues to outpace the demand across most markets. Overall for 2010, JLL expects office supply of 52msf against the estimated absorption of 29msf. This will further push the vacancy levels higher to >20% by 2010 end from ~18% currently. CBDs however will be an exception to this trend given limited supply addition in these micro markets. CBD rental values increased marginally by 3-5% during the quarter. Capital values, however, might start to increase given the decline in yields. Investment yields across markets have declined by 50-100bps over the last year and the trend is expected to continue on the back improving demand environment and of reduced risk aversion. In terms of markets, Mumbai and NCR have been leading the demand revival on the back of improving demand financial institutions and IT companies. Going ahead, we expect that Bangalore market to outperform on the back of encouraging results (increased hiring activity) posted by most IT companies and improving offhsoring outlook. Further, the market has healthy pre lease commitments in place. Chennai however has been underperforming with current vacancies at ~24%. While there has been some pick up in demand in Chennai, overall sentiment is not as buoyant as other metros.
13
Figure 13: Office absorption trends

Leasing activity picked up during the quarter with 7.3msf of office space being absorbed in 2Q10 vs. 6.3msf in 1Q10.
Source: JLL State of nation 2Q
Figure 14: Pan India Demand Supply Trends

2010 is expected to witness 52msf of office supply as against estimates absorption of 29msf. This will further push the vacancy levels higher to over 20% from 18% currently.
Source: JLL State of nation 2Q
Figure 15: Construction status of future supply

Majority of the supply expected to be added in 2010/2011 is at advanced stages of construction.
Source: JLLM State of nation 2Q
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Figure 16: Relative position of key micro markets
Figure 17: Office Investment yield trends in key cities

12.0% 11.5% 11.0% 10.5% 10.0% 9.5%
Ap r-0 8 Au g08 De c-0 8 Ap r-0 7 Au g07 De c-0 7 Ap r-0 9 Au g09 De c-0 9 Ap r-1 0
NCR
Source: JLL, J.P. Morgan
Mumbai
Bangalore
Chennai
Figure 18: NCR Office: Supply Absorption trends

20 15 10 5 0 2005 2006 2007 2008 2009 2010E 2011E 35% 30% 25% 20% 15% 10% 5% 0%
Figure 19: Mumbai Office: Supply Absorption trends

16.0 12.0 8.0 4.0 2005 2006 2007 2008 2009 2010E 2011E Vacancy (%) 30% 25% 20% 15% 10% 5% 0%
Absorption (msf)
Source: JLL, J.P. Morgan estimates
Supply (msf)
Vacancy (%)
Absorption (msf)
Source: JLL, J.P. Morgan
Supply (msf)
estimates
Figure 20: Bangalore office: Supply Absorption trends (msf)

14.0 12.0 10.0 8.0 6.0 4.0 2.0 2005 2006 2007 2008 2009 2010E 2011E Vacancy (%) 20% 15% 10% 5% 0%
Figure 21: Chennai Office: Supply Absorption trends (msf)

10.0 8.0 6.0 4.0 2.0 (2.0) 2005 2006 2007 2008 2009 2010E 2011E Vacancy (%) 35% 30% 25% 20% 15% 10% 5% 0%
Absorption (msf)
Supply (msf)
Absorption (msf)
Supply (msf)
15
Office market update: 2Q10

Market NCR Comments - 2Q10 witnessed increased level of transaction activity especially in Gurgaon & Noida given availability of quality supply at affordable rentals and flexible lease terms. Overall 2Q10 absorption stood at 2.2msf (up 126% Q/Q) with SEZ accounting for 50% of the total. - Supply for 2Q10 stood at 1.5msf (vs.0.8msf in 4Q) on account of completion of significant projects during the quarter. The entire supply was concentrated in the suburban locations. 3.3msf of supply is expected to be added in 3Q. - While the overall market vacancy levels remained stable at 13-14%; Gurgaon (12.2%) and CBD (2.2%) witnessed marginal decline in vacancy rates over the quarter. Rentals remained largely stable across most markets. C&W expects rentals across majority of the markets to strengthen in the medium term. Mumbai - Mumbai witnessed absorption of 1.7msf in 2Q10 with fresh leasing picking up meaningfully during the quarter. SEZs in Thane Belapur accounted for >20% of total absorption for the quarter. - Overall vacancy rate remained stable at 14-15% in 2Q 2010 as supply continues to outstrip demand especially in the Andheri, Malad and Thane Belapur micro markets. CBD vacancy levels however increased on account of tenant movement to new buildings in suburban locations (Lower Parel/BKC). - Rentals remained largely stable across most micro markets and the trend is likely to continue given sizeable supply addition expected in suburban Mumbai (7msf primarily coming in Andheri, Lower Parel). - Navi Mumbai has emerged as a preferred location for tenants looking for SEZ space. Companies like Wipro, Syntel, Accenture, L&T Infotech, etc. have committed large quantum of space in the Raheja Mindspace project in Airoli. Bangalore - 2Q10 witnessed absorption of 2.4msf primarily coming from earlier pre-commitments in buildings which were delivered during the quarter. Avg. transaction sizes also increased (>70,000sq ft) as compared to last quarter. - Bangalore witnessed 6.2msf of completion in 2Q10 with Whitefield accounting for ~77% of the total supply. 3Q is expected to witness 4.2msf of office supply. - Overall vacancy levels for the city increased marginally to 16% (vs. 15% in 1Q) primarily on account of significant space additions in Whitefield. Vacancy rate in Whitefield currently stands at 35%. - Rentals have largely remained stable over the last quarter with the exception of CBD/off CBD location given limited supply addition in the micro market. C&W expects the rentals to start strengthening in select micro markets over the next 2-3 quarters. Chennai - Demand has started to pick up in the market (1.2msf in 2Q10); however, the sentiment is not as buoyant as in other metros. This coupled with existing high vacancy levels and expiry of STPI tax benefits has led to deferment of supply substantially. Landlords are offering preferential rent pricing, higher rent free period to secure big leases. - Overall vacancy levels remain high at ~22% and rentals remained largely stable despite improving demand trends. Key projects including DLF IT Park and RMZ Millennia witnessing strong leasing interest saw some rental appreciation. - Peripheral Business District (PBD) of Perungalathur, Sholinganallur,Siruseri, Ambattur and GST Road continue to remain under pressure even as rentals seem to have bottomed out. Vacancy level continued to remain high at 18% 20%.
16
Rental trends in key cities

Table 10: NCR Grade A Office rental trends
Rs psf pm Connaught Place Nehru Place Jasola Saket Gurgaon Noida
Source: CBRE, J.P. Morgan
Jun-09 220 160 110 140 60 30
Sep-09 230 160 105 135 65 30
Dec-09 230 160 105 135 65 30
Mar-10 240 150 100 133 65 30
Jun-10 240 150 100 133 65 30
% ch (Q/Q) 0% 0% 0% 0% 0% 0%
% ch from bottom 9% 0% 0% 0% 8% 0%
Table 11: Mumbai Grade A Office rental trends

Rs psf pm Nariman Point, Fort, Cuff Parade Worli, Lower Parel,Prabhadevi Bandra Kurla Complex Andheri Malad Thane, Navi Mumbai
Jun-09 300 225 250 125 70 37
Sep-09 300 225 250 125 70 37
Dec-09 290 250 265 115 65 40
Mar-10 290 250 275 115 65 40
Jun-10 290 250 275 115 65 40
% ch (Q/Q) 0% 0% 0% 0% 0% 0%
% ch from bottom 0% 11% 10% 0% 0% 8%
Table 12: Bangalore Grade A office rental trends

Rs psf pm CBD (MG Road, Residency Road) Koramangala, Indira Nagar Outer ring road Whitefield, electronic city South Bangalore North Bangalore
Jun-09 73 48 40 25 35 42
Sep-09 73 48 40 25 35 42
Dec-09 73 48 40 25 35 42
Mar-10 70 48 38 24 35 42
Jun-10 72 48 38 24 35 42
% ch (Q/Q) 3% 0% 0% 0% 0% 0%
% ch from bottom 3% 0% 0% 0% 0% 0%
Table 13: Chennai Grade A Office rental trends

Rs psf pm CBD (Anna Salai,Nungambakkam, RK Salai) Off CBD (Alwarpet,Egmore,Guindy,Adyar) SBD (Valachery, Taramani, Perungudi) SBD (Ambattur,Siruseri etc)
Jun-09 68 49 38 25
Sep-09 64 47 37 25
Dec-09 62 45 35 24
Mar-10 62 45 35 24
Jun-10 62 44 35 24
% ch (Q/Q) 0% -2% 0% 0%
% ch from bottom 0% 0% 0% 0%
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Table 14: Significant recent office lease transaction 2Q10

Project NCR Oxygen DLF Building 10C Vatika Business Park Unitech Infospace Express Tradw Towers II DLF Building 5 Park Centra Mumbai Mindspace Supreme Business Park The Ruby Natraj Bangalore Kalyani Platina Vrindavan Tech Village Vrindavan Tech Village Salarpuria Supreme JP Techno Park Kalyani Magna Embassy Golf Links RMZ NXT Kalyani Platina Chennai DLF IT Park Alpha City SP Infocity RMZ Millenia Independent building
Source: CBRE, Cushman and Wakefield
Location Noida Gurgaon Gurgaon Noida Noida Gurgaon Gurgaon Airoli Powai Dadar Andheri Kurla Whitefield Outer ring road Outer ring road Outer ring road Miller Road Whitefield Domlur Whitefield Whitefield Mannapakkam Navallur Perungudi Perungudi Guindy
Area sq ft 250,000 50,000 100,000 250,000 200,000 50,000 50,000 300,000 70,000 27,000 22,500 110000 100000 90000 56891 100000 100000 120,000 65,000 110000 423,000 25,000 20,000 60,000 65,000
Tenant EXL Initto Stryker India Accenture Net Ambit BMR Advisors Bharti Infra L&T Infotech Fullerton ARCIL Canon Mu Sigma Altisource Brocade Deloitte Samsung MU Sigma NetApp Schneider Mu Sigma CTS, TCS Daksh IBM Lister Technologies Flextronics HOV Services
Table 15: Key projects under construction 2Q10

Property NCR Orient Bestech Business Park Techno Touch Mumbai Indiabulls Finance Center Kaledonia Nirlon Knowledge Center Bangalore Prestige Exora Divyasree Technopark Vasawani Centropolis Chennai ASV Chandilya Ascendas ITPC Leela IT Park
Location Gurgaon Noida Lower Parel Andheri Malad Outer Ring Road Whitefield Langford road Thoraipakkam Taramani Santhome
Area Leased (sq ft) 540,000 240,000 540000 565,000 325,000 674,429 625,000 144,000 500,000 750,000 250,000
Completion Date 3Q10 3Q10 3Q10 3Q10 4Q10 3Q10 4Q10 3Q10 3Q10 3Q10 3Q10
18
Retail segment showing signs of improvement as rentals bottom out

Retail market has witnessed meaningful improvement in lease enquiries over the last quarter as developers become more accommodative in terms of asking rents and lease terms to ensure higher occupancy. Rentals across markets have corrected by 30-40% from their peak levels. Minimum guarantee coupled with revenue sharing has emerged as a favored model amongst the retailers over the past one year. Most retailers (Pantaloons, Shoppers Stop) have reported healthy sales trends over the last 6 months driven by improved consumer spending and now seem to have resumed back their expansion plans. High street seems to be leading the demand recovery with domestic players resuming their expansion plans and entry of new international brands. While there has been a noticeable increase in leasing activity, retailers have become cautious in their choice of micro markets. There has been a visible shift in demand towards prime high street locations or quality mall developments. This has resulted in appreciation in rentals in select markets, while non prime developments continue to witness corrections. 2010 is expected to witness completion of 14msf of retail space vs. an estimated absorption of ~7msf (Source: JLL). Of the total expected supply, over 50% is at advanced stage of construction and is therefore certain to become operational by 2010 end. This would keep the vacancy levels elevated (currently at 24%) and rentals under check.
Figure 22: Pan India Retail Demand Supply Trends
2010 is expected to witness completion of 14msf of retail space vs. an estimated absorption of ~7msf. This will keep the vacancy levels elevated across markets.
Source: JLL REIS
Figure 23: Status of construction of future retail supply
All of the expected future supply in 2010 is at advanced stages of construction with more than 50% of the structure ready. Nearly 4.4 million sq ft of retail space in 2010 is already ready for fit-outs.
Source: JLL REIS
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Table 16: Revenue sharing model

Hypermarket Departmental Stores Apparel Footwear Jewellery Health and Beauty Food Entertainment
Source: ET
Percentage of revenue as rent (%) 3%-4% 7%-8% 12%-18% 15%-18% 2%-2.5% 10%-12% 15%-20% 8%-10%
Figure 24: Retail Investment Yields in key cities (%)

12.0% 11.0% 10.0% 9.0% 8.0%
l-0 5 No v-0 5 M ar -0 6 ar -0 8 Ju l-0 8 No v-0 8 M ar -0 9 l-0 6 No v-0 6 M ar -0 7 l-0 7 No v-0 7 l-0 9 No v-0 9 M ar -1 0
Rent psf pm Zara Croma Croma Landmark, Deisel Westside, Odyssey Completion Date 3Q10 3Q10 3Q10 4Q10 3Q10 3Q10 4Q10 1Q11
Ju
Ju
Ju
NCR
Source: JLL
Mumbai
Bangalore
Chennai
Table 17: Key Mall Lease Transactions: 2Q10

Project DLF Place Standalone Standalone Palladium Express Avenue
Location Saket, Delhi Connaught Place Koramangala, Bangalore Lower Parel, Mumbai Whites Road, Chennai
Area (sq ft) 18,000 8,000 14,000 45000 51,000
Table 18: Key projects under construction 2Q10

Property Metropolis South Court Magnet Infinity 2 Kohinoor Mall Gopalan Innovation Ramee Mall Coromandel Mall
Location MG Road, Gurgaon District Center, Saket Bhandup, Mumbai Malad, Mumbai Kurla,Mumbai Bannerghatta Road Mount Road Rajiv Gandhi Salai
Area (sq ft) 800,000 400,000 650,000 550,000 500,000 180,000 200,000 250,000
20
Ju
Figure 25: NCR Retail: Supply Absorption trends

6.0 5.0 4.0 3.0 2.0 1.0 2005 2006 2007 2008 2009 2010E 2011E 0.4 0.3 0.3 0.2 0.2 0.1 0.1 -
Figure 26: Mumbai Retail: Supply Absorption trends

6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010E 2011E 40% 30% 20% 10% 0%
Absorption (msf)
Supply (msf)
Vacancy (%)
Absorption (msf)
Supply (msf)
Vacancy (%)
Figure 27: Bangalore Retail: Supply Absorption trends

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2005 2006 2007 2008 2009 2010E 2011E 25% 20% 15% 10% 5% 0%
Figure 28: Chennai Retail: Supply Absorption trends

2.5 2.0 1.5 1.0 0.5 0.0 2005 2006 2007 2008 2009 2010E 2011E 35% 30% 25% 20% 15% 10% 5% 0%
Absorption (msf)
Supply (msf)
Vacancy (%)
Absorption (msf)
Supply (msf)
Vacancy (%)
21
Retail market update: 2Q10

Market NCR Comments - 2Q10 witnessed resumption of expansion plans by domestic retailers as well as arrival of new retailers in NCR. Rentals improved marginally over the quarter especially in prime Gurgaon malls and prime high street locations; while non prime markets continue to witness rental corrections. - Vacancy is expected to increase marginally as under construction malls (in West Delhi and South Delhi) become operational. Further, developers are now looking to revive their projects that had been stalled in 2008/09 due to slowdown in leasing demand. Mumbai - 2Q10 witnessed improved leasing activity across markets in Mumbai; while there was no supply addition during the quarter. This led to a marginal decline in vacancy levels. - Rentals remained largely stable across micro markets with the exception of Thane and high street of Linking road which witnessed marginal rent appreciation on account of improved leasing and low vacancy levels. - While huge supply is expected to come up in 2010, majority of this is expected to be concentrated in new emerging locations like Bhandup, Kurla. Rental values in existing retail locations could see some appreciation in coming quarters given the demand improvement and restrained supply. Bangalore - Leasing activity picked up in the city during the quarter with number of new retailers entering the market like Reliance Living, Men and Boys and Howards Storage world. However, no new supply was added during the quarter. - High streets seem to be leading the recovery with F&B players (like Mc Donalds, Costa Coffee, CCD, etc) and hyper markets (Bharti, Star Bazaar) dominating the incremental demand. - On the organized retail front, Royal Meenakshi Mall (expected to be operational by Oct) on Bannerghatta road has witnessed heightened activity. Key tenants include Cinepolis, Star Bazaar, Landmark, Westside, Madura, Barista etc. Chennai - Chennai has witnessed a visible pick up in absorption post the sharp decline in rentals. This is evident from the high occupancy in the recently opened mall - Express Avenue (which is the largest mall in Chennai). Over 85% of the mall is already occupied and the enquiries are picking up steadily. Further, high streets continue to witness healthy leasing and rentals in select micro markets have witnessed marginal appreciation due to lack of supply in these locations. - Enquiries by retailers for malls along Rajiv Gandhi Salai and GST Road are witnessing significant revival. This has led to increased pace of construction in these peripheries. Other large developments in the city include Phoenix market city (1msf in Valanchery) and Junction mall (0.8msf) in OMR.
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Table 19: NCR Prime Mall Rental trends

Rs psf pm South Delhi West Delhi Noida Gurgaon
Source: Cushman & Wakefield
Jun-09 475 240 310 230
Sep-09 450 225 300 225
Dec-09 450 225 275 225
Mar-10 425 225 275 215
Jun-10 430 233 275 225
% ch (Q/Q) 1% 4% 0% 5%
Table 20: Mumbai Prime Mall Rental trends

Rs psf pm Malad Lower Parel Link Road Andheri (W) Mulund Goregaon Vashi Ghatkopar
Jun-09 525 480 400 260 275 185 220
Sep-09 510 480 400 260 280 185 220
Dec-09 480 480 400 260 280 185 220
Mar-10 480 480 400 260 280 185 220
Jun-10 480 480 400 260 280 185 220
% ch (Q/Q) 0% 0% 0% 0% 0% 0% 0%
% ch from bottom 0% 0% 0% 0% 2% 0% 2%
Table 21: Bangalore Prime Mall Rental Trends

Rs psf pm Koramangala Magrath Road Cunnigham Road Mysore Road
Jun-09 400 315 200 150
Sep-09 400 315 200 150
Dec-09 400 315 200 150
Mar-10 400 315 200 150
Jun-10 400 315 200 140
% ch (Q/Q) 0% 0% 0% -7%
Table 22: Chennai Prime Mall Rental trends

Rs psf pm Chennai CBD Chennai Suburbs
Mar-09 220 145
Jun-09 180 140
Sep-09 180 140
Dec-09 180 140
Jun-10 140 180
% ch (Q/Q) 0% 0%
% ch from bottom 0% 0%
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Companies Recommended in This Report (all prices in this report as of market close on 06 August 2010) Ascendas India Trust (AINT.SI/S$0.97/Overweight), Brigade Enterprises (BRIG.BO/Rs132.60/Neutral), DLF Limited (DLF.BO/Rs307.70/Overweight), Housing Development and Infrastructure Ltd. (HDIL) (HDIL.BO/Rs265.15/Overweight), Indiabulls Real Estate (INRL.BO/Rs169.75/Overweight), Puravankara Projects Ltd (PPRO.BO/Rs115.70/Overweight), Sobha Developers (SOBH.BO/Rs340.10/Overweight), Unitech Ltd (UNTE.BO/Rs85.00/Overweight)
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.
Important Disclosures
Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for Housing Development and Infrastructure Ltd. (HDIL) within the past 12 months. Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares of Indiabulls Real Estate: Bijay Kumar. The following analysts (and/or their associates or household members) own a long position in the shares of Sobha Developers: Bijay Kumar. Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of Housing Development and Infrastructure Ltd. (HDIL), Indiabulls Real Estate, Unitech Ltd. Client of the Firm: Ascendas India Trust is or was in the past 12 months a client of JPMSI. Brigade Enterprises is or was in the past 12 months a client of JPMSI. DLF Limited is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services and non-investment banking securities-related services. Housing Development and Infrastructure Ltd. (HDIL) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Unitech Ltd is or was in the past 12 months a client of JPMSI. Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking services from DLF Limited, Housing Development and Infrastructure Ltd. (HDIL). Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment banking services in the next three months from DLF Limited, Housing Development and Infrastructure Ltd. (HDIL). Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from DLF Limited.
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Coverage Universe: Saurabh Kumar: Ascendas India Trust (AINT.SI), DLF Limited (DLF.BO), Housing Development and Infrastructure Ltd. (HDIL) (HDIL.BO), Indiabulls Real Estate (INRL.BO), Indian Hotels (IHTL.BO), Ishaan Real Estate Plc (ISH.L), Puravankara Projects Ltd (PPRO.BO), Sobha Developers (SOBH.BO), Unitech Ltd (UNTE.BO)
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J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010 Overweight (buy) 46% 49% 44% 68% Neutral (hold) 42% 46% 48% 61% Underweight (sell) 12% 31% 9% 53%
JPM Global Equity Research Coverage IB clients* JPMSI Equity Research Coverage IB clients*
*Percentage of investment banking clients in each rating category. For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.
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Asia Pacific Equity Research

Realty Check India

India India Property Saurabh Kumar

(91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

BSE Realty vs. Sensex

Source: Bloomberg, J.P. Morgan estimates. Prices as of Aug 5, 2010

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Share price performance

Source: Bloomberg, Prices as of Aug 5, 2010.

Figure 1: BSE Realty vs. Sensex

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Table 2: India: Comparative Valuations

DLF Unitech IBREL HDIL Puravankara Sobha Brigade AIT

Source: Bloomberg, J.P. Morgan estimates

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Affordability levels remain healthy across markets ex Mumbai

Figure 3: Mumbai Affordability (EMI/Monthly Income)

Source: Residex, J.P. Morgan estimates

Source: Residex, J.P. Morgan estimates

Figure 4: Bangalore Affordability (EMI/Monthly Income)

Figure 5: Chennai Affordability (EMI/Monthly income)

Source: Residex, J.P. Morgan estimates

Source: Residex, J.P. Morgan estimates

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Land market in Mumbai is heating up

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Source: News reports (Economic Times)

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Residential: Volumes remain healthy; however peak maybe behind us

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Table 5: Average monthly absorption trends across key markets

Residential market update: Key market trends as of 2Q 2010

Source: Cushman and Wakefield

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Supply and Absorption trends

Months of inv entory

Figure 8: Noida/G Noida: Absorption trends and months of inventory

Months of inv entory

Months of inv entory

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Figure 10: Bangalore: Absorption trends and months of inventory

Months of inv entory

Source: Prop Equity, J.P. Morgan

Figure 11: Chennai: Absorption trends and months of inventory

Months of inv entory

Saurabh Kumar (91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com

Asia Pacific Equity Research 09 August 2010

Capital value trends

Jun-09 14,000 19,000 4,400 3,750

Sep-09 15,000 19,000 5,250 4,350

Dec-09 15,500 19,500 5,250 4,350

Mar-10 16,250 19,500 5,600 4,450

Jun-10 16,500 20,000 5,900 4,450

% ch (Y/Y) 18% 5% 34% 19%

Table 7: Mumbai capital value trends