Bangalore + Chennai + Hyderabad Real Estate Review

Exclusive survey of South Indian Real Estate Market. What is common in the Tri-Cities of South India is , IT/ ITeS is still the key demand driver in these markets, though Retailing is fast catching up.

• supply across asset classes gets more visible, while most of this is pre-leased/sold; risks remain.
• residential prices are holding /stabilized after some correction, while rentals are firm/increasing; land prices spiraling; Owning a Bungalow is now a dream for a middle class Indian.
• Infrastructure development is slow compared to Realty

Bangalore Real Estate:
Strong demand for IT space has led to 4-5% increase in rentals (Rs.42-45/sq ft); residential sale prices (Rs 3500/sqft) are holding with yields of 3-4%, relatively better than 1-2% in North. Potential supply risks, however, remain. We see good progress on infrastructure projects; new airport (Apr'08), peripheral road network (large parts complete) to enhance value ahead.

Chennai's Realty Reality:
While Chennai is a growing IT destination, Sriperumbudur near Chennai is an emerging manufacturing hub. This has led to land prices spiraling and greater thrust on infrastructure. IT space rentals (Rs.38-42/sq ft) are on the rise; residential prices are also firm at Rs 3600/sqft. Supply risks are relatively lower vs. other southern markets, barring some pockets.

Hyderbad Emerging IT Hub:
Madhapur (Hi-Tech City) and Gachibowli are the IT CBD of Hyderabad. Land availability/clear titles and spiraling land prices are key challenges. Potential supply risks have kept IT space rentals (Rs.36- 40/sqft) in-check; residential is a relatively (Rs 4000/sq ft) better market. Progress on road/airport projects and the pace of construction is encouraging.