THE

METAMORPHOSIS
Changing Dynamics of the Indian Realty Sector
TABLE OF
CONTENTS

1 INTRODUCTION

CHANGING DYNAMICS OF THE

REAL ESTATE SECTOR 5
DEMAND FORECAST
4
7 REAL ESTATE SECTORAL
OPPORTUNITIES

REAL ESTATE INVESTMENT SCENARIO 11

CONCLUSION
16
 INTRODUCTION
India is facing a cyclical downturn in its economy at
present; but we believe this phase to be a short one.
Though recent downturns in investment activity have
contributed to the overall deceleration in manufacturing
and construction, this in no way indicates a long-term
slowdown. The country's strong economy coupled with
existing domestic demand in the realty sector will
continue to attract investments. In this paper Cushman
& Wakefield Research projects the robust demand of the
Indian real estate sector for the next five years,
highlighting the current investment scenario with its
challenges and sectoral opportunities.
The country's economy has been growing at an average rate of
8.8% in the last four fiscal years (2003-04 to 2006-07), with
the 2006-07 growth rate of 9.6% being the highest in the last
18 years. The industrial and service sectors have been
contributing significantly to this effect. Projections made by
the International Monetary Fund (IMF) earlier this year
indicated that global growth was expected to slowdown to
4.1% in 2008 – down from estimations of 4.9% made last
year, due to intensified market conditions led by the U.S. sub-
prime crisis. It is however expected that the strong domestic
demand from emerging markets, such as India and China, will
lessen the impact on capital inflows by positively affecting
world economic growth.
India's GDP growth for the current fiscal year is expected to
be in the range of 7.5-8.0% which is an impressive figure by
itself though down from earlier expectations of 9.0%. This is
essentially due to the tight monetary measures that have been
called in to control the country's inflation rate, which has
reached a 13-year high. The average growth of the economy
for the last five years has been impressive; but such a
continuing growth pattern cannot be predicted for the next
five-six years, considering the general global economic
slowdown and oil price crisis. Though certain economists
argue that India is isolated and 'Decoupled' from global
uncertainties, present market realities indicate otherwise.
Despite the global slowdown, India is expected to be the
second fastest growing economy in the Asia Pacific. India's
long-term growth story continues to remain intact, against the
backdrop of an increase in FDI over the last fiscal year, which
stood at USD 24 billion. According to the Department of
Industrial Policy and Promotion (DIPP), the country is
expected to receive USD 35 billion of FDI in the current fiscal
year, with the first quarter having attracted USD 10 billion. A
sizeable portion of this FDI inflow went into the real estate and
housing sectors, with services and infrastructure being other
the recipient sectors.
According to ASSOCHAM, currently the domestic real estate
market in India is expected to be USD 15 billion, of which
FDI contributions are estimated to be less than USD 4 billion.
India Snapshot
Real GDP
? Growth 2007-08: 9.10%
Projected
? Real GDP Growth: 7.5-8.0%
GDP as
? per Economic Activity:
Trade, hotels, transport and communication –
¡
12.0%
Financing, insurance, real estate & business
¡
services – 11.8%
Construction – 9.8%
¡
India ranked
? #2 in the Global Retail Development
Index 2008
With the gradual relaxation of ceiling in construction space
permitted to foreign developers, the share of FDI in real estate
is expected to increase manifold over the decade. A growing
trend also points to an increasing number of global direct real
estate investment deals that are going through India-specific
real estate funds, rather than taking the FDI route.
According to Cushman & Wakefield research estimates, the
pan-India cumulative demand projection for the real estate
sector across office, residential, retail and hospitality is
expected to be approximately 1,098 million sq.ft. by the year
2012. The residential segment will continue to drive real
estate demand in the country accounting for nearly 63% of the
total space demand during the period 2008-12. While the
demand for commercial office space is expected to be 243
million sq.ft. during this time frame, the retail and hospitality
segments are expected to constitute 95 million sq.ft. and 73
million sq.ft. of this total demand, respectively.
1
 CHANGING DYNAMICS OF
THE REAL ESTATE SECTOR
Ever since India's inflation rate accelerated to 11% in June The economy continues to remain strong in comparison to
2008, peaking since the mid '90s, fears of a spectre of the that in the mid-'90s. Consumption demand too has remained
1995 scenario loomed large. Thirteen years ago India's
economy presented eerie similarities with circumstances today, Economic Performance of India
leading to current and popular speculations of a 1995 revisit. 8
7
After hovering at around 1.4% during 1991-92, the GDP 6
growth rate had shot to 6.4% in 1994-95 depicting increased 5

Growth (%)
confidence in the economy post liberalisation. This resulted in 4
many firms (including those in the realty sector) to embark 3
upon expansion plans, encouraging them to go in for huge 2
investment outlays. The euphoria, however, did not last long 1
0
and the country was confronted with double-digit inflation of
1970-71 to 1991 1992-93 to 1992-93 to 2000-01 to
over 11% during April-May 1995. Much like today, the RBI (pre-reform) 2007-08 1999-00 2007-08
had hiked interest rates to contain inflation that point in time GDP Growth (%) Per Capita Growth (%)
as well. On the realty front, the property market had crashed,
Source: Confederation of Indian Industry (CII)
creating widespread turmoil as demand and money supply
witnessed constraints. Faced with a severe liquidity crunch,
strong despite dire predictions. The savings rate is at a high of
companies had found it difficult to fund their ambitious plans
35%; and as interest rates rise, the likelihood of investors to
and by 1997-98, India's economic growth had fallen to a
save money will rise too. Taken together, that should help the
growth rate of 4.3%.

Thirteen years later the situation looks apparently similar or Indian Economy: Then & Now
worse considering the general global economic slowdown and Returns from Various Financial Interest Rates (%)
the oil price crisis. The economy was growing at 9% per Instruments 1995¹ 2008²
Bank deposit rates
annum; Forex reserves had risen to over INR 300 billion; the (1-3 year deposits) 11.50 9.50
dollar-rupee conversion stood at less than INR. 40 to a dollar. Post office deposit rates
But by mid-June 2008 inflation hit the country with double (1-3 year deposits) 10.50 - 12.50 6.25 - 7.50
digit figures (for the week ended 6th September 2008, the NSC* 12.00 8.00
inflation rate stood at 12.1%). Food prices and those of other Kisan Vikas Patra** 13.43 8.25

essential commodities like steel and cement went soaring, PPF 12.00 8.00
PF 12.00 8.50
with little signs of coming under control.
91-day treasury bill 12.60 8.81
364-day treasury bill 12.00 9.17
There has been a progressive slowdown in the sale and lease of
10-year treasury bill 13.99 9.13
real estate since early 2008 across the residential, commercial
Corporate bonds NA 10.50
and retail segments. Demand has moderated with the sharp
Source: RBI's Handbook of Statistics on the Indian Economy
increase in real estate prices, coupled with rising interest rates
¹ Inflation rate as on 6th May 1995 was 11.11%
that have made housing loans increasingly unaffordable for the ² Inflation rate as on 8th August 2008 was 12.44%
common man. The RBI's decision to yet again raise the repo * National Savings Certificate
rate and cash reserve ratio have caused tightening of liquidity ** Maturity period in 1995 was 5.5 years, now it is 8.7 years
for developers and put a dampener on end-user demand by
putting pressure on home loan rates.
economy to sustain a growth rate in the range of 7.5-8.0%.
This in comparison to the 6.4% GDP growth rate in 1994-95
But despite all such apparent similarities, it would be unfair to
followed by its fall to 4.3% during 1997-98 makes the current
liken the economy's performance in 2008 with that in 1995.
situation rather different.

2
 GDP Composition: Then & Now
1995-96
28%
44%
28%
Agriculture
Source: Central Statistical Organisation (CSO)
Even if one goes by the differences in GDP composition
between then and now, the increase in the share of the services
sector is glaring while the industry segment has remained
more-or-less constant and the agricultural sector has declined.
With the services segment comprising sub-segments like
trade, hotels and restaurants, real estate, banking and
insurance, etc., the growth of the segment clearly indicates a
space demand for commercial office, retail and hospitality
verticals.
It is important to reiterate that with a moderate growth rate
predicted for the time being, the real estate sector will revert
2007-08
18%
53%
29%
Industry Services
to its strong uptrend over the long term, performing in line
with the overall economy. The long term robustness of
demand for real estate in India will remain intact and we will
probably see resurgence once the market finds its own level by
responding to these short to mid-term global and domestic
factors. The BRIC report citing indian economy's potential
with the view of surpassing the richest countries by 2050 is
indicative of it being among the fastest growing markets. In
the following section we present real estate demand
projections for the country over the next five years.
3
 DEMAND FORECAST
The real estate demand projection has been based on a model
that is leveraged on a correlation between GDP estimates,
historical commercial office real estate demand and current
market scenario. Based on this, the demand in India's real
estate sector has been forecasted for the next five years. Having
first computed the demand in the commercial office segment,
the projections for the other realty segments have been based
on their respective sectoral shares in relation to office space in
2007, together with the estimated future supply of each.
203 million sq.ft., retail at 79 million sq.ft. and hospitality at
66 million sq.ft.
The real estate demand is expected to increase marginally over
the period with the Tier I cities expected to generate majority
of the demand during 2008-2012. The Indian economy is
expected to perform well with growth driven by domestic
factors which will add momentum to the real estate sector in
addition to expected improved global economic situation with

Demand Projection - Pan India Demand Projection - 7 Cities

250 50
16 15
15 21 14 17
200 14 14 20 13 13
13 19 12 16
18 Million Sq.Ft. 50 15 16
Million Sq.Ft.

17 14
150
142 152 50 110 117
132 136 97 102 104
100 125

50
50
44 47 48 50 54 37 39 40 42 45
0 0
2008E 2009E 2010E 2011E 2012E 2008E 2009E 2010E 2011E 2012E

Commercial Residential Retail Hospitality Commercial Residential Retail Hospitality

Source: Cushman & Wakefield Research Source: Cushman & Wakefield Research

According to Cushman & Wakefield Research, the pan-India reinforced investor confidence in the coming years.
demand projection across office, residential, retail and
hospitality segments is expected to be approximately 1,098 COMMERCIAL SPACE
million sq.ft. in the coming five years. The residential
The demand for commercial office space, which is estimated to
segment continues to drive real estate demand with 687
be approximately 243 million sq.ft. across India, reflects the
million sq.ft., contributing 63% throughout the term under
performance of the economy at a micro-level, helping to
consideration. Despite the expected slow down in the office
generate further demand in the residential, retail and
market, the demand for commercial office space is projected to
hospitality segments. Commercial real estate demand is
be 243 million sq.ft, which is around 22% of the total demand
essentially driven by the performance of the economy,
projections for the next five years. The retail and hospitality
infrastructure developments, inherent talent pool and state-
segments are expected to constitute 95 million sq.ft. (9%) and
level policies to encourage investment. In sync with corporate
73 million sq.ft. (6%) of this total demand, respectively,
India's expansion plans, these demand dynamics lead to a few
driven by an increase in income levels as well as by accelerated
cities continuing to remain the preferred destinations with
travel in the domestic and international sectors.
buoyant demand in the country.
The top seven cities in India account for nearly 80% of this
According to Cushman & Wakefield Research projections,
pan-India demand with around 877 million sq.ft. The
Bangalore is likely to lead the pack with an estimated office
residential sector still remains the largest segment for the top
space demand of 51 million sq.ft. by 2012. The city is the
cities with 60% share, the commercial office segment coming
largest IT hub in the country and the infrastructure
up to 23%, followed by the retail (9%) and hospitality (8%)
improvement initiatives of the city will only add impetus to
segments. The residential segment is expected to be the major
commercial office space demand. National Capital Region
demand contributor over the next five years with a total space
(NCR) and Chennai are expected follow with approximately
requirement of 529 million sq.ft., followed by office space at
48 million sq.ft. and 33 million sq.ft. demand respectively,

4
foreseen in each city by 2012. NCR has witnessed emergence
of business districts like Gurgaon and Noida over the years
that has strengthened the presence of corporate firms in the
region.
The highest growth in demand during the period is likely to
be witnessed by Chennai although it lags in terms of absolute
demand numbers through the term under review. The city is
likely to emerge as a promising location for real estate
developments due to large skilled workforce and huge floating
population. The thriving services and manufacturing sectors
will provide the much needed momentum for the same. The
Silicon Valley of the country, Bangalore, depicts the second
largest compounded annual growth in demand for commercial
office space over the next five years and represents the highest
cumulative demand among the top seven cities. Mumbai ranks
Commercial Office Demand Projection
(2008-2012)
17% 20%
8%
8% 21%
14%
3% 9%
NCR Bangalore Mumbai Kolkata
Chennai Hyderabad Pune Others
Source: Cushman & Wakefield Research
fourth in terms of the cumulative absolute numbers and the
demand growth because of its sky-high real estate values that
only a few corporate firms can afford. As validated by the
projections, Pune is gradually gaining prominence, set to be
the third fastest growing city with favourable demographics
resulting in IT/ ITeS companies increasing their presence in
the city. The state government too has helped by initiating
infrastructure developments such as the Mass Rapid Transit
System (MRTS) there in.
RESIDENTIAL SPACE
The total demand estimated for the residential segment is
approximately 687 million sq.ft. across India, of which nearly
77% is accounted for by the top seven cities. NCR surpasses
all other cities with 114 million sq.ft. of demand projected
through 2008-2012, followed by Bangalore and Chennai that
account for 16% each of the total demand projected in this
segment. The high residential demand witnessed in NCR is
most likely because of the buoyant corporate sector in the
region, which requires a huge migrant working population
with residential needs, in addition to working professionals in
the city aspiring for a second home. However, the highest
growth rate is depicted by Chennai (9%) which is attributed to
the increasing migrant population driven by the buoyant
Residential Demand Projection (2008-12)
17%
22%
16%
10%
6%
9%
4%
16%
NCR Bangalore Mumbai Kolkata
Chennai Hyderabad Pune Others
Source: Cushman & Wakefield Research
manufacturing as well as the IT/ ITeS sector; the latter having
envisioned the need for multi-storeyed residential
developments. Bangalore (6%), Pune (4%) and Mumbai
(3.7%) are most likely to be second in line with regards to
growth in residential demand forecasts.
Other cities that are expected to witness an increase in
residential demand through 2008-2012 are Mumbai, Pune,
and Hyderabad accounting for 6%, 10% and 9% respectively,
of the total residential demand projected across india.
RETAIL SPACE
The demand drivers for retail space in a city typically include
demographics, such as resident consumer age profile,
dominant consumer occupation, spending capacity, etc., in
addition to macro policy decisions, such as allowing FDI in
single brand retailing and cash-and-carry formats. The
projected retail demand figures (essentially representing
shopping mall development) depict a large variation in
demand among the Tier I, II and III cities. With the share of
organised retail in the country likely to increase to USD 30
billion by 2010, according to Ernst & Young estimates, there
exists immense prospect for retailers to consider expansion
plans in this growing sector. Incase of the city ranking NCR
leads with 19 million sq.ft. of the total estimated retail
demand (20%), followed by Mumbai at 15 million sq.ft.
(16%) owing to the high consumer spends.
5
 Retail Demand Projection (2008-12)
18% 20%
8%
10%
16%
8%
9%
NCR Bangalore Mumbai
Chennai Hyderabad Pune
Source: Cushman & Wakefield Research
In terms of aggregate growth, Hyderabad(59%) and
Chennai(59%) take the lead, followed by Bangalore(28%). The
growing Indian middle class (with income levels ranging from
INR 200,000 to 1,000,000) is expected to surpass 153 million
by 2009, which would provide opportunities for retailers to
explore newer geographies.
HOSPITALITY SPACE
The growing economy and increasing commercial activity,
coupled with the entry of several trans-national corporations in
the past few years have provided the necessary impetus for the
growth of the Hospitality sector in India. The demand for the
sector continues to be fuelled by the rising number of business
and leisure travellers within the country as well as by a
significant increase in foreign travellers coming to India.
Major cities like Bangalore, Mumbai, NCR, Hyderabad,
Chennai and Kolkata are witnessing significant developments
in this sector and are likely to generate demand of more than
60 million sq.ft. over the next 5 years. This accounts for over
90% of the all-India hospitality space forecasts that is nearly
73 million sq.ft. Bangalore and NCR are expected to generate
majority of the demand in this sector (together adding 31
million sq.ft or 43% share of pan-India demand projection),
followed by Mumbai with 12 million sq.ft. (16%). The
11% forthcoming Commonwealth Games in 2010 scheduled in
NCR have brought the region in focus, where bed-and-
breakfast (B&B) formats and home stays are being promoted
by the government in anticipation of the large volume of
expected visitors to the city. Apart from the seven major cities
under consideration, other locations such as Jaipur,
Kolkata Ahmedabad, Kochi and Goa too add a significant share with
Others approximately 6 million sq.ft. of upcoming hospitality space
in the rest of the country between 2008-2012. This is largely
due to the government's initiatives to promote tourism in the
Tier II and Tier III cities of India. Of course the growth in
inventory in these cities is nothing compared to their bigger
cousins but in relative terms to inventory and quality
available, the future looks rather bright for these cities.
Hospitality Demand Projection (2008-12)
9%
5% 25%
10%
11%
19%
5%
16%
NCR Bangalore Mumbai Kolkata
Chennai Hyderabad Pune Others
Source: Cushman & Wakefield Research

Cumulative real estate demand (2008 - 12) by sectors

Office Retail Residential Hospitality
Estimated demand Estimated demand Estimated demand Estimated demand
Rank (mn sq.ft.) Rank (mn sq.ft.) Rank (mn sq.ft.) Rank (mn sq.ft.)
Bangalore 1 51 3 11 3 107 2 14
NCR 2 48 1 19 1 114 1 17
Chennai 3 33 5 6 2 108 4 8
Mumbai 4 23 2 15 5 41 3 12
Pune 5 21 7 8 4 67 6 4
Hyderabad 6 21 6 10 7 61 4 8
Kolkata 7 7 4 10 6 30 6 4

Summary space requirement (51 million sq.ft.), followed very closely

At 114 million sq.ft., 19 million sq.ft. and 17 million sq.ft. by NCR (48 million sq.ft.) Chennai also indicate healthy
NCR leads in the demand requirement among the top demand with nearly 108 million sq.ft. required in the city's
Indian cities in the residential, retail, hospitality sector, residential sector, followed by a robust demand of nearly 33
respectively. While Bangalore tops the commercial office million sq.ft. of office commercial space by 2012.

6
 REAL ESTATE SECTORAL OPPORTUNITIES
OFFICE SECTOR
During the first six months of 2008, the seven major cities in
India witnessed commercial office space supply over and above
space uptake, validating the temporary slump in the economy
and in the realty sector at large. An oversupply situation was
prominent in a few micro-markets, primarily in the suburban
and peripheral locations of certain cities. For instance, during
the second quarter of 2008 the total office demand was 9.74
million sq.ft, as against a supply of 18.07 million sq.ft. Micro-
This correctional phase, partially gripping the office sector at
present, is expected to lead to a more stable market situation in
the near future. Despite the likelihood of the IT/ ITeS sector
continuing as the primary demand driver of office space in the
country, the share of non-IT sectors is also expected to increase
Supply Vs. Adsorption: First Half of 2008
10.0 Absorption lagging supply - Result of
temporary slowdown in the econmy
9.0

Area (Million Sq.Ft.)

markets such as Noida in the NCR, Lower Parel and Bandra 8.0
7.0
Kurla Complex in Mumbai and Rajiv Gandhi Salai in Chennai
6.0
recorded majority of the excess supply. However, at the same 5.0
time there are also instances like Chennai and Bangalore where 4.0
the first half of 2008 saw a definite increase in demand over 3.0
2.0
the same period last year. On the supply side, the number of
1.0
new developments getting the status of Special Economy 0.0
NCR Mumbai Pune Kolkata Hyderabad Bangalore Chennai
Zones (SEZs) is on the rise too, with SEZs helping in
attracting investments and promising employment generation. Supply 1H08 Absorption 1H08
Source: Cushman & Wakefield Research
With the sunset clause on STPI benefits which concludes on
31st March 2010, IT/ITeS firms are most likely to set up IT Big 7: Commercial Office Space Supply
SEZs in the Tier I and Tier II cities where as in case of the Tier
60
III cities with planned IT SEZ's may get attention from
IT/ITES sector, however, alternative industries, such as IT 50
Area (Million Sq.Ft.)

hardware, auto ancillaries, gaming and animation, etc., form 40

the preferred business options. The point to be noted here is 30
that such locations require a longer gestation period to grow 20
into mature markets, in terms of delivery capabilities, talent
10
pool, supply chain logistics, etc.
0
NCR Mumbai Pune Kolkata Hyderabad Bangalore Chennai
In order to ride over the economic slowdown, several corporate
2006 2007 2008 2009
entities have deferred their expansion plans. Based on
Source: Cushman & Wakefield Research
investors' varied risk appetites and risk horizons there exist
several opportunities at different stages of commercial
developments. Certain investors may perceive that they can BIG 7: IT/SEZ Supply
manage to take the risk of investing in a distressed property 10
and re-develop the project to get a defined rate of return. For 9
Area (Million Sq.Ft.)

instance, small and medium players in select cities have been 8

7
seen selling projects to big developers to ride over the sluggish
6
phase. This provides an exit opportunity for sellers, while large 5
developers and private equity (PE) investors specialising in 4
distressed buy-outs acquire the property at a comparatively 3
2
lower valuation. However, this situation is only applicable to
1
the case of partial or complete ownership where the project has 0
NCR Mumbai Pune Kolkata Hyderabad Bangalore Chennai
not been launched.
2007 2008 2009
Source: Cushman & Wakefield Research

7
in this sphere. Diversification/expansion of business activities
in line with the anticipated revival in the economy will
support more demand for commercial office space. Hence, it is
advisable for investors to stay focused on this sphere with a
long-term investment horizon. In this regard, the biotech
sector is likely to emerge as the next growth driver for office
space demand coming up as a close second to the IT/ ITeS
industry, especially in the southern cities of Bangalore,
Hyderabad and Chennai.
RETAIL SECTOR
The retail sector in India is currently riding the growth phase
with retailers, domestic as well as foreign, aggressively
investing in this sector. India's retail boom primarily
originated in the metros and then trickled down to the Tier II
and Tier III cities. Leading retailers and developers have
continued to plan shopping malls and hypermarkets in these
locations. The increased purchasing power of the growing
middle class and its consumerist aspirations are some of the
factors propelling planned retail activities in the country.
Mall Supply Distribution: 2006-11
35
30
25
20
15
10
5
o
2006 2007 2008 (E) 2009 (E) 2010 (E)
Pune NCR Mumbai Kolkata Hyderabad Chennai
Source: Cushman & Wakefield Research
The soaring rentals of malls and main streets in major
metropolitan cities have turned retailers cautious, with many
stalling their immediate expansion plans or altering their
business strategy by entering value retailing, for instance. This
movement is likely to open a plethora of opportunities for
developers and investors alike, particularly in the Tier II and
Tier III cities that offer quality space and affordable rentals for
retailers with product offerings that are suited for consumers
at these locations.
Established global retailers such as the German Metro AG, the
South African Shoprite, Wal-Mart and now UK's Tesco, etc.,
have already made their entry into India. Luxury brands such
as Armani, Aigner, Versace, Louis Vuitton, Dolce & Gabbana,
8
Zegna and Hugo Boss among many others have also
established their presence across major Indian cities. The
Collection at UB City, Bangalore and DLF Emporio at New
Delhi's Vasant Kunj are the country's first operational luxury
malls for Indian consumers. However, the concept of 'Specialty
Malls' though not new in India, is yet to taste success. Such
developments require more expertise and planning in terms of
location evaluation, zoning, pricing and promotional
strategies; and therefore this space continues to attract
opportunities for investors specialising in niche retail
operations.
HOSPITALITY SECTOR
India is one of the world's fastest growing hotel markets at
present. With the surge of leisure and business travellers
headed towards India, it is boom time for the country's
hospitality industry.
A strong domestic economy, business opportunity, the
government's open sky policy, initiatives to liberalise foreign
investment and especially the Ministry of Tourism's (MoT)
efforts to communicate the "Incredible India" campaign have
together contributed to a robust demand for hospitality space
in major cities across India. In keeping with the current
growth rate, India's hospitality industry is anticipated to grow
at 8% per annum between 2007 and 2016.
As compared to office or retail development, investment in
hospitality as a real estate asset class takes a longer time to
generate returns. This is primarily due to the very nature of
the product since a hotel takes at least 2.5 to 3 years for a full
2011 (E)
service product to become operational. However, a sound
investment horizon is expected to earn good returns. While all
Bangalore
other real estate segments are witnessing growing demand in
tier-II cities, the hospitality industry has not lagged behind.
Be it luxury chains like the Taj, Oberoi, Hyatt or ITC
WelcomGroup, or mid-segment chains like Ginger Hotel,
Lemon Tree, Formule One, Peppermint, etc., most of them are
foraying into smaller cities.
The development of airports, roads and convention centres in
these locations has also created a platform for such hotel chains
to flourish. The foray of IT/ ITeS firms in these towns and
cities, coupled with tourist attractions, has generated a
congenial business and leisure environment to trigger an
increase in travel. Cities like Pune and Gurgaon, for instance,
are witnessing a rise in demand for quality rooms due to the
development of IT and BPO industries; at the same time cities
like Goa and Kochi thrive on tourism. The organised
hospitality sector is just beginning to realise the potential of
these untapped markets.
One of the most noticeable trends in the Indian realty sector
has been the emergence of service apartments. The potential of
this business segment is estimated to be nearly 20% of the
total hospitality industry. As the hospitality sector touches
new heights, service apartments will become a lucrative
investment option offering high profit margins. The typical
investors in this property class include pure-play property
developers, high net worth individuals and hotel operators.
Organised operators, such as the Oberoi Group, Taj Group and
the Intercontinental Group to name a few have already
ventured into this space with high-end offerings. Major
developers like Parsvnath, Ansal API and Kolte-Patil have also
initiated serviced apartment projects in Greater Noida,
Bhiwadi in Rajasthan, Chandigarh, and Hinjewadi in Pune.
New contenders too are coming in, such as Mennen Aviation
& Hospitality Ltd., with plans to set up 15 service apartments
by 2010. Tourist hubs like Goa, Kochi and Jaipur will also see
hospitality developments, with Hilton Hotel Corp. coming up
with a five-star property in Goa by end-2008, the
Intercontinental Group launching the five-star Crowne Plaza
at Kochi by 2009, and the Accor Group setting up a four-star
property, Ibis, at Jaipur in 2008.
Total supply of rooms* projected till 2011 in
prominent Tier I & II cities
3% 3%
23% 13%
7%
6%
11%
19%
7% 3% 5%
Jaipur Ahmedabad Mumbai Pune Hyderabad
Cochin Chennai Bangalore Goa NCR
* Comprises of 5 star deluxe, 5 star, 4 star & 3 star hotels in organised sector
Source: Cushman & Wakefield Research
According to Cushman & Wakefield Research, the total
expected supply of hotel rooms in the country is estimated to
be 52,000 for the top cities by 2008-11, while the existing
stock at the below-mentioned locations stands at 64,000
rooms. The 11 cities considered include Mumbai, Bangalore,
Delhi NCR, Chennai, Kolkata, Hyderabad, Pune, Jaipur,
Ahmedabad, Kochi and Goa (classifications include five star
deluxe, five star, four star, and three star hotel rooms in the
organised sector). Five star deluxe, five star and four star hotels
together form around 68% of the existing room stock,
followed by budget hotels. NCR, Mumbai, Bangalore and
Chennai together account for approximately 60% of the
existing room stock among these major cities. By 2011 nearly
28,000 - 29,000 new hotel rooms are expected in the five star
deluxe and five star segments, as compared to a total of nearly
25,000 hotel rooms in the other segments under consideration.
The NCR, followed by Bangalore, Mumbai and Hyderabad are
expected to lead in terms of infusion of these new hotel rooms.
On the whole, the international hospitality sector has been
resilient amidst tough economic conditions, with emerging
economies like India having maintained its strength. The hotel
industry in general has continued to witness a rise in average
room rates, albeit at a much slower rate in comparison to the
corresponding period in 2007. With the overall growth of
travel in India and especially with a large portion of this
consequent demand for hospitality space being generated
within the national sector, a robust demand for further
development of hotels exists across the country. Emerging
trends include domestic and international hotel brands
continuing to enter the Indian market at a growing pace as
well as that of hotels increasingly utilising mixed-use
development structures to capitalise on the surging demand for
other major commercial asset classes, such as office and retail.
RESIDENTIAL SECTOR
Rising property prices and increased interest rates, coupled
with a demand-supply mismatch has brought down the overall
affordability of residential properties in the country today.
Suburban and non-metro locations have mostly been affected
due to this economic slowdown and some developers have even
resorted to freebies and early bird discounts because of a fall in
sales. Developers have also come up with innovative schemes
like “Book Now & Pay Later on Possession”, as well as home
loan instalment payment for the initial one to two years. A few
Kolkata high-end residential projects in Chennai have even marketed
their property with the unique concept of an unlimited and
unconditional lifetime guarantee, which includes guarantee on
title deeds, complete structural guarantee against leaks and
cracks and a lifetime warranty for standard fixtures. However,
established developers with substantial cash reserves have up
till now remained insulated from this trend.
Middle income housing projects as envisaged by industry
experts is gaining visibility. For instance, under a newly
launched residential scheme, the Greater Noida authority has
offered the middle-income group an opportunity to book and
own exclusive, independent and well finished houses. In order
to meet the demand for affordable housing, the Confederation
of Real Estate Developers Association of India (CREDAI) has
9
even proposed a concept of Special Residential Zones (SRZ) as
a solution. An SRZ is a notified geographical region that is
free of domestic taxes, levies and duties, with special
development rules to promote large-scale, greenfield
affordable housing projects. The objective is to create an
independent living system that is not only self-sufficient but
can also offer growth potential into the geographical areas
around the SRZ. The SRZ is expected to have a prescribed
minimum number of dwellings of specific sizes with adequate
social infrastructure, including schools and medical facilities.
According to the housing ministry estimates, urban housing
backlog assumes alarming proportions, especially for the
economically weaker section (EWS) and low-income group
(LIG), who constitute more than 99% of the total urban
housing shortage of 24.71 million (11th Plan Period, 2007-
2012). The magnitude of this backlog is evident from the fact
that 21% of India's urban population lives in slum-like
conditions and 35% in one-room accommodations. In this
scenario, incentives from the government in the form of tax
sops such as duty cuts, subsidisation of various construction
inputs, procedures like the Valmiki Ambedkar Awas Yojana
(which provides subsidies for construction of housing and
sanitation), mobilisation of funds from various agencies,
increasing private-public participation (PPP) in projects,
micro-financing, developing land and infrastructural facilities,
etc., would definitely boost the move towards low-cost
housing initiatives. A notable initiative in this direction has
come from the floor space index (FSI) increase in Mumbai,
with the Mumbai Metropolitan Regional Development
Authority (MMRDA) planning to build over 500,000 houses
over the next six years as part of the slum rehabilitation
scheme of the Maharashtra State Government.
10
With more structural policy reforms for the segment being
implemented in recent times, low-cost housing is slowly
taking shape on the agenda of developers too. If innovative
approaches are taken, there is immense prospect for developers
in such projects, in addition to an enormous population
benefiting from such schemes. In New Delhi, for example,
private developers are being provided with 40% FSI for
developing low-cost housing projects. Developments such as
Shapoorji Pallonji's SP City, a mass housing project at
Rajarhat, Kolkata and Marathon Realty's mass housing
projects in Thane, Badlapur and Karjat, near Mumbai, have
already started low-cost housing projects. If housing finance
firms show their interest in tapping the low-cost segment
with flexible terms and innovative home loan packages, more
such activities can be expected to crop up.
On the larger residential front, tie-ups are taking place
amongst developers and venture capital funds for development
of townships, where project costs are equally shared. Re-
development of properties has also become lucrative, where
developers acquire lands or dilapidated buildings and convert
them into premium residential properties. However, this
process is mainly limited to Mumbai, where the state
government is aggressively pursuing the re-development of
such buildings. A large number of developers are keenly
participating in such projects in anticipation of high returns.
In view of the fact that 50% of the population of India is
expected to be living in urban areas by 2041, it is necessary to
develop more integrated townships in tier-II and III towns.
Finally, a 10-15% fall in price or a decline in mortgage rates is
most sought after in the current scenario to improve
affordability and for end-users/home buyers to come back into
the market. If this happens, demand is likely to pick up again
with rising income levels.
 REAL ESTATE INVESTMENT SCENARIO
The Reserve Bank of India (RBI) recently declared real estate
space as a sensitive sector under its prudential norms. In tune
with the rising cost of funds and the need for additional
capital for risky assets, banks in India have increased their
lending rates for real estate projects. The prime lending rate
(PLR) of most public sector banks has increased to 13.75%
from 12.75% effective from August 12th 2008 in comparison
to last year's rate of 10%. Since banks have to set aside a
comparatively higher amount of capital for real estate exposure
compared to other sectors, real estate attracts higher-risk
weightages and lending too becomes closely monitored. Banks
have also begun to ask for higher contributions from
promoters and developers as a precautionary measure to
safeguard themselves against loans. Given the inflationary
pressure that the current government is facing, it is more
likely that monetary policies will put more pressure on already
very high interest rates and that, by no means, is good news.
Increased construction cost due to rising commodity prices
have already increased input costs for companies; and the
increasing cost of construction materials like steel and cement,
is putting further pressure on developer margins. As far as the
Indian mortgage market is concerned, the share of the same in
the top cities has risen steadily over the past few years,
indicating that in value terms the industry is fairly
concentrated. The fastest growth in mortgages among the top
cities includes Mumbai, Bangalore and Hyderabad. According
to the RBI, the share of the top six cities (Mumbai, Delhi
NCR, Bangalore, Hyderabad, Chennai and Kolkata) in the
mortgage market reached 47% at the end of fiscal 2007-08, in
comparison to 36% in fiscal 2003-04.
In addition to the above developments, the union budget
announcement of February 2008 includes a few initiatives
taken by the central government in the corporate tax segment:
• A five-year tax holiday has been extended to existing hotel
groups that intend to expand to Tier II and Tier III cities.
• A five-year income tax holiday has also been granted to
two, three and four star hotels established in districts that
have been declared as 'World Heritage Sites'. However, to
avail this, the hotels in question need to become
operational by 31st March 2013.
As a major relief to the IT/ ITeS industry, the Central
Government has extended the tax exemption available to IT/
ITeS firms under the Software Technology Parks of India
(STPI) scheme by one year. Originally expected to lapse on
31st March, 2009, the extension is now in place till 31st
March, 2010.
For the housing sector, RBI has relaxed its norms for housing
loans by cooperative banks. It has reduced the risk weightage
on home loans upto INR.3 million, from 75% to 50%. This
will reduce the cost of funds for home loans upto INR.3
million; earlier home loans upto INR.2 million had a risk
weightage of 50%.
REGULATORY CHANGES
Regulatory changes are geared towards sustaining long-term
growth while dealing with changing domestic economic
conditions. The Indian government has so far followed a
cautious approach in its macro-level policy changes by:
• Hiking interest rates in various phases,
• Considering venture capital investments in real estate and
• Easing ECB norms
The government also released regulations for REMF (Real
Estate Mutual Funds) and REIT (Real Estate Investment
Trusts) as an investment option for the individual investors in
the country. In addition to this, these instruments also offer
funding options to developer by the retail investor in the
country.
CRR HIKE
To control credit growth and contain inflation the central bank
recently hiked both its repo rate and cash reserve ratio (CRR)
to 9%. This has made lending expensive, with borrowers
paying a higher EMI for home loans, resulting in a slackening
demand in the residential sector. These monetary measures
have successfully restricted credit growth as banks have
adopted a cautious approach and are being selective about
extending loans, especially to the realty sector.
FOREIGN VENTURE CAPITAL INVESTMENT (FVCI)
Venture capital investment provides risk capital to the
project/enterprise in certain sectors stated under the regulation
governing venture capital investments. Current regulations
permit such investments under the FDI route without
11
complying with the post-IPO investment lock -in period of
one year, sector-specific restrictions and the entry-exit pricing
regulations.
The central bank has forwarded that there are regulatory
variances in terms of tax treatment and capital commitment
for domestic and foreign venture capital investments that
needs to be rectified. The policy review is aimed at providing a
level playing ground for foreign and domestic VCs on taxation
jurisdiction and capital base front. As most of the FVCIs are
based out of countries with which India has a double taxation
avoidance treaty that exempts them to pay taxes and therefore
puts them in an advantageous position to the domestic VCs.
Also, the domestic venture capital funds are required to have
capital base of INR 50 million while the foreign entities do
not need any capital commitment.
Securities and Exchange Board of India (SEBI), the market
regulator, cleared 50 applications in the current year that
conformed to the FVCI norms, on which the Reserve Bank of
India (RBI) expressed reservations on the nature of venture
capital investment. However, the finance ministry directed the
RBI to approve the applications to avoid uncertainty among
foreign investors and delay in procedures. Of the 50
applications, real estate sector witnessed 20 applications that
raised concerns about the expected amount of money flowing
into the sector.
ECB NORMS
External Commercial Borrowing (ECB) norms were relaxed to
enable the small and medium enterprises easy access to
overseas debt market and repatriation of funds to India. The
interest rate ceiling was raised from 150 to 200 basis points
annually over Libor having average maturity of three to five
years and to 350 bps from 250 bps for an ECB of more than
five years. The repatriation norms were also relaxed, under the
approval route the limit for infrastructure and others has been
raised to USD 100 million and USD 50 million respectively.
This would provide access to the debt market for infrastructure
companies which can now borrow up to USD 100 million for
investments on the infrastructure sector.
The easing of norms would aid higher capital flows which have
been rapidly receding after the restrictions imposed in 2007 to
reduce the high capital inflows, which caused the rupee to
appreciate. As the Prime Minister's Economic Advisory
Council (PMEAC) projected a 34% decline in foreign capital
flows, it has been recommended to further relax the ECB
norms to assist domestic companies in raising funds overseas.
12
As developers cannot source funds through this route as the
SEZs are not stated in the list of 'infrastructure' or 'real sector',
the government shall consider the easing of the norms.
REAL ESTATE MUTUAL FUNDS (REMF)
The regulations governing the REMF circumvented the
mutual fund guidelines with certain conditions to be adhered
which was long due keeping in mind the nascent stage of the
real estate market. Recently released amended guidelines for
REMF have brought clarity about the instrument that would
help the entities to structure the instrument to bring liquidity,
institutionalisation and transparency into the real estate
market. The guidelines state the valuation disclosure and
periodicity, impose cap on investment in a single city and
project, spell out the requisite expertise to float an REMF,
refrains the fund to transfer asset among different schemes of
the Asset Management Company and the nature of the
instrument i.e. close ended and listed on the recognised stock
exchange.
In April 2008, Securities and Exchange Board of India (SEBI)
announced amendments to the SEBI (Mutual Funds)
Regulations 1996 permitting the launch of REMFs. The
regulations offer a wide definition of real estate to include
immovable property in India located in certain specified cities
or SEZs which is fully constructed and usable, transferable and
free from any encumbrances, litigation and with clear title
documents. Agricultural land and vacant land however are
excluded. REMFs are required to invest at least 35% of the net
assets of the scheme directly in real estate (in ready to use
property that assures rental income and capital appreciation)
not stating the maximum investment limit. The balance can
be invested indirectly in the real estate sector through
investment in mortgage backed securities and securities of
companies dealing in or engaged in the development of real
estate. According to the recent developments, the finance
ministry allowed NRIs and FIIs to invest in REMFs as the
investment decisions of the fund is purely dependent on the
fund management company and the investors do not steer the
investment decision to any asset class.
REAL ESTATE INVESTMENT TRUSTS (REITS)
The market regulator SEBI released a draft guideline on REITs
in 2007 with a formal regulation and more clarity underway.
The draft guidelines outlined the scope of investment,
structure and regulatory requirements to be complied with to
launch the financial product. REITs cater to the capital
requirement of the real estate sector as it enables the company
easy access to funds and preferable exit options. They are
primarily income generating instruments as 90% of income
shall compulsorily be distributed as dividend. These funds are
managed by professional with expertise to provide diversified
portfolio of the asset class. At present REITs are yet to make
an entry into India.
CURRENT INVESTMENT SCENARIO
Since the opening up of the real estate sector in 2005, Private
equity funds in India have been very active with a number of
transactions taking place in the past three years at entity,
portfolio and SPV level. According to Department of
Industrial Policy & Promotion data, a good amount of Foreign
Direct Investment (FDI) inflows have been channelled into the
Housing and Real Estate (RE) sector, with approximately 50%
of last years inflows already having been accumulated during
the first two months of second quarter 2008. This acts as a
testimony for the investor confidence in the sector.
FDI Inflow in Housing & Real Estate Sector
50
Investment (INR million)
50
50
50
50
0
Apr 05 - Apr 06 - Apr 07 -
Mar 06 Mar 07 Mar 08
Source: Dipp.nic.in
Recently private equity funds have adopted a cautious
approach towards the kind of projects they pick up and there
is an increased emphasis on the reputation of the developer
particularly the execution bandwidth and corporate
governance. As a result, the lesser known developers are
finding it difficult to raise funds. This has in turn resulted in
availability of more suitable investment terms for the funds.
Private Equity players have also increased their internal rate of
return (IRR) expectations from projects to cater for the
increased risk. As an indication of the rising concerns over
projects being undercapitalised investors are insisting on
developers to achieve financial closure for debt funding before
they sign the definitive agreement. Investors are also growing
more restrictive about the end us of funds and their diversion
to other projects.
An analysis of 79 deals from mid August 2007 to mid August
2008 shows an investment commitment to the tune of INR
269,000 million. If we look at the distribution of number of
deals; most of the funds are still being diverted to SPV level
(51%)deals as they are individual projects and cater to more
focused investment approach apart from giving the funds more
control on the investment. It is also suitable for investors who
are looking to test the market and diversify through multiple
partners, locations, assets and size of transactions. As funds
grew more focused towards one sub-sector, interest for
portfolio level deals (24%) has also grown as it provides a
focused approach to a particular asset class and offers benefits
of automatic diversification. Entity level (25%) deals were the
least in number terms as these are significant ticket size which
suits the appetite of very few capital providers. It can be seen
that there is an even distribution in the quantum of
investment in both SPV and Portfolio level deals as they
attracted a total investment in excess of INR 100,000 million
each.
Distribution of the number of PE deals
in RE sector
24%
51%
25%
Apr 08 -
Mar 09 SPV Entity Portfolio
Source: Cushman & Wakefield Research
Distribution of Investment in PE deals across
the RE sector*
(total quantum is INR 269,000 million)
40% 38%
22%
SPV Entity Portfolio
Source: Cushman & Wakefield Research
* Indicative samples of reported deals from mid August 07 to mid August 08
in the Indian Real Estate sector
13
This year investments have diversified across asset classes, Delhi (NCR) have contributed to a large extent to the higher
with the highest share going to the residential (41%) and average size of the deals in this region. Eastern zone (primarily
township (21%) sectors with the quantum of investment in West Bengal) has not been able to evince significant interest
the range of INR 128,600 million. Due to high composition amongst investors.
of housing in these two sectors they have received higher Real Estate
investments on account of certainty of exit and high latent PE deals break up quarterwise and Tierwise
demand. Commercial real estate sectors (office, retail, SEZ and 100% 4%
mixed use) have attracted significant investment to the extent 21%
28% 29%
80% 40%
of approximately INR 57,600 million which forms 28% of
the pie. Logistics and Healthcare are other asset classes that 60% 34%
found new interest from investors.
40% 36%
68% 71%
Distribution of PE deals across asset classes
20% 45%
in RE sector (INR 209,300 million) 24%
0%
2% 3% 4% 10% Q4 07 Q1 08 Q2 08 Mid Aug 08
21%
Tier I Tier II Tier III
Source: Cushman & Wakefield Research

41%
6% Real Estate
0% PE deals quarterwise and tierwise
7%
7%
80,000 20
Office Residential Retail Pune SEZ
Investment (INR million)

Healthcare Township Logistics Unpecified Mixed Use

60,000 15

Number of deals
Source: Cushman & Wakefield Research
* Indicative samples of reported deals from mid August 07 to mid August 08
in the Indian Real Estate sector
Note: Does not include entity level deals 40,000 10
Region-wise distribution of PE deals
(Investment quantum - INR 209,300 million) 20,000 5

5% 0 0
37% Q4 07 Q1 08 Q2 08 Mid Aug 08
32%
Tier I Tier II Tier III Number of Deals
Source: Cushman & Wakefield Research

Tier-wise categorisation of cities shows the following trends:

26%
East South North
Source: Cushman & Wakefield Research
* Indicative samples of reported deals from mid August 07 to mid August 08
in the Indian Real Estate sector
Note: Does not include entity level deals
A region-wise distribution of PE deals during the period
under consideration shows the western (37%) and southern
(32%) zones accounting for almost 70% of the total
investment which is followed by the north region (26%).
South zone has seen the maximum number of deals (24) and
the average size of deals in this zone (INR 2,800 million) is
significantly lesser than the northern (INR 3,700 million)
and western zones (INR 3,700 million). This is largely on
account of southern cities showing definite market trends and
rationalised valuations. Higher valuations in Mumbai and
Fourth quarter in 2007 witnessed an even distribution of
West investor interest across all tiers. With the market conditions
changing over the first half of 2008 investors have become
cautious and have chosen to remain in tier-I cites, where
market trends are more definite. As a result there is a marked
reduction in investors interest in projects across Tier II & Tier
III cities. The southern cities of Bangalore (9) and Hyderabad
(6) have been able to attract maximum numbers of SPV deals;
which is closely followed by Mumbai (8) and Delhi NCR (7).
Q4 07 (34%) witnessed the highest quantum of investment,
which was in the range of approximately INR 77, 300 million
with the average size of deal being INR 4,700 million.
Conversely, the subsequent quarters saw a remarked
reduction in the investment quantum largely due to the more
cautious approach adopted by investors in wake of global and

14
domestic economic scenario. The average deal size reduced
significantly to approximately INR 1,900 million as investors
were taking smaller exposures and demonstrating enhanced
preference for diversification. Notwithstanding this, the fact
that there has been nearly even distribution in the number of
deals (Q2 08 recording the highest) clearly shows the interest
and activity of investors in the market
In a nutshell, though the investor activity still remains high
they are adopting a selective and more cautious approach to
investments. The fact that the real estate developers are
struggling with execution of projects in a market where
uptake is slowing and credit is becoming tighter gives
justification to this approach.
Prominent Private Equity Deals in the Market
• Deutsche Bank and a group of PE firms are investing
USD 425 million (25% stake) in the Lodha Group for
a SPV spread across 70 acres in three FDI-compliant
real estate projects at Thane and Dahisar,
Maharashtra.
• German real estate fund MPC Synergy has picked up
equity in various SPVs floated by real estate
developer, Phoenix Mills for INR 1300 crore
• Credit Suisse, the Swiss investment bank, has made
investments to the tune of about USD 77 million in
Hyderabad-based Indu Projects
15
 CONCLUSION
The economic slowdown is real, it is broad and it is impacting
the entire real estate sector, including many other industries.
But fortunately it is unlikely to continue beyond the next 2 -
3 years. The Asia Pacific is expected to perform stronger than
other markets; and even though transaction volumes have
currently dropped across the region, the activity levels remain
well above the long-term average for the Asia Pacific.
The region has also seen a widening gap between values that
sellers quote and what buyers are ready to shell out in the
present circumstances. But this gap between reality and
expectation is beginning to diminish in markets such as China
and India where in case of the latter there is already a decline
in quoted land prices as against soaring price points of the
previous years.
The current short-term stagnation in commercial and
residential activity in India has led to an overall reduction in
the number of land transactions as developers have deferred
their decisions to occupy additional land reserves. On the
bright side, the present turmoil will only strengthen the
Indian realty sector, encouraging continual growth of quality
developments. Reputed grade-A developers will not be as
affected as small-time operators, even leading to consolidation
of the industry by bigger players. From a highly fractured
presence, this can only prove to be beneficial for the sector's
future stability and transformation into a mature and more
confident market. Pioneering developments in India by trans-
national developers like Ascendas, CapitaLand, Keppel Land,
Tishman Spyer, Hines, IJM, etc. together with a host of fast-
growing national developers will also help the market to
mature, compared to the more matured Asia Pacific markets.
The country's real estate sector might be witnessing ebbs but
the downturn can only make things attractive for foreign
investors. The slowdown, in fact, has set in more realistic
them more reasonable. A correction of land prices, together
with a slow-down on the frantic run for creating land-banks
may lead to a possibility of more PE investments in the real
estate sector in the coming quarters.
16
valuations and growth-oriented investment opportunities for
big players to close in on lucrative deals. With the property
market stagnating in many areas and a wait-and-watch
sentiment developing among buyers, PE funds focussed on the
real estate sector will now be better off -- forcing developers to
re-work on valuations and construction timelines to make
them more reasonable. A correction of land prices, together
with a slow-down on the frantic run for creating land-banks
may lead to a possibility of more PE investments in the real
estate sector in the coming quarters.
One could even term the current market upheavals to be
necessary for the Indian real estate sector - a welcome
correctional phase in any emerging market on its way to
transforming into a strong and sustainable sector. The
unabated growth of the sector over the last couple of years had
led land rates to inflate irrationally, affecting the overall real
estate market in the country. But it is the long term robustness
of demand for real estate in India (as projected earlier in this
paper) that will remain intact; and will probably see us
through another business cycle once the market finds its own
level by responding to these short- to mid-term global and
domestic factors.
In conclusion, it will help to keep in mind that the positive
aspects of the Indian market -- a dynamic workforce,
liberalised economy, robust demand for real estate across all
sectors, investments for the future -- continue to remain in
tact. It is after all the fundamentals that count. While success
comes easy in a booming market, the true test of ability lies in
dealing with the trough in business. Past success stories are
generally not applicable to new situations and this is the time
to reinvent India's real estate sector by responding to change
with innovative business models and investment options.
The GRI is a global club of senior real estate investors, developers and lenders.
Its mission is to help its members build personal relationships and work
together in creating better places as a legacy to our children. Founded in 1998,
its core constituency consists the world's leading real estate players.

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The GRI welcomes industry leaders who find it useful For further information on the report, please
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©2008 Cushman & Wakefield

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Marketing & Communications
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