Bangalore gets a big bite of realty pie, absorbs 3rd of India's commercial space

Powered by strong demand from IT and related sectors, Bangalore is seeing a record absorption in commercial and residential segments amid a sharp fall in demand seen in key property markets such as Mumbai and the national capital region (NCR).

The Karnataka capital, classically called the City of Gardens and of late touted as an IT hub, has consumed a third of country’s total absorption of commercial space at 11.7 million sq ft in 2011. This is 15 per cent higher than the space absorbed by the city in 2010, says a report released by Kotak Institutional Equities on Tuesday.

In comparison, NCR and Mumbai have absorbed commercial space of 6.2 million sq ft and 4.1 million sq ft respectively in 2011. NCR has seen an increase of 8 per cent over 2010 and Mumbai has seen a decline of 6 per cent.

The record office absorption has also fuelled similar levels of demand in residential properties. Bangalore has seen an absorption of 49 million sq ft of residential properties in 2011, which was more than any Indian city, according to Kotak Institutional Equities

While Bangalore had a share of 20.4 per cent in 238 million sq ft of residential units sold in top seven cities in 2011, Mumbai had a share of 14.8 per cent and Gurgaon 19.7 per cent in 2011.

Although Bangalore has seen a drop of 18 per cent in absorption of residential units in 2011 vis-à-vis 2010, the city is well placed in comparison with the NCR and Mumbai Metropolitan Region (MMR) which have seen 52 per cent and 57 per cent fall in absorption of residential units respectively in in 2011, according to data culled by realty research firm PropEquity.

“IT companies have seen a windfall due to rising rupee,” says K Madhusudan, co-chief investment officer, Azure Capital, Bangalore based realty fund manager. “Both global IT majors such as IBM, Oracle and Cisco and domestic companies are hiring aggressively. That is driving the growth of residential and office markets in the city.”

Ashutosh Limaye, head of research and real estate intelligence service at Jones Lang LaSalle, points out that apart from within the state, the pan India demand for Bangalore properties is high.

As per property consultant JLL, the vacancy in commercial properties stood at 11 per cent in in four quarter of 2011. It is further set to fall to 8 per cent in 2013. Rentals are set to increased 5 per cent and 7 per cent in 2012 and 2013 respectively. As per software industry body Nasscom, IT headcount is set to grow by 10 per cent per cent in FY2013, which augurs well for commercial demand by IT/ITES, especially in Bangalore.

According to experts, affordable prices and availability of land have also fuelled the demand for properties.

In the recent National Housing Bank Residex, the index indicating property prices across key cities in India, Bangalore saw a mere fall of 1 per cent in residential properties in October to December 2011, compared to the corresponding period in 2010. Mumbai saw a 11.6 per cent jump in home prices, while Delhi saw a 35.8 per cent increase during the October to December 2011.

“Despite good demand, prices have not gone up sharply,” says Madhusudan. “You can get good residential property at Rs 30 lakh to Rs 35 lakh in Bangalore.”

Adds S Bhaskaran, chief financial officer at Bangalore-based Sobha Developers: “There is a good absorption and developers are proactively keeping prices affordable. There is a product available at different price points. You can buy a house at any price between Rs 20 lakh and Rs 1 crore or more.”

According to Limaye, there is no pressure on land, unlike in Mumbai, which is surrounded by sea at both the sides. “Different corridors are leading out of the city and new areas have come up outside the city,” he adds.

The favourable property markets also resulted in Bangalore remaining at the tenth place in the top investment destinations 2012 list brought out by Urban Land Institute and PricewaterhouseCoopers. Mumbai and New Delhi fell from the third and fifth place in 2011 to 15th and 12th in 2012.

“Bangalore’s organic growth-driven market and ability to buck mega trends,” said a report by ULI and PwC, “has helped it retain its credentials as a stable play and maintain its position on the list.”

Cess on new layouts may fund Namma Metro phase II

Land transactions, buildings near corridors likely to be taxed

The Bangalore Metro Rail Corporation Limited (BMRCL) and other agencies involved in the implementation of the phase II of Namma Metro are toying with various ideas to generate funds. The project proposal is now with the Centre for clearance.

The State government has given an official in-principle approval for phase II of Namma Metro project, covering 72.095-km with 61 stations. The estimated completion cost of the project, the order said, is Rs 26,405.14 crore.

Among the proposed sources of funds, “levy and collection of cess from new layouts/new property developments” tops the list.

According to sources, “cess at five per cent of the market value of land or/and building in future property developments and new layouts is proposed to be levied under Section 18(A) of the Karnataka Town and Country Planning Act. The cess proceeds, to be credited to Metro Infrastructure Fund, will be shared by the BMRCL, BWSSB and BDA at 65 per cent, 20 per cent and 15 per cent, respectively, to finance the project directly by the BMRCL and to augment other civic infrastructure by other agencies.”

Delhi Chief Secretary P K Tripathi on Tuesday also favoured the Central government’s proposal to levy additional taxes on land transactions and buildings near Metro corridors.

Cess on Additional Area Ratio, including for properties along phase I, has also been proposed. “The Floor Area Ratio (FAR) up to 4.0 is proposed to be allowed for all properties lying within an influence area of 500 metre on either side of the alignment of both phase I and phase II.”

A part of the benefit accruing to property owners due to higher FAR will be collected through cess of 10 per cent for residential buildings and 20 per cent for commercial ones.
“The cess proceeds will be shared by the BMRCL, BBMP, BWSSB and BDA at 60 per cent, 20 per cent, 10 per cent and 10 per cent, respectively, for debt servicing of the senior term debt raised by BMRCL and for financing augmentation of civic infrastructure by other agencies.”

Phase II is proposed to be financed broadly through a similar financing plan as has been put together for phase I –– Karnataka will provide 30 per cent of the project cost as equity (15 per cent) and subordinate loan (15 per cent), the Centre will be requested to fund 25 per cent of the project cost as equity (15 per cent) and subordinate loan (10 per cent) and the remaining 45 per cent of the cost is proposed to be mobilised as senior term debt from external and domestic financial institutions.

It is also proposed that the State government provide financial support to BMRCL “for the cash shortfall, if any, during the operation period.”

Highlights

* Cost: Rs 26,405.14 crore
* Coverage: 72.095 km
* No. of stations: 61
* Completion: 2017-18
* Passenger capacity: 14.80 lakh per day

Karnataka gives tax sops to Honda bike plant

The Karnataka government Friday granted a slew of tax incentives to Honda Motorcycles & Scooters India Ltd (HMSI) for setting up its first plant in southern India at Narasapur in Kolar district.

“The government has decided to convert 40 percent of the value added tax (VAT) to be levied on HMSI into an interest free loan for 10 years, reimburse 95 percent of the central sales tax (CST) for five years and exempt stamp duty and registration fee on 96 acres of land allotted to it in the Narasapur industrial estate,” Law Minister Suresh Kumar told reporters after a cabinet meeting here.

As a wholly-owned subsidiary of the Japanese auto major Honda Motor Corporation, HMSI is setting up a two-wheeler plant with an upfront investment of Rs.1,300 crore (Rs.13 billion) with an installed capacity of 1.8 million units per annum.

“The cabinet has decided to extend these incentives to the company as a quid pro quo to provide 85 percent jobs to the local people in all departments. The company has agreed to our condition,” Suresh Kumar said.

The company in its proposal has indicated that it would provide direct jobs to 3,200 people and indirect jobs to 15,000 people in its third plant in the country.

HMSI’s two plants are located at Manesar in Haryana with a capacity of 1.6 million units and Tapukara in Rajasthan with 1.2 million units per annum.

The company has set a sales target of 2.1 million bikes for this fiscal (2011-12) as against 1.6 million units sold in last fiscal (2010-11).

The new plant is set to reduce the waiting period for Honda vehicles in the southern states to 30 days from six months currently.

Honda’s range of two-wheelers include three automatic scooters (Activa, Dio & Aviator) and six motorcycles (CB Twister, CBF Stunner, CB Shine, CB Unicorn, CB Unicorn Dazzler and CBR 250R).

Kerala's biggest IT employer UST Global expands Bangalore operations

Kerala's biggest IT employer UST Global Friday expanded its Bangalore operations which will initially accommodate 600, with the capacity to expand to over 5,000.

Elaborating on UST Global's expansion plans, its chairman Satendra Gupta said the company's offshore operations have so far been centred on South India and the Philippines and it now makes sense to build a broader base in the IT capital of India, Bangalore.

"After being the forerunner in creating opportunities and retaining the position of the largest employer in the IT Sector in tier-2 cities of Kerala, we believe our expansion in Bangalore is the next step," said Gupta.

UST currently employs 9,000 IT professionals, 4,000 of them in Kerala alone.

California-based UST Global is a next-generation IT service and business process outsourcing provider focused on delivering IT and business solutions.

UST Global is also building a new flagship campus here, the first phase of which is expected to be completed soon. Once operational, the three million sq ft campus will be a major hub for offshore IT services.

Metro explores ways to MAKE MORE MOOLAH

Insurance Event Will Be Held At MG Road,Byappanahalli Stations

With commercial operations on the Reach 1 stretch settling down,Namma Metro is now looking at innovative ways to augment its revenue and address commuters needs.As a first step,the Bangalore Metro Rail Corporation (BMRC) will commercially exploit spaces in Reach 1 stations by renting them out for marketing events.
Given that the sprawling spaces at entrance and concourse levels of its Metro stations are a veritable goldmine,the BMRC will itself host an insurance event from March 5 to 19 at MG Road,Indiranagar and Byappanahalli stations.Insurance companies have been invited to hire spaces at these stations and market their policies and plans for commuters on the go.
A senior BMRC official told TOI that eight companies will be selected on a first-come-firstserved basis for each of the three stations.A maximum space of 50 sqft can be rented out at the concourse or entrance levels of a station to each of the eight participants.But rent and other details are still being worked out.
BMRC will hold the first preparatory meeting in this regard on Friday with some of the top government and private insurance companies,to give them a brief idea of what they intend to do and how much space will be available for each of them.A second round of meeting will be held on February 21 to clinch the issue.
The agenda is to generate revenue and at the same time benefit our esteemed commuters.The 15-day event will give Metro commuters the range of insurance options available for them and help them choose the best, a source in BMRC said.

SPACE FOR ADs SOON

The insurance event is just the beginning.BMRC is being approached by a number of media and advertising agencies to put up their ads on Metro piers and viaduct.
"We have planned to float tenders to sell space for advertising soon.Instead of letting people stick posters on the piers and causing visual pollution,it is better to organize things so that there will be a semblance of aesthetics and revenue generation as well,"BMRC officials said.
BMRC has already rented out a small corner for a kiosk selling national flags and knick-knacks at the MG Road station.

ON-THE-GO MARKETING

Harish Bijoor,brand consultant and CEO of Harish Bijoor Consults,believes that Namma Metro is truly going international,given its latest plans to exploit its marketing potential to the hilt.
"Metro is a natural passenger traffic generating outlet like malls,where you can market one thing with the other.This kind of marketing can be called on-the-go marketing or event marketing,where you can have stalls,skits,awareness programmes and video walls,which talk about brands.By taking such steps,Namma Metro can try to emulate London's Victoria station,"he said.
Bijoor said Metro stations are a great place for generating leads for business developers from all brands and services."You can create databases from the leads that you can collect from Metro locations,catch people who can be potential buyers and leads which are cold can be later warmed up to generate business.Metro can also be a great awareness creation centre point,"he explained.

WHAT AN IDEA: A 50 sqft space can be rented out at the concourse or entrance of the Metro stations

Embassy may tap equity for Rs 3,000 cr project

Embassy Group, Bangalore-based real estate developer, is close to embarking on a massive 80 million square feet of integrated township development worth in the range of Rs 3,000 crore. The company which has accumulated land close to 300 acres over the years, near the Bangalore International Airport (BIA) is understood to be in talks with various players to raise equity for the project.

According to investment bankers close to Embassy Group, the company may be looking at options of raising resources from private equity players as well as some strategic players. According to few investment bankers, the group may open discussions with Emkay Group based in Malaysia. Embassy may be looking to infuse close to Rs 700 crore equity into this project, a part of which is expected to be from an external source. Embassy Group offered not comment on the transaction. The road leading to the Bangalore airport has been attracting a lot of attention from majority of real estate players right from Godrej Properties to Century Real Estate to Brigade Group and now Embassy Group besides a score of other players.

If Embassy decides to go ahead with Emkay Group, it will cement the relationship further between the two players. Embassy already has a joint venture with Azikaf Sdn Bhd, a member of the Emkay Group of Malaysia, for the development of MKN TechZone, a business park being developed in Cyberjaya, Malaysia.

The Emkay Group is active in residential, commercial, resort and ICT developments. In addition to this, Embassy also has a joint venture agreement with MK Land, Malaysia. Through this partnership with MK Land, Embassy intends to develop affordable housing projects in India. MK Land is a major property developer in Malaysia. The company has a diversified portfolio of projects, which includes affordable housing, lifestyle living, commercial development, resort, a water theme park and property investment.

If this move by Embassy fructifies, it will be its second major equity fund raise in the recent past after it raised a record $200 million from global private equity major Blackstone for a SEZ project in Bangalore. During late 2010, Embassy was planning to take the company public in a Rs 2,400 crore issue, but had to give up the plans as the markets tanked.

Embassy Group, which started operations in 1993, has an extensive land bank across the country and has developed over 28.5 million square feet of prime commercial, residential and retail space.

The majority of the completed projects in its commercial portfolio are built-to-suit and fit-out developments undertaken for specific clients. Going forward, the company intends to undertake a combination of built-to-suit projects and those done without pre-commitment.

Cargo service at BIA wins award

Air India-SATS, the joint venture of AI, providing ground handling and cargo handling services at the Bengaluru International Airport, has been awarded the Air Cargo Terminal Operator of the Year award
at the Indian Supply Chain and Logistics Summit and Excellence Awards, 2012, organised by the Indian Chamber of Commerce in New Delhi.


The award was based on the excellence of service provided by AI-SATS in its Bangalore cargo terminal capacity utilisation, level of mechanisation, range of specialised and valueadded services, IT and electronic Date Interchange (EDI) system, customer satisfaction and responsiveness, security management, energy conservation and innovation.


The Excellence Awards have been instituted to honour and recognise efforts of the Indian logistics and supply chain organisations in creating industry benchmarks and adopting best practices.


On winning this award, AISATS CEO, Willy Ko, said: “We are honoured to receive this award on behalf of our AISATS team, our partners and the customers.”


He said AI-SATS is the first company in India to install the automatic storage and retrieval system.
“We will soon be launching another first, the Very-Narrow Aisle Material Handling System.We are actively working with our customers and the air cargo community to help grow their business and help improve the value chain to benefit the whole industry,” the AI-SATS CEO said.

Bangalore, Ahmedabad and Kolkata IIMs make it to Asia-Pacific top 10 again

The Indian Institutes of Management (IIMs) - Bangalore, Ahmedabad and Calcutta - continue to be the quality B-schools in the country.

The trio has figured in the top 10 in the Asia-Pacific region. The QS Global 200 Business Schools Report 2012 has put these B-schools among other Indian schools in the global rankings.

IIM-Ahmedabad is ranked second, IIM-Bangalore's rank is fifth and IIM-Calcutta is ranked eighth.

IIM-A and IIM-C have shown the biggest improvement in employer opinion this year in the region by improving four places.

Indian School of Business has been ranked seventh, S P Jain Institute of Management and Research is at 16 and Indian Institute of Foreign Trade at 21.

INSEAD, Singapore is number one in the region for the third consecutive year. Melbourne Business School (University of Melbourne, Australia), NUS Business School, ( National University of Singapore) and University of New South Wales were some of the other institutes that featured among the top 10 in the region.

The QS global report, which originated in the early 1990s, provides a detailed overview of the most popular business schools around the world based on information given by global recruiters.

It lists out 200 business schools from which employers prefer to recruit MBAs. The ratings are made regionwise (Africa and the Middle East; Asia-Pacific; Europe; Latin America; North America) and MBA specialization ratings.

According to the report, even though business schools in the United States and Europe remain the most popular destinations for MBA, schools in other partsm, like in the Asia-Pacific, are gaining popularity.

"Business schools in the Asia-Pacific region are looking at the standard of top American and European institutions as indicators of how they compare and where they could improve. Furthermore, the economic growth in some Asian countries, particularly in China and India, has heightened the demand for more accredited business schools in the region in order to train the next generation of successful business leaders," says the report.

"IIM-B has shown gradual improvements in the ratings, climbing from sixth (2009) to fifth (2010) and this year missed the top cluster by just 2.7 points," the report says.

However, there is a worry about international student enrolment.

"Many of Asia's business schools lack in international student enrolment, causing concern among employers who are looking for graduates to work in a multinational environment," the report says.

The percentage of international students in IIM-A, IIM-B, IIM-C and ISB is 1, 10, 3 and 5 respectively.

Karnataka considers Metro zone levy

The government will monetize the appreciation in real estate along Metro corridors through a special property tax.

 

While the Union government gave the go-ahead on Tuesday-the rate will be decided by the Delhi government-Karnataka is considering a similar levy in Bangalore -in the second phase of the ongoing Metro rail project in the city.

The Union ministry of urban development (MoUD) has advised the state to increase the floor area ratio (FAR) along Metro corridors and levy additional FAR charges to support the funding of the Metro through a dedicated urban infrastructure fund.

FAR, also known as floor space index (FSI) in some parts of the country, is a measure of the extent of construction permissible on a given plot of land.

The tax is among the measures being adopted by the ministry and the Delhi government to raise funds for the Metro and reduce the funding pressure on the Centre and the state, Sudhir Krishna, secretary, MoUD, told reporters on Tuesday.

“We are encouraging mixed land use and higher floor area ratios along the Metro corridors to enhance economic activity,” Krishna said. “Through a property tax (on properties) along the Metro, we will try to mobilize resources to fund the future phases of the Metro.”

Property analysts said rental and capital values of property along Metro corridors escalated in Delhi as well as in Bangalore, where the Metro rail was opened to the public only last year. The Delhi Metro became operational in 2002.

Residential prices have grown by 15-20% along Bangalore’s Old Madras Road, where the first leg of the Metro commences.

Cashing in on the demand for property close to Metro stations, a clutch of real estate projects were launched last year by large developers on an extension of Old Madras Road.

The government’s move will curtail the holding of property as assets and thus more housing will open up for the rental market, said Romi Roy, senior consultant, Unified Traffic and Transportation Infrastructure (Planning and Engineering) Centre, a unit of the Delhi Development Authority.

“Now people will think before they sell property and only those who really need the Metro will live near it. It is a welcome move by the ministry,” she said.

Similarly, in Bangalore, there are multiple proposals to levy a property tax that the state government is toying with to take advantage of the growth in capital values that is expected along the Metro corridor, said K.M. Shivakumar, additional chief secretary, urban development department, Karnataka government.

“If property values are going up, the government or the implementation agency should also partially benefit because the capital will eventually be infused for the project itself,” said Shivakumar.

In the second phase of the Bangalore Metro, which is yet to be approved by the central government, the new tax may be levied on properties located within 500m of each Metro station.

Chintan Patel, director of real estate and hospitality services at consultancy Ernst and Young, said if the initiative is aimed at monetizing the rise in real estate values because of the Metro, the money needs to be ploughed back into the transport project. “It also needs to be seen if the tax is a one-time payment against a transaction or it is payable annually like the regular property tax. Of course, the amount of this new tax will also decide the growth potential of capital values in these areas and may be, (they will) keep prices in check,” Patel said.

Bangalore job market looks up

Backed by demand for talent in the IT sector, Bangalore city registered double-digit annual growth (of 18%) in the Monster Employment Index for India. Bangalore not only remained the strongest annual gainer among major metro-markets, but also was the only one among all major metros to report double-digit growth. Bangalore gained 19 points from January last year to 124 in January 2012.

The Monster Index, which is a monthly gauge of online job demand based on review of a large number of career web sites, grew to 120 in January 2012, from 115 in December 2011. On a year-on-year basis, the Index grew by 6%.

" Given the current global economic conditions, it is not surprising to see continued single digit annual growth in the Index. However, employers have started the year on a relatively positive note with continued recruitment within large sectors like IT, FMCG and Import/Export," said Sanjay Modi, managing director (India/ Middle East/ South East Asia), Monster.com.

Two other cities from South India - Kochi and Coimbatore, showed remarkable growth, leading the pack with more than 20% annual growth in the Index. While both Mumbai and Chennai fell by three points each on an annual basis on the Index, Delhi/NCR grew by 6 points to 119 over the last one year.

Among the sectors, social services and non-government organizations (NGOs) registered the highest annual growth of 31% on the Index, while banking & financial services emerged from its subdued recruitment period of recent months, gaining 9 points between December'11 and Januray'12. Over the past year, the sector has gained 3% in the Index.

The demand in IT talent could also be seen on the rise for the first time, after declining continuously since September 2011. The Index for IT (hardware and software) grew by 20% on an annual basis and is now close to the level of 143 in September 2011.

The most notable decline was the government/PSU/defense sector, which fell down by 21% to 101 during the last month. The corresponding figure for January 2011 was 128.

Other sectors that grew on an annual basis include agro-based industries (29%), import/export (27%), consumer goods, FMCG, food and packaged food (20%).

Among the sectors that fell down in the Index compared to January 2011 were production and manufacturing (-4%), printing & packaging (-5%), logistics, courier/ freight/ transportation (-10%), besides government and PSUs (-21%).

Stamp duty hike upsets builders

The increase in stamp duty (apart from 0.72% additional duty and surcharge) on registration of Joint Development Agreements (JDA) and General Power of Attorney (GPA) from 1 per cent to 6 per cent from April 1, 2011 has brought more worries than cheers to the government. Builders are now taking an alternative route to avoid taxes and deprive the state’s exchequer of revenues.

Sample this: The number of JDAs registered has come down from over 2,000 last year to just 154 this year. Before April 1 this year, the developers were expected to pay a flat 1 per cent stamp duty on JDA on the guidance value of property or a maximum of Rs 1.5 lakh. In case of GPA, the fee was Rs 15,000. But the increase has not gone down well with the developers taking up joint ventures as they have to pay the registration fee again after completing the projects, said sources in the registration department.

With the steep increase, the government is forcing the realtors to tread the illegal path by not registering the JDAs with the registration department, they said. Paying stamp duty for the JDA or GPA does not confer any powers to the builder. But he will end up paying the registration fee again after completing the project. To avoid paying stamp duty twice on the same property, builders are not just registering JDA and GPA projects, they added. Property owners enter into joint development agreements to make transactions bona fide. The stamp duty on JDA and GPA is imposed after arriving at the cost of the project.

IBM launches new Centre of Excellence in Bangalore

IT giant IBM has set up a centre in Bangalore that will offer solutions to automate and accelerate the purchasing, sales and customer service functions.

The new Centre of Excellence (CoE) at the India Software Lab will offer solutions to organisations across India, South Asia and Asia Pacific.

The CoE will consist of a team of 25 technical experts selected from the business to business and commerce enterprise marketing management teams from India Software Lab, IBM said in a statement.

India Software Lab (ISL) is one of the largest product development centres for IBM globally. ISL focuses on developing products, technology and solutions for IBM Software Group, IBM Systems and Technology Group and IBM Engineering & Technology Services.

"By bringing together a powerful combination of technical expertise, domain knowledge, and best practices from IBM's extensive global engagements, the CoE will offer innovative solutions to automate and accelerate the purchasing, marketing, sales and customer service functions to organisations across India, South Asia and Asia Pacific," India Software Lab Vice-President Gopalakrishnan said.

IBM commerce solutions have enabled customers like ING to increase average campaign response rates and expects to reduce its direct marketing costs by 35 per cent per year, the company added.

"The CoE for Smarter Commerce, will work closely with the business teams on customising Smarter Commerce solutions for companies. These solutions, across different technology platforms, will integrate and more effectively manage the value chain across buying, marketing, selling and service processes for different sectors," Gopalakrishnan said.

In India, IBM is working with leading companies in retail, financial services, auto and manufacturing sectors.

Standard Chartered Bank lends Rs 250 crore to Bangalore realty firm, DivyaSree Developers

Standard Chartered Bank has lent 250 crore of construction loan to DivyaSree Developers for developing a mixed used project in Bangalore, said more than one person with direct knowledge of the development. 

The mixed-use residential project, DivyaSree Technopolis, is being built on the Old Airport Road in Bangalore. 

DivyaSree Developers refused to comment on the transaction. Standard Chartered could not be reached for a comment. 

The Bangalore-based builder is also in talks with private equity funds, including the PE arm of Standard Chartered to raise $30 million by selling a stake in its residential development in Bangalore. 

"The company plans to raise around $100 million in the next six to nine months in three tranches across different residential projects and to buy land," said a Divyashree executive, who did not wish to be named. 

So far, the company has developed seven million square feet of commercial space, and has around three million square feet under construction that is slated for completion in the next eighteen months. The company is also looking at selling around 2.7 million sq ft of income producing office space for 1,600 crore in different developments in Bangalore and Hyderabad. 

DivyaSree has a total debt of 750 crore. 

The IT capital of India has been attracting large PE deals, in the largest real estate this year, PE major Blackstone in June picked up 37% stake in Manyata Tech Park for over 1,000 crore ($200 million). 

In a similar instance Maple Tree has acquired 2 million sq ft from Assetz Global Technology Park in a deal valued over 800 crore and Baring Private Equity Partners invested 450 crore in RMZ Corp for acquiring 6 million sq ft of office space in Bangalore.

Slowdown hits commercial real estate market

The commercial property market was the only hope for builders already reeling under record low sales in the residential segment has hit a road block.

As per latest RICS India Commercial Property Survey, after a period of strong growth witnessed in occupier and investment demand over the previous few quarters, the market now looks to be cooling down.

In Q4 2011, there has been a marginal drop with respect to global rental expectations, with India now ranked at 24 in comparison to the previous quarter’s 19. Even on the investment side, the market does not seem to be fairing any better, with investment enquiries falling for the third consecutive quarter.

“During Q4, 2011, we witnessed a continuing slowdown in supply of prime office space coupled with a decline in office space take up. The continuing volatility in the global and Indian financial markets, coupled with rising inflation and interest rates, has led corporates and developers to be cautious in their expansion plans,” says Anshuman Magazine, chairman and managing director CBRE South Asia and chairman, RICS South Asia Board.

New projects in Q4, which were rising since past 15 months were being stalled as the demand from tenants dried up in the second half of the year. Available space to occupy also continued to rise,” mentioned RICS.

Further, the investment side of the market also witnessed subdued activity as the demand from investors fell for the third consecutive quarter and capital value expectations sunk to the lowest reading for over two years.

City to get its biggest clock tower

  

Time is never in our hands, but soon the commuters passing through South End Circle can get a glimpse of time at the new clock tower, that will be constructed shortly. The clock is named ‘Ambara Chumbana’ and is under construction at Jayanagar 3rd block near DCP (South) Office.
The project is one of the many initiatives by corporator N R Ramesh of Bruhat Bangalore Mahanagara Palike (BBMP), ward no 167. Ramesh says, “We are building this project on a waste land. Earlier, the place was used as a dumping yard. It was even used as a urinal, by many. Initially we placed rocks to prevent the residents from disposing off waste here, but it didn’t work well with them. With the constrction of the 51 feet clock tower, this menace has disappeared already. Apart from that, the clock will be surrounded with greenery.”
The tower will be made of pure Hassan green granite. An amount of `45 lakh has been sanctioned for the project. Ramesh says, “The work on the project has begun already. The construction started in the beginning of this year, and is scheduled to be inaugurated on April 31.” The proposal for this project was sent in the mid of 2011, but the plan was implemented only in January. Ramesh says, “Any plan or idea must go through all opinions from different heads of various departments. We took some time to get the estimated amount sanctioned and this subsequently affected the start of the project also.” He adds, “As the project is being constructed on commercial area, it is going to be a monument in Karnataka. We have taken all kinds of measures for its timely completion and the fencing of the land has already been completed."
He also informed City Express that after the completion of the construction of the clock tower, the remaining place will be converted into a small park, with trees and benches for visitors.

Bengaluru Industry in doldrums: ABIDe member

Has governance been severely affected due to the ongoing political struggle in the state?

Industrialists and infrastructure experts feel Bengaluru has not moved forward for the past three years because of the never ending troubles of the BJP.

Following frequent queries raised by industrialists regarding the delay in implementing infrastructure projects, member of ABIDe, R.K. Mishra has expressing concern over inadequate infrastructure in Bengaluru and has sent an SMS to the Chief Minister’s Economic Advisor Dr K.V. Raju, principal secretary I.S.N. Prasad, Karnataka BJP in-charge Dharmendra Pradhan and party general secretary Ananth Kumar.

Mr Mishra stated in the SMS that “there is an enormous delay in implementing infrastructure projects. My industry friends met me and said that they were fed up. As an economic advisor to the CM, you should convey their sentiments to the CM. There is a need to form a special team to expedite infrastructure projects”, stated the SMS.

Confirming the sending of SMS to Mr Raju and other key members in the government, Mr Mishra told Deccan Chronicle that “many industrialists are fed up with the inadequate infrastructure. Bengaluru is not moving forward in the real sense. Projects taken up by BBMP and BDA have been stalled. Due to politics, governance has taken a back seat. As a member of ABIDe it was my duty to bring this to the notice of the government”, he said, adding, “Brand Bengaluru has taken a major hit”.

The government should come out with specific projects for Bengaluru based on a PPP model, he added Economic Advisor to CM, Dr Raju denied receiving any SMS from Mr Mishra. “No project has been stalled. We will have a discussion with industrialists before preparing the Budget”, he told Media.

Brigade Group Moves Office to World Trade Center

We’ll have the best nanotech park in India

The government is planning to set up a nanotechnology park in Bangalore in the financial year 2012-13 to give an impetus to the technology and will soon constitute an expert committee.

The park is likely to be featured at the proposed Information Technology Investment Region at Devanahalli. An initial grant of Rs20 crore has been proposed to develop it on public-private-partnership model on 25 acres.

The final proposal regarding the park was submitted to the government recently. The science and technology (S&T) department is working towards making the park the best in the country.

The aim of the park is to popularise the use of nanotechnology, touted as a gamechanger in fields as diverse as electronics, automobile technology and healthcare.

Nanotechnology’s applications in various industries offer a huge potential for business opportunities.

A nano-incubation centre will be set up at the park. Itsaim will be enabling research and development. It will offer facilities for R&D on a rental basis to make research more accessible.

An advanced laboratory would be set up. Also, it will seek to support new and small companies attain their business goals and achieve a good growth rate.

Further, to provide business opportunity as well as to familiarise students, scholars and public with the concept of nanoscience, an exhibition centre of international standards will be set up at the park.

Educating bureaucrats
Besides promoting research in the field, the S&T department plans to give training to bureaucrats as it believes this would make it easier to promote nanotechnology in the state. Workshops and seminars will be held in this regard. Also, technicians will be trained in the technology to cater to the needs of the industry, which is still in a nascent stage.

Karnataka Industrial Areas Development Board will allot the land for the park after acquiring it from farmers. The government has published advertisements, seeking expression of interest from business houses to develop the park. The last date for corporates to respond was January 31.

MN Vidyashankar, principal secretary for IT, BT and S&T, said the government received more than 16 expressions of interest. He said some companies are from the US and Europe.

He said a technical team would prepare the shortlist by February 20.

The government is now acting towards setting up an expert committee to give shape to its dream of setting up the best nano-park in the country. Besides the initial grant of Rs20 crore, efforts are on to seek funds from the Union ministries of S&T and information technology.

Asia’s largest data centre launched in Bangalore

Minister of state for communications and IT, Sachin Pilot, inaugurated Tulip Data Services Pvt Ltd’s new data centre in Bangalore on Monday.

Tulip Data City (TDC) is Asia’s largest data centre.
“It is a matter of pride that India today boasts of a world class data centres, which is the largest outside the US. Data centers are at the heart of today’s digital revolution and enable not only enterprise services but also many government-to-citizen services,” the minister said.

TDC is the most green and power efficient data centre in the country, and is expected to save about 35MW power at full capacity.

“The launch of this world-class facility is aligned with our vision to become one of the largest players in the data services space globally. With this, the data centre is now a completely independent operational subsidiary with a strong financial backbone, operational infrastructure and a robust organization,” said Lt Col HS Bedi, CMD, Tulip Telecom Ltd.

Tulip sets up Rs 900-cr data centre

Enterprise data services company Tulip Telecom has established a 9 lakh sq ft data centre ‘Tulip Data City' here, the world's third largest data centre, at a total investment of Rs 900 crore.

“The company has made an immediate investment of Rs 230 crore and has secured loans for Rs 50 crore from leading banks,” Lt Col H.S. Bedi, Chairman and Managing Director of Tulip Telecom, said. The company is planning to raise another Rs 250 crore through debt, Rs 250 crore through equity and will fund the rest using internal accruals, he added.

“We might also look at strategic partners for the business,” he added. With more companies moving to professional data centres for their storage needs, the telecom company expects the entire facility to be occupied in three years.

RS 600-CR ORDERS

Tulip Data City, the 100 per cent subsidiary data centre of Tulip Telecom, currently has orders worth Rs 600 crore from IBM, NTT and HP.

“About 20 per cent of the data centre has already been booked by three customers and we expect it to be fully contracted in three years,” Lt Col Bedi said. Tulip Data City expects to earn revenues of Rs 1,000 crore once the data centre is fully operational.

The facility was inaugurated by Mr Sachin Pilot, Minister of State for Communications and IT. “The future will be decided based on who owns the data, and currently, a large part of our data is owned outside India… so it is extremely important to have a data centre here,” Mr Pilot said after the inauguration.

Tulip Data City is Tulip Telecom's fifth data centre and Lt Col Bedi said that once this centre takes off, the company could consider bringing other data centres under this. The servers at Tulip Data City consume about 100 MW of power in peak but it is still lower than where the servers were earlier used where they consumer about 130 MW power, Lt Col Bedi said.

The company draws 20 MW from the Bangalore Electricity and Supply and Company and is planning to source the remaining power from other entities, he said.

KPMG India launched its Technology Center in Bangalore today

KPMG India launched its Technology Center in Bangalore today. Located at the iconic World Trade Center (WTC) in Bangalore, this center houses technologically advanced teams specializing in enterprise applications, business intelligence and analytics, as well as network design, architecture, data management, and application development.

Professionals working at the facility will focus on innovation and strategies to help clients achieve their business objectives, address their pain points with the help of suitable enterprise class applications from within a wide array of choices across the product spectrum.

''We have always believed in providing additional value to our clients. This brand new India Technology Center is a testimony of the same,'' said Mr. Michael J Andrew, global chairman, KPMG.

Mr. Andrew added, ''Our decision to locate the center in Bangalore is complimented by the wealth of relevant talent and strong educational facilities, which will be the key in growing this center.''

One of the key highlights at this facility is a unique Client Experience Zone, a hi-tech experiential environment for clients to get a demonstration of the full range of all the technology assisted service offerings tailored to meet varied business needs.

Complimenting the experience zone is a well equipped global program management control center that permits simultaneous review of multi location, multi-product complex engagements.

''We have created the Center for the benefit of our local and international clients who can experience our capabilities in delivering advanced technology solutions,'' said Mr. Russell Parera, CEO, KPMG India.

He added, ''The information technologists working at this center will help converge KPMG's wide array of advisory services ranging from performance and reporting to accounting, tax, compliance and regulatory.''

Housing the best in class solutions for various enterprise applications such as Oracle, SAP, Siebel, Hyperion, Business Objects, PeopleSoft, Primavera, and Business Intelligence amongst others, the center comes fully equipped with an enterprise class data center comprising high computing capacity to cater to the wide range of technology solution offerings across key sectors.

''The Center will become an important hub for our innovation in information technology solutions, critical to solve complex business issues of our clients. They will be able to experience these solutions and better understand their benefits prior to making significant investments'' said Mr. Kumar Parakala, partner and head of IT Advisory for EMA.

KPMG also expects to partner with Oracle and SAP education on training programs for its employees at the center.

Going forward, KPMG is well poised to leverage this center to benefit clients by allowing them to directly experience its technology solution capabilities, delivery strengths in this space and become a value adding and forward thinking differentiator for its clients

Luxury Apartments are Bid for,not Bought Now

International auction houses are making their way into the Indian luxury property segment 

Late last year,Sotheby International Realty organised a preview of Indian art alongside an auction of Bangalores Four Seasons Residences in Delhi,sponsored by London-based developer Westcourt.Half of these 30 luxury residences featured there were sold to international buyers as well as those from Delhi.Now,Sotheby International Realty plans to organise a similar auction in Bangalore for the rest of the apartments.We are selling lifestyle,not just condominiums.We host art exhibitions of notable Indian artist and are able to connect with art patrons who also have interest in luxury homes, says Philip Grant,project director,real estate sales & marketing at Sothebys International Realty.Many international and domestic auction houses like Saffronart,Christies and Bid & Hammer,which are normally associated with high stake art auctions,are entering the Indian property market,selling ultra premium and luxury projects.Selling through these auction houses,developers get to access an exclusive clientele that is associated with art and luxury.Local property broking is usually not very effective for selling luxury homes An exclusive platform like ours attracts both overseas and domestic buyers looking for primary and secondary properties in their home country, says Nish Bhutani,chief operating office of Saffronart,which is marketing properties in the range of Rs 3-8 crore for holiday and luxury homes.The auction house has tied up with international property consultants Cushman & Wakefield to sell exclusive beachside bungalows and holiday homes in Goa and around Mumbai and even some contemporary city homes.For instance,a 3-bedroom apartment measuring 3,100 sq ft overlooking the Race Course in Bangalore has an asking price of Rs 6 crore.Another major auction house Christies,headquartered in London,is also exploring options to tap the luxury real estate market in India.Internationally we tie up with establish agents to market luxury properties and we want to do same in India.Buyers here are discerning and the luxury real estate market throws enough opportunities for us, says Menaka Kumari Shah,director and country head (India) for Christies.Bid & Hammer,a Bangalore-based auction house widely known for its fine art auctions,says that though an art auction house is a distinctly different entity from its real estate division,the crossover point is of practical interest for developers and individuals eyeing a targeted client base.Entering the luxury home market is a natural transition as this is only segment showing signs of no impact.We plan to enter this segment in next one or two years, says Maher Dadha,chairman and managing director of Bid & Hammer.A consortium of developers in Kolkata,who are developing the high end Urbana project too are using art to sell homes.They recently organised a Vietnamese art-cheese-wine evening for 60-70 of the citys creme-de-la-crme.It triggers a huge word-of-mouth publicity.We had art lovers booking flats and even some flat owners buying art.Overall,flat sales since then have been very encouraging, says Rahul Todi,director at Bengal NRI Complex,which is developing the project.

CBDs Losing Favour as Firms Shift Base to City Outskirts

Famed and feted for its sales prowess,Indias top consumer goods company Hindustan Unilever appears to be struggling to close one deal for about two years it has failed to find a buyer for an iconic building it owns in South Mumbai.When the Indian arm of Anglo-Dutch Unilever shifted its office to a new campus-style facility in the suburbs of Andheri in January 2010,it had hoped to sell its headquarters for 46 years Lever House in the Backbay Reclamation Area near Churchgate.The proceeds,it may have hoped,could have more than paid for the cost of the new 12.5-acre,state-of-the-art Andheri East campus,but so weak is the demand for properties in the central business district that the company had to recently launch a second attempt to sell the building after a previous attempt failed to find a buyer.Not very far from Lever House,and in an even more upscale location,stands the Air India building,a seafacing landmark of the city that towers over the Nariman Point area.Even as recently as a few years ago,its owner,national flag carrier Air India,could have monetized this 1974-built,24-storey building and hoped to ease some of its financial woes,but experts in the real estate business now say it will not be easy.Along Bangalores MG Road,vacancies have risen to 10% in the last three years.The vacancy levels in traditional CBDs are only growing,with large companies moving out of these business districts to better,cheaper buildings in the suburbs, says Sanjay Dutt,chief executive officer (business ) at property consultancy Jones Lang LaSalle India.

Locations such as Bandra-Kurla Complex and Lower Parel in Mumbai,Noida and Gurgaon in the national capital region were being increasingly preferred by businesses over the old favourites.And as this trend gathers pace,companies that had bought space in the original business districts are stuck,unable to attract buyers deterred by high prices or by tenants put off by a mix of high prices and poor quality amid a changing design paradigm.Much like Hindustan Unilever,companies such as Motilal Oswal,Standard Chartered Bank and Deutsche Bank,which have set up offices in Prabhadevi,Bandra Kurla Complex or Lower Parel,are also said to be looking to selling their old offices,but have not been able to do so.In the past one year,Axis Bank has moved out of its offices in Cuffe Parade near Nariman Point and has bought an office in Lower Parel because of similar reasons.In Delhi,while several companies still have a presence in the Connaught Place area,it is a token presence,kept only because of the areas proximity to ministries and government offices.Only companies that need to have smaller offices near government institutions will stay in the CBD, says Vivek Dahiya,CEO at GenReal Property Advisors.Companies that have little to do with the government have vacated Delhis CBD to places such as Noida and Gurgaon.In the case of Bangalore,the shift has been from MG Road and its nearby areas to places such as the Outer Ring Road,Koramangala and Whitefield,where rentals are comparatively much lower.The biggest thrust over the last two years has been in the Outer Ring Road where companies have moved because of the good social infrastructure and talent pool, says Juggy Marwaha,director for leasing at RMZ Corp,a commercial property developer.MG Road has lost out because of higher costs and low availability of land for new developments.Rentals here have fallen 15% in the last three years,while rentals in places such as the outer ring road have been on the rise.During the past three to four years,a steady stream of companies led by the likes of Accenture,Broadcom,HP and Symantec have all moved out of the area.Even today,a few of our clients are in the process of expanding and consolidating to new buildings in the suburban and peripheral locations, says Naveen Nandwani,director for Bangalore and Hyderabad at real estate consultants Cushman & Wakefield.

BDA plans hi-tech zone to recover PRR costs

In an apparent bid to recover the land cost of Rs 2,000 crore for the construction of the Peripheral Ring Road (PRR), the Bangalore Development Authority (BDA) and the State government are likely to deem one kilometre area around the 65-kilometre stretch as hi-tech zone.
























Hi-tech zoning is the creation of a priority area for the establishment of industries like automobile, IT and other allied industries.

Owners of land within the area will have to pay hefty sums as betterment charges and other taxes to the BDA for converting their land under the hi-tech zone.

“While the actual beneficiaries of this plan will be the land owners who wish to sell their land, we will be recovering certain amount from people who wish to get their land converted under the hi-tech zone as per betterment charges,” said the official.

Sources indicate that hi-tech zoning will facilitate a real estate boom around the PRR, with land prices already skyrocketing in and around the City.

“The region will be an attractive land bank for industries to set up shop as it is away  from the City’s traffic congestion,” said a government official.

With the PRR providing a connecting route from Tumkur Road to Hosur, it is likely that industries that wish to cater to the neighbouring state of Tamil Nadu may find the zone an attractive investment option.

As per the hi-tech development zoning proposal, any person who is interested in buying land will have to acquire at least three acres of land, big enough to set up an industry.

Further, it also stated that the State government and the BDA may relax the Floor Area Ratio (FAR) for the entire 65-kilometre stretch enabling commercial property builders and companies to increase the height of their buildings.

“This will encourage builders to come forth and invest in the vicinity,” said the official.
Currently, as per CDP 2015, the FAR in hi-tech zones is between two to 3.25 times the extent of the land on roads that are 12 metre to 30 metre wide.

For road users

For road users, the PRR is likely to have as many as 10 grade separators for commuters to exit the toll road. Sources said toll will not be applicable to those residing in the nearby villages.

Currently, the PRR is pending before the Urban Development Department for its clearance and to be presented to the Finance department. “In all likelihood, we expect the proposal to go before the Cabinet in the next 20 days,” informed the official.

Baring set to seal.500-crore Bangalore IT park deal

PE Firm To Hold 28% In RMZ Corps 6Mn Sft Project

 Private equity giant Baring Private Equity Partners (BPEP) is investing $100 million (Rs 500 crore) in one of south Indias largest office space builders,RMZ Corp.The PE player will back RMZ Corps acquisition of 6 mn sft of office space in Bangalore.
It had previously reported that RMZ Corp is buying out a 50-acre office development,Adarsh Prime Projects,in a deal valued at Rs 1,080 crore.The transaction,one of the biggest in the office space segment,involves purchase of 1.2 mn sft of pre-leased space and land,with rights to build an additional 4.8 mn sft space.
Baring will pick up 28% stake in the special purpose vehicle (SPV) floated for this buyout.The SPV is one of RMZs group companies.The remaining stake will be held by RMZ.The deal with Baring is the second PE transaction for RMZ,which had attracted $350 million funding from AIG Global Real Estate five years ago.
RMZ declined to comment on this story.Baring Private Equity Partners (BPEP) India,one of the oldest PE firms in the country,manages assets worth over $1 billion.
RMZ currently has 6.5 mn sft of built-up office space across Bangalore,Chennai and Hyderabad.The deal to buyout the Adarsh project will almost double RMZs portfolio of office space.RMZ is also in talks with multiple developers to buyout an additional 5 mn sft in the three southern cities.
The real estate major wants to cash in on the demand for pre-leased office space coming from IT/ITeS companies expanding in the three southern cities.
The family-owned RMZ is exploring a REIT (real estate investment trust) listing of its office assets in the next five years."The first preference will be to do it in India if local regulations allow for such a platform.It would otherwise look at Singapore,where such a platform already exits,"said a source familiar with the plans.A REIT deploys investors money in commercial real estate assets.The trust pays dividend to shareholders from the rent accumulated from commercial properties.The capital market regulator Sebi is yet to finalise the guidelines for REIT listing.