Karnataka govt notifies land to set up IT park

The first phase of the IT investment region will come up 13-15km north of the Bangalore airport

Taking advantage of the location of Bangalore’s international airport, the Karnataka government has initiated a process to set up an information technology (IT) park on 50 sq. km of land north of the city.

As part of the Union government’s special investment region scheme, the state government in early May issued a preliminary notification to build an IT investment region (ITIR) on 2,082 acres of land at Devanahalli.

 

 

The first phase of the ITIR will come up 13-15km north of the Bangalore airport, said Hari Kumar Jha, managing director of Karnataka State Electronics Development Corp. Ltd, the nodal agency to implement the project.

A Union cabinet committee accorded approval for the ITIR in April.

The government will seek investments from companies to establish units at the ITIR during the Global Investors Meet next week, Karnataka chief minister D.V. Sadananda Gowda said in an earlier interview.

IT parks have played an important role in Bangalore’s status as an IT hub. Electronic City, where Bangalore’s most prominent firms such as Infosys Ltd are located, was mooted in the late 1970s by then chief minister Devaraj Urs.

The special investment region scheme was floated by the Union government in 2008 and several states have already announced plans to establish such regions, including Gujarat at Dholera, and Kerala at Thiruvananthapuram.

Under the scheme, the Union government will provide grants for developing infrastructure such as electricity, roads, sewerage and water supply in the special investment regions. While these regions themselves cannot avail tax benefits, special economic zones within them can.

In 2010, the state government passed the Karnataka IT Investment Regions Act to enable the setting up of the investment region. Jha said nearly 60% of the region will be used for production, and the remaining 40% will be used as residential areas including housing units, parks, schools and hospitals. The state government has prepared a draft master plan for the ITIR specifying parameters such as covered area, height restrictions and floor area ratio (FAR) that defines the extent of permissible development. “The master plan will be finalized in a few weeks,” said M. Maheshwar Rao, commissioner of the state’s industrial development department.

Once the master plan is prepared, the state government will choose a developer through an international competitive bidding process to build and manage the region.

Before that, the Karnataka government will have to deal with the land acquisition hurdles that have arisen. A part of the area notified for the ITIR is fertile agricultural land irrigated by the Arkavathy river. The state’s ITIR Act specifies that land acquired for the project should preferably be non-agricultural land. Two officials of the Karnataka Industries Areas Development Board (KIADB), which is undertaking the land acquisition process, independently confirmed that the board has received several objections to the proposed acquisition of irrigated land. Both declined to be identified.

“Moreover, the state government had promised to release Rs. 500 crore as compensation to KIADB for the land acquisition. We are yet to receive that,” one of the officials said.

The IT industry has largely welcomed the state’s plan for an ITIR, and some companies have already expressed their interest to set up shop. Ramadas Kamath, senior vice-president, head of infrastructure, Infosys, said there was definitely a need for more IT infrastructure near Bangalore. “Talent is not an issue in Bangalore. IT companies will definitely come if infrastructure is available,” he said.

Kamath said the government will have to ensure proper connectivity to the ITIR. While the state government has tackled air connectivity by locating it near the airport, road connectivity is also good as the proposed region lies 2-3km from the national highway to Hyderabad.

The state government has also proposed a high-speed rail link project from Bangalore’s centre to the airport, which can be extended to the ITIR.

Luxury property sales robust

Despite rising concerns about the economy, one segment of the real estate market remains buoyant: the luxury category. 

”Surprisingly, at a time when economic indicators are not favourable, we sold 15 luxury units valued at over Rs 90 crore this month. Normally I’m happy selling 3-4 luxury units every month,” says Irfan Razack, CMD of the Prestige Group.

Our estimates show that investments of about $1 billion (Rs 5,500 crore) have been lined up for Bangalore’s luxury residential space, to flow in over the next 3-4 years. A dozen luxury launches with over 800 units are expected to happen in the next 3 years.

Amongst ongoing and upcoming projects are the ultra luxurious Prestige Golfshire near Nandi Hills, with units priced at over Rs 6 crore, Skyline’s Villa Maria off Brigade Road priced between Rs 12 and 22 crore, apartments in City View (Four Seasons) coming up near Mekhri circle priced at Rs 4-10 crore, and ultra luxurious flats in Kingfisher Towers at over Rs 22 crore. Nitesh Estates, Sobha Developers, Brigade Enterprises, Embassy, Mantri, Century and several others have ventured into the luxury space.

One reason for the continued robustness appears to be Bangalore’s real estate pricing. “The Bangalore market is not stressed out like Mumbai where prices shot up irrationally impacting property registrations,” says Ashutosh Limaye, head – research & real estate intelligence service in property consultancy Jones Lang LaSalle India.

But some are also beginning to question whether the buoyancy can continue for long, and fear that a bubble may be building up. The weakening in the general sentiment is likely to eventually impact the luxury segment too. The real estate sector was the most impacted in the last crisis.

“The year 2008 had no new issues in the form of IPO/FPO while there was just one issue in 2009,” noted Samantak Das, national head of research at Knight Frank India.

Bengaluru International Airport unveils host of new services for passengers on its 4th Anniversary

Celebrating its 4th anniversary, Bengaluru International Airport today announced a range of new services and offerings for its passengers. As the Airport turns four, the new offerings are designed to add to the overall convenience and passenger experience at the airport. To mark this special occasion, a senior citizen was invited to light the symbolic lamp in the presence of dignitaries and BIAL terminal staff. The occasion was also a moment to cherish for children with BIAL gifting the little ones with the book titled 'One Day at the Airport'.

Senior citizen couple transiting through the Bengaluru International Airport light the lamp on the airports 4th Anniversary

All four year old children transiting through received an airport book today

Starting June, passengers have reason to cheer as BIAL announced a host of services for its discerning passengers. Soon passengers will be able to enjoy cities own Kannada cuisine through Halli Mane, try out the taste of the orient through the Wangs Kitchen, enjoy a hot cuppa through Chai point and continue to indulge in authentic South Indian kaapi though a renewed Hatti Kaapi outlet. This is in line with BIAL's objective of providing airport users with a high standard cuisine while providing an experience that symbolizes the distinctive culture of South India. Adding to all this will be the opening of Pause Lounge Bar Restaurant for those looking to indulge.

"On the occasion of our 4th anniversary, we would like to thank all our stakeholders, especially airport users and passengers for their unwavering and continued support. We have constantly strived to make the airport passenger friendly through various new initiatives including the Smile Bengaluru campaign which invited suggestions and feedback from people on ways to improve the airport. Needles to state we are also committed to making Bengaluru International Airport a destination that will promote the essence and culture of South India through its initiatives" saidMr.Sanjay Reddy, Managing Director, BIAL.


Pause Lounge Bar and Restaurant

Located at the domestic departure terminal, the Pause Lounge bar and Restaurant is a swanky, smart and trendy outlet that will offer signature dishes from a pan Indian cuisine. The Restro Bar will offer the best variety of Liquors, Beers and Wines. The Lounge facility caters to the esteemed and high Profile frequent Business class travelers of the Bangalore Silicon City.



Chai Point

A food and beverage retail chain serving high quality, healthy and hygienic Chai and food to the Indian-on-the-go.










Hatti Kaapi

A conventional filter coffee store will be serving authentic South Indian coffee at their brand new Kiosk at the airport. The store is targeted at passengers who cannot start their day without a cup of brewing rich coffee.

Wangs Kitchen

For foodies looking for Chinese delicacies, BIAL has new outlet of Wang's Kitchen at the airport. The outlet will serve up delectable mouth-watering array of Chinese dishes that are tasty, hygienic and of supreme quality, with a great value for money.



The "Nammura Halle Mane"

Outlet at the airport is a culmination of influences from the four south Indian states - Karnataka, Tamil Nadu, Andhra Pradesh and Kerala. The outlet represents the warmth and scale of a typical "Halle Mane" (Village House). The interiors and menu are reminiscent of south Indian culture and ways. The décor of the shop is reflective of the rich heritage and traditions of south India and the purpose of this décor is also to touch a chord with anybody who can relate to it or educate passengers who are unaware or new to it.

‘Taiwanese City' to come up near Bangalore

The next iPad could be built out of Karnataka. Taiwanese companies are planning to set up their electronics hardware manufacturing plants in the state.

Taiwanese companies and investors have approached the Chief Minister, Mr D.V. Sadananda Gowda, for setting up electronics hardware manufacturing units at Narsapura, Kolar and in and around Devanahalli.

“We have shown 1,400 acres in Narsapur in Kolar and about 700 acres in Devanahalli which we already have in our possession,” Mr Gowda told  “So far, about 15 companies have shown keen interest in investing in hardware units,” he added.

Integrated township

Also, there are plans to create a ‘Taiwanese City' that would be a 70:30 integrated township, where 30 per cent is being reserved for residential and creating other amenities for hardware companies. The balance will be offered to different electronics industries.

The move to set up electronics hardware manufacturing units, hardware industry watchers feel, would enable head honchos to stay in the country and supervise operations on a daily basis.

This is a part of the Indian government's ongoing push to bring hardware manufacturers to India after failing to secure investments in mid-2000.

Start-up devices

“This, typically, would open up opportunities for start-up device manufacturers. “A start-up company cannot afford to order million of chipsets, with the costs associated with it and if there is a plant in India, it would work out better in terms of logistics and cost negotiations,” said Dr Praveen Vishakantaiah, President – Intel India.

Agreeing with this view, Mr Will Poole, co-chairman, NComputing, said, “India needs a manufacturing eco-system that would put in the global manufacturing map.”

Fab facility

Last year, the Union Government invited expressions of interest from technology providers and investors for setting up a semiconductor fabrication plant in the country to meet fast-growing demand in the electronics sector.

“India has seen a huge IT revolution due to setting up tech parks and it would give Indian manufacturers a big boost,” said Dr Adwaita Menon, Associate Director, of IDC.

A semiconductor fabrication plant is a factory where devices such as integrated circuits are manufactured. Demand for electronics hardware in India currently stands at about $45 billion and is expected to cross $400 billion by 2020.

Out of this, demand for semiconductors is expected to amount to nearly $50 billion, it said. In order to promote semiconductor manufacturing, the government has already allowed 100 per cent foreign direct investment under the automatic route.

Airbus to set up global innovation cell in Bangalore

 

Bangalore will conceive new generation Airbus aircraft, the Toulouse, France-based aircraft manufacturer Airbus Industrie has announced.

It will set up its global innovation cell in India. The Airbus President and CEO, Mr Tom Enders, said , “This cell will not just be based in India but also be headed by an Indian. We see the future of aviation industry lies in Asia.”

Although he did not announce the name of the new head, it is believed that Mr Ardhendu Pathak (earlier with GE Industrial Solutions) will be heading the new cell.

Adding to Mr Enders' statement, Mr Kiran Rao, Executive Vice-President (Marketing and Contracts), Airbus, said that the new innovation cell will start working from next year, from the existing engineering facility at Bangalore. “It will work on next generation aircraft for 2030, 2040, 2050 and so on,” Mr Rao said.

Asia-Pacific market

Setting up a global innovation cell in India is part of Airbus' bid to tap the bigger potential of the Asia-Pacific market. It is estimated that the APAC market will require 9,160 aircraft in the next 20 years.

At the same time, India, along with China and other emerging markets, is estimated to witness 6 per cent yearly growth in revenue passenger per kilometre (RPK). Nearly 6 billion people in these regions undertook air travel in 2011.

Echoing the same sentiments, Mr John Leahy, Chief Operating officer (Customers), Airbus, said that emerging economies such as India and China will drive strong travel growth.

At present, the per capita air travel in India is around 0.01-0.1, so there is lot of potential to grow. With such potential in entire region, Asia-Pacific region will account 32 per cent (highest among all the regions) of total delivery.

INDIA PLANS

Mr Rao said efforts are on to increase the headcount at the Bangalore offshore Engineering Centre, one of the five such centres worldwide for Airbus.

At present, it has nearly 300 persons employed there. This is likely to increase to 450 over the next year or two. By the end of the decade, the plan is to take this number to 1,000. A new pilot training centre near the F1 Racing ground in Greater Noida near Delhi is expected to start functioning from May-June 2013

Karnataka clears Infosys' Rs 600-cr SEZ project near Bangalore International Airport

IT major Infosys will set up its second biggest facility worth nearly Rs 600 crore in Bangalore after it received necessary clearances from the Karnataka Government.

The new facility will be set up in north Bangalore and can seat 8,000 employees.

The Karnataka Government early this week cleared Infosys' proposal to set up an ‘IT/ITES Special Economic Zone' (SEZ) near the Bangalore International Airport.

According to Industries Department officials, the company had sought an additional 60 acres of land adjacent to the 40 acres of land already allotted to it.

The company is yet to get an official communiqué from the State Government. In May, Infosys received clearance for 7.23 acres of land near its existing IT SEZ campus in South Kanara. At that time, Infosys had said that it plans to open a software development centre of 2 million built up sq ft area with an investment of Rs 700 crore.

SHLCC (State High Level Clearance Committee) which cleared the Infosys proposal has asked its promoters to provide local employment in the project as per the Dr Sarojini Mahishi report on reservation of jobs for the locals.

The land will be allotted by the Karnataka Industrial Areas Development Board and also provide water of 13 lakh litres a day.

Another IT giant, Wipro earlier this month received formal approval, both from the State Government and the SEZ Board of Approval to build and operate an SEZ in Bangalore.

Goldman Sachs seals India's biggest office space deal

US banking group Goldman Sachs has agreed to take on lease 1.6 million sq ft of office space - an area the size of nine football fields - in Bangalore, in what is the biggest recorded commercial property deal to date in India.

The two-step transaction, according to people familiar with the transaction, will see the New York-headquartered investment bank initially taking up one million square feet. Another 600,000 square feet will be taken up in the second step of the transaction.

The space, housed in a purpose-built block of three buildings for Goldman, is located on Bangalore's Sarjapur outer ring road. To be built on 14 acres by local builder Kalyani Developers, it will be ready in 2017 and house a bulk of the bank's staff in Bangalore, now scattered across six offices in a city IT park.

A spokesman for Goldman's Asian operations confirmed the bank had taken on lease one million square feet. "This new lease is...to consolidate our presence and to accommodate future growth in the country," he said. A senior executive at Kalyani, asking not to be identified, also confirmed the deal.

The transaction is welcome news for the commercial property business, which has been plagued by overcapacity and hit hard by the economic slowdown that has crimped demand for office space. While the slowdown has meant a sharp drop in new ventures seeking space, even businesses that need office space are choosing to adopt a wait-and-watch strategy in the hope of sealing deals at lower prices.

Goldman employs 4,000 people in Bangalore, performing back-office functions as varied as technology, finance and other operations.

Deal Hints at Major Ramp-Up

A deal for office space of this size suggests a major ramp-up by Goldman in India in the years ahead, with commercial property market experts estimating that one million square feet of space can seat around 10,000 people.

In March this year, Goldman held its annual board meeting in Mumbai and Delhi. The assembly of all its high-profile directors in India for three days was widely viewed as an acknowledgement of the importance it attaches to the country.

Goldman, which was advised by real estate consultant CBRE, will pay a rental of around Rs 49 per square foot a month, which works out to Rs 60 crore a year as rent for the one million square feet. CBRE declined to comment.

The bank has also engaged New York based architect Pei Cobb Freed & Partners, which was the key designer for the modernisation of the Grand Louvre in Paris, to design the building and the workspace.

Previous single-location lease deals in India have been well short of the one million square feet mark and this one easily beats the previous record - IT firm Cisco's deal for 700,000 square feet earlier this year, also in Bangalore. This deal is the second big real estate transaction involving a US bank in recent weeks.

Last month, Citigroup bought a building with 297,000 square feet of space in Mumbai's Bandra Kurla Complex for Rs 985 crore to house its India headquarters from a consortium led by the Purnendu Chatterjee Group.

According to property advisory firm CBRE, demand for office space slowed down in the January-March 2012 quarter, with around 4.1 million sq ft getting absorbed across the top cities in India, compared with almost 6.5 million sq ft in the previous quarter.

NCR & Bangalore witness highest rental gains across Asia in Q1 2012: Cushman & Wakefield

The central business district in the national capital region of Delhi is the fifth most expensive CBD location in the Asia pacific while the Mumbai's CBD is at the tenth position, according to the latest Asia Pacific Office market report from Cushman & Wakefield.

Traditionally expensive office destinations of Hong Kong, Singapore and Tokyo continued to hold the top three positions respectively.

Among 25 cities of Asia, NCR and Bangalore saw the highest increase in office rental value in the January-March 2012 quarter. Rents in Bangalore CBD increased 18% while NCR-CBD recorded an increase of around 14% over the previous quarter.

"CBD locations across most cities of Asia particularly Hong Kong had witnessed a significant run up in rental and capital values over the last year however most Asian markets are currently depicting signs of stability, with some key emerging markets of India still showing growth owing to the sustained demand generated specially from banking & consultancy, automobile, engineering and pharmaceutical sectors," says Ravi Ahuja, executive director, office transactions at Cushman & Wakefield India.

"There has been a clear preference for cost efficient locations which is the reason why traditional high cost locations have seen a slight correction, while cities such as Bangalore, New Delhi-NCR and Bangalore have seen a stable rise. These markets are high on the value proposition with inherent demand for services / products as well as provide quality work force," he adds.

The CBD in New Delhi, which continues to get limited new supply, emerged as the most expensive office market destination in India at the end of Q1 2012. With a rental value of INR 366 per sq ft per month, rising 14% over the previous quarter, rentals here have surpassed those in Mumbai CBD and Bandra Kurla Complex.

Bangalore, which has always been a high absorption market-11 million YoY-witnessed the highest percentage rise in rents in the CBD location at 18%, making it the fastest growing office market across Asia in Q1 2012

PHL Finance buys 51% in Bagmane project

PHL Finance,the NBFC arm of Ajay Piramal-promoted Piramal Healthcare,is buying 51% stake for Rs 150 crore in a special purpose vehicle (SPV) floated by Bagmane Developers to develop its 27-acre mixed development project in Garudacharpalya in Whitefield.

Sudha Ravi,CEO of PHL Finance,and Raja Bagmane,MD of Bagmane Developers,declined to comment on the matter.The Bangalore-based real estate company bought 27 acres in Garudacharpalya for Rs 270 crore or Rs 2,300 per sq ft from Hyderabad-based Indu Projects.Mahender Basani,CFO of the Hyderabad-based firm,said,We havent closed the deal yet.

Sources in the real estate industry told that Total Environment and Shriram Properties were also in the running to buy that land parcel.The 27-acre land is a strategic fit for Bagmane,considering its accessibility to Bagmane World Technology Centre on Outer Ring Road.

Bagmane has a land bank of over 150 acres in Bangalore spread across C V Raman Nagar,Outer Ring Road and Devanahalli.

Land transactions in Whitefield have picked up speed since the second half of last year.Whitefield continues to be a priority destination for corporate occupiers,with absorption of around 0.18 million sq ft in the Jan-March quarter this year leading to a dip in vacancy rates as compared to the previous quarter,said a report by real estate consultancy CB Richard Ellis.

Some of the key leasing transactions include Polycoms 41,260 sq ft in Brigade Summit and Times Incs 35,000 in RMZ Nxt.Capgemini and HUL are taking up 4 lakh and 2.5 lakh sq ft of commercial space in the area,said sources in the industry.

Clinical research organization Quintiles leased 2.5 lakh sq ft on Outer Ring Road recently.Whitefield has emerged as a self-contained hub with IT occupiers expanding in the region.This is driving residential demand that is positively impacting land values, said Ram Chandnani,deputy MDSouth India,CB Richard Ellis.

DivyaSree launches 2 uber-luxury residential projects in Bangalore

DivyaSree Developers has launched two uber-luxury residential projects in Bangalore recently.

One of them, 1 North, would be located in Hebbal on a 4.7-acre site.

The project, with two 30-floor towers, would develop four lakh sq ft across 85 residential units.

“The project would be initially priced at Rs 7,500 a sq. ft, and the sales turnover from this project is expected to be between Rs 300 crore and Rs 350 crore,” Mr Bhaskar N. Raju, Executive Director, DivyaSree Developers, told Media.

The other project, 77° East, would come up on a 60-acre parcel off Old Airport Road, where the company already has constructed a 2.5-million-sq-ft office space.

Existing customers here include Logica and JDA.

The project also has 1.7-million-sq-ft of built-to-suit space here.

The project would also have a six-acre “round-the-corner retail hub and amenities to suit the IT hub”, said Mr Raju.

Residential segment

The residential segment, which would be added now, will include 77 luxury villas and 275 apartments.

Villas here are priced between Rs 5.5 crore and Rs 10.5 crore, and “we are yet to finalise the apartment pricing strategy,” Mr Raju said.

The company is also negotiating for another 15 acres adjacent to the project, for a joint development with a private equity firm.

“These would predominantly be a villament project, and would have 75 units. We are yet to arrive at a final design,” he added.

Mid-market projects

Besides, two mid-market projects would also be launched in North Bangalore this year, said Mr Raju.

The company also project launches planned for Hyderabad and Chennai.

Whitefield flats reap high rents in B'lore

Tony areas of Gurgaon,Mumbai and Pune have seen high rental value appreciation for apartments for the January-March quarter this year.Bangalore came a distant ninth with Whitefield recording a 16.66% jump in apartment rentals in the same period.

MagicBricks.com,in its PropIndex anniversary edition,said Gurgaons Golf Course Extension Road grew a whopping 40% with average (apartment) rentals at Rs 15.50 per sqft in the quarter compared to the same period last year.The hotspots in Mumbai and Pune are Kanjur Marg West and Viman Nagar,respectively.
Bangalores Whitefield continued to be a priority destination for corporate clients.The micro-market absorbed 180,000 sqft in the quarter with a dip in vacancy rates.Suburb Yelahanka recorded a 15.78% rental appreciation with North Bangalore absorbing 100,000 sqft of office space in the period.

Big real estate action is seen in Gurgaon,which is growing rapidly thanks to the Southern Peripheral Road.The city is emerging as a growth corridor providing good connectivity to New Delhi and Faridabad.
According to MagicBricks.coms the minimum rentals for a 2-BHK apartment in Wembley Estate Rosewood City on Gurgaons Golf Course Extension Road is Rs 22,000 with maximum being Rs 31,000.Rentals for a 3-BHK apartment in Unitech Escape in the same location is priced between Rs 25,000 going up to Rs 45,000.

Gurgaon has seen a healthy rental yield of 5-6 % compared to the countrys rental average of 2.5%-3 %.Healthy absorption by corporate clients has lifted the sentiment in the office market.The investor appetite in the residential space has pushed up the rentals in certain micro-markets, said Ashutosh Limaye,head research & real estate intelligence service at Jones Lang LaSalle India.Close to 0.1 mn sft of commercial space and 1.56 mn sqft of IT SEZ space was added to the Gurgaon micro-market in the Jan-March quarter,said a report by real estate consultancy CB Richard Ellis.

Kanjur Marg West in Mumbai,located off the Eastern Express Highway,is emerging as one of the preferred business address for IT/ITeS sector and textiles.Rentals in the area shot up by 29.54% to Rs 28.50 in the Jan-March period over same period last year with more action on the residential front.Many industrial plots being redeveloped into residential complexes is aiding rental appreciation.This are is located in proximity to the Harbour and central lines which further enhances its profile as the desirable business address, said Sudhir Pai,business head at MagicBricks.com.

Interestingly,the mostsought after addresses like Mahalakshmi,Colaba and Cuffe Parade slipped in ranks recording a negative growth in rental values.Average apartment rentals in Colaba dropped 7.94% to Rs 98.50 in the Jan-March period compared to Rs 107 during the same time last year.Colaba and Cuffe Parade were thriving when Nariman Point was the hub for corporate action.Corporate clients migrating to the Bandra Kurla Complex has led to the exodus impacting apartment rentals, added Limaye.
Vimana Nagar in Pune has registered a 29.16% increase in rentals primarily because of its proximity to the new IT hub of Kharadi and Kalyan Nagar.

Flat rentals in Vasundhara in Ghaziabad and DLF City Phase II in Gurgaon rose 25% and 21% in rentals respectively.

In Bangalore,Whitefield is seeing big action.Whitefield was battling the oversupply bulge as commercial rentals had plummeted drastically during 2008-10.However,better space offtake by IT/ ITeS players since last year has revived the sentiment in the residential space positively, said Anshuman Magazine,CMD of CB Richard Ellis,South Asia.

Some of the key leasing transactions in the region includes Times Inc taking 35,000 sft in RMZ Nxt in Whitefield.Other firms like SunGard and Ixia leased 90,000 sft and 30,000 sft in Sarjapur-ORR.

Developers diluting stake in SEZs

The generous tax concessions heaped upon SEZ developers are on the wane forcing some of them to dilute equity in their projects in Karnataka.Bangalore-based Adarsh Developers and Golden Gate Properties are offloading stake in their projects by this year-end or early next year,a move that many developers are exploring to book profits partially or exit the project.

Adarsh Developers,for instance,has put Adarsh Prime Projects,a 50-acre IT SEZ located on the Outer Ring Road on the block.

It is learnt that southern real estate major RMZ Corp is close to sealing a Rs 1,000-crore,or $200 million,deal to buyout an Adarsh Prime Projects in the technology hub of Bangalore.BM Jayeshankar,MD of Adarsh Developers,said the company was offloading stake in the project,but didnt disclose the quantum of stake dilution.Adarsh is investing Rs 527 crore into the SEZ providing employment to over 4,000 people.
Another Bangalore-based developer,Golden Gate Properties,is planning to dilute stake in its Rs 500-crore SEZ project in North Bangalore.But Pratap Kunda,MD at Golden Gate Properties didnt disclose how much stake he plans to dilute in the project.

Last year,the SEZ Board of Approvals (BOA) gave its nod to three firms DLF Ackruti Info Parks (Pune),Aachivis Softech and Sterling Addlife Mundra hospitals -- to dilute stake in their projects.This move may spur mergers and acquisitions in the SEZ space and enable SEZ developers to consolidate their businesses.

Six years since the SEZ Act was introduced,these exportpromoting zones have lost sheen with developers in delivering more bang for the buck.SEZs haven't found favour with many developers after the Minimum Alternate Tax (MAT) and the Dividend Distribution Tax (DDT) were introduced, added Kunda.Companies have to pay a MAT at 18.5% on their book profits.Experts say this will impact their cash flow position and reinvestment opportunities.

With no decrease or rollback of MAT on developers of SEZ as well as units operating within these export-promotion zones,there has been an increase in the tax liability of SEZ developers and units.The financial model of the SEZ and the nature of incentives have changed with the budgetary announcement of MAT and DDT.The goalpost kept changing for the developers,which didnt bode well for the SEZ story.Other asset classes like commercial and residential have proven to be more attractive for them, said Ravi Ahuja,executive director at real estate consultancy Cushman & Wakefield.

But others like DivyaSree Developers have denotified a portion of their 75-acre SEZ land in Whitefield and converted it into the STP (software technology park) scheme.We are reducing the size of the SEZ rather than going for stake dilution.We have got 20 acres out of total 75 acres denotified, said Bhaskar Raju,executive director of DivyaSree developers.Raju also said with STP benefits ending by 2014,it has made it less attractive.

The SEZ Board of Approvals has given an in-principal nod for over 50 SEZs in Karnataka out of which 20 SEZs are operational with an investment outlay of Rs 15,240 crore comprising 88 units.The rest are under various stages of implementation.

Firms expansion drives North Bangalore

Many companies are looking to expand their operations in the North Bangalore.Manyata Embassy Business Park hosting over 80,000 IT employees will see the number going up to 1.2 lakh by next year when the entire 18.29 million sqft is developed.Philips,Target,Cognizant and NXP Semiconductors have a strong presence there.Several developers including Beary's,Karle,G Corp and Legacy have announced residential projects within a 5-km radius of Manyata Embassy business park.

The government plans to convert the Hebbal-Devanahalli stretch into a signal-free carriageway by 2013 under the National Highway Development Programme (NHDP) to providefaster accesstothe airport.An aerospace SEZiscoming up near Devanahalli.A Rs 1,000-crore financial city and the Information Technology Investment Region and the proposed high-speed rail link from the central business district to Devanahalli will spur a residential boom in the region.

SPREADING WINGS

Flats in North Blore see highest capital value rise

Hebbal Tops The Chart,Followed By Horamavu
 

 A once far-flung slice of the city is buzzing with realty action.North Bangalore is pipping southern and eastern parts as the preferred residential hotspot,according to Magic-Bricks.com.

Micro markets in the northern areas have seen a spurt in capital value,thanks to infrastructure projects catalyzing growth there.Hebbal,with a well-knit social infrastructure,has seen the highest capital value appreciation (apartments ),followed by Horamavu and Sahakar Nagar.

Capital values in Hebbal rose 33.94% to Rs 3,650 per sqft in the January-March 2012 compared to the same period last year.Horamavu came a distant second,recording a 25.51% increase at Rs 3,075 per sqft.Close on its heels was Sahakar Nagar with a 23.80% increase in capital value to Rs 3,900 per sqft.

Hebbal has seen commercial activity catalyzing residential development.Sobha Developers Sobha City,launched at Rs 3,700 per sqft,has shot up to Rs 4,200 in less than a year,says company MD JC Sharma.Other prominent developers who have announced projects in north Bangalore include Hiranandani,Prestige,Puravankara,Century and Brigade Enterprises.

Karun Varma,MD-Bangalore at real estate consultancy Jones Lang LaSalle India,says over-supply in the south and east is adding to pressure on pricing.But the inventory in the north is comparatively lower with a good offtake.Were seeing many new launches by Grade A developers. 

In comparison,Electronics City witnessed a negative growth in capital values to Rs 2,350 per sqft,a 9.61% dip in Jan-March compared to same period last year,the PropIndex report of MagicBricks said.Whitefield and Sarjapur grew 14% and 16% respectively in the same period.The scope for capital value appreciation is higher with infrastructure projects aiding growth in the northern corridor, says Sudhir Pai,business head at MagicBricks.com.

Developers are betting their money banking on infrastructure development expected to invigorate residential development in the northern corridor.The government has planned a six-lane carriageway that will form a ring between Outer Ring Road and Satellite Town Ring Road in Devanahalli.

The closest node to this site will be Kogilu junction on NH-7.This will improve connectivity between NH-7 and the non-CBD commercial areas like Whitefield and Hosur, says Avinash Rao,regional director-south at real estate consultancy Knight Frank India.

PropIndex benchmarks capital values,rental yields and captures realty trends across 11 metros.

It is destination Bangalore for overseas tech product start-ups

Snap MyLife Inc, a start-up headquartered in Princeton, New Jersey, which provides cloud-based applications, opened its India development centre in February. 

Similarly, in April, BloomReach, a California-based start-up that develops products for Web-based marketing, set up its Bangalore R&D centre. 

It is not just companies from the US, but start-ups from other countries are also flocking to Bangalore due to the wide talent pool available here. 

New Zealand-based Pingar, with offices in Hong Kong, India, the UK and the US, entered India in February in partnership with CMC to develop and implement software products in India and abroad. A couple of years ago, top IT companies like Infosys and others started to move into tier-2 cities like Thiruvananthapuram. But for product start-ups, Bangalore is the big draw. 

Good quality engineers

“Despite high commercial real estate, we see good quality technical engineers for developing products like ours in Bangalore,” said Mr Jiren Parikh, President and CEO of Snap MyLife. 

According to analysts and industry watchers, what has changed now is the increased maturity and the perception of building products that create higher value. “Career paths in product companies add a lot of value and engineering graduates are starting to realise that,” said Mr Reji Baby, Vice-President, Engineering, Snap MyLife India. 

Others share a similar point of view. “People migrate to different companies since they don't get to build products, and Bangalore has a wide talent pool to choose from. Also, opportunities in areas like cloud and mobility are making employees consider product companies,” said Mr Vinodh Kumar, Global Director of Engineering and Head of BloomReach India. BloomReach India, a three-year-old company was started by ex-Google employees. 

Snap MyLife currently employs 35 product engineers and, according to company executives, will triple the number in the next few months. Pingar India plans to increase its staff strength in Bangalore from 13 to 35 over the next few months. “These positions will be focused largely on new business development and technical engineering support,” said Mr Peter Wren-Hilton, CEO, Pingar. 

BloomReach, which has about 80 employees in the US, said it plans to hire aggressively in India.

Ashok Kheny to build an all-weather stadium which will also have an integrated sports academy

Cricket stadium that rocks

Ashok Kheny to build an all-weather stadium which will also have an integrated sports academy

Bangalore will have India's largest state-of-the-art cricket stadium-cum rock concert venue.

In the first major infrastructure project to take off after Bangalore-Mysore expressway from Nandi Infrastructure Corridor Enterprise,the Rs 1,000-crore multipurpose stadium will come up on more than 150 acres on the city's outskirts.

While a hanging rooftop will enable automatic opening and closing of the roof to ensure events in any weather conditions,floor shifting facility in the stadium is designed to transform the cricket stadium into a rock concert venue.With this,we want Bangalore to be a world-class destination when it comes to sports, said Ashok Kheny,managing director,NICE.

The work will begin in October and is expected to be completed in two years.

THE VENUE

The project will come up on the BMIC stretch connecting Bangalore and Mysore.The cricket stadium-cum-rock show venue will be spread over 15 acres and the rest will be used for an integrated sports academy,which will teach the less-taught sports.These will include water sports (rowing and sailing),basketball and football.More than 50 disciplines of sports will be taught.

Technology makes it unique.We are using cranes as in suspension bridges on the stadiums rooftop.The roof will be hanging from suspension bridges, said Kheny.The venue can also be used for exhibitions and auctions.

The sports complex is designed on the lines of the basketball stadium in University of Arizona and a football stadium in Germany.However,the ones coming up in Bangalore will be four times larger.

The stadium is expected to accommodate 60,000 cricket fans and more than a lakh music fans.

More than 50 disciplines of sports will be taught at the stadium 

arnataka Udyog Mitra clears Ozone Group’s Pharma Cluster ‘Jeevitham’ investment of Rs.500 cr

Karnataka Udyog Mitra under the High Level Clearance Committee (HLCC) of the state government has approved the project of Ozone Group Infrastructure Developers to set up the Pharma Cluster titled ‘Jeevitham’. The Cluster will focus and encourage the manufacture of drug formulations besides biotechnology R&D.

The Pharma Cluster spans over 330 acres and is located at Chikkaballapur which is 30 kilometers away from Bengaluru. Of the 330 acres, 278 acres has been cleared by the State Level Single Window Clearance Committee (SLSWCC) in 2011. The remaining 62 acres was approved here recently. Ten acres of the land is earmarked for biotech R&D.

“We have received the clearance under HLCC which are for investments valued above Rs.50 crore chaired by the Karnataka Chief Minister DV Sadananda Gowda. The concept of a state-of-the-art Pharma Cluster was presented to the state government and the Karnataka pharma industry officials, P Lalith Kumar, vice president, Corporate Strategy, Ozone Group told Pharmabiz.

“This will see Ozone make an investment of over Rs.500 crore in the project. In addition, around 20 to 25 pharma companies would pump in Rs.1400 crore to invest in the facility over the next two years. We plan to commence construction in August this year and the entire phase I of Jeevitham on 278 acres would be operational in August 2014. Further, we are also planning to develop a plug and play R&D hub as part of the initiative which would also be made available for operations,” he added.

Ozone Group has generated promising enquires which it hopes will be converted into positive outcomes. It has appointed KPMG as the Project Associates and Consultants, Jurong as its master planners and engineering consultants, Ernst & Young as the tax consultants and Davis Langdon & Seah as the cost consultants.

Karnataka was strong in the area of development of formulations and there is already a strong presence of biotechnology research and development. There are leading companies including AstraZeneca, Bal Pharma, Micro Labs among other engaged in formulation development. There is also huge scope for contract research and manufacturing services for formulations from Kemwell to Semler Research, Medreich among others in the space.

Ozone will support the Jeevitham initiative as an enabler to set up the logistics and warehouses, training-cum- business centre, serviced apartments, business hotel, truck terminal, residential development besides ancillary services like printing, packaging to facilitate operational efficiencies.

Pharmabiz had earlier reported that the Jeevitham Pharma Cluster will have serviced plots measuring from 1, 5 to 10 and 20 acres to suit the varying needs of pharma formulation production and technology development.

Moreover the global pharma market is expected to provide contract manufacture opportunity for generics as drugs worth $13 billion have gone off patent in US in 2007 and another $60 billion will go off patent in 2012.

Bangalore realty market attracts HNIs

The residential real estate market in Bangalore has emerged as an attractive investment proposition, with high net worth individuals attracted by the city’s stable demand outlook and attractive pricing, mention a recent report by CBRE.

“Around 30% of the total real estate demand in Bangalore is investor driven while 70% is end users,” says J C Sharma vice chairman and MD of Sobha Developers.

The growing demand for home upward of Rs 1.5 crore has led to increase in launches of new properties in the premium segment. Some of the key luxury projects launched in 2011 included Nitesh Logos at MG Road, Four Seasons’ CityView at Bellary Road, Sobha City at Thanisandra and Prestige Edwardian at Cunningham Road

“We have sold 100 units in last three months. There is a huge demand from people who now wants to upgrade to bigger house,” says Raj Menda MD RMZ Corp

However, property prices were largely stable for most part of the year, with growth witnessed in the last quarter only. “Capital values in and around the CBD appreciated by 12-15% y-o-y,” mentioned the report.

Karnataka will handover land to Infosys, Wipro by month-end The companies will set up their development centres in the Bangalore

Karnataka Industries Minister Murugesh Nirani today said the government by month-end would hand over land to Infosys and Wipro to set up their development centres in the city.

"By month-end, we will clear all hurdles in handing over the land to the concerned IT companies," he said on the sidelines of Southern Regional Council Meeting of Confederation of Indian Industry here.

During the last Global Investors Meet (GIM), Infosys and Wipro had signed MoUs with the government to set up development centres in the state.

While Infosys signed a Rs 2,950-crore MoU to set up a software development centre on Sarjapur Road, Wipro signed a Rs 537-crore MoU to set up a software export hub at its existing Sarjapur facility.

Because of land issues with farmers and fake land documents among others, there has been a delay in handing over the land to the companies, Nirani said.

Even the work on developing infrastructure around the proposed development centres has hit a roadblock because of land issues, he added.

"We will clear all hurdles of handing over the land and start work on infrastructure next month onwards," he said.

When asked about reports of Arcelor Mittal deciding to put their India projects on hold for another few years, Nirani said he would not like to comment on it

Bangalore eyes financial businesses

After making a mark as an IT hub, Bangalore is hoping to evolve as a financial centre with the creation of a dedicated facility for companies in financial services. It has the software in the form skilled human resource, presence of global leaders in financial services and allied sectors and a proven capability to attract the needed resources. All that remains is to assemble the hardware – a dedicated financial city.

Such a facility will offer multiple benefits in terms of downstream development and also diversify its economic strength which is now dependent on IT.

On April 8, the Finance Minister laid the foundation stone for a financial city in Bangalore. The IFCI Financial City will come up near the international airport, at the Hardware Park on Bagalur Road.

The Karnataka Government has allotted 50 acres for this project, to be developed by IFCI Infrastructure Development Ltd (IIDL), which is to develop the facility in association with banks and financial institutions.

Explaining the financial city, Mr P.V. Srinivas, Managing Director, IIDL, says that it will be a hub where all participants in the financial system have their offices. “It will be a one-stop-shop for all those who would like to avail of financial services.”

The project will be a model for regional financial centres across the country. Space has been taken up by 16 financial services companies, including banks, insurance companies, investment companies and the Income-Tax Department.

The Financial City project is expected to be completed in three years. According to Mr Srinivas, the total investment into this project by IIDL and all participant institutions will be around Rs 1,200 crore.

Compared to Mumbai or Ahmedabad, Bangalore has not been recognised as a financial centre in the country yet, despite several home-grown banking institutions making it big from the State. It is in this context that the emergence of Bangalore as a financial hub will be interesting, as the city has already made a place for itself on the global map as a major IT/ITeS destination and a biotechnology hub.

Benefit Bangalore

“With so many banks having their head offices or operating out of Karnataka, the need to start a finance hub was felt and IFCI signed a memorandum of understanding with the State Government of Karnataka to create a Financial City ,” says Mr Srinivas.

“Developing a financial services sector in the city will help to decrease the dependence on only the IT/ITeS sector,” says Mr Naveen Nandwani, Director, South India, Cushman & Wakefield. Explaining the advantages that Bangalore as a financial city will bring forth, he says that the initiative to set up IFCI Financial City akin to the information technology parks is likely to offer new opportunities for the banking and financial services sector in Bangalore.

The city has been witnessing increasing and continuous demand from the banking, financial services and insurance sector and the financial services consulting firms. Quite a few major players, such as JP Morgan, Northern Trust, Societe Generale and Goldman Sachs, have set up their operations in the city, he points out.

Mr Nandwani adds that Bangalore has the advantage in terms of its location, talent pool availability (locally and ability to attract migrant population), climate, etc., for a financial city. “Setting up a dedicated financial city will provide a tremendous boost in realising this objective,” he says.

Mr Srinivas of IIDL says that the Financial City will help create more jobs and result in increased tax collections, create better infrastructure and consequently lead to the development of the entire region. Besides, there will be other impacts on the local market and surrounding areas such as increased employment, development of physical and social infrastructure and a boost to the local economy as a whole, adds Mr Nandwani.

According to him, this development is expected to generate and attract other developers, investors and end users, leading to increased activity in all asset classes — commercial office, residential, retail and hospitality.

A large development like this will increase the importance of the local market, and Devanahalli will no longer be known only for the international airport, says Mr Nandwani. “Many developers have land parcels in and around this location and some of them have initiated developments or are in the planning stage board on these lands,” he points out. Buoyed by the response, IIDL plans to request for additional space from the Karnataka Government to make the Financial City a bigger project.

The State Government representatives at the launch event — including the Chief Minister, Mr D.V. Sadananda Gowda, and the Minister for Large and Medium Industries, Mr Murugesh R. Nirani — offered full support for the same. According to Mr Srinivas, the company plans to ask for 25 acres more, to start with.

What the space will house

The Financial City answers the need for space required by banks and financial institutions in the region and will be developed to cater to their growth plans. Bankers that we spoke to said that their initial plans were to use the space that they have been allotted as an IT centre, given that Bangalore is an IT city.

Ms Shubhalakshmi Panse, Executive Director, Vijaya Bank, says the bank plans to build a data centre or an IT centre in the two acres that they have been allotted. She points out that typically a data centre would need 10,000 sq. ft, and the bank could also house allied activities such as data warehousing and customer relationship management at this centre.

“If we get additional space, we could house a training centre at the financial city,” says Ms Panse.

Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, says the decision on the use of the two acres would depend on how other institutions plan to use their space. “If the focus of the financial hub is more on IT, then we will use the space as an IT centre. If others use the space for backend services, we would also do similarly,” he adds.

But the challenges for the Financial City remain in terms of getting adequate water and power supply, and public transport, which Mr Srinivas pointed out that the State Government has agreed to provide.

eBay & PayPal to launch a new Bangalore development center, opening up 1,000 jobs

eBay has revealed that it plans to open a new development center in Bangalore, the capital of the Indian state of Karnataka, and expects to hire up to a thousand “technologists” in the coming years.

The online auction giant says that the new facility will feature “several centers of excellence” and will serve as home to technologists from both eBay and its subsidiary company PayPal. This development center will build on eBay’s existing presence in India, which includes a global development center with over 2,200 employees in Chennai and the eBay India business unit in Mumbai.

“eBay’s ecosystem provides technologists a unique combination of startup culture to innovate and product excellence culture to build products that creates value to millions of customers,” says Rajesh Ramachandran, General Manager at eBay Marketplaces. “The unprecedented scale of the eBay platform challenges technologists to innovate and create new architecture paradigms and technologies. The India center plays a strategic role in global product and technology innovation. The Bangalore Center will bring in significant thought leadership to drive critical business initiatives.”

The company says that it is aggressively hiring senior technologists with strong product development experience across many areas, including research, platform and application development, architecture, quality engineering, product management, marketing and product analytics, user experience and design, and information security.

Founded in 1995 in San Jose, California, eBay is one of the Web’s most recognizable e-commerce brands, and it snapped up e-payments platform PayPal for more than $1bn way back in 2002.

“PayPal is growing at a phenomenal rate globally, as we continue to execute on our bold vision of re-imagining money,” said Anupam Pahuja, General Manager, PayPal. “To support this growth, we are looking to tap into the large pool of software engineering talent in Bangalore to come innovate with us and create the future of commerce. We are committed to India as a technology hub and see India’s software engineering talent as a critical driver for the long-term success of PayPal’s global payment platform.”

Red Hat opens R&D centers in Pune and Bangalore

Red Hat, among the world's leading open source solutions provider announced the setting up of it's largest engineering facility outside North America in Pune today. The company also launched another 'Engineering Center of Excellence' in Bangalore, reiterating its commitment to the Asia-Pacific region.

Speaking at the inauguration ceremony in Pune, Paul Cormier, executive vice president, products and technologies, Red Hat, said, "Innovative product development and engineering services are the cornerstone of any company with global aspirations and we expect the current expansion to further Red Hat's goal to lead the way in innovative collaboration and open source technology development locally, regionally and globally."

The Pune facility, which is spread over 50,000 sq ft will serve to incubate, support and sustain local talent.

"2012 is the year of the developer for Red Hat and with a growing number of developers coming from India, Red Hat brought several notable global developer events to APAC - Fedora Users and Developers' Conference (FUDCon) in November 2011 in Pune and JBoss User and Developers Conference (JUDCon) in January 2012 in Bangalore," said Anuj Kumar, general manager, Red Hat India.

"With our new facilities and events like this, we hope to continue showing our commitment to developers throughout the APAC region."

There has been growing market interest across the region in open source technologies, which has led to the company significantly expanding its presence in the region. The engineering team in India works closely with local educational institutions, research bodies, and agencies involved in formulating standards and to support the proliferation and adoption of open standards in interactions.

Bangalore property prices up by 4.5 per cent in last 4 months

Bangalore has witnessed a rise of around 4.5 percent on an average in the property prices in for the period between December 2011 and April 2012.

According to a study carried on by group buying portal, Groffer.com, the price change was observed for 85 projects. The study also observes that while some areas have witnessed some stability in the prices, property rates in some areas have risen by more than 5 percent.

"Our survey shows that there were 41% projects where the prices remained stable and another 40% projects where prices were raised by more than 5%," the study revealed.

Th study shows that Bangalore is divided into 2 segments-prices are stable in certain areas like Yelahanka, Electronic City and there are certain areas like Sarjapur Road, Banerghatta Road and Kanakpura Road where prices have increased by more than 5%.

Disparity in price rise

The study observed an 8% price rise in project in Sarjapur Road and 7% price rise in projects in Banerghatta Road. These were clearly the hot demand spots in Bangalore right now. While the average price rise of 4% in projects in Kanakpura Road like Mantri Serenity, Pride Springfields.

However property developers in general did not increase pricing in projects in Yelahanka except for one project- Krishna Northwoods where price was increased by 14%. No price change in North City by HM Constructions, Century Wintersun. According to the study price change in projects in Electronic City like Nitesh Estates,Townsville by Patel Realty, Jain Heights and Itinna was also not observed

Which projects and builders?
- DLF increased prices for Maiden Heights in Electronic City by 13%

- Confident Group has increased prices for most of their projects by close to 10%.

- SJR raised prices for SJR Unity in Brookfields by 15% and Luxuria in Banerghatta Road by 14%

- Biggies like Sobha Developers, Prestige Construction have kept prices stable.

Global coffee shops want a toehold in Metro stations

Everybody wants a pie in the Brand Namma Metro. Global coffee shop brands are now bidding for licences to run cafeteria at the MG Road and Byappanahalli Metro stations.

An artists impression of the cafeteria at MG Road Metro station

The Bangalore Metro Rail Corporation floated a tender a month ago to run coffee shops at the two stations on Reach 1 to impart a world class feel-good touch to the terminuses. BMRC sources said that besides international coffee brands, government tourism entities too have come forward to book space.

The proposal is to have two terminuses each at the two stations. The cafeteria at the Kumble Circle end of the MG Road station platform will be spread over 47.19 sq metres, while the one on the other end will be spread over 44.33 sq metres. The Byappanahalli station will have cafeteria at the NGEF Layout end (57.59 sq mts) and the Old Madras Road end (71.20 sq m).

The licence fee suggested was on the higher side: Rs 1 lakh or 20% of the gross revenue (excluding taxes) whichever is high for MG Road station cafeteria and Rs 80,000 or 20% gross revenue (excluding taxes) whichever is higher for Byappanahalli cafeteria.

"The response to our tender proposal has been phenomenal. Some of the most popular international coffee brands and retail chain hotels have bid. Nobody even questioned why the licence fee was high. Obviously, the bidders know that the Metro stations are prime locations both in terms of revenue and eyeball gathering. We have extended the time for pre-bid queries so that it gives us some more time to firm up the power requirements with the Bescom," said UA Vasanth Rao, general manager finance, BMRC.

The Karnataka State Tourism Development Corporation (KSTDC) is also among the bidders. "The revenue sharing model will be a win-win situation for licencees. This is a normal business model," Rao added.

The Bidders

The top brands vying for cafeteria spaces at MG Road and Byappanahalli stations.

• Cafe Coffee Day
• Costa Coffee
• Barista
• Au Bon Pain
• City Max Hotels
• Travel Food Service
• Gloria Jean
• Cafe Pascusi 
• Karnataka State Tourism Development Corporation (KSTDC)

Bangalore Office Space Q1 2012 Report

HIGH LEVEL OF PRE-COMMITMENTS

Bangalore‟s commercial office market was characterized by buoyant performance in the first quarter of 2012 with demand approximately at 5.24 million square feet (msf). Pre-commitments constituted almost 55% of the total demand with lease commitments for space in the range of 0.25 msf to 1.6 msf. The IT/ITeS sector was the prime absorber. Interestingly, small and medium enterprises accounted for quite a few significant deals in the range of 40,000 square feet (sf) to 90,000 sf. Peripheral markets of Whitefield and Electronics City recorded the highest absorption on account of availability in Grade A space at comparatively reasonable rentals. The absorbed space ranged between10,000 sf to 40,000 sf of floor-space area. About 32% of the total absorption was recorded in Grade B developments. On account of persistent demand, an escalation in the rentals was observed in the CBD/off-CBD and suburban micro markets.

CONTINUED ABSORPTION IN GRADE "B" SPACES

Supply infusion during the quarter was recorded at approximately 1.27 msf of which approximately 350,000 sf was in the SEZs. Most of the new supply was delivered in the latter part of the quarter; as a result of which,84% of the new supply remained vacant. This led to a marginal increase in the vacancy level in the city to about 13.2% in the first quarter of 2012 as compared to 12.0% in the fourth quarter of 2011. Vacancy in SEZ developments also witnessed a rise to about 4.4% on account of new supply not taken up.

Notwithstanding the high availability in Grade A developments in Whitefield, sizeable absorptions in Grade B developments were primarily due to better value propositions of available and fully furnished space in these developments. The suburban markets dominated the quantum of deals for Grade B developments.Quite a few corporates were also observed to vacate their existing premises and consolidate their operations in other developments or incubation spaces.

OUTLOOK

Approximately 11 msf of new supply is expected by the end of 2012. Absorption levels will remain on the higher side as significant lease transactions are expected to be closed during the forthcoming quarters. By the end of 2012, vacancy too is expected to come down marginally and suburban markets will continue to witness absorptions in Grade B developments

PEs like Blackstone, KKR in talks to buy Vijay Mallya’s office towers for Rs 650 crore

Beleaguered billionaire Vijay Mallya’s investment holding company UB Holdings is in talks with Blackstone and KKR to unlock value of its office spaces, including the iconic head office UB Tower, said banking sources briefed on the matter.

PE investor may acquire Mallya’s office real estate, part of the UB City development in the heart of Bangalore, through a structured equity deal for roughly Rs 650 crore.

UB Holdings is also the parent of the debt-laden kingfisher Airlines. UB Group CFO Ravi Nedungadi offered “no comments” in reply to a texted query. A group spokesperson quoting Mallya denied that UB Tower was for sale. He did not elaborate.

The discussions with the competing PE investors are centered around a sale and lease back model, with UB Holdings having the right to buyback after a fixed period. “So it may not be sale technically,” said one of the sources mentioned earlier.

UB City is a joint venture between Mallya’s UB Holdings and Prestige Developers, with 1.6 million sqft mixeduse development comprising of office spaces, luxury retail and hospitality. Mallya solely owns UB Tower, while the rest of the property is split between the two JV partners.

The 200,000 sqft luxury hotel, Oakwood Serviced Residences, is owned by Prestige. Mallya’s share of UB City is around 905,000 sqft, with UB Tower alone being 300,000 sqft.

UB Tower, which is 123 metres high and one of the tallest buildings in city as of date, houses all the UB Group companies corporate offices, which include United Breweries, United Sprits, Mangalore Chemicals and Fertilizers, and UB holdings. Some of the other big corporate names occupying the office space in UB City include 3M, Apple, Citibank, Ernst & Young, Kawasaki and Yahoo!

Blackstone declined to comment while queries to a senior KKR executive remained unanswered at the time of going to press.

“Mallya is offering a 13% return on rental incomes,” said a source privy to the ongoing developments, and added that rental monetization package which Mallya had struck with HDFC would not come in the way of the deal. “The rental monetization package brought only around Rs 100 to Rs 150 crore for Mallya, which can be paid off with the money got from the sale and lease back model he plans to do now,” said the source.

PE investors like Blackstone have been on the prowl to buy out rent-yielding office space assets. The risk investors, who have shied away from typical PE investments in broader realty market, find office space a safer bet. Blackstone clinched two IT park deals recently in Bangalore and Pune.