Where to invest in 2009 in ITndia

The soothsayers are back with predictions. Not where prices will drop, but where prices will rise.
Jones Lang LaSalle Meghraj, the sophisticated marketing arm of the building industry are making new predictions. Here is the link for the pdf on LiveMint.com's site. The analysis seems pretty straightforward as it proximity to the IT/ITES industry as the main drivers and I've headlined this post to reflect that.

Mumbai
Mumbai has witnessed some of the highest selling prices in the residential market till the
beginning of this year. Clearly, those prices were not sustainable, since buyers for super
luxury homes are shrinking fast.

One of the focal areas was central Mumbai (specifically Lower Parel and Worli) that
witnessed the highest price escalations. These now faces the challenges of the slowdown.
The current slowdown has curtailed the investor segment in the residential property market.
The driver for what demand exists now are real end-users.
In Mumbai, there is no dearth of those desperate to find homes within an affordable range -
affordable housing is therefore now the silver lining on the dark cloud of today’s slowdown.
Mumbai has three different directions in which growth can still be observed. Appreciation is
not a factor currently, but these are the areas that will sustain their prices – while other areas
in Mumbai will correct.
The extended western suburbs; Vasai-Virar sub-region
Drivers:
1. Economic drivers such as the MP SEZ by DHL, BIO tech SEZ by Mahindra
and IT SEZ
2. Connectivity is going to increase by introduction of additional suburban trains
from next year
Prices are in the range of Rs2,500-3,500/sq.ft
Area adjoining Panvel
Drivers:
1. This region is benefiting significantly from trunk infrastructure enhancements
such as the upcoming new airport, the Trans-Harbor Link, a railway terminus,
mono rail etc.
2. Positive impact from the upcoming Mega SEZs by Reliance and others.
3. The expansion of JNPT.
Many developers have already initiated large township projects in this region. The price range
are Rs. 3000-3800/sq.ft.

Bandra-Khar area
Prime property hunters are still focused on this area.
Drivers:
1. It will witness increased connectivity by the Bandra-Worli sea-link, the
proposed Metro Line 2 and also the upcoming Santacruz-Chembur Link road.
2. This region is always a preferred destination for prime property seekers
because of its elite profile, and because of the high level of available
shopping, healthcare, education and recreation facilities. Developers there
are offering products in redevelopment schemes.
The prices range from Rs18,000–25,000/sq.ft.

DELHI
Currently, there is a definite slowdown in growth in the suburban residential market.
Construction has stopped on new projects, resulting in a stabilization of rates for readypossession
flats. This scenario also reflects in Delhi, where the rates for good properties rates
are now stable.
However, the areas around the 150-meter road that will eventually connect Gurgaon to
Dwarka – specifically, Sectors 103-111 – have significant growth potential.
Drivers:
1. Sufficient developments will come up in this area, and one can expect a year-on-year
appreciation of at least 5-7% even now.
2. The area is currently under-developed – however, when residential projects there
reach completion in 2-3 years, the appreciation will be between 30-35%.
3. A lot of this depends on the ability of developers to raise enough cash to complete
their projects. Those who do not have the requisite finances will miss out on an
extremely lucrative opportunity.
The current rates in this belt range between Rs. 2200-2300/sq.ft. In Dwarka, the rates are
between Rs. 4000-4500/sq.ft and in the further locations of Gurgaon between Rs. 3500-
4000/sq.ft.

CHENNAI
Chennai’s residential real estate scenario is considerably depressed at the current time.
Developers who have projects along the once booming IT corridor are all set to reduce their
rates by as much as 20%.
However, the Mogappair-Porur composite region continues to hold mid-to-long term
investment potential.
Drivers:
1. This overall location is very close to the prime residential catchment of Anand Nagar
and also to Chennai railway station and the bus terminus.
2. The fact that it is not near the IT corridor also increases its potential.
3. The rates there are competitive at Rs. 2800-3000/sq.ft.
The expected appreciation for residential properties here is between 20-30% long term).

BENGALURU
Bengaluru (erstwhile Bangalore) is surely feeling the brunt of the IT slowdown. However,
established suburban areas like Koramangala, Outer Ring Road and Bellari Road continue to
be good investment destinations.
As in the case of Mumbai, appreciation is not a focal point in the current scenario - these are
the areas that will sustain their prices, while other will correct.
Apart from these, Mysore Road –which encompasses the upcoming NICE corridor, has lots
of future promise thanks to good connectivity to Mysore and many commercial developments
being planned there.
Koramangala
Drivers:
1. No scope for fresh developments
2. Close to Electronics City
3. Residential demand is high
Rates are between Rs7,000-8,000/sq.ft.
Outer Ring Road and Bellari Road
Drivers:
1. Close to IT hub
2. Outer Ring Road is close to Whitefield and is a commercial area.
3. New developments are coming up on Bellari Road, which is also close to the
Devenhalli airport.
Rates – Rs3,500 – 5,500/sq.ft. Appreciation potential between 5-8% short term. Long term
10-15%.

PUNE
With Talegaon not picking up in the anticipated manner, Pune’s new growth corridor now
encompasses Kharadi and Nagar Road. This can be safely considered as the most lucrative
real estate investment zone for 2009-2010.
Drivers:
1) Eon IT Park – 4 million square feet of prime IT space in the last stages of completion
2) Other IT SEZs as well as commercial ventures also on the anvil
3) Proximity to revamped airport
4) Improved connectivity, largely via the opening of the VIP Road connecting Viman
Nagar to the airport
5) Imminent arrival of 5-star hotels such as JW Marriott, Grand Hyatt and Leela
6) Reasonably low entry costs:
Rates – Rs2,700-3,500/sq.ft

HYDERABAD
Hyderabad continues to hold its own in the current slowdown scenario, though significant
growth has now been restricted to certain specific areas.
Residential real estate investment growth potential in Hyderabad will center primarily around
Gachibowli and Tellapur.
Drivers:
1) Proximity to the financial district, which is where the highest growth of IT and other
commercial projects is happening
2) Could become another CBD over the next ten years
3) Outer Ring Road (Phase 1 in advanced stage, phase 2 scheduled after six months) in
the vicinity will reduce commuting time of residents to key workplace locations
Rs3,000-3,500/sq.ft.
Appreciation in these areas will be about 5% in 2009 and might increase in further years.

MOHALI
Residential rates at Chandigarh have gone through the roof, and there is little scope for
appreciation for now. Moreover, because Chandigarh is a planned city conceived on certain
density specifications, which give rise to limitations on development.
It is therefore not dynamic in real estate terms, which means it will not change much with time.
Chandigarh could not partake in the IT boom for these reasons. However, adjoining Mohali
presents a completely different picture. The area called Greater Mohali, which encompasses
the fast-developing Landra-Mohali Road area, is a very promising residential nexus.
Pan-India developers such as Unitech, Emaar-MGF, Ansals and DLF have snapped up land
there for development into mega, multi-sector residential hubs. These will be highly organized
cluster projects, and all the right drivers are in place:
Drivers:
1) International airport coming up
2) Indian Business School coming up
3) Multi-terminal bus stand soon to be commissioned
4) 120 acre township with IT SEZ coming up
The investment opportunity here is in land, which currently sells at between Rs12,000-
14,000/square yard. After 3-4 years, the land rates in these areas will surpass those in central
Mohali, which currently stand at Rs30,000-35,000/square yard.

KOCHI
Kochi has the fast growing residential market in Kerala. The NRI investments has caused
sudden spurt in residential demand in Kochi City.
Apartment units have the highest demand owing to affordable prices and availability. In
addition, high ranking of Kochi as IT/ITES destinations which resulted in demand generated
by the infrastructure initiatives like the Smart City Project, Cyber City project, Infopark,
International Transshipment Container Terminal Project, etc.
Waterfronts are the most sought out residential real estate destinations and usually get a
premium. The prime residential areas adjacent to M.G. Road and along Marine Drive still
command a premium with landmark projects asking for Rs7,500/sq.ft
Drivers:
1) Close to CBD
2) Attractive Water fronts
3) Huge demand for waterfront apartments
Peripheral areas of the city such as Kakkanad, Edapally and Kalamassery currently face a
short-term oversupply of mid-range flats that are selling in the Rs. 2,500-3,000/sq.ft range.
Drivers:
1) Close to the existing InfoPark
2) Positive impact from the upcoming Proposed Smart city and Cyber city in Kakkand
3) Good infrastructure has lead to a diverse and robust economy and job creation.
Commercial trade, a traditional sector of the economy, is being complemented by growing
sectors such as IT/ITES (due to large scale IT parks and SEZ), BFSI activity and tourism.
4) Excellent connectivity resulting from a combination of airport, sea port, road and rail,
has positioned the city for long term growth and competitive advantage.
5) A disproportionately large number of NRIs, or non-resident Keralites to be more
specific, are investing from abroad and have increased demand for residential space.
Appreciation in the peripheral areas of the city will be about 5% in 2009. We expect a 5-
10% increase over the long term.
Rates: Rs2,500-3500/sq.ft.

AHMEDABAD
Ahmedabad, which has recently started leveraging its real estate potential for ‘real’ now, has
some real residential hotspots coming up.
For instance, there will be considerable economic activity with the arrival of the Tata Nano
project, which will definitely boost the value of real estate in and around the corridor of
Sanand.
Drivers:
1) Located in an industrial region rich with SEZs
2) NANO plant coming up
3) Infrastructure upgradation in process
4) Good connectivity due to S G Highway and SP Ring Road
5) Good land availability
6) DMIC investment region
7) Low land prices (Rs. 650/sq.ft)
Some of the reputed developers active in this region include Pacifica Sahara, Savvy and
Safal. Residential units are primarily villas, selling at rates between Rs2,600-3,000/sq.ft.
Prahlad Nagar is another good area to consider. It is surrounded by premium areas, has a
high income population and the prices are still relatively low. It is also close to the new
business district on SG Highway and has good connectivity to the core city. Rates range
between Rs. 2300-3000/sq.ft
One should also mention the Sabarmati-Gandhinagar highway, which is close to the airport
and Gandhinagar as well as the upcoming GIFT city and Ecopolis, has good connectivity and
infrastructure and will soon see many institute campuses like NID, IIT and DAIICT coming up.

JAIPUR
Jaipur has witnessed some of the best-planned and balanced real estate developments in
commercial, retail and residential space.
While affected by the current slowdown, Jaipur still manages to sail through on account of its
growing population and sound purchasing power.
While residential projects within central locations of the city have witnessed high absorption,
the city seems to be expanding towards two new prime destinations for residential
development.
Two key destinations with the highest investment potential in residential real estate include
Ajmer Road and Jagatpura (both suburban locations).
Ajmer Road (NH-8)
Drivers
1) Availability of land parcels to support large expansive townships as against low land
availability within city limits
2) Low land prices
3) Proximity to Mahindra World City; Mahindra’s SEZ being developed close to Ajmer
Road having campus developments by Wipro, Infosys, Deutche Bank, among others;
this makes the region a potential business hub of the future
4) Rapid connectivity to neighboring towns of Rajasthan as well as the prime city of
Jaipur with NH-8
5) Presence of numerous townships being developed by established developers like
Vatika, Omaxe, Ansal among others provide multiple options for sound investment
Rates - Rs2,500-3,000/sq.ft.
Jagatpura
Drivers
1) Proximity to South Jaipur, the hub of upcoming institutional, commercial and retail
developments. The location is also close to the new airport coming up, which
provides good connectivity
2) Availability of land parcels to support large expansive townships as against low land
availability within city limits
3) Low land price points and entry costs attracting good investor interest
4) Rapid residential development accruing to large number of townships and group
housing projects and townships in and around the area
5) An upcoming destination as a residential hub, with a large concentration of
government housing projects as well; a new expansion zone for the city population
Rates - Rs 2,000-2,500/sq.ft.

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Sabeer Bhatia's Nano dream

Looks like this one is turning out to be a nightmare for him. I particularly like the line where he says "Each acre is more expensive then the previous". Welcome to capitalism Mr Bhatia. The San Francisco chronicle has a more detailed report then all the stupid Indian tabloids which masquerade as news-papers.

S.F. tech mogul wants to build city in India How to build a city sustainably

Sabeer Bhatia plans a 17.6-square-mile city of world-clas... Nano City, as shown in this architectural rendering, is e...

(08-10) 19:14 PDT --

A few days after his 29th birthday, Sabeer Bhatia sold Hotmail, the company he co-founded, to Microsoft for $400 million. Selling the Web-based e-mail service bought him a swank Pacific Heights condo with a panoramic view, buzz as the next hot Silicon Valley player, boldfaced name recognition in the Indian press - and eventually, one incredibly unchallenging year off playing golf and jet-set partying.

He became haunted by the question common to those who find wild success at a preternaturally young age: Now what?

Granted, over the past decade, Bhatia has had his hand in several technology startups and post-startups both here and in India, some mildly successful, some not. But his latest project is one that comes from the heart: He is trying to develop an Indian version of Silicon Valley, a sustainable city spread over 11,000 acres in northern India that he envisions will be home to 1 million residents employed largely by world-class universities and A-list companies that act as the country's idea generators. He calls it Nano City.

One problem: Until recently, Bhatia knew nothing about developing cities. The 39-year-old San Francisco resident is an electrical engineer by training and profession. And with a ton of cash in the bank, the last challenge he thought he would face is the hassle of navigating India's cash-under-the-table democracy, while preaching sustainable development. India, with a population of 1.12 billion, is beset with energy and infrastructure problems; most citizens don't have access to safe drinking water.
Major developer

But now - after spending $4 million of his own money and learning some hard lessons about international development - Bhatia's project could be on the brink of starting. This summer, he partnered with a major Indian developer that pledged funds to help purchase the land needed in the northern Indian state of Haryana to break ground on Nano City.

But major hurdles remain, and the project could easily fail.

Bhatia wasn't thinking about urban development when the idea for Nano City first surfaced in March 2006. He was watching a cricket match in India with a government official from Punjab, pitching a plan to bring premier U.S. educational departments in science and technology to Indian universities.

"The education over there, until the undergrad level, is pretty good," said Bhatia, who attended Indian schools before receiving an undergraduate scholarship to the California Institute of Technology and earning a master's degree in electrical engineering from Stanford University. "But when it comes to grad school, it just falls off the cliff in terms of quality."

The official asked what he needed to get the project done. Bhatia casually told the official that he could lure A-list U.S. universities to the area if the government provided land and financial incentives.

A few days later, Bhatia returned to the United States, having agreed to write a proposal. But he considered the conversation the kind of casual banter one has at a sporting event, something not to be taken too seriously - until Naval Bhatia, Sabeer's cousin and an attorney, mentioned the conversation to a friend, an official in nearby Haryana.

The Haryana official told Naval Bhatia, "Why should Punjab get him? We want to offer him even more."

"It's a common occurrence, especially in developing countries," said Seshan Rammohan, executive director of the Silicon Valley chapter of the Indus Entrepreneurs, an international organization of Indian and other South Asian entrepreneurs. "When someone gets some notoriety, as Sabeer did after selling Hotmail, they get bombarded with offers.

"If someone like Sabeer is attached to a project, then the thinking is: Other people will want to invest," Rammohan said.

Within days, Bhatia returned to India to speak with the Haryana officials. They discussed an 11,000-acre spot about 15 miles east of Chandigarh, Bhatia's birthplace and one of the few planned cities in India.
Not another Bangalore

The idea of an Indian Silicon Valley began to resonate with Bhatia. He didn't want to create another Bangalore, the traffic-tangled, booming thicket of a city where he had grown up, best known for its outsourcing operations for American companies. He wanted a place where Indian-germinated ideas could flourish and where young Indian students could receive a first-rate education.

In pursuing the Nano City project, Bhatia found the answer to the question, "Now what?" If it succeeded, he could make millions of dollars more. "But my reason for doing this is to leave behind a legacy," Bhatia said.

"How many times in our lives do we get a chance to build a city?" he said. "How many times do we get an opportunity to fix some of the problems that affect 1.1 billion people - that's one-sixth of humanity."

Bhatia is aware that planned cities often fail. To avoid pitfalls, he intends to involve "the right partners, do proper design, provide basic things that you and I take for granted here."
Atypical entrepreneur

Before calling in the bulldozers and cranes, Bhatia boned up on development. He ordered dozens of books on Amazon.com and picked the brains of Stanford professors, real estate developers, even the guy who renovated his apartment.

"Why not?" Bhatia said. "He was a guy in the construction business."

That summer, his assistant set up a meeting with several UC Berkeley professors. The professors had met Bhatia's type before.

"A lot of these rich entrepreneurs come to us, thinking they have all the answers," said Nezar AlSayyad, a professor of architecture, city planning and urban design at UC Berkeley who has been involved in projects around the world. "I expected him to be like that."

AlSayyad grilled Bhatia during their first meeting, asking for specifics and trying to ferret out his motivations. The professor silently shuddered when Bhatia mentioned he liked Santana Row, the San Jose development that is one of the few spots in Silicon Valley that tries to create a public square with a mix of retail and housing. AlSayyad thinks it is part of suburban sprawl.

Nonetheless, AlSayyad came away impressed with Bhatia, and for one simple reason. "He listened. And he asked questions."
Social, financial impact

In early 2007, Bhatia flew nearly two dozen students and faculty to the proposed site in India, where for nine days they met with local officials and residents, and studied the topography of the site. Over the summer, the group explored green ideas, such as ensuring that a public park was within a five-minute walk of any point in the city and how best to create efficient mass transit.

"Sabeer really pushed these ideas of sustainability," said Stefan Al, lead designer of the project. "A lot of these ideas have been tried before, but not all together in one place."

In addition to contributing design ideas, the students challenged Bhatia with questions about Nano City's social and financial impact. They posed one particularly challenging question in the developing world: What will happen to the people who live in the roughly two dozen villages where Nano City would be built?

Many belong to families who have lived on small plots for more than 100 years. In May, 71-year-old Karam Singh, a farmer who owns 25 acres near the proposed project site, told the Indian Express, "Even my great grandfather was born here. How can I sell this land?"

Land prices in the area have quadrupled since the project was announced, and currently stand at about $50,000 an acre. Rafiq Dossani, senior research scholar at the Shorenstein Asia-Pacific Research Center at Stanford University, believes land acquisition from villagers will pose the biggest problem.

"The state leaves it to the businessperson to negotiate his way through the thicket of corruption and lack of information that typically surrounds land records in rural areas," Dossani said. "A piece of agricultural land will often have multiple claimants, indebtedness and prior claims over the generations."
Mt. Everest challenges

Last fall, Bhatia began purchasing the land, a few acres at a time. After acquiring about 50 acres, he found that "every subsequent acre of land we were buying was more expensive than the previous one," he said. In November, he stopped the process and hired four attorneys to research who owns every plot.

Meanwhile, he was having trouble raising money. Nobody wanted to invest. The name "Sabeer Bhatia" opened some doors, but he was repeatedly told he lacked sufficient real estate development experience.

Last month, Parsvnath Developers Ltd., an Indian development firm with experience in land acquisition, agreed to pick up a 38 percent equity stake in the project. The move, Bhatia said, will enable him to break ground on Nano City early next year and develop its first 1,000 acres.

Bhatia plans to offer free university education to the children of landowners. "We think that over 95 percent of all the farmers actually want to sell," he said. "We think this will put pressure on that remaining 5 percent of people who are maybe greedy for more money."

If they don't sell, Bhatia said, "We are ready to walk away. ... You can't build a city around a farm."

If he does succeed, then the hard part comes: developing Nano City in an environmentally sustainable way in a rapidly growing country. "This is not Sabeer climbing Mount Everest," said entrepreneur group leader Rammohan. "It's Sabeer climbing Mount Everest with the city of San Francisco on his back."
India facts

Although India occupies only 2.4 percent of the world's land area, it supports over 15 percent of the world's population. India's median age is 25, one of the youngest among large economies. About 70 percent of the population lives in more than 550,000 villages, and the remainder in more than 200 towns and cities.

Population: 1.12 billion, 27.8 percent living in cities; annual growth rate: 1.3 percent.

Workforce: 450 million; agriculture - 60 percent; service and government - 22 percent; industry and commerce - 18 percent.

Literacy: 61 percent.

Gross Domestic Product (2007): $1 trillion.

Real growth rate (2006-2007): 9.4 percent.

Per-capita GDP (2006-2007): $909.

Trade: Exports (2006-2007): $127 billion, $22 billion of which are software exports.

Major trade partners: United States, China, EU, Russia, Japan.

Source: U.S. Dept. of State, Bureau of South and Central Asian Affairs (June 2008)
Nano City's green features

Sabeer Bhatia intends to incorporate green and sustainable building practices into Nano City's design - a rarity in India, where availability of power and water is inconsistent. Stefan Al, the Berkeley-based lead designer of the first phase of the Nano City, is planning the following features:

-- Fifty percent park and open green space, with only local, self-sustainable vegetation planted in landscaped areas. A park will be less than a five-minute walk from any starting point in the city.

-- Shaded walkways, arcades and tree-lined boulevards to encourage walking.

-- A rapid bus-transport system, where buses will travel in dedicated lanes.

-- Living machines, such as surface-water treatment plants that convert wastewater into chemical and odor-free drinking water by using algae, plants, bacteria and micro-organisms.

-- Power generated by windmills and photovoltaic technologies.

-- Green roofs that capture rainwater.

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Sabeer Bhatia's new flop investment

Its been 10 years since Mr Bhatia sold his company to Microsoft but ever since that he's been trying valiantly to build the next sucess story. Unfortunately this new venture like few of his others is a dud from day one. Trying to create a semiconductor fabrication enviroment is easier said then done. Skilled manpower, water, electricty and partnerships with bechtel or similar likes are needed before the groundbreaking crememony. Unfortunately in India lured by the hype of the Sensex and PE firms these morons think they can sucker local Indians into buying apartments in an SEZ mirage. As with other mega deals I expect this one to fail in times to come. Pasvanath has nothing to claim in expetise apart from oiling policiticans and babu's. If this was a sunrise industry Ratan Tata, Premji or the Ambani's would be right at the forefront with solid business plans, not with real estate development hype companies. The ecconomic times press release as usual with no analysis is below


Parsvnath Developers on Wednesday joined hands with Sabeer Bhatia, co-founder of Hotmail, to develop a 11,138 acres knowledge city near Chandigarh, where the company will initially invest Rs 400 crore.

The project, Parsvnath Nano City, valued at Rs 50,000 crore (12 billion dollars), is promoted by the former Hotmail innovator Sabeer Bhatia, whose company holds the majority stake of 52 per cent. The Haryana government holds 10 per cent stake.

"We have already made an investment of Rs 41.5 crore for acquiring 38 per cent stake and the remaining will be invested as debt in future," Parsvnath Developers Chairman Pradeep Jain told reporters here.

To be developed in Panchkula, the project would be completed in two phases over the next 10 years, where the company would develop 5,000 acres in the first phase.

"We have already acquired about 1,500 acres and we are talking to various land owners for acquiring the rest," Jain said.

The realty firm would invest Rs 400 crore initially in the form of equity and debt in the project, he said.

All the stake holders of the project has formed a new entity, Nano City Haryana Ltd, which would raise funds from the capital market within 18-24 month for completing the project.

"We plan to take the company public in 18-24 months, but we have not finalised how much stake will be diluted or how much money we are going to raise," Jain said, adding the company would also dilute some stake to private equity investors.

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