Chennai Realty

Last week saw the RBI increasing the base rate for the 10th time since March 2010 to 7.5 percent. The rationale behind this move was to control high inflation which stood at 8.37 percent. There seems to be a short term myopic view trying to control the expense side of things rather than addressing production and supply side issues. Banks are likely to increase their lending rates for their home, auto and personal loans correspondingly which would result in the customer shelving more out of their pockets in the next few months. Housing prices may rise by 5-10 percent in the next 3-6 months as the cost of funds for developers is expected to increase. This will also slow down the demand for housing as customers are likely to postpone their purchases. In this weeks newsletter, we take a look at the state of housing affairs in Tamil Nadu with the state being ranked second in the country for shortage of housing. While this could be interpreted as an opportunity for the real estate promoters, it must be kept in mind that most of the demand is for low budget housing within a budget of Rs.20-25 lakhs. The new Tamil Nadu governments willingness to focus on the core area of infrastructure is a welcome change as compared to their previous two terms. Large scale investments would serve to generate jobs and create wealth resulting in overall growth of the state and its citizens. Take a look at our coverage on the status of PE investment in India across various sectors in the first half of the year followed by our regular round up of interesting news from the real estate sector. Keep an eye for our forthcoming edition of Chennai Realty, wherein we plan to cover key topics like Property Joint Ventures, Service Tax, Vaasthu for kitchen, Citys Top Project update and City real estate pricing sum up. Do give us your feedback and suggestions which will help us improve our standards both in terms of quality and content. Happy Reading! Kishore Kumar Editor Chennai Realty.biz

June 2011 www.chennairealty.biz Vol. 1 : Issue 7

weekly Newsletter on Real Estate in Chennai

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TN ranks second in housing shortage

having the highest number of homeless, about 7.3% of the total homeless population in the country. Chennai has 75% of them, according to a study conducted by the NGO, Indian Community Welfare in places Organisation. like Parrys, As The numbers are higher Royapuram, Basin Bridge 2.7 lakh houses for the EWS. Government needs to look at public-private partnership for fulfilling this demand. The government should unlock its land parcels for housing development and engage private builders, said T Chitty Babu, president, Tamil Nadu chapter of the CREDAI.

India Housing Shortage (in million units) All India Maharashtra Tamil Nadu Uttar Pradesh West Bengal Gujarat Karnataka Madhya Delhi Rajasthan Kerala 24.71 3.72 2.82 2.38 2.04 1.66 1.63 1.29 1.13 1 0.76

found. About 11% of total housing shortage in the country is in Tamil Nadu, which is only a notch below Maharashtra when it comes to low housing stock. The shortage is expected to touch 29.53 million by 2012 and to fulfill this demand the government needs to spend Rs 3,61,318 crore, about 39% of Indias estimated total tax receipts for the current financial year. Tamil Nadu also has the dubious distinction of

and Wall Tax Road.

amil Nadu is among the worst states when it comes to housing, a study by the Union housing ministry has

per the housing ministrys figures, about 88.14% (21.78 million) of the housing demand is among the economically weaker sections (EWS), 11.7% (28.89 million) among the low income groups and the balance 0.16% (0.4 million) among the middle and high income groups. In Tamil Nadu the state government has set an agenda of providing pucca houses to all in the next five years. But this is hardly anything compared to the total housing demand in cities here. Chennai alone needs about

Andhra Pradesh 1.95

INSIDE
PE Investment Tracker Wealth Monitor TN to Attract Huge Investments Real Estate News New Project Launch City Price Index

New Tamil Nadu Government to focus on infrastructure

Chief Ministership of Ms. J Jayalalithaa has urged the Central Governments support to implement several urban and road sector infrastructure projects in Tamil Nadu. Foremost among them is the implementation of an ambitious monorail project at an investment of Rs 16,650-crore. In the first phase, the monorail will cover 111 km and is to be completed in the next two years at a rough cost Rs 150 crore/km. It is a capital intensive but environment friendly project, which the Centre could support under the National Urban Transport Policy. This will be extended in stages to 300 km and integrated with the existing transportation systems.

iving a thrust to investment in the core infrastructure sector, the new Tamil Nadu Government under the

Ms Jayalalithaa has also requested that the Centre expedite the process of getting Japan International Cooperation Agency assistance for the Rs 1,075-crore second stage of the Chennai Outer Ring Road project. The first phase of Rs 1,081 crore is now under implementation. To strengthen urban infrastructure, the State needs over Rs 20,000 crore over the next five years to cover water supply, drainage, waste disposal and road infrastructure. The State Government estimates that Rs 9,500 crore will be needed to revamp and augment waste water supply in the urban local bodies; Rs 5,700 crore to renovate about 18,000 km of the 39,500 km urban roads; Rs 3,000 crore for solid waste management with scientific landfills; Rs 1,100 crore for sewer networks; and Rs 700 crore for new Urban Health Centres.

Chennai Realty

Weekly Wealth Monitor

Market Update
140 120 100 80 60 40 20 0 -20 -40 Last week This week 125.58 109

Crude (per Brl in US$)

Events Calendar
Composites India Expo 2011
Crude (per Brl in US$)

Date : 17 - 19 June 2011 Chennai Trade Centre, Chennai

Up / Down -16.58

Gold (10 gms ingms in Rs.) Gold (10 Rs.)

25000 20000
RETAIL INFoTECH bANKING
-41.21 16.7 15.2 27.54

25000 22140 20000 15000 10000 5000 0

21870 22533

June 23-26, 2011 Chennai Trade Centre, Chennai

Interior Exterior Expo 2011

22600

15000 10000
Last Year Last week

Gold (10 gms in Rs.) Rs.) Gold (10 gms in

5000 0

7 - 9 July 2011 Chennai Trade Center, Chennai

Luxury Homes 2011

REALTy

67

-15.73 CoNSTRuCTIoN -60 -40 -20 0 20 40

Last week -5000

This week Last week

Up -270 / Down Up / Down This week

T amil Nadu set to lure Rs.1,00,000 Cr Investment

Central panel clears mega petrochemical hub in TN
n inter-ministerial group headed by cabinet secretary KM Chandrasekhar has cleared a Tamil Nadu government proposal to set up a petroleum, chemicals and petrochemicals investment region (PCPIR) to attract Rs 1,00,000 crore in investment. The centre has directed the state government to come up with phased investment on support infrastructure, including rail, air and sea connectivity shortly. Tamil Nadu will set up the region over 25,683 hectares across Cuddalore and Nagapattinam districts in the state. Of this, 40 per cent of the land would be for processing and the remaining would be earmarked for non-processing activities, said a senior government official privy to the development. Nagarjuna Oil Corporation (NOCL) is the anchor investor for the region. NOCL is a joint venture between Tamil Nadu Industrial Development Corporation (TIDCO) and Nagarjuna Fertilisers and Chemicals (NFCL). The joint venture is setting up a refinery project in the region with a capacity of six million tonnes a year. NOCL has invested Rs 4,500 crore and has projected an additional investment

of Rs 5,000 crore in the region by February 2012. It has plans to invest Rs 12,500 crore in expanding the refinery project to 15 million tonnes by 2015. The second anchor investor in the region will be Chennai Petroleum Corporation (CPCL), which plans to establish an integrated 15 million tonnes per annum refinery and petrochemical complex. The oil ministry pointed out at the high-powered committee meeting that CPCL has been offered land by TIDCO in Ramanathapuram, which falls outside the proposed PCPIR. The centre has agreed to provide budgetary support of Rs 4,285 crore for strengthening NH45A, up-grading state highways and doubling and electrification of the Viluppuram-Mayiladuthurai railway line. In addition, the region will be eligible to receive Rs 660 crore through viability gap funding for a desalination and common effluent treatment plant. Meanwhile, the government has also decided to allow existing special economic zones in the region to be governed by the SEZs Act. In effect, these projects will continue to get fiscal incentives and tax concessions under the act. This is expected to jump to about 36.9 million sq ft this year. Rentals have started to inch up in a few locations. Consultancy firm Cushman & Wakefield says that in the office hub of Gurgaon, for instance, rentals have grown by 5-10 percent. In Bangalore, it is up 10-15 percent, Chennai by 4-9 percent, Kolkata by 10-19 percent and Mumbai by 10-13 percent, depending on the location.

I Infrastructure tops PE chart in May

deals; around 180% increase over $408 million across 17 deals in the same period last year.
in the first topped the investment chart, accounting topped the investment chart, accounting for $676.4 million. The power) sectorfive months last year. The infrastructure (including power) sectorfor 59%, with 12 deals worth 59%, with 12 deals worth $676.4 million. The banking, financial services and insurance (BFSI) sector grabbed the second slot with five deals worth The charts cover PE activity for the last month, and till date this year. PE activity till date (year-on-year)
The first five months of 2011 have attracted investments worth $5.42 billion, compared with $3.53 billion in the same period last year.

Infrastructure tops PE chart in May

n another month that saw more than $1 billion (around R4,500 crore) in private equity/venture capital (PE/VC) investments, May accounted for $1.14 billion of investments in Indian companies across 39

Indian worth$1.14 billion of investments in from $29.1 miliion across 39million.around 180%far attracted investments worth $5.42 The infrastructure year. $5.42 billion, comparedcompanies to $33.6 deals; 2011the so increase over $408 million across 17 deals in the same period$3.53 (including with $3.53 billion in has first five months last year. billion, compared with last billion The average deal size increased

The average deal size increased from $29.1 millioninto $33.6 million. 2011 hasinvestments, May accounted for In another month that saw more than $1 billion (around R4,500 crore) private equity/venture capital (PE/VC) so far attracted investments

banking, financial servicesInformation technology/IT enabled services (IT/ITeS) aggregated investments slot with five deals worth $168.5 $168.5 million. and insurance (BFSI) sector grabbed the second worth $101.2 million.
Mint, in association with Four-S Services, million. Information technology/IT enabled services presents a snapshot of the PE landscape in India. worth $101.2 million. (IT/ITeS) aggregated investments

164 130

Graphics by Ahmed Raza Khan/Mint

Month-wise PE activity
May witnessed PE investments worth $1.14 billion in Indian companies across 39 deals.

No. of deals PE investments ($ mn)

3,531.6
Jan-May 2010

5,417.1
Jan-May 2011

No. of deals

28

24

37

36

39

1,111.1 Value
($ mn)

583.8

1,524.2

1,055.2

1,142.8

January 2011

February

March

April

May

Indias first Urban Affairs University set up in Bangalore

The Indian Institute of Human Settlements (IIHS) exclusively dedicated to urban and civic affairs will be set up in Bangalore at a cost of Rs 250 crore. According to Mr. Aromar Revi, a development consultant, researcher and academic, The main campus will come up at Kengeri and will occupy 58 acres with a built-up area of roughly 0.5 million square feet. Work on planning the first phase of the campus has started. The campus is expected to set global standards for efficient, economic and sustainable design, operations and maintenance. It will aggregate and demonstrate the talents of Indias best designers, construction agencies and artisans. IIHS is the creation of a group of leading entrepreneurs, intellectuals and professionals including Nandan Nilekani, Shirish Patel, Rakesh Mohan, Deepak Parekh, Vijay Kelkar, Jamshyd Godrej, Deepak Satwalekar, Xerxes Desai, Nasser Munjee, Renana Jhabvala, Kishore Mariwala, Rahul Mehrotra, Pradeep Saxena and Revi.

Sector-wise investment
The infrastructure (including power) sector topped the chart in May, accounting for 59% of investments. The BFSI and IT/ITeS sectors took the second and third spots, respectively.

Sector-wise allocation
The infrastructure sector accounted for 12 deals worth $676.4 million in May, with four of the top five transactions being in the sector. Investment ($ mn) No. of deals

The top five transactions accounted for around 59% of total PE investments in May. In the largest deal, GMR Airports raised $200 million from Standard Chartered PE, Jacob Ballas and Old Lane Capital.
Investor(s) Target Sector Stage

Major investors

Stake (%)

Amount ($ mn)

4.2% Real estate

3.6% Manufacturing

(% share)

Infrastructure 676.4 BFSI 168.5 IT/ITeS 101.2 Agriculture and food 57.3 Real estate 47.9 Manufacturing 41.5 Others 50.0

12 5 8 4 2 2 6

Standard Chartered PE, Jacob Ballas and Old Lane Capital

GMR Airports

na

200

Airports Late

Others

4.4%

Morgan Stanley Infrastructure Partners

Road projects joint venture with Isolux Corsn Concesiones

50

200

Roads SPV*

5% 8.9%

Food

Warburg Pincus
Diligent Power

na

150

Chennai Silks enters construction sector

Chennai-based retail textiles major, The Chennai Silks, along with its sister company, SCM group has made a foray into construction sector by forming a new venture, Teemage Precast, and setting up a factory to manufacture precast concrete products. The plant has come up at Kangeyam near Erode and equipment has been imported from Germany and Belgium. Commercial production will begin from June, according to N. K. Nandagopal, Managing Director, Teemage Precast.

IT/ITeS

Power Growth

Infrastructure

59.2%

14.7%
BFSI

Mount Kellet Capital, Wolfensohn Capital Partners, Customers Bancorp, Multiples

Dhanlaxmi Bank

19.6

64

BFSI Late

IFCI Venture Capital

Gayatri Energy Ventures

na
na: not available

57

Power Growth
*SPV: Special purpose vehicle

Fund-raising
Two India-dedicated funds were raised in May. Renuka Ramnath-led Multiples closed its fund at $375 million, adding $125 million to the first close of $250 million in 2010.
($ mn)

PE vs other modes of funding

PE outperformed the QIP and IPO markets in May. Five public issues fetched $1.06 billion. There were no QIP issues.
No. of events

Liquidity events
May saw four PE exits. Strategic exits (mergers and acquisitions, buy-back and secondary sales to other PE firms) accounted for 97.4% of total exits.
No. of events % share

($ mn)

PE
1,142.8 1,061.7

IPOs
5

IPO exits
nil

Multiples Alternate Asset Management

125
39

Total 2,204.5
($ mn)

97.4% (529.2)

Strategic sale
2

Avendus PE

Commercial rentals inching up

According to real estate consultancy firm Jones Lang LaSalle, the net absorption of space in 2010 was 30.5 million sq ft, up 35 percent from 19.6 million sq ft in 2009.

50

2.6% (14)
QIP: Qualified institutional placement IPO: Initial public offering

Open market
2

2011 has so far attracted investments worth $5.42 billion, compared with $3.53 billion in the first five months last year

Chennai Realty
SILENT VALLEy by VIJAy SHANTHI buILDERS
The company has chosen British architecture, which requires lot of manual skills to build the residential units. While this architecture helps in saving electricity consumption by at least 20 per cent, we will use high-end Jaguar fittings in bathrooms, besides marble floorings to make it truly high-end, said Suresh Jain, Managing Director, Jain Housing. The project also offers a clubhouse, a gym, party hall and a swimming pool, besides childrens play area. It will also have a mini-theatre, yoga hall and a place for indoor games. Each block will have a stilt plus two floors and a total of 19 blocks are being developed to accommodate the residential units as well as common amenities.

ijay Shanthi Builders, one of leading Chennai-based property developers, has launched a residential project, Silent Valley featuring a mix of apartments and villas, at Tambaram, a southwestern suburb of Chennai.

Silent Valley, will come up on 27 grounds, off Mudichur Road, an emerging residential suburb close to Tambaram. It will offer 70 flats, comprising 1BHK, 2BHK and 3BHK units and 10 duplex villas. While the

LoTuS MANoR

apartments are priced at Rs 3,500 per sq ft, the villas come with a price tag of Rs 4,000 per sq ft and each villa has two car parks. Construction is underway and delivery will take place by Dec 2012.

cchuthan Builders has launched Lotus Manor, a high end apartment project at South Avenue, Thiruvanmiyur. Lotus Manor will offer sixty premium 3-BHK apartments ranging from 1585 1695 sq.ft in three blocks. The unique feature of this project is that each apartment feels like an independent house with no common walls and also Vaasthu compliant. Prices start from Rs.1.5 crore*. Amenities include power back up, indoor gym, indoor games facilities, multipurpose hall, water treatment plant and more......

Chennai Realty
residenTial
LocationS

Chennai ProPerty trends

capitaL vaLue 2 bHk ( ` / sft) budget preMiuM 17000 10000 16000 10000 14000 5500 6500 12500 4700 7000 7500 5400 4200 3200 2400 2500 rentaL vaLue 2 bHk of 1000 sft ( ` / Month ) budget 16000 10000 16000 12000 16000 7000 6500 9000 7500 8000 8000 6500 5000 7000 5000 4500 preMiuM 26000 15000 28000 18000 25000 15000 9000 18000 16000 17000 17000 15000 8000 15000 7000 6000 capitaL vaLue 1 ground of 2400 Sft ( ` Lacs ) average 250 - 350 250 - 275 500 - 600 120 - 150 220 - 280 80 - 100 90 - 110 140 - 180 80 - 100 180 - 225 180 - 225 70 - 80 55 - 60 25 to 35 12 to 15 15 to 20

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centraL Adyar Egmore R A Puram nortH Anna Nagar West Extn Kilpauk Mogappair West SoutH Adambakkam Ashok Nagar Chromepet WeSt Arumbakkam Choolaimedu Maduravoyal Porur outer Padur Sriperumbudur Singaperumal Koil CommerCial Sub MarketS CBD (Anna Salai, Nungambakkam, RK Salai, T Nagar, Egmore, Alwarpet) Grade A Grade B Off CBD (Guindy, Kiplauk, Taramani, Adyar, Anna Nagar) Grade A Grade B Suburban Business District (Velachery, Perungudi, Mount Poonamallee Road) Grade A Grade B Peripheral Business District (Perungalathur, Sholinganallur, Siruseri, Ambattur, GST Road) Grade A Grade B 35 - 40 25 - 35 30 - 40 25 - 35 35 - 45 30 - 40 40 - 50 30 - 40 50 - 65 42 - 47 55 - 65 45 - 50 70 - 90 55 - 65 70 - 100 55 - 70 average rent in May 2010 ( ` / sft per month) average rent in june 2010 ( ` / sft per month) 2700 2100 2000 6000 6500 4500 3700 5000 7500 3800 7500 8000 4000 8000 7000 9000

Chennai Realty
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ConsTruCTion maTerial PriCe index *

coMModity CEMENT STEEL STEEL STEEL STEEL STEEL STEEL BRICKS RIVER SAND FLY ASH
* Courtesy : BAI, Chennai

unit MeaSure Per 50 KG BAG Non ISI 6MM / Ton TMT 8MM dia / Ton 10-25 MM dia / Ton RMS / Ton STIRRUPS / Ton VSP/SAIL 10mm dia / Ton 1 No. Cubic Feet Per Ton (Ennore) 20MM / Cubic Feet 40MM / Cubic Feet 0 2 MM / Cubic Feet GRADE 80/100 GRADE 60/7O

previouS Week Rs. 295/Rs. 40, 000/Rs. 42, 250/Rs. 41,100/Rs. 44, 500/Rs. 46, 500/Rs. 46, 800/Rs. 5.6/Rs. 50/Rs.120/Rs. 26/- to Rs. 28/Rs. 24/Rs. 20/Rs. 37,100/Rs. 37, 675/-

current Week Rs. 290/Rs. 40, 100/Rs. 42, 350/Rs. 41,000/Rs. 44, 500/Rs. 46, 500/Rs. 47, 300/Rs. 6/Rs. 55/Rs.120/Rs. 26/- to Rs. 29/Rs. 24/Rs. 22/Rs. 39,400/Rs. 38, 590/Albert Einsten

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