HYDERABAD OFFICE REPORT 3Q11

ECONOMY India economy grew at 7.7% during the second quarter of the year which is noted to be the lowest in last six quarters. High inflation and steady increase in interest rates hampered the growth in the domestic market. Although the manufacturing sector grew 7.2% over the year in the second quarter, higher than the previous quarters growth rate, construction sector saw a meager 1.2% yearly increase in the second quarter compared to last quarters growth of 8.2% on account of slower construction activity with increase in interest rates. OVERVIEW The SEZ developments continued to gather attention of the occupiers who wish to avail the fiscal benefits according to the 2012 milestone. The total demand was recorded at approximately 857,900 sf, which was 14% lower than the previous quarter. The suburban location continued to be the most active micro market where the SEZ developments were seen to register healthy pre commitments and were estimated to be 242,000 sf. Though IT/ITeS was the key demand driver in the region, pharmaceutical and manufacturing companies accounted for nearly 36% which shows the rising interest of the city where others are also looking to have their presence. The overall weak economic sentiments were reflected in the reduced demand and enquiries for office spaces in Hyderabad. Several delayed projects that were slated to be delivered in the previous quarter were completed which lead to an increase in supply by nearly 53%. The trend for smaller sized developments in the prime office locations continued but was unable to attract significant occupiers, which resulted in raising the vacancy levels. The overall vacancy rose to 14% and has put pressure on rentals leading to a moderate correction in several micro markets. Rentals have witnessed a moderate correction as a result of small variations in demand and large scale availability of second generation commercial space across the city. The overall vacancy rate has slightly increased (from 13% to 14%) on the account of reasonable supply in the Prime Suburban, Off CBD micro markets and continued availability of second generation properties in certain key locations across the city. OUTLOOK The demand for SEZ spaces is likely to continue in the coming quarters and is expected to aid the demand for commercial spaces. However, the planned supply of nearly 1.2 msf in the next two quarters is likely to increase the vacancy, leading to further correction in rentals in the short term. Developers for Non SEZ developments may defer the completion of their projects in anticipation of revival in demand. Interest generated by the engineering and pharmaceutical companies may continue in the next quarter.
1 HYDERABAD OFFICE REPORT 3Q11

BEAT ON THE STREET Moderate demand and steady supply has led to an increase in the vacancy level

ECONOMIC INDICATORS 2009 GDP Growth CPI Growth Industrial Production WPI Growth 7.4% 12.4% 10.5% 3.8% 2010 8.0% 9.6% 9.8% 8.2% 2011 8.5% 10.5% 8.1% 9.6%

Source: Consensus Economics, Media releases

MARKET FORECAST VACANCY: An infusion of a moderate

supply along with the existing second generation space in the next two quarters is likely to increase the vacancy levels.

SUPPLY: Approximately 1.25 to 1.5

million square feet of fresh supply is expected during the next 6 months.

RENTAL RATES: Rental rates across

the Suburban and Prime Suburban regions are likely to witness a downward pressure due to a slowdown in the transactions.

GRADE A CBD RENTALS VS. OVERALL VACANCY RATES

HYDERABAD OFFICE REPORT 3Q11

MARKET / SUBMARKET STATISTICS

MARKET/ SUBMARKET

OVERALL VACANCY RATE

CONSTRUCTION COMPLETIONS** UNDER CONSTRUCTION** YTD 3Q 11 COMPLETIONS

OVERALL ABSORPTION**

DIRECT WTD. AVG. GRADE A GROSS RENTAL RATE 2Q11 INR/ Sq Ft/Mth INR/ Sq Ft/Mth 3Q11 USD/ Sq Ft/Yr Euro/ Sq Mts/Yr

3Q 11

CBD Off CBD Suburban Prime Suburban Peripheral I Peripheral II

23% 17% 10% 28% 73% 76%

0.44 0.21 1.80 0.30 0.12 0.00

0.43 0.14 2.10 0.53 0.00 0.62

0.14 0.10 0.50 0.27 0.00 0.00

0.03 0.01 0.57 0.00 0.00 0.00

47 46 38 44 20 28

46 45 37 43 20 28

11 11 9 10 5 7

88 86 69 83 38 54

Conversion Rate: US$1= INR 49.76 and Euro 1 = INR 67.23 *Warm Shell includes core facility, high side air conditioning and 100% power back up ** in Million sq.ft. Due to limited-availability of warm shell properties in CBD & Off-CBD, regions, fit-out and bare shell rentals have been adjusted to reflect warm shell rents. Notes to Micro Markets: CBD: Banjara Hills Road No. 1, 2, 10 & 12 Off CBD: Begumpet, Somajiguda, Raj Bhavan Road, S.P Road Suburban: Madhapur, Gachibowli- Nanakramguda, Manikonda & Raidurg Prime Suburban: Rest of Banjara Hills, Jubilee Hills Peripheral I: Pocharam and Shamshabad Peripheral II: Uppal

MARKET HIGHLIGHTS
SIGNIFICANT 3Q11 NEW LEASE TRANSACTIONS
BUILDING SUBM ARKET TENANT SQUARE FEET BLDG CLASS

KRC MindSpace (Building - 20 ) KRC MindSpace (Building - 20) DLF

BUILDING

Madhapur Madhapur Gachibowli

SUBM ARKET

Yash Technologies Facebook Parexel

M AJOR TENANT

122,000 122,000 122,000

SQUARE FEET

A A A
COM PLETION DATE

SIGNIFICANT 3Q11 CONSTRUCTION COMPLETIONS

Ramky Selenium
BUILDING

Gachibowli
SUBM ARKET

NA
M AJOR TENANT

452,045
SQUARE FEET

3Q 11
COM PLETION DATE

SIGNIFICANT PROJECTS UNDER CONSTRUCTION/ RENOVATION

Ramky Towers KRC Mindspace (Building - 20) Gachibowli Madhapur N/ A CTS 150,000 890,000 4Q 11 1Q 12

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*Market terms & definitions based on BOMA and NAIOP standards. This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete. Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2011 Cushman & Wakefield, Inc. All rights reserved. Please consider your environmental responsibility before printing this report.

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HYDERABAD OFFICE REPORT 3Q11