More Malls Vacant In Cities As Retail Pace Slows

General | By mahendra | 2009 Trackbacks (0) Comments (1)   

Even as demand seems to be returning slowly to the residential space, the retail real estate market continues to look disappointing. The average vacancy across malls in major cities shot up to 19 per cent during the second quarter (April-June) of 2009 against 10 per cent in the last quarter. It is also expected that over 50 per cent of the estimated mall supply planned for 2009 will be delayed due to slowing construction and deferment of mall space, and also withdrawal of previously-announced retail projects. According to global property consultant Cushman and Wakefield, the Delhi NCR (National Capital Region) is expected to see the maximum deferment of mall supply in this regard at 3.9 million sq ft, followed by Kolkata at 2.5 million sq ft. According to the quarterly report by the consultant, this quarter too was marked by subdued retail activity, as retailers continued to remain cautious about expansion. "Mall supply was only marginally higher by 3 per cent from the previous quarter and was recorded at 1.14 million sq. ft. Expected mall supply by the end of 2009 is reduced to 8.55 million sq.ft about 50 per cent lower than what was estimated at the beginning of the year," it said.

Surge in supply

The vacancy rates rose on the back of a slowdown in uptake of mall space and churn among existing clients. This, in turn, prompted a further correction in the mall rentals. Surge in supply but a relatively slower absorption of malls space in the NCR led to vacancy of nearly 26 per cent in the second quarter of 2009. The vacancy level in Mumbai continued at nine per cent, while Chennai - in the absence of fresh mall supply and restrained churn - witnessed mall vacancy of only one per cent.

New malls

Hyderabad witnessed the largest infusion of mall supply of about 450,000 sq. ft., followed by Bangalore, which saw an addition of 300,000 sq. ft. in fresh mall supply. Kolkata (215,000 sq. ft.) and the NCR (175,000 sq. ft.) were the other markets that saw fresh additions to mall supply. "Many upcoming malls have been deferred or in certain cases withdrawn given the rather lukewarm response from retailers," the report said. The demand for mall space across most micro-markets remained slow due to conservative approaches from retailers and overall slowdown in consumer demand, it said. Slowing retail demand in many micro-markets led to rental values either remaining stable or correcting marginally, in the range of 5-10 per cent, over the previous quarter.

According to Mr Jaideep Wahi, Director, Agency, Retail Services, Cushman & Wakefield, there could be more corrections as a result of renegotiations. "Retailers are looking at changing their business understanding with upcoming malls into a revenue share or minimum guarantee model as an alternative to the fixed rental model previously employed," Mr Wahi said.

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AP Government To Call For Fresh Bids Hyderabad Metro

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BL reported that after scrapping the INR 12,132 crore project contract awarded to the Maytas Infra led consortium, the Andhra Pradesh Government recently decided to call for fresh global bids for the Hyderabad Metro Rail Project. While the project cost would remain the same, the government has decided to increase the caution money from 0.5% of the contract to 1%, which works out to INR 120 crore. Mr Anam Ramnarayan Reddy State minister for Urban Development said "The State Government is keen to put the project on fast track and expects to make up for the lost time due to cancellation of contract awarded to Maytas Infra."

Speaking to reporters after a review of the project with Dr YS Rajasekhara Reddy CM of AP, Mr Reddy said while the project cost would remain the same, the Government expects to take this up now basing on viability gap funding mode. This is in contrast to earlier approach of awarding the contract to Maytas Infra, which had based the project on commercial exploitation of real estate. In fact, it had promised to pay back about INR 30,000 crore during the contract period and drew flak from experts. for more details visit

25 Percent Upswing In India’S Housing Market

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Activity levels are gaining traction in the near moribund housing market as a flurry of interest rate cuts, price drops and the building industry's focus on affordable housing start to lure buyers back into the market. A cross section of banks, property developers and real estate consultancies confirmed that the rise in activity levels since the start of the year had picked up momentum in the last three months, with some in the sector saying that sales were up by as much as 25-30% since April, after witnessing a growth of 10-15% during the first quarter of 2009.

India's property market started showing signs of serious trouble nearly a year ago with first the American sub-prime crisis and later the Lehman bankruptcy playing havoc. The overpriced projects by builders found few takers which was worsened with the IT industry facing a major setback.Builders were stuck with high-end apartments which had no takers. There was a severe drop in sales with people wanting to conserve resources. As a result, property prices too fell 30-45% since peak of 2007, according to industry estimates. But today the scenario is different, with builders getting a mix of mid end and affordable housing into their portfolio.

Raminder Grover, CEO-Homebay Residential, Jones Lang LaSalle Meghraj, says the revival in sales has been, conservatively speaking, to the tune of around 25% across the mid-to-high income segments, according to his company's sales records. Rohtas Goel, CMD of Delhi-based Omaxe too says there has been a 30% increase in sales thanks to factors such as a reversal in general economic sentiment after the elections and more options available in affordable housing. Statistics too would appear to bear this out. India's largest real estate developer DLF says it has sold almost 1,500 flats in various cities since April, notably some 400 flats in its mainstay market Gurgaon, 700 in Bangalore, 100 plots in Indore, 200 flats in Hyderabad and 50 in Cochin. Rival Unitech has managed to sell more than 4,000 units in the last two and a half months in the National Capital Region, Chennai and Mumbai.

Omaxe has also sold almost 500 apartments in its Omaxe Eternity project in Vrindavan. Niranjan Hiranandani, MD of Hiranandani Developers says there had been a sale of 7,000 apartments across the industry, mainly in Mumbai suburbs, over the last 60 days. Despite indications of improving demand, builders don't seem to be in a hurry to raise prices. They are conscious that demand was up due to price cuts and the affordable housing strategy. Builders are loathe to do anything that could incipient recovery. "We will not be looking at a price increase," says DLF's group executive director Rajeev Talwar. The company says it has cut prices by up to 30% from peak levels of 2007. Others point out that the demand is coming from the low-end housing segment comprising house prices under Rs 25 lakh. "Buyers have come out of the waiting mode...By December, the situation is expected to become much better," said Mr. Goel of Omaxe.

Mr. Hiranandani of Hiranandani Developers also agreed that affordable housing was selling the most right now, saying that while the overall market had improved, this particular segment was doing really well as buyers realised that the market has bottomed out. Bank officials spoke to also confirmed the trend of rising demand, and noted an increasing demand for home loans. Largely the demand is coming from the sub Rs 30-40 lakh category. Resale market is also showing high growth. However, there is lesser demand for new projects as well as in yet to be completed ones," said Kamlesh Rao, senior vice president at Kotak Mahindra Bank. "While during January-March, there was a growth of 10-15%, now it is around 15-20%." He is not alone.

Officials at UCO Bank, Axis Bank and the country's top mortgage lender HDFC too agree that an improving sentiment had helped drive housing sales. "We are witnessing an increased interest from our clients. The condition has definitely improved over the last 3-4 months," says Sujan Sinha, senior VP and head of retail assets at Axis Bank. An HDFC spokesperson felt the growth is up month on month mainly due to decline in interest rate and the growth of affordable housing. "We are confident that we will achieve the 20% annual target growth," he said.

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