Aug 13 2010 India Real Estate

8/8/2019 Aug 13 2010 India Real Estate

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Asia Pacific Equity Research09 August 2010

Realty Check IndiaResidential volumes are stabilizing, office absorptionis gaining traction

India

India Property

Saurabh KumarAC

(91-22) 6157-3590

[email protected]

Gunjan Prithyani

(91-22) 6157-3593

[email protected]

J.P. Morgan India Private Limited

See page 24 for analyst certification and important disclosures, includi ng non-US analyst d isclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm m

have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making thinvestment decision.

BSE Realty vs. Sensex

100

105110

6/9/2010 6/23/2010 7/7/2010

Sensex BSE Realty

Source: Bloomberg.

Divergent YTD performance in a beta sector source of opportunity?-YTD stock returns within the property space have been fairly disparate, atrend that is new in the relatively short history of the listed sector. Againstthe aggregate index BSE Realty that is YTD down 10%, UT is up 3.3%whereas DLF is down 15%. Mumbai developers, HDIL/IBREL, are down~25% each whereas Bangalore developers, Sobha/Puravankara are up38%/25%. Looking at this performance, while an overweight Bangalorereal estate strategy has largely worked, a buy commercial exposure(DLF/IBREL/Brigade) is as yet not yielding results. Going ahead we wouldexpect catch up in underperformance on some of these names vs. the betterperforming ones.

Key trends in the physical market:

o 2QCY10 residential volumes move up by 5% Q/Q This is quiteencouraging post a 10-15% volume decline in 1QCY10. WhileGurgaon continued to witness healthy absorption (up 13% Q/Q),volumes in Mumbai/Bangalore remained largely stable. However,anecdotal evidence suggests that volumes in Mumbai have come off by15-20% in July due to uncertainty over imposition of sales tax/VAT.Prices across key markets (with the exception of Mumbai suburbs)strengthened during the quarter driven by positive absorption trends.

o Office absorption +16% up Q/Q to 7.3 msf an encouraging trendOverall JLL expects office absorption to grow at 30% CAGR over2009-12. Recently, there has been a noticeable shift in lease enquiriestowards SEZ projects vs. IT Parks given imminent expiry of STPI tax

benefits by Mar-11; however, conversions remain low due to prevailinguncertainty on SEZ regulations in the proposed DTC. Clarity on theseregulations could provide a boost to SEZ absorption in the near term.

o Retail leasing is improving at the margin Underlying fundamentalfor retailing seems to be turning positive with most retailers reportingpositive sales trends and looking favorably at space expansion.However, supply remains a challenge. Against a total 13.9 msf ofexpected completions, demand this year is likely to be only 7 msf,which should push vacancies up to 24-25% levels.

o Please see the report for a detailed outlook and movement inphysical real estate trends across key markets and overview of

recent land deals.Indian developer valuations

Market Cap P/E P/B ROEUS$MM FY11E FY12E FY11E FY12E FY11E FY12E

DLF 11,255 25.7 19.2 1.9 1.7 8% 10%Unitech 4,487 20.8 14.3 1.8 1.6 10% 12%IBREL 1,464 22.9 11.3 0.7 0.8 3% 7%HDIL 2,091 11.8 6.4 1.2 1.0 11% 18%Puravankara 533 15.5 11.7 1.5 1.3 10% 12%Sobha 750 19.9 12.5 1.7 1.5 9% 13%Brigade 319 12.6 9.4 1.3 1.2 11% 13%AIT 532 15.7 13.0 1.1 1.1 9% 9%

Source: Bloomberg, J.P. Morgan estimates. Prices as of Aug 5, 2010


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Saurabh Kumar(91-22) [email protected]

Share price performance

Over the past month (July 6 Aug 6), the BSE Realty Index gained by 11% over the

last month outperforming Sensex by meaningful 7%. Key outperformers over themonth include Ansal Housing (+18% M/M), Unitech (+14% M/M) and Sobha

(+12% M/M). AIM listed developer UCP too was up 15% M/M after Unitech

proposed to make an offer to buy out the company from existing shareholders.

Table 1: Stock price performanceUS$MM Absolute (%) Relative (%)

Mcap 1 week 1 month 3 month 1 week 1 month 3 monthDLF 11,225 1 10 4 (0) 6 (2)Unitech 4,487 2 14 9 1 10 3HDIL 2,091 2 11 7 1 7 1Indiabulls Real Estate 1,464 3 9 5 2 5 (1)Akruti 792 2 8 1 1 3 (6)Annat Raj 750 2 - (3) 1 (4) (9)

Sobha 697 1 12 13 (0) 8 7Parsvnath 550 1 7 9 (0) 2 3Puravankara 533 6 7 12 5 3 5Mahindra Lifespaces 421 3 1 11 2 (3) 4Peninsula Land 407 (1) (7) (5) (2) (11) (11)Brigade 319 (0) 0 (4) (1) (4) (10)Orbit 293 (1) (5) (14) (2) (9) (20)Ansal Properties 227 12 12 5 11 8 (1)Ansal Housing 28 13 18 2 12 14 (4)SENSEX Index NA 1 4 6 - - -BSEREAL Index NA 1.24 11 4 0 7 (2)

AIM DevelopersTrinity 221 1 15 8 0 11 2Unitech Corporate Parks 165 1 15 (3) (0) 10 (10)Ishaan 146 (2) (1) 1 (3) (5) (6)Hirco 129 (6) (15) (20) (7) (19) (27)

Source: Bloomberg, Prices as of Aug 5, 2010.

Figure 1: BSE Realty v s. Sensex

100

102

104

106

108

110

112

114

7/7/10 7/10/10 7/13/10 7/16/10 7/19/10 7/22/10 7/25/10 7/28/10 7/31/10 8/3/10

Sensex BSE Realty

Source: Bloomberg. Prices as of August 5, 2010


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Table 2: India: Comparative Valuations

Market Cap P/E P/B ROE

US$MM FY11E FY12E FY11E FY12E FY11E FY12EDLF 11,255 25.7 19.2 1.9 1.7 8% 10%Unitech 4,487 20.8 14.3 1.8 1.6 10% 12%IBREL 1,464 22.9 11.3 0.7 0.8 3% 7%HDIL 2,091 11.8 6.4 1.2 1.0 11% 18%Puravankara 533 15.5 11.7 1.5 1.3 10% 12%Sobha 750 19.9 12.5 1.7 1.5 9% 13%Brigade 319 12.6 9.4 1.3 1.2 11% 13%AIT 532 15.7 13.0 1.1 1.1 9% 9%

Source: Company reports and J.P. Morgan estimates. Prices as of Aug 5, 2010

Sector performance

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Dec-0

7

Jan-0

8

Feb-0

8

Mar-0

8Ap

r-08

May-0

8Ju

n-08

Jul-0

8

Aug-0

8

Sep-0

8Oc

t-08

Nov-0

8

Dec-0

8

Jan-0

9

Feb-0

9

Mar-0

9Ap

r-09

May-0

9Ju

n-09

Jul-0

9

Aug-0

9

Sep-0

9Oc

t-09

Nov-0

9

Dec-0

9

Jan-1

0

Feb-1

0

Mar-1

0Ap

r-10

May-1

0Ju

n-10

Jul-1

0

Aug

Prices & volumes

continue to fall.

Lending contraction

begins.

Financing costs

start rising

Volumes pick up in the mass

residential launces (at 20-25%

discunt to peak).

Price showing signs of

stabilization and even start to

increase in Mumbai/NCR

Equity raisings start

Leverage concerns allay

Developer financing completely

halts. Incremental sales at a

standstill. Asset liability mismatch

on balance sheet worsens

Policy breather- RBI permitted real estate

loan restructuring comes as a breather.Home loan rate cuts announced.

Financing costs start

rising sharply.

Volumes keep drying up

developers adopt wait and

watch attitude

Stocks fell 50-70% even from these

levels even as they traded on discounts

to NAVs estimated at that pointSigns of revival in office market

with lease enquiries picking up.

Provisioning

norms for

commercial real

estate raised to

1% from 0.4%

RBI disallowed

resttructuring of loans

Introduction of service

tax on residential sales

- Residential volumes start to taper off

esp in Mumbai as prices increase.

- Pick up in transactions in land market

- Incidence of service tax reduced

SBI, HD

exteteaser ho

lo

Source: Bloomberg, J.P. Morgan estimates


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Affordability levels remain healthy across markets exMumbai

Residential prices in Mumbai have increased by 30-50% over the last few quarters

and are now even above their peak levels of 2007-08. This has started to constrain

the affordability thereby adversely impacting the volumes in the market.

Affordability in other cities (ex Mumbai), however, remains sound given prices in

these markets have remained flat or have witnessed marginal increase of 5-10%.

Figure 2: NCR Affordability (EMI/Monthly Income)

40%

60%

80%

100%

FY99FY

00FY

01FY

02FY

03FY

04FY

05FY

06FY

07FY

08FY

09FY

10

FY11E

Source: Residex, J.P. Morgan estimates

Figure 3: Mumbai Affordability (EMI/Monthly Income)

40%

45%50%

55%

60%

65%

70%

FY99

FY01

FY03

FY05

FY07

FY09

FY11E


Figure 4: Bangalore Affordability (EMI/Monthly Income)

30%

35%

40%

45%

50%

55%

60%

65%

70%

FY99

FY01

FY03

FY05

FY07

FY09

FY11E


Figure 5: Chennai Affordability (EMI/Monthly income)

35%

40%

45%

50%55%

60%

65%

70%

FY99

FY01

FY03

FY05

FY07

FY09

FY11E



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Land market in Mumbai is heating up

Land market in Mumbai has started to heat up with US$2B of land deals being

concluded over the last one year. Clearly, developers' appetite for land has increasedsignificantly over the last one year on the back of sharp revival in residential demand

and improved financing. Further, most of these land parcels are fairly prime in nature

either located in Western Mumbai suburbs (Andheri, Vile Parle) or Central Mumbai.

Land prices playing a catch up

Looking at the most recent transactions, the acquisition price seems to be at a

significant premium to the transactions concluded in 2HFY09. While these

transactions are not strictly comparable, the land prices seem have appreciated by

over 50% over the last one year. Further, the acquisitions made under the recent

public auctions have been done at 100% premium to the reserve price. We note that

the increase in land prices is not in sharp contrast to increase in end unit prices,

which are now back to their 2008 peak levels.

Is the pricing reasonable?

While the FSI details on these transactions are not available, it seems developers in

most cases are looking to avail higher FSI under the parking scheme. Assuming the

developers are able to avail high FSI (2.54x), most of these transactions seem to

make economic sense (for 30-40% margin) if the pricing continues to hold at current

levels in Mumbai.

How are developers going to finance it?

While most of these acquisitions require substantial initial outlay (over US$100MM),

developers seem to be confident of getting financing from non-banking sources

(banks in India do not lend for land financing) to secure these projects. Typically

land financing is done from non-banking sources at a 15-20% interest rate (bridge

loan for a year) which is then taken out by a lower cost bank loan for construction

(11-13% rate) which is secured once the approvals come through.

Oversupply risks building up?

Following the success of recent land auctions, various other government agencies

and private companies (RLDA, MMRDA, RCF, NTC) have revived their land

auction plans for the city. While NTC mill auctions in Central Mumbai concluded

recently, further supply is expected to come from other government agencies

(MMRDA/Railways) in BKC over the next few months.

Based on our estimates, upcoming land auctions coupled with recently concluded

land transactions should augment the supply in the suburbs by over 20msf (almost

15-20K units on an average). The new planned supply is 1.3x of last years

absorption levels of 16 msf. Further, all new supply will take 4-5 years to build out

and may not put a very huge immediate pressure on built up asset pricing, in our

view.


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Table 3: Key Land deals in Mumbai ov er the last one year

Buyer Date Location Area (acre) Price (Rs B) Price peracre (Rs MM)

Seller

Indiabulls Real Estate Aug-10 Upper Worli, Mumbai 8.4 acre 15.1 1,800 NTC

Indiabulls Real estate Aug-10 Upper Worli, Mumbai 2.4 acre 4.74 1,983 NTC

Sheth developer Aug-10 Andheri (E), Mumbai 18 acre 8.8 489 Borosil Glass works

Sunteck July-10 Goregaon, Munbai 6 acre 1.5 250 NA

Private developer May-10 Wadala, Mumbai 6 acre 40.5 6,750 MMRDA

Sheth developer Feb-10 Vile Parle, Mumbai 14 acre 5.9 421 GTC

Private developer Feb-10 Goregaon, Mumbai 5 acre 2.7 540 Lupin

Wadhwa developer Dec-09 LBS Marg, Mumbai 18 acre 5.7 317 Hind. Composite

Private developer Jul-09 Lower, Parel 10.3 acre 7100 689 NTC

Source: News reports (Economic Times)

Table 4: Bid pri ce vs. reserve price in auction deals co nclud ed over the last one year

Date Developer Locati on Bid Price (Rs MM) Reserve price (Rs MM) % premiu m

Aug-10 Indiabulls Real estate Upper Worli, Mumbai 15,050 750 100%

Aug-10 Indiabulls Real estate Upper Worli, Mumbai 4740 2500 90%

May-10 Private developer Wadala, Mumbai 40,500 19,800 105%

Jul-09 Private developer Finlay Mills, Lower Parel 7,100 7,080 0%

Source: News reports (Economic Times)


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Residential: Volumes remain healthy; however peak maybebehind us

2009 was a year of record volumes for a number of developers; however, the peak in

terms of residential bookings now seems to be behind us as volumes stabilize across

markets.

Overall, unit absorption across key markets (Gurgaon, NCR, Bangalore) has

increased by 6% in 2QCY10 after witnessing a 10-15% volume decline in 1Q10.

While Gurgaon continues to witness healthy volume growth with 2Q10 units sales

increasing by 13% Q/Q, volumes in Mumbai (MMR) and Bangalore remained

largely stable over the last quarter. Anecdotal evidence suggests that volumes in

Mumbai have come off by 15-20% in July due to uncertainty over imposition of

sales tax (came into effect in July) and VAT.

Noida/Greater Noida market stood out over the last quarter registering a twofold

increase in absorption run rate. This was driven by strong offtake in few biglaunches. These include Supertechs Ecovillage in Greater Noida and Jaypees

Kensington project in Noida.

Capital values took a breather in Mumbai given sharp appreciation witnessed over

the last one year. Prices in other markets (Gurgaon/Chennai/Bangalore) however

strengthened further driven by positive absorption trends.

Unsold inventory across markets has been declining over the last one year with

Mumbai/NCR reaching their two year lows over the last quarter.

Months of unsold inventory in Mumbai / NCR is at 8-10 months; while it is still high

at 12-15 months of inventory in South India markets (Chennai and Bangalore). This

in part explains the muted price increase in Bangalore/Chennai markets as yet.

Mumbai/NCR had been leading the launch activity over the last one year accounting

for over 75% of the new launches. Going ahead, new launches are expected to gain

traction in Bangalore with number of key players firming up their plans for big

launches in FY11 on the back of positive hiring/salary trends in the IT sector.

Figure 6: Pan India Residential absorp tion trend s

Source: JLL


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Table 5: Average monthly absorption trends across key markets

Units/month

YTD CY10

average CY09 average % ch

2QCY10

average 1QCY10 average % ch Q/QMMR (including Thane and Navi Mumbai) 4,758 5,121 -7% 4,816 4,700 2%Gurgaon 2,114 2,092 1% 2,242 1,985 13%Bangalore 1,752 1,723 2% 1,725 1,779 -3%Chennai 1,160 1,197 -3% 1,307 1,062 23%

Total (ex Noida/G Noida) 9,784 10,133 -3% 10,090 9,526 6%Noida/Greater Noida 8,626 2,296 276% 12,715 4,536 180%

Source: Prop Equity. Note that 2QCY10 data for Chennai is available for Apr/May only

Residential market upd ate: Key market trends as of 2Q 2010

Cushman CommentsNCR - Residential market in NCR continued to witness robust transaction activity for both mid income as well as high end

properties. This led to further strengthening of capital values especially in prime Gurgaon. Prices in Noida however remainedstable at last Q levels.

- NCR continues to witness heightened launch activity with number of mid range projects being launched in Gurgaon andNoida. Key projects launched in 2Q include Victory Valley by IREO, Tulip Purple by Tulip Infratech Pvt. Ltd., HarmonyNirvana Country by Unitech Ltd., Jaypee Kensington Boulevard, Kasa Isles, and Knights Court by Jaypee Developers.

Mumbai - Mumbai has witnessed strong pick up in demand from both investors as well as end users over the last one year. Howevewith prices surpassing the 2008 peaks, volumes have now started to moderate in the market. Further, capital values too tooa breather over the last quarter.

- A number of premium projects were launched this quarter in Mumbai including Ahuja Towers by Ahuja Builders, KumaCortue by Kumar Builders, Oberoi Exquiite by Oberoi Builders, Aqua Marine & Hill Roof by Kamla Group. Most of theseprojects were concentrated in Lower Parel, Prabhadevi, Goregaon and Bandra.

Bangalore - Bangalore market continues to witness healthy pick up in absorption. Driven by improved absorption trends, both launch aswell as construction activity has picked up meaningfully over the last quarter. Number of projects across all segments werelaunched in 2Q including Melody and Purva Atria Platina by Salarpuria Group and Purvankara, respectively.

-Capital values across markets too have started to appreciate over the last quarter. Price increase was registered primarily inready to move/near completion premium properties; however appreciation in mid income segment was marginal. As perC&W, ~ 15,000 mid segment units are likely to be added in Bangalore in 2010.

Chennai - Chennai residential market has witnessed a noticeable pick up in sales over the last 6 months. While the end users continuto dominate the overall demand, investor demand has also started to come back in peripheral locations. Capital values toohave started to increase in select locations with limited supply.

- Launch activity in the city has picked up over the last quarter given improving demand trends. Majority of the launches wereconcentrated in the affordable/mid income segment.

Source: Cushman and Wakefield


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Supply and Absorption trends

Figure 7: Gurgaon: Absorption trends and months of inventory

-

500

1,000

1,500

2,000

2,500

3,000

Sep-2

008

Dec-2

008

Mar-2

009

Jun-2

009

Sep-2

009

Dec-2

009

Mar-2

010

Jun-2

010

0

10

20

30

40

50

60

Absorption Months of inventory

Source: Prop Equity, J.P. Morgan

Figure 8: Noida/G Noida: Absorption trends and months of inventory

-

5,000

10,000

15,000

Sep-2

008

Dec-2

008

Mar-2

009

Jun-2

009

Sep-2

009

Dec-2

009

Mar-2

010

Jun-2

010

0

10

20

30

40



Figure 9: Mumbai (including Thane & Navi Mumbai): Absorption trends and months of inventory

-

2,000

4,000

6,000

8,000

10,000

Sep-2

008

Nov-2

008

Jan-2

009

Mar-2

009

May-2

009

Jul-2

009

Sep-2

009

Nov-2

009

Jan-2

010

Mar-2

010

May-2

010

0

5

10

15

20

25


Source: Prop Equity, JP Morgan

Gurgaon recorded average

monthly absorption of 2,242

units/months in 2Q10. This is

13% higher than 1Q average and

largely stable at CY09 average.

Months of unsold inventory (~6

months) continued to decline in

the market and is currently at its

two year low thereby keeping

pricing relatively strong.

Absorption pick up in

Noida/Greater Noida has been

astonishing as run rate over

Apr/May tripled from 1Q levels.

New launches by Jaypee

Infratech and local developers

have contributed a lot to this.

Key launches Supertechs

Ecovillage in Greater Noida and

Jaypees Kensington project in

Noida.

Average monthly sale run rate

(4,816 units/month) in Mumbai

(including Navi Mumbai and

Thane) in 2Q stabilized (up 2%

Q/Q) after witnessing a 13%

volume decline in 4Q10.

Months of unsold inventory

continued to decline in the

market and is currently at its two

year low of 9 months.


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Figure 10: Bangalore: Absorption trends and months of inventory

-

500

1,000

1,500

2,000

2,500

Sep-2

008

Dec-2

008

Mar-2

009

Jun-2

009

Sep-2

009

Dec-2

009

Mar-2

010

Jun-2

010

0

10

20

30

40



Figure 11: Chennai: Absorption trends and months of inventory

-

500

1,000

1,500

2,000

2,500

Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010

0

5

10

15

20

25

30

35



Average monthly sales run rate

(1,725 units) over 2QCY10 in

Bangalore were largely flat afterwitnessing 13% decline in 1Q.

Decline in 1Q was primarily on

account of seasonal weakness.

Months of unsold inventory has

been coming down over the last

one year; however it still

remains high at 15 months

thereby keeping the prices under

check.

Chennai is witnessing steady

pick up in absorption with

average sales run rate (1,307

units) over Apr/May increasing

by 23% from 1Q10 levels.

Months of unsold inventory has

been declining over the last one

year.


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Capital value trends

Table 6: NCR Capital value tr ends

Rs psf Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) % ch (Y/Y)South East (New Friends Colony, Kalindi Colony, Ishwar Nagar) 14,000 15,000 15,500 16,250 16,500 2% 18%South Central (Safdarjung Enclave, Sarvapriya Vihar, Panchsheel) 19,000 19,000 19,500 19,500 20,000 3% 5%Gurgaon 4,400 5,250 5,250 5,600 5,900 5% 34%Noida 3,750 4,350 4,350 4,450 4,450 0% 19%

Source: Cushman & Wakefield

Table 7: Mumbai capital value trends

Rs psfJun-09 Sep-09 Dec-09 Mar-10 Jun-10

% ch(Q/Q)

% ch frombottom

South Central (Altamount Rd., Malabar Hill, Napeansea etc) 38,500 38,500 40,000 41,000 44,000 7% 14%Central (Worli, Prabhadevi, Lower Parel / Parel) 18,000 19,000 20,500 21,250 22,750 7% 26%North (Bandra (W), Khar (W), Santacruz (W), Juhu) 14,500 18,000 20,000 20,000 20,000 0% 38%Far North (Andheri (W), Malad, Goregaon) 6,500 8,500 10,000 10,500 10,500 0% 62%North East (Powai) 4,500 7,100 7,450 7,500 7,500 0% 67%


Table 8: Bangalore Mid inco me capital value trends

Rs psfJun-09 Sep-09 Dec-09 Mar-10 Jun-10

% ch(Q/Q)

% ch frombottom

Central (Brunton Road, Artillery Road, Ali Askar Road,Cunningham Road) 5,800 5,500 5,500 5,750 5,900 3% 7%East (Marathalli, Whitefield, Airport Road) 2,550 2,550 2,550 2,650 2,850 8% 12%South East (Koramangala, Jakkasandra) 3,000 2,950 2,850 3,000 3,250 8% 14%Off Central (Vasanth Nagar, Richmond Town, Indiranagar) 4,800 4,400 4,400 4,600 4,750 3% 8%North West (Malleshwaram, Rajajinagar) 4,700 4,500 4,350 4,300 4,600 7% 7%


Table 9: Chennai Mid Income Residential Capital Values

Rs psf Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch(Q/Q) % ch frombottom

Rajiv Gandhi Salai 2,650 2,650 2,650 2,875 3,500 22% 32%Velachery 3,900 3,750 3,750 4,000 4,250 6% 13%Poes Garden 12,000 12,000 12,000 12,000 12,000 0% 0%T Nagar 5,250 5,250 5,250 5,750 7,750 35% 48%Nungambakkam 7,500 7,500 7,500 8,000 10,250 28% 37%Anna Nagar 6,250 6,250 6,250 6,500 6,750 4% 8%



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Figure 12: Regulatory/Policy action over the last three years

- HDFC extends the teaser home loan scheme to Mar-11Jul-10

Date Comments

May-10 - SBI has extended its offer on teaser rate schemes till end June (by 2 months). Now followed by other private sector banks

Apr-10 - Incidence on service tax on home purchase reduced to 2.5% from 3.5% earlier (proposed on the budget). Additionally for low cost housing projectsfunded under special govt initiatives (JNUURM / RYA) have been exempted from imposition of these taxes

Feb-10 -Withdrawal of teaser home loan rates by a number of banks ICICI, HDFC, BOI etc

Feb-10 -Budget proposes imposition of service tax on sales/rentals and increases input costs (excise hike).

Feb-10 -RBI disallowed restructuring of loans for real estate developers.

Oct-09 - Increase in provisioning requirements for commercial real estate loans from 0.4% to 1%

Sep 09 - RBI eases lending norms for SEZs (classified as infrastructure lending)

Jul 09 -Extension of 80IB(B) scheme by one year and interest subsidy of 1 %

Jul 09 -Norms relaxation for SEZ development

Jan-09 - ECB norms for overseas lending relaxed

Dec-08 - Home loan rates on below Rs 20L segment to be cut by about 200bps

Dec-08 - Rs40B credit line to National Housing Bank to to kick start lending in the Rs2MM category (priority sector lending)

Dec-08 - Permitted real estate loan restructuring upto Jun-09 as standard loans without requiring banks to classify these as NPAs

Nov-08 - HFCsallowed to raise short term foreign currency borrowings under the approval route

Nov-08 - Reduction in provisioning requirements on advances to the commercial real estate sector and home loans beyond Rs 2MM to 0.4%

Nov-08 - RBI reduced risk weightings on banks' exposures to commercial real estate to 100% from 150% earlier

May-08 -Lower risk weight (50%) on home loans upto 30L (20L earlier)

May-07 -Ban on ECB's for township projects. Likely to hit the development plans of large developers

Jan-07 -Increase in provisioning requirements for real estate loans

Sep-06 - RBI asks banks to treat loans to SEZs as real estate loans

May-06 - RBI increases risk weightings on banks' exposures to commercial real estate to 150% from 125%

May-06 - Increase risk weightings and general provisioning of residential housing/commercial loans above Rs 2MM

Apr-06 - FII entry into real estate IPOscomes under scanner with RBI trying to classify it as FDI

- HDFC extends the teaser home loan scheme to Mar-11Jul-10

Date Comments

May-10 - SBI has extended its offer on teaser rate schemes till end June (by 2 months). Now followed by other private sector banks

Apr-10 - Incidence on service tax on home purchase reduced to 2.5% from 3.5% earlier (proposed on the budget). Additionally for low cost housing projectsfunded under special govt initiatives (JNUURM / RYA) have been exempted from imposition of these taxes

Feb-10 -Withdrawal of teaser home loan rates by a number of banks ICICI, HDFC, BOI etc

Feb-10 -Budget proposes imposition of service tax on sales/rentals and increases input costs (excise hike).

Feb-10 -RBI disallowed restructuring of loans for real estate developers.

Oct-09 - Increase in provisioning requirements for commercial real estate loans from 0.4% to 1%

Sep 09 - RBI eases lending norms for SEZs (classified as infrastructure lending)

Jul 09 -Extension of 80IB(B) scheme by one year and interest subsidy of 1 %

Jul 09 -Norms relaxation for SEZ development

Jan-09 - ECB norms for overseas lending relaxed

Dec-08 - Home loan rates on below Rs 20L segment to be cut by about 200bps

Dec-08 - Rs40B credit line to National Housing Bank to to kick start lending in the Rs2MM category (priority sector lending)

Dec-08 - Permitted real estate loan restructuring upto Jun-09 as standard loans without requiring banks to classify these as NPAs

Nov-08 - HFCsallowed to raise short term foreign currency borrowings under the approval route

Nov-08 - Reduction in provisioning requirements on advances to the commercial real estate sector and home loans beyond Rs 2MM to 0.4%

Nov-08 - RBI reduced risk weightings on banks' exposures to commercial real estate to 100% from 150% earlier

May-08 -Lower risk weight (50%) on home loans upto 30L (20L earlier)

May-07 -Ban on ECB's for township projects. Likely to hit the development plans of large developers

Jan-07 -Increase in provisioning requirements for real estate loans

Sep-06 - RBI asks banks to treat loans to SEZs as real estate loans

May-06 - RBI increases risk weightings on banks' exposures to commercial real estate to 150% from 125%

May-06 - Increase risk weightings and general provisioning of residential housing/commercial loans above Rs 2MM

Apr-06 - FII entry into real estate IPOscomes under scanner with RBI trying to classify it as FDI Source: RBI, J.P. Morgan


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Office recovery gaining traction; however, rentals to remainunder pressure given sizeable supply pipeline

Demand for office segment continues to improve with most micro marketswitnessing increased transaction activity over the last quarter. Number of companiesthat had earlier put their expansion plans on hold are now looking to take up spacegiven affordable rentals (post 30-35% decline from peak levels), flexible lease termsand improving economic outlook. Even while a large amount of supply is expectedacross most micro markets, improving demand trends auger well for the overalloffice market in 2010.

Leasing activity has picked up primarily for projects nearing completion; while

demand for under construction projects still remains low. Overall absorption for

2Q10 stood at 7.3msf against 6.3msf absorption in 1Q10. Further, construction

activity too seems to be gaining momentum as demand has shown visible signs of

improvement. This is quite encouraging given construction on most of the office

projects had been on hold in 2008/09 on account of slowdown in leasing demand.

There has been a noticeable shift in lease enquiries towards SEZ projects vs. IT parks

over the last quarter as STPI tax benefits are set to expire by Mar-11. However, the

SEZ lease decisions are being deferred due to prevailing uncertainty over SEZ

regulations in the proposed DTC code (all SEZ units set up after 31 March 2011

would not be eligible for any tax breaks). Clarity on these proposed regulations can

likely boost the SEZ demand in the near term.

Despite improving absorption trends, rentals have remained largely stable and are

likely to remain under check in the near term as supply continues to outpace the

demand across most markets. Overall for 2010, JLL expects office supply of 52msf

against the estimated absorption of 29msf. This will further push the vacancy levels

higher to >20% by 2010 end from ~18% currently. CBDs however will be anexception to this trend given limited supply addition in these micro markets. CBD

rental values increased marginally by 3-5% during the quarter.

Capital values, however, might start to increase given the decline in yields.

Investment yields across markets have declined by 50-100bps over the last year and

the trend is expected to continue on the back improving demand environment and of

reduced risk aversion.

In terms of markets, Mumbai and NCR have been leading the demand revival on the

back of improving demand financial institutions and IT companies. Going ahead, we

expect that Bangalore market to outperform on the back of encouraging results

(increased hiring activity) posted by most IT companies and improving offhsoring

outlook. Further, the market has healthy pre lease commitments in place. Chennai

however has been underperforming with current vacancies at ~24%. While there hasbeen some pick up in demand in Chennai, overall sentiment is not as buoyant as

other metros.


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14



Figure 13: Office absorption trends

Source: JLL State of nation 2Q

Figure 14: Pan India Demand Supply Trends

Source: JLL State of nation 2Q

Figure 15: Construction status of future s upply

Source: JLLM State of nation 2Q

Leasing activity picked up

during the quarter with 7.3msf of

office space being absorbed in

2Q10 vs. 6.3msf in 1Q10.

2010 is expected to witness

52msf of office supply as against

estimates absorption of 29msf.

This will further push the

vacancy levels higher to over

20% from 18% currently.

Majority of the supply expected

to be added in 2010/2011 is at

advanced stages of construction.


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15



Figure 16: Relative posit ion of key micro markets Figure 17: Office Investment yield trends in key cities

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

Apr-0

7

Aug-0

7

Dec-0

7Ap

r-08

Aug-0

8

Dec-0

8Ap

r-09

Aug-0

9

Dec-0

9Ap

r-10

NCR Mumbai Bangalore Chennai

Source: JLL, J.P. Morgan

Figure 18: NCR Office: Supply Absorption trends

0

5

10

15

20

2005 2006 2007 2008 2009 2010E 2011E

0%

5%

10%

15%

20%

25%

30%

35%

Absorption (msf) Supply (msf) Vacancy (%)

Source: JLL, J.P. Morgan estimates

Figure 19: Mumbai Office: Supply Absorption trends

-

4.0

8.0

12.0

16.0

2005 2006 2007 2008 2009 2010E 2011E0%

5%

10%

15%

20%

25%

30%



Figure 20: Bangalore office: Supply Absorption trends (msf)

-

2.04.0

6.0

8.0

10.0

12.0

14.0

2005 2006 2007 2008 2009 2010E 2011E

0%

5%

10%

15%

20%



Figure 21: Chennai Office: Supply Absorption trends (msf)

(2.0)

-

2.0

4.0

6.0

8.0

10.0

2005 2006 2007 2008 2009 2010E 2011E

0%

5%10%

15%

20%

25%

30%

35%




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Office market update: 2Q10

Market Comments

NCR - 2Q10 witnessed increased level of transaction activity especially in Gurgaon & Noida given availability of quality supply at afforentals and flexible lease terms. Overall 2Q10 absorption stood at 2.2msf (up 126% Q/Q) with SEZ accounting for 50% of the to

- Supply for 2Q10 stood at 1.5msf (vs.0.8msf in 4Q) on account of completion of significant projects during the quarter. The entirsupply was concentrated in the suburban locations. 3.3msf of supply is expected to be added in 3Q.

- While the overall market vacancy levels remained stable at 13-14%; Gurgaon (12.2%) and CBD (2.2%) witnessed marginal devacancy rates over the quarter. Rentals remained largely stable across most markets. C&W expects rentals across majority of thmarkets to strengthen in the medium term.

Mumbai - Mumbai witnessed absorption of 1.7msf in 2Q10 with fresh leasing picking up meaningfully during the quarter. SEZs in Thane accounted for >20% of total absorption for the quarter.

- Overall vacancy rate remained stable at 14-15% in 2Q 2010 as supply continues to outstrip demand especially in the Andheri, and Thane Belapur micro markets. CBD vacancy levels however increased on account of tenant movement to new buildings insuburban locations (Lower Parel/BKC).

- Rentals remained largely stable across most micro markets and the trend is likely to continue given sizeable supply addition exin suburban Mumbai (7msf primarily coming in Andheri, Lower Parel).

- Navi Mumbai has emerged as a preferred location for tenants looking for SEZ space. Companies like Wipro, Syntel, AccentureInfotech, etc. have committed large quantum of space in the Raheja Mindspace project in Airoli.

Bangalore - 2Q10 witnessed absorption of 2.4msf primarily coming from earlier pre-commitments in buildings which were delivered during tquarter. Avg. transaction sizes also increased (>70,000sq ft) as compared to last quarter.

- Bangalore witnessed 6.2msf of completion in 2Q10 with Whitefield accounting for ~77% of the total supply. 3Q is expected to w4.2msf of office supply.

- Overall vacancy levels for the city increased marginally to 16% (vs. 15% in 1Q) primarily on account of significant space additioWhitefield. Vacancy rate in Whitefield currently stands at 35%.

- Rentals have largely remained stable over the last quarter with the exception of CBD/off CBD location given limited supply addthe micro market. C&W expects the rentals to start strengthening in select micro markets over the next 2-3 quarters.

Chennai - Demand has started to pick up in the market (1.2msf in 2Q10); however, the sentiment is not as buoyant as in other metros. Thcoupled with existing high vacancy levels and expiry of STPI tax benefits has led to deferment of supply substantially. Landlordsoffering preferential rent pricing, higher rent free period to secure big leases.

- Overall vacancy levels remain high at ~22% and rentals remained largely stable despite improving demand trends. Key projecincluding DLF IT Park and RMZ Millennia witnessing strong leasing interest saw some rental appreciation.

- Peripheral Business District (PBD) of Perungalathur, Sholinganallur,Siruseri, Ambattur and GST Road continue to remain undepressure even as rentals seem to have bottomed out. Vacancy level continued to remain high at 18% 20%.



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Rental trends in key cities

Table 10: NCR Grade A Office rental tr ends

Rs psf pm Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q)% ch from

bottomConnaught Place 220 230 230 240 240 0% 9%Nehru Place 160 160 160 150 150 0% 0%Jasola 110 105 105 100 100 0% 0%Saket 140 135 135 133 133 0% 0%Gurgaon 60 65 65 65 65 0% 8%Noida 30 30 30 30 30 0% 0%

Source: CBRE, J.P. Morgan

Table 11: Mumbai Grade A Office rental tr ends

Rs psf pmJun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q)

% ch frombottom

Nariman Point, Fort, Cuff Parade 300 300 290 290 290 0% 0%Worli, Lower Parel,Prabhadevi 225 225 250 250 250 0% 11%

Bandra Kurla Complex 250 250 265 275 275 0% 10%Andheri 125 125 115 115 115 0% 0%Malad 70 70 65 65 65 0% 0%Thane, Navi Mumbai 37 37 40 40 40 0% 8%


Table 12: Bangalore Grade A offi ce rental trends


% ch frombottom

CBD (MG Road, Residency Road) 73 73 73 70 72 3% 3%Koramangala, Indira Nagar 48 48 48 48 48 0% 0%Outer ring road 40 40 40 38 38 0% 0%Whitefield, electronic city 25 25 25 24 24 0% 0%South Bangalore 35 35 35 35 35 0% 0%North Bangalore 42 42 42 42 42 0% 0%


Table 13: Chennai Grade A Office rental trends


% ch frombottom

CBD (Anna Salai,Nungambakkam, RK Salai) 68 64 62 62 62 0% 0%Off CBD (Alwarpet,Egmore,Guindy,Adyar) 49 47 45 45 44 -2% 0%SBD (Valachery, Taramani, Perungudi) 38 37 35 35 35 0% 0%SBD (Ambattur,Siruseri etc) 25 25 24 24 24 0% 0%



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Table 14: Signifi cant recent off ice lease transaction 2Q10

Project Location Area sq ft Tenant

NCROxygen Noida 250,000 EXLDLF Building 10C Gurgaon 50,000 InittoVatika Business Park Gurgaon 100,000 Stryker IndiaUnitech Infospace Noida 250,000 AccentureExpress Tradw Towers II Noida 200,000 Net AmbitDLF Building 5 Gurgaon 50,000 BMR AdvisorsPark Centra Gurgaon 50,000 Bharti Infra

MumbaiMindspace Airoli 300,000 L&T InfotechSupreme Business Park Powai 70,000 FullertonThe Ruby Dadar 27,000 ARCILNatraj Andheri Kurla 22,500 Canon

BangaloreKalyani Platina Whitefield 110000 Mu SigmaVrindavan Tech Village Outer ring road 100000 AltisourceVrindavan Tech Village Outer ring road 90000 Brocade

Salarpuria Supreme Outer ring road 56891 DeloitteJP Techno Park Miller Road 100000 SamsungKalyani Magna Whitefield 100000 MU SigmaEmbassy Golf Links Domlur 120,000 NetAppRMZ NXT Whitefield 65,000 SchneiderKalyani Platina Whitefield 110000 Mu Sigma

ChennaiDLF IT Park Mannapakkam 423,000 CTS, TCSAlpha City Navallur 25,000 Daksh IBMSP Infocity Perungudi 20,000 Lister TechnologiesRMZ Millenia Perungudi 60,000 FlextronicsIndependent building Guindy 65,000 HOV Services

Source: CBRE, Cushman and Wakefield

Table 15: Key projects under construction 2Q10

Property Location Area Leased (sq ft) Completion DateNCROrient Bestech Business Park Gurgaon 540,000 3Q10Techno Touch Noida 240,000 3Q10

MumbaiIndiabulls Finance Center Lower Parel 540000 3Q10Kaledonia Andheri 565,000 3Q10Nirlon Knowledge Center Malad 325,000 4Q10

BangalorePrestige Exora Outer Ring Road 674,429 3Q10Divyasree Technopark Whitefield 625,000 4Q10Vasawani Centropolis Langford road 144,000 3Q10

ChennaiASV Chandilya Thoraipakkam 500,000 3Q10Ascendas ITPC Taramani 750,000 3Q10Leela IT Park Santhome 250,000 3Q10



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Retail segment showing signs of improvement as rentalsbottom out

Retail market has witnessed meaningful improvement in lease enquiries over the last

quarter as developers become more accommodative in terms of asking rents and

lease terms to ensure higher occupancy. Rentals across markets have corrected by

30-40% from their peak levels. Minimum guarantee coupled with revenue sharing

has emerged as a favored model amongst the retailers over the past one year.

Most retailers (Pantaloons, Shoppers Stop) have reported healthy sales trends over

the last 6 months driven by improved consumer spending and now seem to have

resumed back their expansion plans. High street seems to be leading the demand

recovery with domestic players resuming their expansion plans and entry of new

international brands.

While there has been a noticeable increase in leasing activity, retailers have become

cautious in their choice of micro markets. There has been a visible shift in demandtowards prime high street locations or quality mall developments. This has resulted

in appreciation in rentals in select markets, while non prime developments continue

to witness corrections.

2010 is expected to witness completion of 14msf of retail space vs. an estimatedabsorption of ~7msf (Source: JLL). Of the total expected supply, over 50% is atadvanced stage of construction and is therefore certain to become operational by2010 end. This would keep the vacancy levels elevated (currently at 24%) and rentalsunder check.Figure 22: Pan India Retail Demand Supply Trends

Source: JLL REIS

Figure 23: Status of co nstruction o f future retail supply

Source: JLL REIS

2010 is expected to witness

completion of 14msf of retail

space vs. an estimatedabsorption of ~7msf. This will

keep the vacancy levels elevated

across markets.

All of the expected future supplyin 2010 is at advanced stages of

construction with more than 50%

of the structure ready.

Nearly 4.4 million sq ft of retail

space in 2010 is already ready

for fit-outs.


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Table 16: Revenue sharing model

Percentage of revenue as rent (%)

Hypermarket 3%-4%Departmental Stores 7%-8%Apparel 12%-18%Footwear 15%-18%Jewellery 2%-2.5%Health and Beauty 10%-12%Food 15%-20%Entertainment 8%-10%

Source: ET

Figure 24: Retail Investment Yields in key c ities (%)

8.0%

9.0%

10.0%

11.0%

12.0%

Jul-0

5

Nov-0

5

Mar-0

6Ju

l-06

Nov-0

6

Mar-0

7Ju

l-07

Nov-0

7

Mar-0

8Ju

l-08

Nov-0

8

Mar-0

9Ju

l-09

Nov-0

9

Mar-1

0

NCR Mumbai Bangalore Chennai

Source: JLL

Table 17: Key Mall Lease Transactions : 2Q10

Project Location Area (sq ft) Rent psf pm

DLF Place Saket, Delhi 18,000 ZaraStandalone Connaught Place 8,000 Croma

Standalone Koramangala, Bangalore 14,000 CromaPalladium Lower Parel, Mumbai 45000 Landmark, DeiselExpress Avenue Whites Road, Chennai 51,000 Westside, Odyssey


Table 18: Key projects under construction 2Q10

Property Location Area (sq ft) Completion Date

Metropolis MG Road, Gurgaon 800,000 3Q10South Court District Center, Saket 400,000 3Q10Magnet Bhandup, Mumbai 650,000 3Q10Infinity 2 Malad, Mumbai 550,000 4Q10Kohinoor Mall Kurla,Mumbai 500,000 3Q10Gopalan Innovation Bannerghatta Road 180,000 3Q10Ramee Mall Mount Road 200,000 4Q10Coromandel Mall Rajiv Gandhi Salai 250,000 1Q11



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Figure 25: NCR Retail: Supply Absorption trends

-

1.0

2.0

3.0

4.0

5.0

6.0

2005 2006 2007 2008 2009 2010E 2011E

-

0.1

0.1

0.2

0.2

0.30.3

0.4



Figure 26: Mumbai Retail: Supply Absorption trends

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010E 2011E

0%

10%

20%

30%

40%



Figure 27: Bangalore Retail: Supply Absorption trends

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2005 2006 2007 2008 2009 2010E 2011E

0%

5%

10%

15%

20%

25%



Figure 28: Chennai Retail: Supply Absorption trends

0.0

0.5

1.0

1.5

2.0

2.5

2005 2006 2007 2008 2009 2010E 2011E

0%

5%

10%

15%

20%

25%

30%

35%




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Retail market update: 2Q10

Market Comments

NCR - 2Q10 witnessed resumption of expansion plans by domestic retailers as well as arrival of new retailers in NCR. Rentals improvemarginally over the quarter especially in prime Gurgaon malls and prime high street locations; while non prime markets continue witness rental corrections.

- Vacancy is expected to increase marginally as under construction malls (in West Delhi and South Delhi) become operational.Further, developers are now looking to revive their projects that had been stalled in 2008/09 due to slowdown in leasing demand

Mumbai - 2Q10 witnessed improved leasing activity across markets in Mumbai; while there was no supply addition during the quarter. Thled to a marginal decline in vacancy levels.

- Rentals remained largely stable across micro markets with the exception of Thane and high street of Linking road which witnesmarginal rent appreciation on account of improved leasing and low vacancy levels.

- While huge supply is expected to come up in 2010, majority of this is expected to be concentrated in new emerging locations likBhandup, Kurla. Rental values in existing retail locations could see some appreciation in coming quarters given the demandimprovement and restrained supply.

Bangalore - Leasing activity picked up in the city during the quarter with number of new retailers entering the market like Reliance Living, Meand Boys and Howards Storage world. However, no new supply was added during the quarter.

- High streets seem to be leading the recovery with F&B players (like Mc Donalds, Costa Coffee, CCD, etc) and hyper markets(Bharti, Star Bazaar) dominating the incremental demand.

- On the organized retail front, Royal Meenakshi Mall (expected to be operational by Oct) on Bannerghatta road has witnessedheightened activity. Key tenants include Cinepolis, Star Bazaar, Landmark, Westside, Madura, Barista etc.

Chennai - Chennai has witnessed a visible pick up in absorption post the sharp decline in rentals. This is evident from the high occupancythe recently opened mall - Express Avenue (which is the largest mall in Chennai). Over 85% of the mall is already occupied andenquiries are picking up steadily. Further, high streets continue to witness healthy leasing and rentals in select micro markets havwitnessed marginal appreciation due to lack of supply in these locations.

- Enquiries by retailers for malls along Rajiv Gandhi Salai and GST Road are witnessing significant revival. This has led to increapace of construction in these peripheries. Other large developments in the city include Phoenix market city (1msf in Valanchery) Junction mall (0.8msf) in OMR.



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Table 19: NCR Prime Mall Rental t rends

Rs psf pm Jun-09 Sep-09 Dec-09 Mar-10 Jun -10 % ch (Q/Q) % ch from botto m

South Delhi 475 450 450 425 430 1% 1%West Delhi 240 225 225 225 233 4% 4%Noida 310 300 275 275 275 0% 0%Gurgaon 230 225 225 215 225 5% 5%

Source: Cushman & Wakefield

Table 20: Mumbai Prime Mall Rental trends

Rs psf pm Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 % ch (Q/Q) % ch from botto mMalad 525 510 480 480 480 0% 0%Lower Parel 480 480 480 480 480 0% 0%Link Road Andheri (W) 400 400 400 400 400 0% 0%Mulund 260 260 260 260 260 0% 0%Goregaon 275 280 280 280 280 0% 2%Vashi 185 185 185 185 185 0% 0%Ghatkopar 220 220 220 220 220 0% 2%


Table 21: Bangalore Prime Mall Rental Trends


% ch frombottom

Koramangala 400 400 400 400 400 0% 0%Magrath Road 315 315 315 315 315 0% 0%Cunnigham Road 200 200 200 200 200 0% 0%Mysore Road 150 150 150 150 140 -7% 0%


Table 22: Chennai Prime Mall Rental trends

Rs psf pm Mar-09 Jun-09 Sep-09 Dec-09 Jun-10 % ch (Q/Q) % ch from botto mChennai CBD 220 180 180 180 140 0% 0%

Chennai Suburbs 145 140 140 140 180 0% 0%Source: Cushman and Wakefield


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Companies Recommended in This Report (all prices in this report as of market close on 06 August 2010)

Ascendas India Trust (AINT.SI/S$0.97/Overweight), Brigade Enterprises (BRIG.BO/Rs132.60/Neutral), DLF Limited

(DLF.BO/Rs307.70/Overweight), Housing Development and Infrastructure Ltd. (HDIL) (HDIL.BO/Rs265.15/Overweight),Indiabulls Real Estate (INRL.BO/Rs169.75/Overweight), Puravankara Projects Ltd (PPRO.BO/Rs115.70/Overweight),Sobha Developers (SOBH.BO/Rs340.10/Overweight), Unitech Ltd (UNTE.BO/Rs85.00/Overweight)

Analyst Certification:

The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarilyresponsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, withrespect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this reportaccurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the researchanalysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by theresearch analyst(s) in this report.

Important Disclosures

Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities forHousing Development and Infrastructure Ltd. (HDIL) within the past 12 months.

Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares ofIndiabulls Real Estate: Bijay Kumar. The following analysts (and/or their associates or household members) own a long position inthe shares of Sobha Developers: Bijay Kumar.

Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities ofHousing Development and Infrastructure Ltd. (HDIL), Indiabulls Real Estate, Unitech Ltd.

Client of the Firm: Ascendas India Trust is or was in the past 12 months a client of JPMSI. Brigade Enterprises is or was in the past12 months a client of JPMSI. DLF Limited is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSIprovided to the company investment banking services and non-investment banking securities-related services. Housing Developmentand Infrastructure Ltd. (HDIL) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to thecompany investment banking services. Unitech Ltd is or was in the past 12 months a client of JPMSI.

Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment bankingservices from DLF Limited, Housing Development and Infrastructure Ltd. (HDIL).

Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investmentbanking services in the next three months from DLF Limited, Housing Development and Infrastructure Ltd. (HDIL).

Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services otherthan investment banking from DLF Limited.

Important Disclosures for Equity Research Compendium Reports: Important disclosures, including price charts for all companiesunder coverage for at least one year, are available through the search function on J.P. Morgans websitehttps://mm.jpmorgan.com/disclosures/company or by calling this U.S. toll-free number (1-800-477-0406)

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform theaverage total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelvemonths, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return ofthe stocks in the analysts (or the analysts teams) coverage universe.] J.P. Morgan Cazenoves UK Small/Mid-Cap dedicated researchanalysts use the same rating categories; however, each stocks expected total return is compared to the expected total return of the FTSEAll Share Index, not to those analysts coverage universe. A list of these analysts is available on request. The analyst or analysts teamscoverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifyinganalyst(s) coverage universe.

Coverage Universe: Saurabh Kumar: Ascendas India Trust (AINT.SI), DLF Limited (DLF.BO), Housing Developmentand Infrastructure Ltd. (HDIL) (HDIL.BO), Indiabulls Real Estate (INRL.BO), Indian Hotels (IHTL.BO), Ishaan RealEstate Plc (ISH.L), Puravankara Projects Ltd (PPRO.BO), Sobha Developers (SOBH.BO), Unitech Ltd (UNTE.BO)
https://mm.jpmorgan.com/disclosures/companyhttps://mm.jpmorgan.com/disclosures/companyhttps://mm.jpmorgan.com/disclosures/company


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J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010

Overweight(buy)

Neutral(hold)

Underweight(sell)

JPM Global Equity Research Coverage 46% 42% 12%IB clients* 49% 46% 31%

JPMSI Equity Research Coverage 44% 48% 9%IB clients* 68% 61% 53%

*Percentage of investment banking clients in each rating category.For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a holdrating category; and our Underweight rating falls into a sell rating category.

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks onany securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named onthe front of this note or your J.P. Morgan representative.

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various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, whichinclude revenues from, among other business units, Institutional Equities and Investment Banking.

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Other Disclosures last revised March 1, 2010.

Copyright 2010 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or

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