INVESTMENT GUIDE: INDIA

CAPITAL MARKETS

CAPITAL MARKETS
INDIA
Shishir Baijal
+91 982131336

Exhibit 6

DEBT YIELDS
IN INDIA
Type of Lender

Yield/Cost
of Debt

10 year benchmark
G-Sec bond

7.7%

Public Sector Bank

10.5-13.5%

Private Sector Bank

11-15%

Non-Banking Finance
Company

14-18%

Mezzanine finance
from debt funds

20-24%

Commercial Lease Structures

Standard commercial leases follow a
9 or 15 year structure with 15% fixed
escalation post 3 years. In most cases,
the lock-in period varies from 3-5 years.
Short tenure leases are also prevalent
making it more tenant friendly in nature.
As per current law, commercial leases are
registered but not regulated.
Rents
Commercial rents are usually quoted in
INR per sq.ft. per month, and are payable
monthly in advance. Rents are charged
separately for the warm shell and fit outs
(only if the property owner arranges for
the fit outs). In most cases, tenants do
their own fit outs.
Lease lengths
Commercial property leases are usually
5-15 years, and often include an option to
renew for a further five year period. The
leases generally have a lock in period of
3-5 years.
Break clauses
Options for the early termination of leases
are non-negotiable. For longer leases,
there is often a tenant option to break but
only post the lock in period.
Rent revisions
The rent is generally revised every three
years and rent escalations vary from 1015% after every three year period.

Building repairs
The landlord is generally responsible for
structural and major repairs while the
tenant carries out internal repairs and
decoration.

[email protected]

Service charges and utilities (popularly

called CAM)
Common Area Maintenance The tenant
bears all the service charges including
common area maintenance charges. The
landlord may agree to manage the asset
and charge the tenant for the service
charges or tenant may directly manage
the building depending on a case to case
basis.

+91 9820036840

Subletting or assignment of
leasing
Subletting is only permitted with the
consent of the landlord. In specific cases,
the landlord provides his consent in the
lease itself.

Jeremy Waters

Rajeev Bairathi
+91 9999705552
[email protected]
Ojas Mody
[email protected]
Ankit Aggarwal
+91 9911181517
[email protected]
LONDON
Peter MacColl
+44 7836718146
[email protected]
+44 7771885992
[email protected]
DUBAI
Joseph Morris
+971 50 5036 351

Fees payable on Property purchases

Stamp Duty - Transfer of real estate in
India is subject to stamp duty (in the
nature of transfer tax) that differs from
one state to another but generally ranges
from 5-8% of the transaction value.

[email protected]

Transfer of Shares In case the landlord

sells the legal entity owning the asset
by way of sale of shares of the entity, no
transfer duty is applicable.

JAPAN

Agents Fee Real estate agents fees

for commercial property transactions are
usually between 1.0% and 3.0% of the
purchase price plus applicable taxes.

GLOBAL RESEARCH

Availability & Pricing of Debt

Banks are the major source of financing
in India, dominating the overall funding to
any industry. Reserve Bank of India (Bank
Regulator) regulates banks to provide
secure lending in the form of construction
finance and lease rental discounting. Thus
all other needs of the Indian real estate
industry are largely fulfilled by private
equity funds and high yield Non-banking
finance companies.

SINGAPORE
Neil Brookes
+65 83094985
[email protected]

Daisuke Naoi
+65 64293597
[email protected]

Darren Yates
+44 7747767978
[email protected]

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Knight Frank India Pvt.Ltd

As of October 2014, banks have an

outstanding credit of USD 27.0 Billion
in the Commercial Real Estate sector
and USD 97.7 Billion in the Housing
sector including priority sector housing.
(Considering exchange rate of
USD 1 = INR 61.4)

Cyber city Gurgaon NCR

INVESTMENT
GUIDE: INDIA

The Wealth Report

2014

Global Cities The 2015 Report

India Real Estate

Outlook - Jan to June
2014

Knight Frank Research Reports are available at KnightFrank.com/Research

Global Capital
Markets 2014

This report is published for general information only and

not to be relied upon in anyway. Although high standards
have been used in the preparation of the information
analysis, views and projections presented in the report, no
responsibility or liability whatsoever can be accepted by
Knight Frank for any loss or damage resultant from any use
of, reliance on or reference to the contents of this document.
As a general report this material does not necessarily
represent the view of Knight Frank in relation to particular
properties or projects. Reproduction of this report in whole or
in part is not allowed without prior written approval of Knight
Frank to the form and content within which it appears.

AN INTRODUCTION TO BUYING COMMERCIAL PROPERTY IN INDIA

INVESTMENT GUIDE: INDIA

WHY INVEST IN INDIA

Exhibit 1 -

INDIA IN
NUMBERS
Population (Billion)

1.2

GDP (FY 13-14)

(USD Billion)

1,892

GDP (USD per capita)

1,564

Consumer Price Inflation

(CPI)

4.21%

Unemployment (FY 13-14)

5.20 %

Source: Central Statistics Organization, Govt. of

India, Census of India 2011

Exhibit 2

REIT Market Potential in India

Property Potential Potential
Type
REIT Area
Market Value

(Million Sq. Ft) (USD Billion)
Office 425 52
Retail 64 16
Warehouse 919

28

Total 1,408 96
Source: Knight Frank Research

A strong demographic dividend and a

consumption led growth have continued
to attract global investors towards India.
With nearly two decades of economic
liberalisation and a stable, growthfocused federal government, India is set
to witness its next phase of economic
growth.
Political Stability & Growth Focused
Government
The current federal government,
empowered with one of the largest
mandates since last 30 years, has
enabled fast, bold and efficient decision
making. The reform focused government
has already taken many critical decisions
to revive the stagnating economy,
including liberalizing foreign direct
investments in certain sectors (especially
real estate), boosting the manufacturing
sector with Make in India campaign,
providing a much needed thrust to
infrastructure sector and controlling fiscal
deficit by cutting subsidies etc. The world
has already taken note of the turnaround
with Indias sovereign credit rating being
upgraded to Stable by Standard & Poor
(Credit rating agency) recently.
Strong Macro-Economic Fundamentals
The Indian economy has exhibited a
healthy average growth rate of 7.02%
over the last seven years. Increased
consumption from strong domestic
demand, increasing investment activity
and reducing current account deficit and
fiscal deficit is expected to further boost
this growth.
Indian Real Estate Market
The Indian real estate market offers a
diverse range of property segments residential being the largest (due to large
housing needs & increasing urbanization),
followed by office which is emerging
as the preferred investment option by
institutional investors besides retail and
logistics sectors. The recent notification
of the REIT policy has made commercial
real estate more attractive for both
domestic and international investors.
In the first phase, the REIT in India
would encompass revenue-generating
commercial real estate assets. We
estimate approximately USD 96 Billion or

1.4 Billion sq.ft. of occupied space across

office, retail and warehouse segments
that could potentially benefit from the
REIT opportunity.
Diversity of Locations
The real estate activity is spread across
multiple cities having independent
demand drivers. Key investment
destinations include Bangalore, DelhiNCR*, and Mumbai, that together account
for more than two-thirds of commercial
investment activity. Emerging metro
cities of Pune, Chennai and Hyderabad,
primarily driven by a strong IT/ ITeS
industry have also seen significant
interest in the recent past.
Market Liquidity
There are a wide range of active
investors present in India. They include
well established domestic institutional
investors, family offices, ultra high net
worth investors, real estate funds and
large global institutional investors.
Many sovereign funds have tied up with
Indian financial institutions or regional
developers to acquire core assets. The
real estate market is expecting higher
liquidity with emergence of REITs in the
near future. Over the last 15 years, India
has observed foreign investment of
USD 341 Billion out of which 10% was
invested in the real estate sector.
Higher yields
India offers one of the highest yields in
commercial real estate across the world.
While yields from residential properties
are between 2-4%, commercial properties
offer around 8-11%, depending on the
quality of asset and leases. Foreign
investors have already bought rent
generating commercial assets worth over
USD 2 Billion in India in 2014, a four-fold
rise compared to 2013.

Exhibit 3

KEY FOREIGN
INVESTORS IN
INDIA
Global Investor

Exhibit 4

Exhibit 5

Property Market Data the Super Six (Q4 2014)

The SUPER SIX facts & figures

Office

Invested /
Committed
Amount
(USD Million)

Blackstone 1,750+
Brookfield 500+
ADIA 500+

Shopping Centers

Prime Gross Yields (%)

Delhi & NCR 9-11

9-11 11-13 8-11

Mumbai

9-11

9-11 11-13 8-11

Bangalore

9-11

9-11 11-13 8-11

Hyderabad

10-12 10-12 11-13 8-11

Chennai

9-12

9-12 11-13 8-11

Pune

9-12

9-12 11-13 8-11

Delhi & NCR 1.0-6.7 0.5-1.7 0.2-0.4 1.7-6.7

CPPIB 750+

Mumbai

1.3-6.7 1.1-2.5 0.3-0.4 1.7-6.7

GIC 850+

Bangalore

0.7-1.3 0.5-1.1 0.2-0.3 1.0-3.3

QIA 500+

Hyderabad

0.7-1.0 0.5-0.9 0.2-0.3 0.8-3.3

Chennai

0.7-1.0 0.5-1.0 0.2-0.3 0.8-3.3

Pune

0.5-1.0 0.5-0.9 0.2-0.3 0.8-3.3

Source: Knight Frank Research

Source: Knight Frank Research

MAIN INDIAN
CITIES

Population
(In Million)

Total Office Stock

(Approx Million Sq.Ft.)

Delhi &
NCR

26.4

126

Diversified Industries,
IT-ITeS, Power, Media,
Telecom, Auto

Connaught Place, Saket,

Jasola, Gurgaon, Noida

Saket, Vasant Kunj,

Gurgaon, Noida

Mumbai

18.4

112

Financial Services,
Banking, Insurance
Textiles, Chemicals,

Bandra Kurla Complex,

Nariman Point, Lower Parel,
Andheri

Lower Parel, Andheri,

Colaba, Bandra

Bangalore

8.5

114

IT- ITeS, Technology,

Electronics, Life
Sciences

MG Road, Whitefield,
Electronic City, Outer Ring
Road, Hebbal

MG Road, Indiranagar,
Brigade Road, Vittal
Mallaya Road, Koramangla,
Yashwantpur

Hyderabad

7.7

61

IT-ITeS, Manufacturing, Hi-Tech city, Gachibowli,

FMCG, Diversified
Banjara Hills, Jubilee Hills
Industries

Banjara Hills, Jubilee Hills,

Madhapur

Chennai

8.7

57

Diversified Industries,
FMCG, Auto, IT ITeS,
Heavy Machines

Anna Salai, Nungambakkam,

Guindy, OMR, GST Road

Nungambakkam, T-Nagar,
Adyar, Velachery

Pune

8.5

55

Auto, IT-ITeS, Heavy

Machines, Dairy &
Food Processing,
Manufacturing

Hinjewadi, Magarpatta,
Kalyani Nagar, Viman Nagar,
Kharadi

Viman Nagar, FC Road,

Koregaon Park, Balewadi

City

Prime rents ( USD Per Sq. ft Per Month)

APG 400+

IT Parks / IT SEZs Logistics

Cyber City-Gurgaon NCR

Bandra Kurla Complex - Mumbai

Delhi, the capital of India and National

Capital Region (NCR) is a large office
market with a diverse occupier base

Real Estate Regulations and Policies

Foreign investment in real estate is
regulated by the Department of Industrial
Policy and Promotion (DIPP), the
Reserve Bank of India (RBI) and the
Foreign Investment Promotion Board
(FIPB) under the provisions of the
Consolidated Foreign Direct Investment
(FDI) Policy revised bi-annually by DIPP.

DELHI & NCR

Mumbai is the financial hub of India
with presence of large global investors

JAIPUR

KOLKATA

AHMEDABAD

Cyber tower-Hitech City- Hyderabad

Rajiv Gandhi IT Park - Pune

MUMBAI
PUNE
HYDERABAD
Pune is a modern city and suburb of
Mumbai with large ITES industry base
UB City - Bangalore

BANGALORE

Hyderabad is reinventing itself as a

modern innovative city and growing
technology hub

CHENNAI

SUPER SIX Cities

Other Major Cities

Bangalore is Indias largest office

market. It is popularly known as silicon
valley of India

Chennai is a vibrant port city and known as

Detroit of India.

The current government has shown

strong focus towards improving
and enhancing the existing urban
infrastructure. Over the last six months, it
has undertaken the following measures: Permitted 100% FDI in completed
projects for operations and
management of township, malls and
business centers
 Approved guidelines for creation of
REITs in India

Siruseri Special Economic Zone - Chennai

*NCR Stands for National Capital Region comprising the Capital city - New Delhi and key suburban towns Gurgaon, Noida, Ghaziabad, Faridabad and Greater Noida.

CAPITAL MARKETS

As per recent notifications, foreign

owned entities are allowed to own select
property classes in India. Such property
classes include IT Park / IT SEZ, Office
buildings, Shopping centers, Hotels and
Logistic Parks.

Key Industries

Key Office Districts

Key Retail Locations

All these measures have enhanced reach

of core assets to public and private
investors, increased liquidity for cash
strapped real estate developers and
generated strong momentum towards
sustained real estate growth.
Taxes associated with the ownership
and sale of property
Property Taxes An annual property tax
is payable on all properties in India. It is
assessed by the local tax office.
Income Tax Rental income from the
property is subject to normal personal
and corporate income tax rates,
regardless of whether the owner is tax
resident in India or abroad.
Tax on Capital Gains Any capital gain
upon the sale of property is subject to
capital gains tax. In case the asset is
transacted before completion of three
years, short term capital gains tax is
applicable and beyond three years, long
term capital gains tax is applicable.
* Knight Franks white paper on REITs in India
being released in Q1 2015

Bandra Kurla complex - Mumbai

INVESTMENT GUIDE: INDIA

WHY INVEST IN INDIA

Exhibit 1 -

INDIA IN
NUMBERS
Population (Billion)

1.2

GDP (FY 13-14)

(USD Billion)

1,892

GDP (USD per capita)

1,564

Consumer Price Inflation

(CPI)

4.21%

Unemployment (FY 13-14)

5.20 %

Source: Central Statistics Organization, Govt. of

India, Census of India 2011

Exhibit 2

REIT Market Potential in India

Property Potential Potential
Type
REIT Area
Market Value

(Million Sq. Ft) (USD Billion)
Office 425 52
Retail 64 16
Warehouse 919

28

Total 1,408 96
Source: Knight Frank Research

A strong demographic dividend and a

consumption led growth have continued
to attract global investors towards India.
With nearly two decades of economic
liberalisation and a stable, growthfocused federal government, India is set
to witness its next phase of economic
growth.
Political Stability & Growth Focused
Government
The current federal government,
empowered with one of the largest
mandates since last 30 years, has
enabled fast, bold and efficient decision
making. The reform focused government
has already taken many critical decisions
to revive the stagnating economy,
including liberalizing foreign direct
investments in certain sectors (especially
real estate), boosting the manufacturing
sector with Make in India campaign,
providing a much needed thrust to
infrastructure sector and controlling fiscal
deficit by cutting subsidies etc. The world
has already taken note of the turnaround
with Indias sovereign credit rating being
upgraded to Stable by Standard & Poor
(Credit rating agency) recently.
Strong Macro-Economic Fundamentals
The Indian economy has exhibited a
healthy average growth rate of 7.02%
over the last seven years. Increased
consumption from strong domestic
demand, increasing investment activity
and reducing current account deficit and
fiscal deficit is expected to further boost
this growth.
Indian Real Estate Market
The Indian real estate market offers a
diverse range of property segments residential being the largest (due to large
housing needs & increasing urbanization),
followed by office which is emerging
as the preferred investment option by
institutional investors besides retail and
logistics sectors. The recent notification
of the REIT policy has made commercial
real estate more attractive for both
domestic and international investors.
In the first phase, the REIT in India
would encompass revenue-generating
commercial real estate assets. We
estimate approximately USD 96 Billion or

1.4 Billion sq.ft. of occupied space across

office, retail and warehouse segments
that could potentially benefit from the
REIT opportunity.
Diversity of Locations
The real estate activity is spread across
multiple cities having independent
demand drivers. Key investment
destinations include Bangalore, DelhiNCR*, and Mumbai, that together account
for more than two-thirds of commercial
investment activity. Emerging metro
cities of Pune, Chennai and Hyderabad,
primarily driven by a strong IT/ ITeS
industry have also seen significant
interest in the recent past.
Market Liquidity
There are a wide range of active
investors present in India. They include
well established domestic institutional
investors, family offices, ultra high net
worth investors, real estate funds and
large global institutional investors.
Many sovereign funds have tied up with
Indian financial institutions or regional
developers to acquire core assets. The
real estate market is expecting higher
liquidity with emergence of REITs in the
near future. Over the last 15 years, India
has observed foreign investment of
USD 341 Billion out of which 10% was
invested in the real estate sector.
Higher yields
India offers one of the highest yields in
commercial real estate across the world.
While yields from residential properties
are between 2-4%, commercial properties
offer around 8-11%, depending on the
quality of asset and leases. Foreign
investors have already bought rent
generating commercial assets worth over
USD 2 Billion in India in 2014, a four-fold
rise compared to 2013.

Exhibit 3

KEY FOREIGN
INVESTORS IN
INDIA
Global Investor

Exhibit 4

Exhibit 5

Property Market Data the Super Six (Q4 2014)

The SUPER SIX facts & figures

Office

Invested /
Committed
Amount
(USD Million)

Blackstone 1,750+
Brookfield 500+
ADIA 500+

Shopping Centers

Prime Gross Yields (%)

Delhi & NCR 9-11

9-11 11-13 8-11

Mumbai

9-11

9-11 11-13 8-11

Bangalore

9-11

9-11 11-13 8-11

Hyderabad

10-12 10-12 11-13 8-11

Chennai

9-12

9-12 11-13 8-11

Pune

9-12

9-12 11-13 8-11

Delhi & NCR 1.0-6.7 0.5-1.7 0.2-0.4 1.7-6.7

CPPIB 750+

Mumbai

1.3-6.7 1.1-2.5 0.3-0.4 1.7-6.7

GIC 850+

Bangalore

0.7-1.3 0.5-1.1 0.2-0.3 1.0-3.3

QIA 500+

Hyderabad

0.7-1.0 0.5-0.9 0.2-0.3 0.8-3.3

Chennai

0.7-1.0 0.5-1.0 0.2-0.3 0.8-3.3

Pune

0.5-1.0 0.5-0.9 0.2-0.3 0.8-3.3

Source: Knight Frank Research

Source: Knight Frank Research

MAIN INDIAN
CITIES

Population
(In Million)

Total Office Stock

(Approx Million Sq.Ft.)

Delhi &
NCR

26.4

126

Diversified Industries,
IT-ITeS, Power, Media,
Telecom, Auto

Connaught Place, Saket,

Jasola, Gurgaon, Noida

Saket, Vasant Kunj,

Gurgaon, Noida

Mumbai

18.4

112

Financial Services,
Banking, Insurance
Textiles, Chemicals,

Bandra Kurla Complex,

Nariman Point, Lower Parel,
Andheri

Lower Parel, Andheri,

Colaba, Bandra

Bangalore

8.5

114

IT- ITeS, Technology,

Electronics, Life
Sciences

MG Road, Whitefield,
Electronic City, Outer Ring
Road, Hebbal

MG Road, Indiranagar,
Brigade Road, Vittal
Mallaya Road, Koramangla,
Yashwantpur

Hyderabad

7.7

61

IT-ITeS, Manufacturing, Hi-Tech city, Gachibowli,

FMCG, Diversified
Banjara Hills, Jubilee Hills
Industries

Banjara Hills, Jubilee Hills,

Madhapur

Chennai

8.7

57

Diversified Industries,
FMCG, Auto, IT ITeS,
Heavy Machines

Anna Salai, Nungambakkam,

Guindy, OMR, GST Road

Nungambakkam, T-Nagar,
Adyar, Velachery

Pune

8.5

55

Auto, IT-ITeS, Heavy

Machines, Dairy &
Food Processing,
Manufacturing

Hinjewadi, Magarpatta,
Kalyani Nagar, Viman Nagar,
Kharadi

Viman Nagar, FC Road,

Koregaon Park, Balewadi

City

Prime rents ( USD Per Sq. ft Per Month)

APG 400+

IT Parks / IT SEZs Logistics

Cyber City-Gurgaon NCR

Bandra Kurla Complex - Mumbai

Delhi, the capital of India and National

Capital Region (NCR) is a large office
market with a diverse occupier base

Real Estate Regulations and Policies

Foreign investment in real estate is
regulated by the Department of Industrial
Policy and Promotion (DIPP), the
Reserve Bank of India (RBI) and the
Foreign Investment Promotion Board
(FIPB) under the provisions of the
Consolidated Foreign Direct Investment
(FDI) Policy revised bi-annually by DIPP.

DELHI & NCR

Mumbai is the financial hub of India
with presence of large global investors

JAIPUR

KOLKATA

AHMEDABAD

Cyber tower-Hitech City- Hyderabad

Rajiv Gandhi IT Park - Pune

MUMBAI
PUNE
HYDERABAD
Pune is a modern city and suburb of
Mumbai with large ITES industry base
UB City - Bangalore

BANGALORE

Hyderabad is reinventing itself as a

modern innovative city and growing
technology hub

CHENNAI

SUPER SIX Cities

Other Major Cities

Bangalore is Indias largest office

market. It is popularly known as silicon
valley of India

Chennai is a vibrant port city and known as

Detroit of India.

The current government has shown

strong focus towards improving
and enhancing the existing urban
infrastructure. Over the last six months, it
has undertaken the following measures: Permitted 100% FDI in completed
projects for operations and
management of township, malls and
business centers
 Approved guidelines for creation of
REITs in India

Siruseri Special Economic Zone - Chennai

*NCR Stands for National Capital Region comprising the Capital city - New Delhi and key suburban towns Gurgaon, Noida, Ghaziabad, Faridabad and Greater Noida.

CAPITAL MARKETS

As per recent notifications, foreign

owned entities are allowed to own select
property classes in India. Such property
classes include IT Park / IT SEZ, Office
buildings, Shopping centers, Hotels and
Logistic Parks.

Key Industries

Key Office Districts

Key Retail Locations

All these measures have enhanced reach

of core assets to public and private
investors, increased liquidity for cash
strapped real estate developers and
generated strong momentum towards
sustained real estate growth.
Taxes associated with the ownership
and sale of property
Property Taxes An annual property tax
is payable on all properties in India. It is
assessed by the local tax office.
Income Tax Rental income from the
property is subject to normal personal
and corporate income tax rates,
regardless of whether the owner is tax
resident in India or abroad.
Tax on Capital Gains Any capital gain
upon the sale of property is subject to
capital gains tax. In case the asset is
transacted before completion of three
years, short term capital gains tax is
applicable and beyond three years, long
term capital gains tax is applicable.
* Knight Franks white paper on REITs in India
being released in Q1 2015

Bandra Kurla complex - Mumbai

INVESTMENT GUIDE: INDIA

WHY INVEST IN INDIA

Exhibit 1 -

INDIA IN
NUMBERS
Population (Billion)

1.2

GDP (FY 13-14)

(USD Billion)

1,892

GDP (USD per capita)

1,564

Consumer Price Inflation

(CPI)

4.21%

Unemployment (FY 13-14)

5.20 %

Source: Central Statistics Organization, Govt. of

India, Census of India 2011

Exhibit 2

REIT Market Potential in India

Property Potential Potential
Type
REIT Area
Market Value

(Million Sq. Ft) (USD Billion)
Office 425 52
Retail 64 16
Warehouse 919

28

Total 1,408 96
Source: Knight Frank Research

A strong demographic dividend and a

consumption led growth have continued
to attract global investors towards India.
With nearly two decades of economic
liberalisation and a stable, growthfocused federal government, India is set
to witness its next phase of economic
growth.
Political Stability & Growth Focused
Government
The current federal government,
empowered with one of the largest
mandates since last 30 years, has
enabled fast, bold and efficient decision
making. The reform focused government
has already taken many critical decisions
to revive the stagnating economy,
including liberalizing foreign direct
investments in certain sectors (especially
real estate), boosting the manufacturing
sector with Make in India campaign,
providing a much needed thrust to
infrastructure sector and controlling fiscal
deficit by cutting subsidies etc. The world
has already taken note of the turnaround
with Indias sovereign credit rating being
upgraded to Stable by Standard & Poor
(Credit rating agency) recently.
Strong Macro-Economic Fundamentals
The Indian economy has exhibited a
healthy average growth rate of 7.02%
over the last seven years. Increased
consumption from strong domestic
demand, increasing investment activity
and reducing current account deficit and
fiscal deficit is expected to further boost
this growth.
Indian Real Estate Market
The Indian real estate market offers a
diverse range of property segments residential being the largest (due to large
housing needs & increasing urbanization),
followed by office which is emerging
as the preferred investment option by
institutional investors besides retail and
logistics sectors. The recent notification
of the REIT policy has made commercial
real estate more attractive for both
domestic and international investors.
In the first phase, the REIT in India
would encompass revenue-generating
commercial real estate assets. We
estimate approximately USD 96 Billion or

1.4 Billion sq.ft. of occupied space across

office, retail and warehouse segments
that could potentially benefit from the
REIT opportunity.
Diversity of Locations
The real estate activity is spread across
multiple cities having independent
demand drivers. Key investment
destinations include Bangalore, DelhiNCR*, and Mumbai, that together account
for more than two-thirds of commercial
investment activity. Emerging metro
cities of Pune, Chennai and Hyderabad,
primarily driven by a strong IT/ ITeS
industry have also seen significant
interest in the recent past.
Market Liquidity
There are a wide range of active
investors present in India. They include
well established domestic institutional
investors, family offices, ultra high net
worth investors, real estate funds and
large global institutional investors.
Many sovereign funds have tied up with
Indian financial institutions or regional
developers to acquire core assets. The
real estate market is expecting higher
liquidity with emergence of REITs in the
near future. Over the last 15 years, India
has observed foreign investment of
USD 341 Billion out of which 10% was
invested in the real estate sector.
Higher yields
India offers one of the highest yields in
commercial real estate across the world.
While yields from residential properties
are between 2-4%, commercial properties
offer around 8-11%, depending on the
quality of asset and leases. Foreign
investors have already bought rent
generating commercial assets worth over
USD 2 Billion in India in 2014, a four-fold
rise compared to 2013.

Exhibit 3

KEY FOREIGN
INVESTORS IN
INDIA
Global Investor

Exhibit 4

Exhibit 5

Property Market Data the Super Six (Q4 2014)

The SUPER SIX facts & figures

Office

Invested /
Committed
Amount
(USD Million)

Blackstone 1,750+
Brookfield 500+
ADIA 500+

Shopping Centers

Prime Gross Yields (%)

Delhi & NCR 9-11

9-11 11-13 8-11

Mumbai

9-11

9-11 11-13 8-11

Bangalore

9-11

9-11 11-13 8-11

Hyderabad

10-12 10-12 11-13 8-11

Chennai

9-12

9-12 11-13 8-11

Pune

9-12

9-12 11-13 8-11

Delhi & NCR 1.0-6.7 0.5-1.7 0.2-0.4 1.7-6.7

CPPIB 750+

Mumbai

1.3-6.7 1.1-2.5 0.3-0.4 1.7-6.7

GIC 850+

Bangalore

0.7-1.3 0.5-1.1 0.2-0.3 1.0-3.3

QIA 500+

Hyderabad

0.7-1.0 0.5-0.9 0.2-0.3 0.8-3.3

Chennai

0.7-1.0 0.5-1.0 0.2-0.3 0.8-3.3

Pune

0.5-1.0 0.5-0.9 0.2-0.3 0.8-3.3

Source: Knight Frank Research

Source: Knight Frank Research

MAIN INDIAN
CITIES

Population
(In Million)

Total Office Stock

(Approx Million Sq.Ft.)

Delhi &
NCR

26.4

126

Diversified Industries,
IT-ITeS, Power, Media,
Telecom, Auto

Connaught Place, Saket,

Jasola, Gurgaon, Noida

Saket, Vasant Kunj,

Gurgaon, Noida

Mumbai

18.4

112

Financial Services,
Banking, Insurance
Textiles, Chemicals,

Bandra Kurla Complex,

Nariman Point, Lower Parel,
Andheri

Lower Parel, Andheri,

Colaba, Bandra

Bangalore

8.5

114

IT- ITeS, Technology,

Electronics, Life
Sciences

MG Road, Whitefield,
Electronic City, Outer Ring
Road, Hebbal

MG Road, Indiranagar,
Brigade Road, Vittal
Mallaya Road, Koramangla,
Yashwantpur

Hyderabad

7.7

61

IT-ITeS, Manufacturing, Hi-Tech city, Gachibowli,

FMCG, Diversified
Banjara Hills, Jubilee Hills
Industries

Banjara Hills, Jubilee Hills,

Madhapur

Chennai

8.7

57

Diversified Industries,
FMCG, Auto, IT ITeS,
Heavy Machines

Anna Salai, Nungambakkam,

Guindy, OMR, GST Road

Nungambakkam, T-Nagar,
Adyar, Velachery

Pune

8.5

55

Auto, IT-ITeS, Heavy

Machines, Dairy &
Food Processing,
Manufacturing

Hinjewadi, Magarpatta,
Kalyani Nagar, Viman Nagar,
Kharadi

Viman Nagar, FC Road,

Koregaon Park, Balewadi

City

Prime rents ( USD Per Sq. ft Per Month)

APG 400+

IT Parks / IT SEZs Logistics

Cyber City-Gurgaon NCR

Bandra Kurla Complex - Mumbai

Delhi, the capital of India and National

Capital Region (NCR) is a large office
market with a diverse occupier base

Real Estate Regulations and Policies

Foreign investment in real estate is
regulated by the Department of Industrial
Policy and Promotion (DIPP), the
Reserve Bank of India (RBI) and the
Foreign Investment Promotion Board
(FIPB) under the provisions of the
Consolidated Foreign Direct Investment
(FDI) Policy revised bi-annually by DIPP.

DELHI & NCR

Mumbai is the financial hub of India
with presence of large global investors

JAIPUR

KOLKATA

AHMEDABAD

Cyber tower-Hitech City- Hyderabad

Rajiv Gandhi IT Park - Pune

MUMBAI
PUNE
HYDERABAD
Pune is a modern city and suburb of
Mumbai with large ITES industry base
UB City - Bangalore

BANGALORE

Hyderabad is reinventing itself as a

modern innovative city and growing
technology hub

CHENNAI

SUPER SIX Cities

Other Major Cities

Bangalore is Indias largest office

market. It is popularly known as silicon
valley of India

Chennai is a vibrant port city and known as

Detroit of India.

The current government has shown

strong focus towards improving
and enhancing the existing urban
infrastructure. Over the last six months, it
has undertaken the following measures: Permitted 100% FDI in completed
projects for operations and
management of township, malls and
business centers
 Approved guidelines for creation of
REITs in India

Siruseri Special Economic Zone - Chennai

*NCR Stands for National Capital Region comprising the Capital city - New Delhi and key suburban towns Gurgaon, Noida, Ghaziabad, Faridabad and Greater Noida.

CAPITAL MARKETS

As per recent notifications, foreign

owned entities are allowed to own select
property classes in India. Such property
classes include IT Park / IT SEZ, Office
buildings, Shopping centers, Hotels and
Logistic Parks.

Key Industries

Key Office Districts

Key Retail Locations

All these measures have enhanced reach

of core assets to public and private
investors, increased liquidity for cash
strapped real estate developers and
generated strong momentum towards
sustained real estate growth.
Taxes associated with the ownership
and sale of property
Property Taxes An annual property tax
is payable on all properties in India. It is
assessed by the local tax office.
Income Tax Rental income from the
property is subject to normal personal
and corporate income tax rates,
regardless of whether the owner is tax
resident in India or abroad.
Tax on Capital Gains Any capital gain
upon the sale of property is subject to
capital gains tax. In case the asset is
transacted before completion of three
years, short term capital gains tax is
applicable and beyond three years, long
term capital gains tax is applicable.
* Knight Franks white paper on REITs in India
being released in Q1 2015

Bandra Kurla complex - Mumbai

INVESTMENT GUIDE: INDIA

CAPITAL MARKETS

CAPITAL MARKETS
INDIA
Shishir Baijal
+91 982131336

Exhibit 6

DEBT YIELDS
IN INDIA
Type of Lender

Yield/Cost
of Debt

10 year benchmark
G-Sec bond

7.7%

Public Sector Bank

10.5-13.5%

Private Sector Bank

11-15%

Non-Banking Finance
Company

14-18%

Mezzanine finance
from debt funds

20-24%

Commercial Lease Structures

Standard commercial leases follow a
9 or 15 year structure with 15% fixed
escalation post 3 years. In most cases,
the lock-in period varies from 3-5 years.
Short tenure leases are also prevalent
making it more tenant friendly in nature.
As per current law, commercial leases are
registered but not regulated.
Rents
Commercial rents are usually quoted in
INR per sq.ft. per month, and are payable
monthly in advance. Rents are charged
separately for the warm shell and fit outs
(only if the property owner arranges for
the fit outs). In most cases, tenants do
their own fit outs.
Lease lengths
Commercial property leases are usually
5-15 years, and often include an option to
renew for a further five year period. The
leases generally have a lock in period of
3-5 years.
Break clauses
Options for the early termination of leases
are non-negotiable. For longer leases,
there is often a tenant option to break but
only post the lock in period.
Rent revisions
The rent is generally revised every three
years and rent escalations vary from 1015% after every three year period.

Building repairs
The landlord is generally responsible for
structural and major repairs while the
tenant carries out internal repairs and
decoration.

[email protected]

Service charges and utilities (popularly

called CAM)
Common Area Maintenance The tenant
bears all the service charges including
common area maintenance charges. The
landlord may agree to manage the asset
and charge the tenant for the service
charges or tenant may directly manage
the building depending on a case to case
basis.

+91 9820036840

Subletting or assignment of
leasing
Subletting is only permitted with the
consent of the landlord. In specific cases,
the landlord provides his consent in the
lease itself.

Jeremy Waters

Rajeev Bairathi
+91 9999705552
[email protected]
Ojas Mody
[email protected]
Ankit Aggarwal
+91 9911181517
[email protected]
LONDON
Peter MacColl
+44 7836718146
[email protected]
+44 7771885992
[email protected]
DUBAI
Joseph Morris
+971 50 5036 351

Fees payable on Property purchases

Stamp Duty - Transfer of real estate in
India is subject to stamp duty (in the
nature of transfer tax) that differs from
one state to another but generally ranges
from 5-8% of the transaction value.

[email protected]

Transfer of Shares In case the landlord

sells the legal entity owning the asset
by way of sale of shares of the entity, no
transfer duty is applicable.

JAPAN

Agents Fee Real estate agents fees

for commercial property transactions are
usually between 1.0% and 3.0% of the
purchase price plus applicable taxes.

GLOBAL RESEARCH

Availability & Pricing of Debt

Banks are the major source of financing
in India, dominating the overall funding to
any industry. Reserve Bank of India (Bank
Regulator) regulates banks to provide
secure lending in the form of construction
finance and lease rental discounting. Thus
all other needs of the Indian real estate
industry are largely fulfilled by private
equity funds and high yield Non-banking
finance companies.

SINGAPORE
Neil Brookes
+65 83094985
[email protected]

Daisuke Naoi
+65 64293597
[email protected]

Darren Yates
+44 7747767978
[email protected]

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Knight Frank India Pvt.Ltd

As of October 2014, banks have an

outstanding credit of USD 27.0 Billion
in the Commercial Real Estate sector
and USD 97.7 Billion in the Housing
sector including priority sector housing.
(Considering exchange rate of
USD 1 = INR 61.4)

Cyber city Gurgaon NCR

INVESTMENT
GUIDE: INDIA

The Wealth Report

2014

Global Cities The 2015 Report

India Real Estate

Outlook - Jan to June
2014

Knight Frank Research Reports are available at KnightFrank.com/Research

Global Capital
Markets 2014

This report is published for general information only and

not to be relied upon in anyway. Although high standards
have been used in the preparation of the information
analysis, views and projections presented in the report, no
responsibility or liability whatsoever can be accepted by
Knight Frank for any loss or damage resultant from any use
of, reliance on or reference to the contents of this document.
As a general report this material does not necessarily
represent the view of Knight Frank in relation to particular
properties or projects. Reproduction of this report in whole or
in part is not allowed without prior written approval of Knight
Frank to the form and content within which it appears.

AN INTRODUCTION TO BUYING COMMERCIAL PROPERTY IN INDIA

INVESTMENT GUIDE: INDIA

CAPITAL MARKETS

CAPITAL MARKETS
INDIA
Shishir Baijal
+91 982131336

Exhibit 6

DEBT YIELDS
IN INDIA
Type of Lender

Yield/Cost
of Debt

10 year benchmark
G-Sec bond

7.7%

Public Sector Bank

10.5-13.5%

Private Sector Bank

11-15%

Non-Banking Finance
Company

14-18%

Mezzanine finance
from debt funds

20-24%

Commercial Lease Structures

Standard commercial leases follow a
9 or 15 year structure with 15% fixed
escalation post 3 years. In most cases,
the lock-in period varies from 3-5 years.
Short tenure leases are also prevalent
making it more tenant friendly in nature.
As per current law, commercial leases are
registered but not regulated.
Rents
Commercial rents are usually quoted in
INR per sq.ft. per month, and are payable
monthly in advance. Rents are charged
separately for the warm shell and fit outs
(only if the property owner arranges for
the fit outs). In most cases, tenants do
their own fit outs.
Lease lengths
Commercial property leases are usually
5-15 years, and often include an option to
renew for a further five year period. The
leases generally have a lock in period of
3-5 years.
Break clauses
Options for the early termination of leases
are non-negotiable. For longer leases,
there is often a tenant option to break but
only post the lock in period.
Rent revisions
The rent is generally revised every three
years and rent escalations vary from 1015% after every three year period.

Building repairs
The landlord is generally responsible for
structural and major repairs while the
tenant carries out internal repairs and
decoration.

[email protected]

Service charges and utilities (popularly

called CAM)
Common Area Maintenance The tenant
bears all the service charges including
common area maintenance charges. The
landlord may agree to manage the asset
and charge the tenant for the service
charges or tenant may directly manage
the building depending on a case to case
basis.

+91 9820036840

Subletting or assignment of
leasing
Subletting is only permitted with the
consent of the landlord. In specific cases,
the landlord provides his consent in the
lease itself.

Jeremy Waters

Rajeev Bairathi
+91 9999705552
[email protected]
Ojas Mody
[email protected]
Ankit Aggarwal
+91 9911181517
[email protected]
LONDON
Peter MacColl
+44 7836718146
[email protected]
+44 7771885992
[email protected]
DUBAI
Joseph Morris
+971 50 5036 351

Fees payable on Property purchases

Stamp Duty - Transfer of real estate in
India is subject to stamp duty (in the
nature of transfer tax) that differs from
one state to another but generally ranges
from 5-8% of the transaction value.

[email protected]

Transfer of Shares In case the landlord

sells the legal entity owning the asset
by way of sale of shares of the entity, no
transfer duty is applicable.

JAPAN

Agents Fee Real estate agents fees

for commercial property transactions are
usually between 1.0% and 3.0% of the
purchase price plus applicable taxes.

GLOBAL RESEARCH

Availability & Pricing of Debt

Banks are the major source of financing
in India, dominating the overall funding to
any industry. Reserve Bank of India (Bank
Regulator) regulates banks to provide
secure lending in the form of construction
finance and lease rental discounting. Thus
all other needs of the Indian real estate
industry are largely fulfilled by private
equity funds and high yield Non-banking
finance companies.

SINGAPORE
Neil Brookes
+65 83094985
[email protected]

Daisuke Naoi
+65 64293597
[email protected]

Darren Yates
+44 7747767978
[email protected]

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Knight Frank India Pvt.Ltd

As of October 2014, banks have an

outstanding credit of USD 27.0 Billion
in the Commercial Real Estate sector
and USD 97.7 Billion in the Housing
sector including priority sector housing.
(Considering exchange rate of
USD 1 = INR 61.4)

Cyber city Gurgaon NCR

INVESTMENT
GUIDE: INDIA

The Wealth Report

2014

Global Cities The 2015 Report

India Real Estate

Outlook - Jan to June
2014

Knight Frank Research Reports are available at KnightFrank.com/Research

Global Capital
Markets 2014

This report is published for general information only and

not to be relied upon in anyway. Although high standards
have been used in the preparation of the information
analysis, views and projections presented in the report, no
responsibility or liability whatsoever can be accepted by
Knight Frank for any loss or damage resultant from any use
of, reliance on or reference to the contents of this document.
As a general report this material does not necessarily
represent the view of Knight Frank in relation to particular
properties or projects. Reproduction of this report in whole or
in part is not allowed without prior written approval of Knight
Frank to the form and content within which it appears.

AN INTRODUCTION TO BUYING COMMERCIAL PROPERTY IN INDIA