Impact on Real Estate I Neutral

UNION BUDGET 2013 - A SNEAK PREVIEW 1Q 2013 RESEARCH Impact on Real Estate I Neutral Company Change (%) BSE SENSEX -1.52 Realty Index -2.72 Anant Raj Ltd. -2.05 D B Realty Ltd. -3.54 DLF Ltd. -0.27 Godrej Properties Ltd. -2.97 HDIL -5.62 Hubtown Ltd. 0.23 Indiabulls Real Estate -7.51 Mahindra Lifespace -2.12 Orbit Corporation Ltd. -4.00 Parsvnath Developers -0.69 Peninsula Land Ltd. -2.93 The Phoenix Mills Ltd. -0.77 Sobha Developers Ltd. -0.04 Sunteck Realty Ltd. -0.99 Unitech Ltd. -7.95 Source: www.bseindia.com Feb 28, 2013 Honorable Finance Minister P. Chidambaram started his budget speech 2013-14 with the pretext of slowed global economic growth in 2012. He acknowledged that the Indian Economy is challenged and mentioned that the Indian economy is constrained because of a high fiscal deficit; its reliance on foreign inflows to finance the current account deficit; decreased savings and lower investment; a tight monetary policy to contain inflation and strong external headwinds. He assured that the budget spelled out measures for each of the above mentioned issues. The agenda for the Union Budget 2013-14 is set for higher growth leading to inclusive and sustainable development. The finance minister projected the economy to grow by 4.8% in the next fiscal down from 5.5% in 2012-13. The real estate sector had high hopes this year from the Budget. However, the budget remained silent on most of the major issues such as enactment of the Real Estate (Regulation and Development) Bill, revision of Land Bill, granting industry status to the sector or infrastructure status to the much ailing affordable housing sector etc. None the less, there are a few small measures that have been taken for the real estate industry in this budget. THE KEY HIGHLIGHTS OF THE BUDGET WHICH MAY IMPACT REAL ESTATE SECTOR ARE AS FOLLOWS: 1% TDS on value of the transfer of immovable properties where the consideration exceeds INR 50 lakh; No TDS for agricultural land transfer; Impact: This move would help to increase the much needed transparency in the real estate transactions. The provision of deducting 1% as TDS will improve the reporting of such transactions and improve the government revenue from capital gain taxes arising from such transactions. Increase in excise duty rate on marble from INR 30 per sq. meter to INR 60 per sq. meter; Impact: The increase in excise duty rate on marble will affect the sector by increasing in the overall construction cost. This impact will however be minor considering the percentage of cost allocated to this particular construction material and the alternates available. The impact will probably be felt more in the luxury residential and hospitality construction sectors. 1 Colliers International

UNION BUDGET 2013 KEY HIGHLIGHTS (CONTINUED) Continuation of service tax exemption for low cost housing and single residential units; Impact: The service tax exemption for low cost housing and single residential units will further encourage affordable housing scenario in the country. Reduction in rate of abatement from 75% to 70% for houses and flats of more than 2,000 sq. ft. or valuing more than INR 1 Crore; Impact: This move will particularly impact the premium residential properties admeasuring at 2,000 sq. ft. or more on carpet area basis or valuing more than INR 1 crore by making them more expensive due to increase in service tax. Increase in provision under Rural Housing Fund to INR 6,000 crore from the existing INR 4,000 crore; Impact: The rural housing fund maintained by National Housing Bank is used to refinance lending institutions for providing loans for rural housing. The increase in fund will help to provide housing finance at competitive rates to targeted groups in rural areas. Allocation of INR 2,000 crore for creation of Urban Housing Fund to National Housing Bank; Impact: With the success of rural housing fund where so far 400,000 families have taken housing loan, the urban housing fund has been created to provide housing finance at competitive rates in urban areas. Allocation of INR 15,184 crore for Indira Awas Yojna; Impact: Under this scheme the financial assistance is provided to some of the weakest sections of society to upgrade or construct a house. Allocation of INR 15,184 crore will help to achieve Government s vision to replace all temporary houses from Indian villages by 2017. 2

UNION BUDGET 2013 KEY HIGHLIGHTS (CONTINUED) Allocation of INR 5,000 crore to NABARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agriculture produce; Impact: This fund will enable finance for construction of new supply chain facilities at competitive rates for both public and private sector and boost the investment in retail and industrial sector. Increase in the exemption limit of home loaninterest payable through a seprate section under chapter VI A of IT Act from 1.5 Lakh to 2.5 Lakh; Impact: This increase will promote home ownership in turn give boost to the affordable housing sector and other related industries like steel, cement, brick, wood, glass. However, this incentive is made available only for those taking their first home loan; upto a limit of INR 25 lakh. Provision is made to claim this exemption in the second year in case the limit is not exhausted in the first year itself. Enhancement of the exemption limit for the general category of individual taxpayers from INR 200,000 to INR 220,000; tax credit of INR 2,000 to individual tax payer having total income up to INR 5 lakh: 10% surcharge on income above INR 1 crore; Impact: Increase in disposable income in the hand of common man which will in turn increase the spending power and boost domestic investments. However, at the same time the surcharge on the individuals, HUFs, Firms and entities having income above INR 1 crore will augment government revenues and help the government. in fiscal consolidation. Conclusion: From real estate perspective the budget seems to be salient; the realty Index and most of the listed real estate companies reacted negatively after the budget announcement. The budget stated that during the 12th five year plan, infrastructure investment will go up to INR 55 lakh crore out of which 47% is expected to come from private sector. The Government has allocated INR 21,700 crore to PMGSY (Pradhan Mantri Gram Sadak Yojana), INR 14,873 crore for JNNURM (The Jawaharlal Nehru National Urban Renewal Mission) 3 Colliers International

and INR 20,000 crore for Rural Infrastructure Development Fund. Government has also encouraged the investment in the infrastructure via raising funds from Infrastructure Debt Funds (IDF), India Infrastructure Finance Corporation Ltd (IIFCL) in partnership with the Asian Development Bank and issuing the tax free infrastructure bonds to a limit of INR 50,000 crore. Further, the budget assured improvement in communication regarding taxation and regulatory policy to boost overall confidence of investor in doing business in India. All these measures are thus expected to enhance capital inflow and indirectly give impetus to the real estate industry. Industry Expectations from Budget 2013-14 Wish-list Results Industry status to Real Estate Sector Infrastructure status to Affordable Housing, Integrated Townships and Group Housing Projects Enactment of the Real Estate (Regualtion and Development) Bill Developer / Investors Approval for The Land Acquisition, Rehabitilation and Resettlement Bill Single window clearance for new projects Extension of tax exemption under section 80 IA (4) for industrial parks Relaxation in the deadlines proposed under revised DTC for Special Economic Zones Extension of the external commercial borrowing (ECB) scheme to the entire Indian Real Estate Sector MAT reduction to 5% for units located in Special Economic Zones (SEZ) Incentives for low cost housing technoligies and raw material by reducing import duty, excise duty and sales tax Provision of additional FSI for public parking and utilities development Additional FSI for developing smaller affrodable houses (300-500 sq ft) Wish-list Reinstatement of the tax holiday benefits under Section 80IB (10) for Affordable Housing Projects Increase in the exemption limit of home loan interest payable under section 24 (b) from 1.5 Lakh to 2.5 Lakh Provision of additional FSI for public parking and utilities development Increase in limit of interest subsidy upto INR 5 lakh from the existing INR 1 lakh Individuals Exclusion of principal repayments on home loans from benefits under section 80 C and inclusion of separate tax exemption entity Continuation of service tax for low cost housing and single residential unit. Inclusion of Housing Finance Companies (HFCs) deposits for tax exemption u/s 80C of Income Tax Act Increasing the deduction u/s 24(a) of the IT Act for repairs, maintenance, etc. from the current 30-50% Removal of service tax on Under Construction Property Extension of the existing scheme of interest subvention of 1% on housing loans upto INR 15 Lakh where cost of the house does not exceed INR 25 Lakhs for another year 4

MID-YEAR 2012 RETAIL TOP 10 GLOBAL RETAIL STREETS* (USD PER SQUARE FOOT PER YEAR) STREET/PRECINCT RENT (USD)** New York Fifth Avenue Hong Kong Queen's Road Central, Central (tie) Hong Kong Canton Road (tie) London Old Bond St.*** Paris Avenue des*** Champs-Élysées Hong Kong - www.colliers.com ANNUAL CHANGE (%) Causeway Bay New York. Madison Avenue Milan (. ) Via Monte Napoleone Sydney Pitt Street Mall (. ) Source: Colliers International * selected cities ** exchange rate as of March 31, 2012 *** Zone A rents REGIONAL RETAIL RESEARCH CONTACTS AMERICAS > Ann T. Natunewicz Ann.Natunewicz@colliers.com EUROPE/MIDDLE EAST/AFRICA > Zuzanna Baranowska Zuzanna.Baranowska@colliers.com ASIA > Simon Lo Simon.Lo@colliers.com AUSTRALIA/NEW ZEALAND > Nora Farren Nora.Farren@colliers.com ANN T. NATUNEWICZ Manager Retail Research USA Colliers 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year Retailers entering new markets both developed and developing continue to hedge risk by targeting the same one or two premier locations, generating heated competition and outsized rental rate growth in a handful of space-constrained corridors. Companies with the most ambitious long-term expansion plans remain focused on emerging markets with rapidly growing middle-class populations, but recently institutional capital has pulled back somewhat to favor core markets and investments. as Cairo and Athens), high streets with strong fundamentals remained remarkably resilient, suggesting, at least for now, some separation between macroeconomic issues and underlying real estate fundamentals. has already begun to impact retailers revenues and could hinder landlords near-term ability to This spring proved to be a tricky time to conduct global benchmarking, as market sentiment has deteriorated markedly since April. During the past year, virtually every entity making a forecast including Colliers in our 2012 U.S. Retail Outlook More than two years post-recession, though, results from our annual survey of High Street rents illustrate that the world s priciest retail corridors continue to attract the most sought-after tenants at lofty rental rates. Eight of Colliers top ten Global Retail Streets in 2011 made the list again this year. The big story, however, lies with the explosive year over year rental growth achieved in a handful of markets. Six 20%. At a regional level, streets in areas that entered 2007-08 better-positioned economically Australia, slower to emerge from the recession. We will be watching these areas closely. Even as they represent some of the most attractive destinations for expansion-minded companies and yield-seeking investor they too are vulnerable to softening consumer demand and, for those with reliable data, encroachment of e-commerce. survey, conducted in April 2012. The second incorporates content from Colliers brokerage and research teams worldwide who contributed market operational metrics, nuanced commentary on retail conditions, and forward-looking opinions on what the next year will hold for consumers, landlords, and investors. INDIA QUARTERLY UPDATE JANUARY 2013 INDIA QUARTERLY UPDATE NOVEMBER 2012 3Q 2012 MID-YEAR 2012 RETAIL ANN T. NATUNEWICZ Manager Retail Research USA Colliers 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year TOP 10 GLOBAL RETAIL STREETS* (USD PER SQUARE FOOT PER YEAR) Retailers entering new markets both developed and developing continue to hedge risk by targeting the same one or two premier locations, generating heated competition and outsized rental rate growth ANNUAL RENT CHANGE in a handful of space-constrained corridors. STREET/PRECINCT (USD)** (%) Companies with the most ambitious long-term expansion plans remain focused on emerging markets New York Fifth Avenue,. with rapidly growing middle-class populations, but recently institutional capital has pulled back Hong Kong Queen's,. somewhat to favor core markets and investments. Road Central, Central (tie) Hong Kong,. Canton Road (tie) as Cairo and Athens), high streets with strong fundamentals remained remarkably resilient, suggesting, at least for now, some separation between macroeconomic issues and underlying real London Old Bond St.***,. Paris Avenue des*** estate fundamentals. Champs-Élysées Hong Kong -,. has already begun to impact retailers revenues and could hinder landlords near-term ability to Causeway Bay New York. Madison Avenue This spring proved to be a tricky time to conduct global benchmarking, as market sentiment has deteriorated markedly since April. During the past year, virtually every entity making a forecast Milan (.) Via Monte Napoleone including Colliers in our 2012 U.S. Retail Outlook Sydney Pitt Street Mall (. ) Source: Colliers International * selected cities More than two years post-recession, though, results from our annual survey of High Street rents ** exchange rate as of March 31, 2012 illustrate that the world s priciest retail corridors continue to attract the most sought-after tenants at lofty *** Zone A rents rental rates. Eight of Colliers top ten Global Retail Streets in 2011 made the list again this year. The big story, however, lies with the explosive year over year rental growth achieved in a handful of markets. Six REGIONAL RETAIL RESEARCH CONTACTS 20%. AMERICAS > Ann T. Natunewicz At a regional level, streets in areas that entered 2007-08 better-positioned economically Australia, Ann.Natunewicz@colliers.com EUROPE/MIDDLE EAST/AFRICA slower to emerge from the recession. We will be watching these areas closely. Even as they represent > Zuzanna Baranowska some of the most attractive destinations for expansion-minded companies and yield-seeking investor Zuzanna.Baranowska@colliers.com they too are vulnerable to softening consumer demand and, for those with reliable data, encroachment of e-commerce. ASIA > Simon Lo Simon.Lo@colliers.com survey, conducted in April 2012. The second incorporates content from Colliers brokerage and research AUSTRALIA/NEW ZEALAND teams worldwide who contributed market operational metrics, nuanced commentary on retail conditions, > Nora Farren Nora.Farren@colliers.com and forward-looking opinions on what the next year will hold for consumers, landlords, and investors. www.colliers.com Q1 2012 RESEARCH MARKET REACTION TO BUDGET Company Change (%) Finance Minister Pranab Mukherjee started his budget speech 2012-13 in the BSE SENSEX -1.19 Realty Index -1.26 Anant Raj Inds -6.04 mentioned that due to adverse global economic sentiments there has been a D B Realty -2.02 slowdown in the Indian Economy but the fact is India still remains among the DLF 0.15 front runners in the economic growth in any cross country comparison. The Godrej Properties -2.82 budget aims at faster, sustainable and more inclusive growth across sectors HDIL -5.21 Hubtown Ltd. -4.13 rapid revival of high growth in private investment, removal of supply bottlenecks, Indiabulls Real Estate -1.95 addressing malnutrition in 200 high burden districts and expedite improvement Mahindra Lifespaces -0.72 in delivery system, governance and transparency. Orbit Corp. -3.37 Parsvnath Developers -4.04 From a real estate perspective, the budget remained silent on most of the major Peninsula Land -3.18 issues including status of STPIs (Software Technology Parks of India), Real Phoenix Mills -2.65 arrive at a political consensus on the issue of allowing 51% Foreign Direct Sobha Developers 3.04 Investment (FDI) in multi-brand retail. Sunteck Realty -1.13 Unitech -1.68 THE KEY HIGHLIGHTS OF THE BUDGET WHICH MAY IMPACT REAL ESTATE Source: www.bseindia.com Mar 16, 2012 SECTOR ARE AS FOLLOWS: projects. external commercial borrowing (ECB) norms as interest rate charged is lower in case of external borrowings in comparison to rates charged by domestic institutions. - Increase in provision under Rural Housing Fund to INR 4,000 crore from the existing INR 3,000 crore. groups in rural areas at competitive rates. - Extension of the existing scheme of interest subvention of 1% on housing loans up to INR 15 lakh where the cost of the house does not exceed INR 25 lakh for another year. by providing cheaper loan to the end users. P. 1 COLLIERS INTERNATIONAL 1Q 2013 I RESEARCH Colliers International (India) provides property services to property Investors and Occupiers. We deliver customised service solutions utilising local and global knowledge in partnership with our clients via our property Investment and Occupier service lines. These service lines include - Office Services, Facility Management, Project Management, Residential Services, Investment Services and Valuation & Advisory Services. For research related queries please contact: Surabhi Arora MRICS Associate Director, Research surabhi.arora@colliers.com United States: 147 Canada: 37 Latin America: 19 Asia P EMEA: 118 $1.8 billion in annual revenue 2.55 billion square feet under management Over 12,300 + professionals Recent Reports : GLOBAL RETAIL INDIA OFFICE INDIA RESIDENTIAL APAC OFFICE GLOBAL RETAIL INDIA BUDGET 2012-13 GLOBAL HIGHLIGHTS GLOBAL HIGHLIGHTS A SNEAK PREVIEW RESEARCH TEAM Record Rents for Top Retail Corridors; Global Slowdown Impacts Momentum Elsewhere OFFICE PROPERTY MARKET OVERVIEW Residential Property Market Overview ASIA PACIFIC OFFICE MARKET OVERVIEW Record Rents for Top Retail Corridors; Global Slowdown Impacts Momentum Elsewhere UNION BUDGET 2012-13 Budget Highlights Real Estate Amit Oberoi MRICS, Valuation & Advisory; Research Email: Amit.oberoi@colliers.com Surabhi Arora MRICS Associate Director, Research Email: Surabhi.arora@colliers.com Sachin Sharma Assistant Manager, Research Email: Sachin.sharma@colliers.com Heliana Mano Assistant Manager, Research Email: Heliana.mano@colliers.com For general queries and feedback: India.Research@colliers.com Tel: +91 124 456 7580 For service line information contact: Joe Verghese Managing Director India joe.verghese@colliers.com George McKay South Asia Director Office & Integrated Services george.mckay@colliers.com Amit Oberoi Valuation & Advisory Services amit.oberoi@colliers.com Poonam Mahtani Residential Services poonam.mahtani@colliers.com Vikas Kalia Office Services vikas.kalia@colliers.com Saacketh Chawla Project Management saacketh.chawla@colliers.com Rajesh Shetty Facilities Management rajesh.shetty@colliers.com Suresh Castellino Investment Services suresh.castellino@colliers.com This document has been prepared by Colliers International for general information only. 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