The commercial real estate sector has been booming in the last few years, driven by the high demand from corporates, especially IT and ITeS companies.
However, with property prices skyrocketing in tier-I and tier-II cities, these companies are now looking at tier-III cities to set up their businesses.
"Wipro [Get Quote] and Infosys [Get Quote] set the trend by setting up facilities in Mysore and Kochi. Foreign companies are now moving into these cities as well, said Akshaya Kumar, CEO, Park Lane Property Advisors.
Broadly, Nagpur, Ahmedabad, Kochi, Indore, Coimbatore, Mysore and Lucknow come under the tier-III classification. Consider these numbers: the lease rates in Mumbai, in places such as Bandra-Kurla complex is around Rs 250 per sq ft whereas in the suburbs of Andheri, it is between Rs 55 and Rs 110. Compared to this, the lease rates in Nagpur are Rs 20 to 30 per sq. ft. "And the space available is larger too," said an industry observer.
A recent report by Jones Lang Lasalle Meghraj (JLLM Asia Pacific Property Digest - Q1 2007) confirms this. A large number of IT and ITeS companies such as Dell, Infosys, TCS [Get Quote], Wipro and Persistent Systems are moving into these cities in a big way. Said a Dell spokesperson, "Dell has gone to cities such as Chandigarh and Hyderabad, apart from Delhi and Bangalore because they had a potential to support a large-scale facility in terms of public infrastructure and access to manpower."
Besides the lower property prices, these cities also provide skilled labour. Kochi and Nagpur have a number of colleges and institutions imparting professional education. The literacy rates in these cities are as high as 94 per cent and 88 per cent respectively.
As a result, big builders are aggressively getting into these areas. Added Kumar, "DLF, Rahejas and Unitech are scouting for opportunities in these cities because the local builders may not be able to handle large scale projects." For instance, Parsvanath Developers are presently developing a residential project called Prideasia (in association with Chandigarh Housing Board), as an integral part of Rajiv Gandhi Chandigarh Technology Park worth $1 billion (Rs 4100 crore). It will have premium accommodation ranging from one to five bedroom air-conditioned apartments priced between Rs 52 lakh and Rs 3.8 crore.
Sources said Mantri Builders, which is present in Bangalore, Pune, Kolhapur and Sholapur, are planning a 40 lakh sq ft IT park-cum-residential complex in Nagpur. The project is going to be announced in the next two months. The company could not be contacted.
As Abhishek Gupta, Senior Research Manager, JLLM explained, "These cities are entailing business capacities ranging from 200 to 3000 seats, underlying the strategic role that these locations have come to play in the off-shoring of business processes." And that augurs well for the overall economy.
Monday 17 September 2007
Now, book tickets, hotels on EMIs
Online travel agency, Cleartrip, has joined hands with the Kishore Biyani promoted Future Money, a non-banking finance company, to provide finance on an equated monthly instalment (EMIs) basis to people wanting to buy its travel products.
The facility will be available at four of Future Group's Big Bazaar outlets in Mumbai. Cleartrip will soon extend this tie-up to other Big Bazaar outlets in the city as well as other metros.
According to the portal, this facility can be used to pay for all Cleartrip's offerings, such as air tickets, hotel bookings and tour packages.
"With this move, we plan to make travel products affordable to the masses. People who otherwise could not think of going on a holiday, can now do so. The idea is to bring down a Rs 8,000 holiday to Rs 200 a month for travellers," said Sandeep Murthy, CEO, Cleartrip.
Representatives of Cleartrip are already present at four Big Bazaar outlets in Mumbai, following a tie-up with the Future Group in July. They will now be assisted by Future Money sales executives.
These executives will guide the customers with the paperwork for the EMIs. Finance will be provided to the customers as soon as the required verifications are complete. The tickets will be handed over to the customers immediately.
According to Murthy, the facility will be available for a transaction above Rs 6,000. The upper limit would exceed the Rs 50,000 mark. The credit risk will be borne entirely by Future Money. However, the revenue sharing agreement between the two companies has not been revealed.
The travel portal is also considering liasing with Pantaloons, the other retail arm of the Future Group.
Murthy said, "By joining hands with the Future Group, we have access to its country-wide network of 57 Big Bazaar outlets, seven malls and 31 Pantaloon [Get Quote] Stores. This improves our visibility and makes much more business sense than investing in real estate and setting up offices all around the country."
The travel industry in India is pegged at $20 billion, while online travel is a $2 billion industry. Travel portals, which currently have a seven per cent share of the total travel bookings market, are expected to raise it to 28 per cent in a year, according to Murthy.
The facility will be available at four of Future Group's Big Bazaar outlets in Mumbai. Cleartrip will soon extend this tie-up to other Big Bazaar outlets in the city as well as other metros.
According to the portal, this facility can be used to pay for all Cleartrip's offerings, such as air tickets, hotel bookings and tour packages.
"With this move, we plan to make travel products affordable to the masses. People who otherwise could not think of going on a holiday, can now do so. The idea is to bring down a Rs 8,000 holiday to Rs 200 a month for travellers," said Sandeep Murthy, CEO, Cleartrip.
Representatives of Cleartrip are already present at four Big Bazaar outlets in Mumbai, following a tie-up with the Future Group in July. They will now be assisted by Future Money sales executives.
These executives will guide the customers with the paperwork for the EMIs. Finance will be provided to the customers as soon as the required verifications are complete. The tickets will be handed over to the customers immediately.
According to Murthy, the facility will be available for a transaction above Rs 6,000. The upper limit would exceed the Rs 50,000 mark. The credit risk will be borne entirely by Future Money. However, the revenue sharing agreement between the two companies has not been revealed.
The travel portal is also considering liasing with Pantaloons, the other retail arm of the Future Group.
Murthy said, "By joining hands with the Future Group, we have access to its country-wide network of 57 Big Bazaar outlets, seven malls and 31 Pantaloon [Get Quote] Stores. This improves our visibility and makes much more business sense than investing in real estate and setting up offices all around the country."
The travel industry in India is pegged at $20 billion, while online travel is a $2 billion industry. Travel portals, which currently have a seven per cent share of the total travel bookings market, are expected to raise it to 28 per cent in a year, according to Murthy.
'Economy may be slowing down'
Slowdown could soon be the new buzzword in industrial circles. For the fourth month in a row the growth in the Index of Industrial Production has seen a decelerating trend. The July number, which has come in at just 7.1 per cent y-o-y, compared with the revised 9 per cent y-o-y for June, has been a bit of a shocker.
With banks lending less -- loan growth has tapered off from 27.6 per cent at the end of March to about 23.1 per cent -- and interest rates refusing to come off, there may just be a change of pace. Economic Advisor to the Tata Group Siddhartha Roy tells Business Standard the economy may be slowing down.
What do you make of the IIP numbers for July?
There appears to be a bit of a slowdown. If you look at the numbers for May, there are a couple of aberrations in the number because wood and wood products have grown at 118 per cent y-o-y, while food products have grown at 23.7 per cent.
Taken together and weighted, these two account for 5.4 per cent of the 10.9 per cent number that was achieved in that month. In June too, there have been similar aberrations and now in July some of these have got smoothened and the growth rate has been just 7.1 per cent.
How much have exports hurt the IIP?
The rupee's appreciation against the dollar has been higher than the appreciation of the currencies of competing countries, with the exception of the Thai baht. So our exports have become uncompetitive. I feel if a strong rupee is constraining growth, it needs to be reviewed.
To what extent are high interest rates responsible for the slowdown?
Interest rates don't seem to be coming down even though liquidity is not tight. That has pushed up EMIs and hurt affordability. It's clear from the negative growth of consumer durables and transport and transport equipment too have seen a degrowth. I feel finance companies will need to start innovating to get customers to buy; they might have to allow customers an interest rate holiday for the initial period of the loan, for instance.
The demand for cars hasn't been too bad?
That's true but you have to remember that demand is driven by both macroeconomic factors as also market developments. Car sales have been good driven by new models and a section of people wanting to upgrade. But this might be temporary, in the long run the macro factors will rule.
Do you see capex slowing down?
No, I haven't but it won't happen immediately because the projects that are under way will be completed. That's why order books of capital goods companies are still strong. What could happen is that if someone was contemplating a new project, he will think twice before he invests in fresh capacity.
Is the RBI hurting growth in its attempt to curb inflation?
RBI has done well to keep inflation in check. You must remember that oil is now at $74 a barrel and if this increase is passed on at the retail level, inflation will go up again. Otherwise the government will have to bear the cost. It's true that high interest rates may be hurting growth but controlling inflation too is important.
Where do you see GDP in FY08?
My assessment would be somewhere between 8.5-9 per cent. I believe services which account for 54 per cent will grow at 10-11 per cent and agriculture with a weightage of 19 per cent will grow at between 3-3.5 per cent. Industry should grow at 9 per cent.
With banks lending less -- loan growth has tapered off from 27.6 per cent at the end of March to about 23.1 per cent -- and interest rates refusing to come off, there may just be a change of pace. Economic Advisor to the Tata Group Siddhartha Roy tells Business Standard the economy may be slowing down.
What do you make of the IIP numbers for July?
There appears to be a bit of a slowdown. If you look at the numbers for May, there are a couple of aberrations in the number because wood and wood products have grown at 118 per cent y-o-y, while food products have grown at 23.7 per cent.
Taken together and weighted, these two account for 5.4 per cent of the 10.9 per cent number that was achieved in that month. In June too, there have been similar aberrations and now in July some of these have got smoothened and the growth rate has been just 7.1 per cent.
How much have exports hurt the IIP?
The rupee's appreciation against the dollar has been higher than the appreciation of the currencies of competing countries, with the exception of the Thai baht. So our exports have become uncompetitive. I feel if a strong rupee is constraining growth, it needs to be reviewed.
To what extent are high interest rates responsible for the slowdown?
Interest rates don't seem to be coming down even though liquidity is not tight. That has pushed up EMIs and hurt affordability. It's clear from the negative growth of consumer durables and transport and transport equipment too have seen a degrowth. I feel finance companies will need to start innovating to get customers to buy; they might have to allow customers an interest rate holiday for the initial period of the loan, for instance.
The demand for cars hasn't been too bad?
That's true but you have to remember that demand is driven by both macroeconomic factors as also market developments. Car sales have been good driven by new models and a section of people wanting to upgrade. But this might be temporary, in the long run the macro factors will rule.
Do you see capex slowing down?
No, I haven't but it won't happen immediately because the projects that are under way will be completed. That's why order books of capital goods companies are still strong. What could happen is that if someone was contemplating a new project, he will think twice before he invests in fresh capacity.
Is the RBI hurting growth in its attempt to curb inflation?
RBI has done well to keep inflation in check. You must remember that oil is now at $74 a barrel and if this increase is passed on at the retail level, inflation will go up again. Otherwise the government will have to bear the cost. It's true that high interest rates may be hurting growth but controlling inflation too is important.
Where do you see GDP in FY08?
My assessment would be somewhere between 8.5-9 per cent. I believe services which account for 54 per cent will grow at 10-11 per cent and agriculture with a weightage of 19 per cent will grow at between 3-3.5 per cent. Industry should grow at 9 per cent.
Musharraf is the most unpopular, hated man in Pak: Top Pak lawyer
Criticising the West for supporting "tottering, slipping" Pakistan President Pervez Musharraf [Images], the lawyer who successfully defended Chief Justice Iftikhar Chaurdhry has warned that a turmoil will break out the moment the General files his nomination for the forthcoming election.
Describing Musharraf as the "most unpopular, indeed hated man in Pakistan," Aitzaz Ahsan said the movement would be on the lines of one that supported the chief justice, and asked the West to embrace it rather than being "enamoured" with the president.
Ahsan, a stalwart in Benazir Bhutto's [Images] Pakistan People's Party, claimed that the deportation of former prime minister Nawaz Sharif will make the negotiations between Bhutto and the General, who is seeking a second presidential term, difficult.
"One of her (Bhutto's) conditions has always been that there must be a free and fair election with the return of all the exiles, including Nawaz Sharif. Is Musharraf prepared to let Sharif come back? If not, then one of her major conditions is not being met. So what happens to the negotiations?" he said.
The deportation of Sharif, he said, showed that Musharraf has run out of political options.
"He committed a crime under Pakistani law by abducting a man and moving him from point A to B against his will. Musharraf's act was not simply a matter of contempt of the Supreme Court's ruling. This is a criminal act punishable by a ten year jail term," he added.
Ahsan, a former interior minister under Benazir Bhutto, had engineered the popular campaign in support of Chaudhry. The campaign eventually developed into an anti-Musharraf movement.
"Sharif's party will press criminal charges against Musharraf at a local police station any day now," he said. Ahsan added that the matter was no longer in the hands of the Supreme Court.
"The matter has now gone into the public domain. People will react. And what will the government do if Nawaz Sharif's wife gets onto a plane and heads for Pakistan? And if his son and daughter come the following week? Will the government keep doing the same thing?" he asked.
"This (deportation) could not have been done without Musharraf's complicity, just as the chief justice could not have been arrested (last March) without Musharraf having ordered it. This case will chase him even in his days of exile outside Pakistan, and the Americans better know it," he said, adding that Musharraf would not be in power for much longer.
"He is not as effective and all-powerful as he used to be. Remember, Pakistan is not Saudi Arabia, Kuwait, Jordan, Syria, Morocco, Libya or Egypt. It is a South Asian
Muslim country where due process of law and an electoral mandate are crucial to the legitimacy of government," Asraf added.
Describing Musharraf as the "most unpopular, indeed hated man in Pakistan," Aitzaz Ahsan said the movement would be on the lines of one that supported the chief justice, and asked the West to embrace it rather than being "enamoured" with the president.
Ahsan, a stalwart in Benazir Bhutto's [Images] Pakistan People's Party, claimed that the deportation of former prime minister Nawaz Sharif will make the negotiations between Bhutto and the General, who is seeking a second presidential term, difficult.
"One of her (Bhutto's) conditions has always been that there must be a free and fair election with the return of all the exiles, including Nawaz Sharif. Is Musharraf prepared to let Sharif come back? If not, then one of her major conditions is not being met. So what happens to the negotiations?" he said.
The deportation of Sharif, he said, showed that Musharraf has run out of political options.
"He committed a crime under Pakistani law by abducting a man and moving him from point A to B against his will. Musharraf's act was not simply a matter of contempt of the Supreme Court's ruling. This is a criminal act punishable by a ten year jail term," he added.
Ahsan, a former interior minister under Benazir Bhutto, had engineered the popular campaign in support of Chaudhry. The campaign eventually developed into an anti-Musharraf movement.
"Sharif's party will press criminal charges against Musharraf at a local police station any day now," he said. Ahsan added that the matter was no longer in the hands of the Supreme Court.
"The matter has now gone into the public domain. People will react. And what will the government do if Nawaz Sharif's wife gets onto a plane and heads for Pakistan? And if his son and daughter come the following week? Will the government keep doing the same thing?" he asked.
"This (deportation) could not have been done without Musharraf's complicity, just as the chief justice could not have been arrested (last March) without Musharraf having ordered it. This case will chase him even in his days of exile outside Pakistan, and the Americans better know it," he said, adding that Musharraf would not be in power for much longer.
"He is not as effective and all-powerful as he used to be. Remember, Pakistan is not Saudi Arabia, Kuwait, Jordan, Syria, Morocco, Libya or Egypt. It is a South Asian
Muslim country where due process of law and an electoral mandate are crucial to the legitimacy of government," Asraf added.
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