Oversupply May Create Problems In Future

The managing director of London Property Research and a visiting professor to the Department of Land Economics at the University of Westminister, Geoff Marsh, is also the founding member of India Property Research. Speaking to Rajeev Jayaswal, he cautioned against the infotech park fever in the office property market and suggested exploration opportunities in industrial and retail sectors for a balanced growth.

Excerpts.

Q: What is the sentiment of the real estate market in India?

A: The rate of change in the Indian property market since 1995 is extremely impressive. However, one sees considerable danger in excessive reliance on infotech parks to promote high technology sectors. The potential oversupply in some sectors of the Indian property market may pose a threat in the long run. In terms of specific market gaps, office property has come of its own in India and matches up to occupier expectations as well as international standards.

 

Funky and functional buildings, typically found in or close to city centres like the Mill district in Parel, Mumbai, are much favoured by the technology, media, and telecommunication sectors abroad. However, the investment gap is quite visible if we compare the office market with retail property.

Q: What is the reason behind the investment gap between the office property and the retail property in India?

A: Office property markets have been influenced by multinational companies (MNCs). These companies have occupied most of the available space in the city centres as well as functional buildings close to business districts. This is not the case with retail property, where the MNC influence has been far less and despite the emergence of malls like Crossroads, Mumbai, and large retailers like Shoppers Stop, India still presents huge opportunities for retail developers and operators working together closely.

Q: Do you think that the emergence of dotcom companies will eventually change the demand situation in retail property markets?

A: It is too early to say whether India would leap to world leadership in the dotcom age, by virtue of going from `no-structured retailing to no retailing'. In dynamic emerging economies like India, it would be a win-win situation if the dotcoms go hand-in-hand with the brick and mortar retailing industry in a complementary manner.

This would help both the sectors in using the same supply chain backbone, which clearly requires huge investment in state-of-art warehouses, something which is conspicuously lacking.

Q: How do you look at the Indian residential property market?

A: In the Indian residential markets, the high and middle income segments have been well-catered to in all metros. However, there is a huge gap in the lower income housing segments. Bengal Ambuja has recognised this in Calcutta and has evolved an effective model to tap a very significant section of the residential property market.

Q: Why have warehouses and industrial property markets failed to attract investment?

A: Mainly because these sectors are considered as low glamour ventures. However, it has tremendous potential specially in the places like Ludhiana, where people are ready to pay for better infrastructure.

Q: Do you think that Indian property market is ready for foreign direct investment?

A: Indian property has made great progress in creating the conditions, whereby international funding can be secured, setting aside the existing barriers to foreign investment. The obstacles to foreign investment are no longer the quality of new property stock, but the market processes which still lack rigour and transparency.

There is an urgent need to prepare a conducive environment to gain investors' confidence.