Lemon & Ice

Moving to India - Gurgaon Perspective

My family and I have recently moved to Gurgaon in India. This is a return for me after 17 years away but the first time for the rest of my family, my kids being 10 and 8. To say that this has been challenging is an understatement. Despite the advantages of fluency in language and similarity in appearance to the locals I have discovered that I am not the same 'Indian' that I was. I have managed to train myself and my children to look past the immediate chaos, squalor and civic mayhem that passes for urban living in this part of India but I am still struggling with the feeling that the affluent people in our nation display an apathetic attitude to any sense of civic or social responsibility. Certainly I am amazed at the continuing feudal structure between the haves and have-nots but also within the struggling have-nots who seem to have unwritten rules about who will deign to do what. Having said all this, I could ramble on with no thought to giving any positive ideas for any one who might find this post useful in preparing to return to India.

Is India's Property Market in Trouble?

The Finance Ministry and the RBI (India's Central Bank) have been on a war path against inflation here, with specific focus on the real estate market. Interest rates have shot up by over 25% in the last one year. Home loans now cost an average of 11%-11.5% on 20 year mortgages, up from 7.5% a couple of years ago. Car loans are at 15% and the auto sector is crying for mercy as vehicle sales are at their lowest in the last 12 months. Till just a few weeks ago, the real estate market was headed north with a teflon like quality. It continued to shrug off the impact of rising rates, even as genuine buyers continues to shake their heads in disbelief. Just two weeks ago, I sold off an apartment I owned in Pune as soon as I received delivery from the builder. I managed the sale without lifting a finger to look for a buyer. However, when I put my second investment in a pre-construction apartment in Pune up for sale last week, there were no buyers at all. All the brokers tell me the local real estate market seems to have suddenly rolled over and died overnight!

All the bids seem to have disappeared overnight. Welcome to real estate investing in India!

Home with a view

180 degree view of Mumbai from my new home in Colaba.

On the left I can see Nariman Point facing Cuffe Parade, in the middle is Mumbai's cityscape growing north and on the right is a view of the Arabian Sea.

Writing this blog is a therape utic experience for me, especially when I feel frustrated with the challenges of setting up a new life here. It allows me to take a step back from my life and examine it objectively. I was reading some of my previous entries here and I could sense my own transition from an outsider to a local in the last few months. As I spend more time here, the thrill of being back home in India has begun to fade away. The mundane aspects of daily domestic life in India are coming to the fore now. When I lived in NYC, my speed dial list was always reserved for hotties. Now, they have been replaced by mission-critical contacts like the electrician, plumber, cable guy, A/C repair guy, washerman, v egetable delivery guy, grocery delivery guy, maid, watchman.. the list is exhaustive. How my life has changed! Anything can go wrong anytime. I am beginning to believe that every device in my house has a temperament of it's own. Yesterday, I was a bit hungover and forgot to wish my shower head a very good morning before I turned it on. Like a woman scorned, it got upset and taught me a lesson by turning off the water just when I had soap all over my eyes. Sheesh, that's a low down trick if you ask me! Afer a couple more such inexplicable 'accidents' in my new house, I have become rather wary of the devices I live with. Today morning, I took the extra precaution of politely requesting my tea kettle if I could put it's bottom on fire to make my tea. It didn't seem to mind and made me a an excellent cuppa to start the day. I think I am getting the hang of living in Mumbai now. But I am getting ahead of myself. Let me first tell you how I found my new home.

South Mumbai Real Estate at Manhattan prices

I have been looking at 2 BR rental apartments in areas within 20-25 minutes of Nariman Point where I have my office. So I focused my search on Colaba, Cuffe Parade, Malabar Hills, Kemps Corner and Worli. I have seen about 15 apartments of varying quality and views. Most of the buildings I have seen are not luxury buildings since very few of them have come up in these areas in recent years due to scarcity of space. The quality of construction is below average by international standards and the apartment interiors need a lot of refurbishing. However, I am not complaining since I expected that. What is interesting is the wide range in prices for different buildings in the same location. Apparently, location is a key consideration but quality of construction and the type of 'gentry' living in the buildings play equally important roles.

Prime properties in Mumbai have almost doubled since 2004 and the landlords are doing their best to move up rents in tandem.

Condo Shopping in Mumbai

I met a real estate broker in Mumbai over the weekend. We went to an old mill in Parel where a developer was building a luxury high rise. Parel is considered to be the value buy in Mumbai, comparable to Brooklyn 6 years ago. According to the broker, it was a no brainer. We reached the site office and were ushered into the sales office.

I looked at the floor plans and picked the smallest apartment available which was 2250 Sq Ft 3 BR apartment and inquired about the price. The 'marketing manager', a rotund paan chewing babu crossed his arms, sized me up for a second and then said; 'Sir, it will be costing you about 2.7 crores* and today is the last day you can book it. After this, price is moving to about 3 crores*'. I was taken aback for a split second but quickly recovered my composure and began contemplating a graceful exit. However, the marketing manager, a seasoned purveyor of stagflationary products was quick on the draw. He swallowed his paan, smiled  with empathy and explained ' You see, Sir, you are getting central AC, German fitting in kitchen and bathroom, 120 feet elevation which means even the 1st floor has a good view. All of this is worth at least 2000 rupees per square foot and this is minimum standard for high class peepul like you.'  I couldn't agree more. Then he emphasized, nodding his head slowly and going in for the kill. 'Sir, Parel area has been 're-rated' just like the Indian stock market. This is the area of the future where everyone wants to be now.'  I had heard that somewhere before, that 're-rating' bit. Then I remembered. There was an analyst on CNBC the evening before. He said the same thing about the Indian stock market, while explaining why conventional valuations didn't apply. I thanked the manager and left promptly with the broker.

Truth is that the property will probably be worth more than 3 crores* in a couple of months. Last year, the same property would have been worth half as much. I don't know if it was undervalued last year or if it's overvalued today. All I know is I am feeling very poor, just like I did when I looked at buying a condo in Manhattan last year.

* A crore is 10 Million and the $1=Rs 44.85

Mumbai Bound

I have made up my mind. I am moving to Mumbai. Delhi scores high on every count except quality of people. In the last few weeks, I have been here, it's evident to me Mumbai folks are far more professional, time conscious and generally more courteous and straightforward to deal with. It's harsh of me to say this but Delhites suffer from a huge attitude problem that is evident everywhere. After spending a decade in New York, most other city dwellers appear mild mannered to me. However, I have to say it like it is here. The 'A-Hole' factor amongst Delhites is pretty high and it does bring out the worst in anyone who lives here.. This was my observation about a decade ago and sadly enough, things haven't changed much. This post is not the result of any one incident that has triggered such a conclusion but a grudging acceptance that while the city's infrastructure has evolved, it's people haven't. Here's a recent article by a major weekly here on why Delhi needs to change:

http://www.outlookindia.com/full.asp?fodname=20060501&fname=Cover+story+%28F%29&sid=2

Mumbai vs. Delhi (Gurgaon)

I have been traveling between Delhi and Mumbai every week on business. While I was quite sure I wanted to set up my office in Mumbai initially, I am evaluating Delhi as a potential location as well. It's a tough decision. The cost of living and working is much high in Mumbai in terms of money and time when compared to Delhi. On my first visit to Mumbai, I came back with the impression that the city was one giant slum that badly needed a paint job. The streets were congested with too many vehicles and the city government seems to mired in inertia when it comes to building flyovers and freeways that would ease the traffic situation.

On the surface, Delhi looked much more livable. The city is much better maintained with beautiful tree lined avenues in the nicer parts of town (Central Delhi) and traffic flows easily in most parts of the city.  The Delhi administration has done a tremendous job in enforcing vehicle emission controls to reduce pollution and has built a large number of flyovers that make it easy to skip crowded areas. When I left 10 years ago, Delhi had become impossible to live in with excessive pollution and really bad traffic. The pollution was so bad that one out of four Delhi residents had developed some form of Asthma! The situation is much better now although I wouldn't say the air smells fresh and crisp.

The difference in the cost of living between Delhi and Mumbai is also in the order of 2-3 X, with real estate accounting for the majority of the cost difference. Mumbai is definitely the financial capital of India whereas Delhi is rapidly emerging as the preferred H.O. location for many corporates. There are a growing number of private equity and real estate funds that have set up base in Delhi. Both cities are equally well connected to all airports in the country so logistically they are both at par.

My self enforced deadline to pick a city is April 15th.

Connecting to the grid

There's been a telecom revolution here while I have been away. We have all read about it and I am now experiencing it. Telecom penetration has shot up to 5.5% from less than half a percent when I left India. I exprienced wireless local loop (WLL) technology for the first time here. WLL offers limited mobility within a city area and is a viable alternative to a landline or a mobile phone. It looks and works like a landline but it is not tethered to a socket in your wall. So if you move homes, you can simply carry the phone with you. Most carriers also offer internet access through the WLL connection, although it's usually narrowband.

Hello again, Hometown!

This is the beginning of my new life in India. I chose to start this journey at my family house where I spent the first 18 years of my life before I left for college. I have been here for a week and gotten over the jetlag with life falling into a languid rythm. I have 2 weeks to chill out before I jump into the fray again and I plan to make the best of it. I typically wake up around 7 or 8 am and join my mom for tea. Some days, I am lazy and my maid brings me tea in bed. Then, the local masseuse shows up to give me a one hour massage. He charges me Rs 30 and takes a Rs 20 tip only after much insisting. I wasn't too happy to get a male masseuse initially but when my mom asked me why I preferred a female masseuse, I dropped the topic quickly.