Monday, July 30, 2012

Why I am India Positive.....

5 Reasons I am positive about India and Bangalore

By Harish Bijoor

The real-estate market of any city is a sub-set of the environment in the State it belongs to. And that is a sub-set of the country and its many policies, progressive or otherwise. Add to it the fact that the world is for sure a connected place today, and therefore there is a bigger environment that governs real-estate prices and practice, and that is the environment across the world at large.

Real estate is however all about geography that is real. It is about physical spaces that are about land, buildings, gated communities and more. To that extent, it is a physicality. A physicality that is very dependent more on the local than the global. To that extent, while the stock market of a country is all about being umbilically linked to the sneezes and joys of the world at large, the physical real-estate market is that much more local than global. And thankfully so.

In the world of real-estate, the further you move away in concentric circles from the local to the global, factors that affect the price point of real-estate get that much more insulated from the factors that surround. To that extent, the point I am making is a simple one. When you look at real estate, don’t fret and fume as to what is happening in Greece. Don’t worry that Nicolas Sarkozy has been replaced by Francois Hollande. Just don’t worry that you will not see Carla-Bruni Sarkozy that much in the news anymore. Just worry more about factors that are immediate and adjunct to the area of your investment. If you are planning an investment in Bangalore, worry more about what is happening to the governance structure in the real estate market, worry about jobs in the eco-system that throws up investors in the Bangalore real-estate market, worry about laws and rules that are in force and ones that will be enforced later than sooner. But worry about nothing more than that.

5 reasons why I am excited about Bangalore and India then, in that order:

1.     The aggressively young population

Bangalore boasts of a young population. While 54% of the population of the country is below the age of 25, Bangalore boasts of 63.6% below the age of 25.  A younger city means a hungry city. A city hungry for achievement, hungry for jobs, and most certainly hungry enough to invest in land and more. This young profile of the city is un-enviable. The only other city that comes close is Pune on this count. Young cities are hungry cities and hungry cities are investment friendly cities.

The downside of a young city is the fact that pressures to perform abound that much more in younger cities. Younger cities are high-tensile cities. No wonder then that Bangalore and Pune have emerged to be the suicide capitals of India as well. Sad fact.

2.     Spends and patterns of splurge in the TOP and MOP

The second reason why cities such as Bangalore are exciting places for the real-estate market for first buys, re-sales and repeat buys, is the fact that the splurge quotient of cities such as Bangalore is very high. The city is a polemical factoid. While Bangalore boasts of  10,600  Dollar millionaires at one end, at the other end, it also hosts large populaces of those living on the fringe of a hand-to-mouth existence. The real-estate market, sadly, depends on what the Top-of-pyramid (TOP) and Middle-of-pyramid (MOP) folk have to contribute to the kitty.

When you look at the spend patterns of the TOP and MOP profile, one witnesses no gloom at all. The splurge quotient is high on products and services alike. Super-market carts are still laden full with products that do not necessarily represent the best value-buys. The number of spas in Bangalore has grown from a measly 6 in 2001 to 121 in 2012. The number of beauty parlors has grown from a mere 107 in 2001 to 1220 in 2012. I do not have a comparative number for restaurants, but if you just look around, you don’t need numbers to tell you the story.

And every one of them is raking in the ‘moolah’. The point is a simple one. Never mind the fact that Greece is in trouble. Never mind that Europe is in shambles. Never mind that the Japanese economy is slated to de-grow at 0.6% p.a, in GDP terms. Just never mind. Look around and you will sniff prosperity and spends in your local TOP and MOP markets. Sadly or happily, the real estate market depends on its future on this market.

3.     The eastern investment mindset, and the shift from metal to land

This is a quick and happy one. Indians at large are very highly investment geared and investment oriented. The old mindset of investment was gold. This has held families in good stead over the years, particularly with gold prices ruling at an all time high as of today. This investment mindset has gradually shifted in the country from gold to land and dwelling units. The first things everyone wants to do, even before buying a Life cover in an Insurance policy, is to own a house or a piece of land. This has spurred and will continue to spur demand. Real-estate investment apathy has not set in as yet. It looks far way for now.

4.     The poised Next-gen ahead

The next generation is a very highly educated generation. Parents of the current generation have spent their lives working hard to educate their children and get them the best in terms of a qualification to earn more than they have earned. This is a good sign for the economy at large. This means the children of tomorrow will earn higher multiples than their parents did, net of inflation. This means there will be more money to invest. This is a trend that is quite unlike what we see in markets of the United States, where new generations are lesser equipped at large in terms of qualification and earning potential.

5.     Bangalore as a magnet city

The city despite all the ills we bemoan, is still a magnet city. We host mixed nationalities. We remain a secular city with secular intent. We are largely peaceful. We seldom fight. We might watch porn in the assembly, we might huddle our MLAs time and again in close-by resorts, we might clamor for free IPL tickets, but essentially we are a nice people living in a nice city. The city will still remain a magnet city. And that’s a big one for real-estate investments.

Harish Bijoor is a brand-strategy specialist and CEO, Harish Bijoor Consults Inc.
Follow him on @harishbijoor


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