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[INDIA] Booming Businesses (Still) Looking for Home

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  • madchinaman
    In India, a boom that s bursting at the seams Companies flocking to New Delhi encounter a lack of space to set up shop legally. A zoning crackdown is making
    Message 1 of 1 , Dec 23, 2006
      In India, a boom that's bursting at the seams
      Companies flocking to New Delhi encounter a lack of space to set up
      shop legally. A zoning crackdown is making the problem worse.
      By Henry Chu, Times Staff Writer
      http://www.latimes.com/business/la-fi-
      space23dec23,0,7707992,full.story?coll=la-home-business


      NEW DELHI — An honest day's work took a good deal of subterfuge for
      Maneesh Mansingka.

      Every morning for a month, he crept surreptitiously into the basement
      of a gated modern building, trying to dodge the authorities. He
      stayed holed up underground all day, calling clients and typing on
      his computer. At night, he slipped out the way he came in: through
      the back door, like a thief, not a successful professional.

      If anyone asked, the ground floor where he normally worked was
      somebody's apartment. A helper even slept in his former office to
      keep up the ruse.

      It was an embarrassing charade for Mansingka, the India director of a
      global commodities brokerage. But it was necessary to evade a recent
      government drive to shut down businesses operating in areas not
      officially zoned for commercial use. Mansingka's office is in a
      residential building he picked three years ago, after a futile search
      for decent commercial space in this teeming capital.

      The zoning crackdown has landed thousands of people like Mansingka on
      the horns of a dilemma. Even as government inspectors scuttle around
      New Delhi handing eviction orders to shopkeepers and other business
      owners, the city is suffering from a dire lack of commercial space
      that leaves those affected with nowhere to go.

      The shortage has become all the more glaring in light of India's
      booming economy, which grew 9.2% last quarter compared with a year
      earlier. Multinational companies are flocking to India for a piece of
      the action. But many arrive to find harsh realities masked by the
      dazzling statistics, such as crumbling infrastructure and a
      bureaucracy that has failed to address such problems.

      The dearth of legal commercial space in Delhi — for offices, retail
      outlets, banks and restaurants — is a prime example of the
      impediments to efficient economic activity and growth in India.

      Fewer than a dozen major commercial centers in the capital serve a
      population of 15 million. Unlike Chinese boomtowns such as Shanghai,
      where gleaming new high-rises and malls seem to adorn every street
      corner, Delhi has so few state-of-the-art office and shopping
      complexes that businesspeople say nabbing such space is about as
      elusive as finding a pot of gold.

      "Today if I want a 5,000-square-foot office, one nice single floor,
      open, looks like an office, you can see from one side to the other —
      there's no building like that in Delhi," said Mansingka, director of
      Noble Grain India, part of Hong Kong-based Noble Group.

      He is not shy about assigning blame for the shortage, calling it "a
      complete failure" by the government.

      Many critics agree, alleging years of inaction and incompetence by
      the Delhi Development Authority, the main body charged with planning
      and developing the capital.

      The agency did not want for good intentions or grand ambition. Master
      plans from as long ago as 1961 called for the construction of large
      marketplaces across the city — 21 of them, according to the most
      recent version — providing millions of square feet of office and
      retail space.

      But only nine such hubs have been developed, the rest bogged down by
      bureaucratic bickering, regulatory issues and alleged corruption. Of
      the commercial space envisioned by planners 45 years ago, a mere 16%
      has actually been built, critics say.

      At the same time, the population has exploded far beyond the numbers
      predicted. Half a million people migrate to Delhi every year,
      desperate for a better life away from India's poverty-stricken towns
      and countryside.

      "The plans originally made were done with very good intentions, but
      like all plans they had their shortcomings," said Ranjit Sabikhi, an
      urban planner and architect. Unfortunately, officials made no effort
      to review and modify the plans on a regular basis to keep up with
      demographic changes, "even when you could actually see that the
      conditions on the ground were very different," Sabikhi said.

      Officials with the development authority defend their record. They
      acknowledge delays but blame them on protracted legal disputes over
      land acquisition or on other agencies involved in development issues.

      "The land has not come into our hands," said Neemo Dhar, the agency's
      chief spokeswoman. "Had it come, we would have done it."

      The crunch is compounded by complaints of poor quality and
      maintenance of the little commercial space that has made it off the
      drawing board. One of the city's most prestigious addresses, a
      commercial center called Nehru Place, would be an eyesore by American
      standards. This concrete jungle features narrow storefronts, dirty
      pavement, exposed wiring, unsightly facades and inadequate parking.

      Businesspeople lament the dearth of "plug-in" office quarters where
      they can move in desks, hook up computers and be ready to go.
      Entrepreneurs often end up spending their own time and money to
      install flooring and roofing, lighting, high-speed Internet
      connections and backup power systems to cope with Delhi's frequent
      blackouts.

      As a consequence, many companies have fled to two satellite
      communities, Gurgaon and Noida, where modern high-rises are rapidly
      going up. Both lie just outside Delhi's borders, depriving the city's
      tax base.

      For those who stay, the alternative often has been to set up
      operations in unauthorized, often residential areas. Illegal markets
      have sprouted up all over. Among Delhi's half-million store owners,
      from mom-and-pop vegetable stands to high-end boutiques, an estimated
      80% work out of premises not zoned for commercial use.

      Many government critics say authorities have generally turned a blind
      eye to such violations or demanded bribes to overlook them, But a
      series of recent court rulings forced the city to crack down.

      The sudden zeal to shut shops and offices, after years of unofficial
      tolerance, prompted a huge outcry, including a wave of strikes and
      protests. Three people were killed during a demonstration in
      September after scuffling with police. Newspapers tell stories of
      company computers filled with vital information trapped behind sealed
      doors and client passports locked inside closed travel agencies.

      The clampdown has spared neither big nor small operations, hitting
      corner grocers as well as major retail outlets and bank branches. One
      of America's latest arrivals, the newly opened Metropolitan Museum of
      Art gift store, had to close its doors temporarily just weeks after
      its grand opening on the edge of a fashionable shopping district.

      To stave off a similar fate, Mansingka, the commodities broker,
      quickly took down his company's sign to avoid unwanted attention. He
      moved files down to the basement of the apartment building where his
      office is housed and replaced his ground-floor desk with a bed to
      fool inspectors.

      He also started scouting legal commercial properties just in case.
      But because of the severe shortage and the extra surge in demand from
      other worried business owners, landlords pushed already high rents
      still higher.

      One place Mansingka checked out shot up from $2 a square foot to
      nearly $2.80 in little more than a month. "It's blackmail," he said
      disgustedly. "Prices don't go up 35% in six weeks."

      For now, another court decision has granted a reprieve to some
      merchants who filed for relief. Mansingka's staffers are trickling
      back into their old quarters.

      Development officials say that several projects are underway and that
      new space will come on line over the next few years.

      Whether companies can afford to wait that long is another matter.
      Real estate agent Sanjjive Leekha has watched prices for commercial
      space triple and even quadruple since 2002. Now he warns his clients
      not to dally.

      "If you want a space and you don't take a decision fast," he
      said, "you'll be the loser."
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