In India, a boom that's bursting at the seams

GLOBAL CAPITAL
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
December 23, 2006


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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