The flight of the falcon

Downtown Bangalore's plexi-glass and steel totems to the information revolution are among the legacy offerings from Prestige Estates Projects Pvt. Ltd, whose every building is crowned by the insignia of a falcon - their (lucky) mascot. The company's first project was Prestige Court on Kengal Hanumanthiah Road in the mid-1980s. Since then, Prestige Estates, which is the flagship of the US$2 billion Prestige group, has completed more than 120 residential, commercial, retail and leisure projects, accounting for over 30 million square feet.

"Our corporate philosophy has always entailed exceeding the expectations of our clients. Under-promise and over-deliver, that's the mantra that's helped us grow and keep growing," says Irfan Razack, chairman and managing director of Prestige Group.

"Destiny takes you to different places. We started out by trading in the real estate business and decided to plunge into construction ourselves when we discovered there was a dearth of quality constructions," recalls Razack.

In the new millennium, Prestige Group gave a fillip to global retail that was slowly moving into India, with The Forum, a project that many would acknowledge as a benchmark in the country's mall space. Razack aptly calls it "a focal point of social gathering."

The company's latest offering, UB City - The Collection, is a thin slice of Manhattan overlooking the verdant Cubbon Park. Future projects include a mall in Hyderabad, a residential development in Cochin, a technology park in Chennai, a residential complex in Mangalore, and villas in Goa.

Neeraj Duggal, vice president of retail development, Prestige Estates Projects, has been closely involved in the concept and trade mix planning, leasing strategy and development of The Collection, which is readying for an April 2008 launch. The Collection is unabashed about seeking to become the first 'luxury' destination in India. Neeraj is responsible for design, development and operations of all mall initiatives of the Prestige Group.

Q: How will you place the current stage of shopping centre development in India in the larger context of urban planning?

Neeraj Duggal (ND): Currently, shopping centres are mushrooming at a dizzying speed, which is exciting as well as alarming to all analysts in India and abroad. Developers in India, mall operators abroad, and funds are all falling over each other to grab market share. While there are many reasons for this growth, the pattern and the lack of control in planning on a larger context is a matter of concern. This is bound to lead to a clustering that will surely lead to high failure rate and infrastructural breakdown.

Q: More often than not, the larger infrastructure development is not commensurate with the pace/scale of real estate projects. How can this gap be tackled?

ND: Infrastructure is a big challenge; some conscientious developers do attempt to trade off their area for road widening. Many are working in sync with municipal authorities to help improve their vicinity, which contributes to some extent. But there is a long way to go yet. The authorities need to have an open mind to engage the developers in improving the infrastructure. Presently, the approach is myopic and lacks vision – often, it is a case of putting a cart before the horse.

Q: Which are the biggest regulatory hindrances that, as a long-timer in real estate development, you would want to be done away with completely/modified?

ND: Liberalising FDI in retail; single-window clearance; and decoupling from real estate in terms of floor space index (FSI) and plot coverage.

Q: Perhaps among the most glaring inconsistencies in shopping centre development in India is the demand-supply ratio. Please comment.

ND: With the average growth in retail moving at 7-8 per cent and in some cities as much as 25-30 per cent, there is a mismatch in supply-demand ratio. Hence, the mushrooming of the shopping centres. But the moment there is a slight shift in this ratio, it will lead to a correction and a fall-out. A planned growth based on more accurate projections keeping in perspective the master plan would prevent many a heartache at a latter stage.

Q: What must necessarily be the middle way between availability/scarcity of (effective) real estate and the spiralling cost of acquiring real estate?

ND: Government being the largest property owner, should proactively free/address the supply situation to contain the escalating real estate costs. This has also resulted in the move by developers and retailers towards tier II cities to avoid exorbitant land costs. Having said that, malls will continue to be built – only, it will become a more suburban- or community-driven focus.

Secondly, the cost of land is going to affect the project cost; therefore, it needs to be factored in arriving at the yield. The yield is a function of occupancy cost, which in turn is driven by sales. If the retailer is sure of his sales, the rent can be worked at to achieve the required yield.