Government’s vision is what inspires people and the most exciting part: Anupam Yog
Virtuous Retail MD says govt has demonstrated it has vision on development of infrastructure, but the challenge is execution
Singapore: The Narendra Modi government has demonstrated that it has the vision when it comes to urbanization and development of infrastructure, but the challenge is execution and the ability to stay the course for at least a decade, said Anupam Yog, marketing director of Singapore-based Virtuous Retail that is backed by global investment firm Xander. The Xander Group is investing $600 million (around Singapore $750 million) in India (via Virtuous Retail) to build a retail presence in the top nine cities by 2017.
Rather than building 100 new smart cities, Yog said in an interview, India should look at making its existing cities smarter through use of technology, improve mobility within cities and between them and also upgrade social infrastructure to enhance the quality of life.
Edited excerpts:
You have done research on urbanization and some of your work is also part of the blueprint for the Delhi-Mumbai industrial corridor.
We promoted this whole idea how cities need to be walkable. We said if you don’t look at core urban infrastructure and also social infrastructure, you are really not creating the right conditions—Singapore was championed as a great idea. Prime Minister Narendra Modi has already made an announcement on upgradation and modernization of railway stations, which I think is an absolutely critical step. We are so fascinated by the idea of new infrastructure development that we often fail to recognise the legacy of the last 100 years, where we have a great amount of infrastructure that is already available. Maintenance and upgradation tends to be a neglected area in India. For development, you have to create social infrastructure and talent gets attracted to social infrastructure—if you look at any financial capital like Singapore or London, it is the social infrastructure and the quality of life that attracts high-quality talent to these cities. If we look at that as a factor of success, India has a lot to do in terms of improving liveability. The new government has been talking about high-speed trains, which points in the direction and that that there is a thought process that focuses on factors that are important.
So do you share the view that existing infrastructure can be relooked at as against building new infrastructure?
It requires both, and there is also a lot of technology available that needs to be used. It is much more than infrastructure—it is about a vision which I think is the most exciting part when I look at the new government and this is what inspires people. Even something as simple as the “Clean India" campaign is very inspirational, in terms of the way action and thought has been mobilized around a very simple idea. Vision is the most important, which clearly there is. Then it is about ideas—it can even be simple ideas that have a large impact. After this, you have to deliberate on what kind of infrastructure, how do you go about it, how will it be financed, how to attract investors, how will it work for them…these kinds of issues need to be deliberated—the building blocks for this are being put in place.
What are the challenges?
The big challenge is the nuts and bolts—this is not an overnight process. The challenges are land acquisition, labour laws, financing these projects—it is about how you sequence it. We live in a geopolitical world and I am glad to see there is a lot of activity on foreign policy by the new government—in improving relations with other countries of strategic importance—and even our immediate neighbours. These things have never received such visible attention as I see happening now. I am also pleased to see the new government is leveraging modern-age communication tools—given the demographics of the country, these are not necessarily just symbolic, but will have a knock-on effect on how the country mobilizes itself, and how people and talent are harnessed to achieve all of this. It is a long journey and we have to stay the course consistently. If you take a tangible measure of, say, foreign investment, it will certainly take a decade, to be conservative, to see the changes. Given the size and scale of India, the kind of opportunities its consumer market offers, if you look at its economic potential, given its demographics, I think a decade is a good time to reorganize and compete at a global level—a decade is a good timeframe if we stay the course.
Modi may have the vision, but do his ministers and people under him get it?
You have hit upon a very important point, which is, what are the rules—you can assemble the players and get the referee, but if the rules of the game are not set out clearly and followed through…India’s credibility is quite weak in this regard. It is about setting the rules and letting people play within the rules. The India opportunity is unparalleled—it is not just the size of the market, but the stage at which the country is in terms of its demographics. We all know that doing business in India is difficult, and that is where the opportunity is.
For Virtuous Retail, we have been at it in India for the last seven years and have developed a portfolio of about 7.5 million sq. ft of assets under development and operations and, I think, it has been quite a unique opportunity even though retail, real estate is an extremely difficult segment. Our first centre opened in Surat in Gujarat, the second is opening in Bangalore and the third in Chennai. We are also into Pune and Mumbai. These are all great markets unto themselves. If you are looking at building a long-term business, it is a great market to be in, but you need deep pockets and you need to assemble the right kind of investors.
India’s inherent strength is that it is the fastest growing free-market democracy. You can portray democracy as a weakness, but it is an inherent strength and I don’t think we need to go into the benefits or merits or demerits of democracy—the idea of a free society, which we saw fully in play in the last elections, the idea of a free media—all of these factors are very enduring and someone needs to harness those. Someone needs to articulate a strong vision, needs to put together a team to set up the right rules and then implement—all this is only as good as the implementation, and you really need strong people in both private and public sector to do it.
Since you have studied and worked on urbanization models, what is your take on the government’s plan to build 100 smart cities?
I hope it does not necessarily translate into the development of new cities—we have an enormous set of assets in terms of existing cities and the focus needs to be on transport and social infrastructure. Those are two key things—mobility within and between cities and social infrastructure will help attract talent. We need to make the existing cities smart using technology. You are basically enhancing the quality of life by using technology. India is a great telecom market—everyone has a mobile—the building blocks are already in place and it now depends on how you harness them.
Are sales in malls being dented by e-commerce?
E-commerce is just a channel. Depending on how regulation pans out, from a foreign investment standpoint, we only see it as an opportunity. People are technology-oriented and we feel that consumers are using their mobile and the Internet to educate themselves prior to visiting malls. There is an experiential element of retail—look at the US where the impact of e-commerce has been severe on retail—even there, retail real estate has not died, but it has evolved into something more. Our whole thesis of not just building a mall but a community-oriented lifestyle centre has become even more relevant. What is to be seen is, how are we going to design such centres for the future—we are very aware of this and have been focused—whether it is digital screens, whether it is creating public plazas—our centres are built to serve as focal points for the community, and it creates added incentive for people to visit, incentives for people to stay longer and it has a knock-on effect on shopping. The e-commerce bit is simply an enabler, and I see models like click-and-collect coming in play. Retail is highly under-leveraged in India. Retail and tourism are two sectors that need topmost priority from both the private sector and government. The government primarily because rules need to be created to push these sectors. These are very strong job-generating sectors—you can create the largest number of jobs through these sectors. You don’t need very highly skilled people; so from a demographic standpoint, it is a great way to create and absorb people. If you look at any developed economy, these are two sectors that contribute an enormous amount to their GDP (gross domestic product). The underlying problem is land and the pricing, so you need to focus on correcting these aberrations and making it a far more attractive sector than it currently is. You also need to think about enabling entrepreneurs to enter these sectors.
Is there excess supply in terms of retail space?
No. There is a dearth of supply—bear in mind that quality supply is very limited. There is a huge dearth of high quality retail real estate and, sometimes, it is good for a company like ours—the remaining part of our portfolio is set to become operational in the next five years and we are well positioned to leverage that opportunity.
Recently the Securities and Exchange Board of India (Sebi) unveiled real estate investment trust (REIT) regulations—how do you see this transforming the sector?
Investors are not necessarily as excited as the creators of the policy. If you look at it from the point of view of a retail investor, I just don’t think it is attractive enough the way it is currently structured—interest rates are higher than cap rates in some instances. The good news is at least India is in good company and has joined markets such as the US, Hong Kong and Singapore which have REITs. I think this is the first step, but clearly there is some refinement that is needed really to be able to list REITs, and to benefit the retail investor. It is a good opportunity conceptually, and it will benefit the retail investor—but, clearly, you need to create an enabling environment for people to list REITs. There is a lot of discussion and debate around it, and the kind of people I see coming into policymaking roles, it is still early days, but in 12 months, there will be a lot of action.
As an investor who is based outside the country, how do you view the new government’s performance? What would be the key reforms you would like to see implemented for your sector?
The way I look at it, it is not so much about reforms as much as it is about putting in place a set of ideas in motion. In my mind, the focus on cities or urbanization is very good. Urban focus is absolutely essential. Real estate—urban land and urban transport—are two critical factors, along with social infrastructure, in our cities. If you just get that alone right, it has a domino effect, and that would be the most critical thing. On a sectoral basis, I would say retail, tourism and education. Schools and hospitals are great economic catalysts—it is all intertwined. If we manage to get these two things right, frankly, I don’t think there is much else to do. I genuinely believe we should focus on existing cities. If we manage to get the investment in, get these projects off the ground, and let these projects see the light of day—that is all it requires. We need to make it simple for people to get on with the job, I mean the number of approvals required is very long. If I were to pick one thing, it would be—set the rules, be transparent about them. Rules is the one thing that we don’t have too much focus about, we don’t seem to care about them and that would be my biggest point—set the rules and don’t change the goal posts.
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