Summit Notebook

A bubble in the real estate market?

Have you tried buying or renting a house in Mumbai recently? If so, then I won’t be surprised if you think real estate prices are plain expensive, and incredibly so. But that’s almost always been the case in India’s commercial capital. After all, when was the last time someone told you they got a cheap house in the city?

So is the real estate market in a bubble? We asked Adi Godrej, the man who controls Godrej Properties, if things could get bubblicious. This is what he had to say: “I don’t think we are in a bubble, because demand is strong, but we could get into a bubble.”

Godrej, whose family fortune is estimated to be about $5.2 billion, doesn’t really care if prices go up in south Mumbai’s old-money neighbourhoods such as Malabar Hill or Altamont Road, where Reliance Industries chairman, billionaire Mukesh Ambani, is building a 27-storey $1 billion home.

“I would be more disturbed if middle-level and lower-level housing in Mumbai were to go up much,” Godrej told the Reuters India Investment Summit in Mumbai.

Godrej Properties, which is developing a lot of what is termed ‘affordable housing’, expects revenue to jump more than 50 percent in the fiscal year ending in March as rising incomes boost demand for housing.

If prices continued to increase at current supply levels, the Indian residential market could head into a “bubble.”

The company, part of the $2.5 billion diversified Godrej group, defines ‘affordable housing’ as an apartment that carries a price tag of less than 2,500,000 rupees or $50,000. Is that within your budget?

‘String of pearls’

  ”String of pearls” could have different meanings.

It is how MphasiS Chief Executive Ganesh Ayyar refers to the Indian IT services provider’s strategy of going for small to mid-size acquisitions. The bigger ones can become a “noose around your neck”, Ayyar said.

The company, 61 percent owned by Hewlett-Packard, is buying the India-based IT services arm of troubled U.S. insurer American International Group. Ayyar, who spoke to us about the company’s “ambidextrous approach” to business, indicated today that any future acquisitions would be in the AIG ballpark.

DELIVERY CAPACITY 

Ayyar also told us that MphasiS was close to opening its first offshore global delivery center outside India.   He offered us no color, telling us to “let it remain a monochrome.” All we know for now is that this center will be in a low-cost emerging market. Your guess is as good as ours.

Breakfast with SAP, anyone?

If you know 5,500 software professionals in India looking for a job, just send them over to Stephen Watts, SAP’s chief operating officer for Asia Pacific and Japan. The Irish-born Watts, who is also temporarily heading the business software group’s India operations, denied any talk of doubling headcount in India by 2010.

SAP has focused in the past on contracts with large customers but is increasingly turning towards mid-sized companies. While talking to us on a conference call from Singapore, Watts compared small and medium enterprises (SMEs) to breakfast. “Life begins with a good breakfast,” he said, emphasising the importance the company gives to SMEs.

SAP’s high-growth markets in the region are obviously China and India, but potential rising stars, as far as Watts is concerned, include Sri Lanka and Bangladesh.

DEAL TALK 

Watts said SAP is “continuing to look at acquisitions” but he didn’t specify where. References to somewhere on the big planet, which is 70 percent water, can’t exactly be classified as helpful. But then for a person who works from 5 to 9 (and not the other way around), a sense of humour may just be the right elixir.

What’s in a Name?

Mahindra Satyam’s president of global operations, Atul Kunwar, told us the “first instinct” was to drop the Satyam name when the company was acquired in the wake of India’s biggest corporate fraud.

“We all need to have a name; sometimes we like them, sometimes we don’t,” Kunwar said while explaining that the company known as Satyam Computers was also known for its “solidity” and “great delivery.”

Mahindra Satyam has managed to retain the 380 customers that the firm had when Tech Mahindra won an auction to take it over. The Satyam name may have been a hard sell after the scandal, but one organisation insisted that the old name was good enough to be displayed in lights: international football’s governing body FIFA.

As parent company Mahindra & Mahnidra is big in vehicles, Korean carmaker Hyundai objected to its logo being shown in the list of sponsors for FIFA events, Kunwar told us. So the old name stood during the Confederation Cup that was held in South Africa in June.

Of course, those fighting the company in a class action lawsuit in the United States may not seem too amused, but then again, does anyone in the country care about “soccer”?

The Reuters India Summit comes to Bangalore

On Wednesday, the Reuters India Investment Summit comes to the information technology hub of Bangalore.

The city has become synonymous in the West with outsourcing and “cheap labor” but is rapidly emerging as a hot spot for research and development. Bangalore is also marching ahead in the information technology value chain. Some companies like Wipro actually outsource work from India to Egypt.

However, the city poses several challenges for the multinational companies. Infrastructure growth in the city hasn’t kept pace with population growth and economic development. Power cuts are frequent, and it isn’t uncommon to see pothole-filled roads clogged with traffic against a backdrop of modern glass and steel buildings.

Other challenges for the outsourcing industry include pressure from populist U.S. politicians, who point out that the economic recovery hasn’t been able to curb unemployment. Buffalo, though, is unlikely to take away any jobs from Bangalore in the foreseeable future.

The Bangalore leg of the Summit will feature senior executives from the information technology giants including Infosys, Wipro, Mphasis, Mahindra Satyam and SAP.