Tuesday, May 15, 2007

Yet another gatecrasher…!

If you believe in something, go for it. This is the only way to really find out. Mathematically, the naysayers are right 95% of the time, but believing you’re in the 5% is what makes VCs they are.

Just as Ankur Srivastava, MD of DTZ brings out this report which talks about oversupply of commercial office space (in Chennai, it’s excess by 200% as they say) in Indian cities, Oak Investment Partners, the US based VC fund is setting up a Real Estate VC fund in India with a $ 200 m corpus. Can we call it the Symposium effect ?

Normally if you enter in an oversupply situation, the downward price pressure (or rental pressure, we are talking about real estate here) would take a long time to stabilize. That’s when leveraged investors (who have mortgaged the properties to Banks to fund their buys) begin to get margin calls from Banks and feel squished. Warren Buffet, the legendary investor's saying “the markets can remain irrational longer than you can stay solvent” comes to my mind.

I have often wondered why the Bubble horn is still not blowing. Aside of occasional rants by Deepak Parikh, Chairman, HDFC Ltd., India’s leading player in real estate and housing finance, not many seemed really concerned. [“How many malls can afford to pay Rs 100-150 or Rs 200 per sq foot? Look what happened to Crossroads (India's first mall). Only restaurants are left because food sells and the Piramals have sold out. The same thing is going to happen to other malls. There are many international brands, but they too cannot afford to be present in every mall”...Mr.Parikh squeals]

If you are riding the wave, why rock the boat....Welcome to party, Mr. Jerry Gallagher and prov'em all wrong !

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