Getting on the India Ride: Arrival – Excitement – Reality Check

For the first few days in India (about Oct 30 – Nov 1), being in Delhi gave me the opportunity to run the SCA concept and mission past some old pals from the World Bank and take their sage counsel on prospects in India and elsewhere.

One evening, I had dinner with Chandrashekar Pant and Ritu Anand. Chandra was one of my bosses – at the time, Principal Economist for former Soviet Union countries – at the World Bank many years ago and is now semi-retired/consulting for the development finance institutions. Ritu was another senior economist in my division at the time and now is the Chief Economist and Policy Advisor for the Infrastructure Development Finance Company in India. On another evening, Chandra toted me over to the house of the current World Bank India Office Director, Roberto Zagha, where I was fortunate to meet both Roberto and his wife, Patricia Annez, a noted senior urban policy specialist and former head of the World Bank’s Urban Division.

Progressive partners. I was grateful to get so many different perspectives on the Smart Cities Advisors concept. Ritu, for instance, agreed with the ideas and objectives I was detailing, but she highlighted several challenges to implementation and uncertainty about the approach and benefits. She felt it would be necessary to partner with progressive cities because the support of the municipality would be necessary for anything beyond very small individual investments.

What’s the real impact? Patricia, in the course of the other dinner, seconded this strongly and added that investing in individual buildings in urban areas with endemic social problems in Brazil, for example, (another SCA target country) would have limited demonstration impact and would represent unnecessary risks to investors. And what would be the point in investing in a neighborhood on the upswing already? You’d just be cashing in and having little real development impact.

Portfolio construct as a solution. All excellent points, of course, but the value of investing in a neighborhood on the upswing might depend on the portfolio construct. An appropriate investment vehicle might combine higher return projects with more established partners with other projects that are lower return but more experimental and hands-on. In this case, the blended rate of return might be sufficient to attract investors with an interest in positive social and environmental impact but who still want to earn a financial return.

Big city or 2nd/3rd tier city? Another good question that came up. The small and medium-sized cities actually seem to be growing and changing faster with more complexity to cope with as growth draws people in from rural areas to existing and new slums and also pulls people out to new developments in peripheral zones or agricultural land. Yet, bigger cities may have more opportunities and underutilized space in the urban core. Chandra and Ritu felt strongly that in India, the best places to look at would be cities like Surat and Vadodara whereas cities like Bombay were already densely populated, with land already at a huge premium and with more complex governance issues. Plus, the “optics” of big redevelopment projects in big cities – like the mill lands and redeveloping the slums of Dharavi (an outline of government plans for Dharavi) –  can be difficult as these projects are seen as non-transparent, dirty money projects – yet another example of developers getting rich.

Big investments are… big… and risky… Capital is an issue too. If you have to do something more extensive to invest with real impact, then you’d have to raise a substantial fund, which would require connections and a real mandate to invest.

Ownership is another problem. Ritu thought, sure, there are opportunities for existing buildings to be redeveloped and retrofitted, but there would be problems with determining ownership, getting permits, etc. Even just doing limited renovation work on her apartment had been a slow, frustrating experience, let alone redeveloping an entire coop building in Mumbai with all the challenges of negotiating with residents as well.

Challenging yes, but helpful to start “pitching” and extremely healthy to get unexpurgated feedback. All a good reminder of how important it is to have objective advisors and commentators with both local and global knowledge. Good to inject a dose of realism and skepticism at the start of the trip and focus on how to make a noticeable, positive impact with a limited amount of capital in a difficult investment environment.

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