Up up and away

Outlook has an article on the property boom in Indian metros. This is primarily fuelled by IT/ITES/BPO boom in NCR and some of the southern metros. I didn’t know Sahara group had set foot in the Chennai property market as well.

Velachery has emerged as Chennai's booming neighbourhood and prices have zoomed from Rs 1,000-1,500 per sq ft in April 2004 to around Rs 2,000 today.

"If you are looking at real estate as an investor in Chennai, you shouldn't invest in known areas like T. Nagar. You should look at the IT corridor along the Old Mahabalipuram Road, where a six-lane expressway is coming up," says Sridhar Varadaraj of the California-registered Hanu Reddy Realty. Since October 2004, prices in Ranga Reddy Gardens, Neelangarai, about 20 km from Chennai, have doubled. The upcoming Sahara City project near Chennai's Avadi-Poonamallee bypass that leads to Bangalore has also resulted in skyrocketing prices. A piece of land measuring 2,400 sq ft that could have been purchased for Rs 2-3 lakh last year costs Rs 20-25 lakh today.

People familiar with Chennai would have definitely heard of a property developer called Alacrity Foundations / Alacrity Housing. They were a publicly listed entity and their stock was quite a talking point during their hey days. Most of their projects were located in upmarket areas and they distinguished themselves by setting very high professional standards in an industry, which was plagued by red tapism, black money and murky deals. Alacrity set very high ethical standards by refusing to bribe the government authorities for getting various clearances and approvals.

While searching for Alacrity, I landed on the QFI egroup, which had a question on Alacrity in one of their quizes :-

This Chennai based company was incorporated in 1979. Its corporate mission reads - To try and prove that organized business when deeply committed to human values is the best equipped to lead society to a better quality of life. Their initial foray was into management consultancy, in which they were influenced by the views of Ayn Rand on the dignity and glory of the human being and bythe views of Peter Drucker on organisation and management. To cut the long story short, this venture wasn't too successful and they turned into the operations for which they are very well know today.

The very same Alacrity is now going through a very bad phase. They are virtually non-existent in the Chennai property market and their story is now being used as a case study in ISB (Who said Indian B-schools don’t have cases about Indian companies?). Here is what an ISB student wrote about the Alacrity case study :-

To give you some context, Alacrity prides itself on being ethical in all its dealings in the real estate space in Chennai. They were a renowned name around the 1990’s. We stayed in one of their apartment when I lived in chennai. They (Amol Karnad) initiated some out of the norm, moves like “home schooling, paying working women to take care of families instead of working, counselling its construction workers against use of alcohol).

Circa 2005, they hadn’t paid wages for 15 months, they are in the rut with SBI recently giving it an extended credit line, they seem to have lost a lot of their credibility (though in the 1990’s and late 90’s they had an impeccable name for construction quality).

Is honesty really rewarding?

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