Archive for July, 2010

Longer way round

Saturday, July 31st, 2010 July 31st, 2010 Srinivas Krishnan

Mahindra Monsoon Challenge 2010
Mumbai – Bhopal
Day One
Mumbai – Nashik

I could have forgotten I was in Maharashtra, and was somewhere in Himachal Pradesh instead. And this was on a route between two of Maharashtra’s big cities – Mumbai and Nashik; a route that many do as a return journey on a single day. But on this day, we were not going to stick to the highway simply to log in kilometres and stitch together the two cities. We were going to take a scenic route that many ‘commuters’ between Mumbai and Nashik would miss.

Skipping the NH3, we took State Highway 44 and went driving on a dark, twisty ribbon of tarmac that wound its way through a lush, greenest-of-all-greens landscape. The rains had drenched the land with precious water and the earth was returning the favour. The ones who benefited were of course us; our eyes which had been used to jungles of grey concrete were now being dazzled by moist grass, verdant rolling hills and leaves dripping with rainwater. And that was before we took the 30 km Kasara bypass that would take us back to NH3.

The bypass took us through the most stunning landscape that we would have never expected in this part of our country. The foliage, fed on a rich diet of pure water, threatened to overwhelm the already narrow road. Waterfalls cascaded down mountain slopes, feeding little streams that in turn fed a river that twisted and turned along with the road. We would cross the river several times, going over it on quaint bridges. A clearing allowed us to take the three vehicles right up to the riverfront and well, it was a spot we would have spent the whole day at…

Ah, the vehicles. We were driving three diverse yet similar Mahindra machines – the Bolero, the Scorpio and the Xylo, and they are virtually going to be our homes till we reach Bhopal and return to Mumbai. The three machines are diverse because the Bolero is a highly utilitarian machine, the Scorpio is an SUV and the Xylo is a comfortable MPV. But the three machines are linked by their rugged appeal, torquey oil-burners and a general go-anywhere attitude. The three Mahindra vehicles are mile munchers, and at the end of the long day (we hit the road at 6 AM), I am still comfortable and raring to go tomorrow morning.

Each vehicle has a two-member team, who are responsible for their respective vehicle. Rohin Nagrani and Aman Chaudhry have been hogging the Bolero, while it’s difficult to prise the Xylo’s keys from Kartik Ware and Aneesh Shivanekar. As for me, I had nothing to complain about – Jatin Lodaya and I are in the well-appointed top-end Scorpio that seems to have everything you could ask for, except perhaps a microwave oven! (Now M&M, please don’t get any ideas.)

The long way round meant we also had lunch at the superbly located MTDC resort in Bhandardara; it was difficult to move us from the bench overlooking the water body after lunch. But the road, Sula Vineyards and Nashik awaited us.

By early evening, we were parking our vehicles for a photo shoot at the picturesque facility of India’s most prominent winemakers. It was a sight - the three white Mahindra vehicles surrounded by rows and rows of vineyards. Sula has revolutionised the Indian wine industry and they are riding the wave of more and more Indians falling in love with wine. Many years back, I had visited the same facility, driving down in a Mercedes-Benz S-Class for a story. Today, I am amazed by the transformation of this place. It has two restaurants, gorgeously landscaped lawns and a beautiful Greek-style amphitheatre and a vast balcony where you could sip Sula’s finest and look out at the vast vineyards spread in front of you. While the rest of the team went on a tour to see the making of the Sula wines, I caught up with Ajoy Shaw, the chief winemaker, who remembered me from my previous visit. Of course, we picked up various souvenirs of our visit to Sula for taking back home!

Tomorrow is a long day and 400-odd km of various diversions later, Aneesh should give you an update from Indore. The 2010 edition of the Mahindra Monsoon Challenge is well underway…

When will we analyse MF inflows-outflows correctly?

Friday, July 30th, 2010 July 30th, 2010 BG ShirsatBG Shirsat

Mutual funds assets under management (AUM) data published by the Association of Mutual Funds in India (AMFI) every month has been news item for all financial journalists. Unceremoniously, journalists interpret the AUM’s inflows and outflows attributing to banks and corporate sector as major culprit. The financial experts supply appropriate quotes to respective reporters to authenticate news analysis.
However, the interpretation turns out to be careless work if reporters analyse the monthly AUM data more carefully, and with the help of supportive information provided by the AMFI.  The heavy redemption at the end of quarter has been more or less mandatory with the mutual funds debt schemes contain 45 per cent portfolio with one to three month maturity. Another 21 per cent debt portfolio expires between 3-6 and 6-12 months.

Historical evidence suggests that debt funds face outflows at the end of every quarter mostly on account of redemption of fixed maturity plans. With MFs floating time-bound fixed maturity plans (FMPs) to attract investments from the corporate sector and banks, the maturity of such schemes also increases outflows. Nevertheless, quarterly outflows become inflows immediately next month in the short term MFs schemes.

The corporate sector has 46.48 per cent shares in the Mutual Funds AUM of Rs 614,547 crore as per the AMFI data dated March 31, 2010. Of the total exposure of the corporate sector, almost 68 per cent (Rs 193,383 crore) has been parked in debt schemes which has maturity period up to 3 months. Banks and financial institutions, however does not have very high exposure (Rs 48,800 crore) in mutual funds. Of the total exposure Rs 30,800 crore has been for short term duration.

So, outflows in the mutual funds schemes may not be entirely withdrawal, but on account of an unavoidable redemptions. The following quotes for June 2010 outflow become factually incorrect when an expert say, “The combined effect of banks withdrawing funds from mid-month itself, and corporations taking out money to meet their advance tax payment requirements, delivered a huge blow to the mutual fund industry in June”

“Usually during the quarter end, 10 per cent of the assets are pulled out by banks from liquid funds,” says …

A debt fund manager, requesting anonymity said, “Typically the money moves out toward the month end. This time it moved out in the middle of the month and hence the outflow was seen”.

Asked when these funds would return to the industry, the fund manager said, “The money will come back if the liquidity turns positive money. But will it come back. My guess is a large part may not come back at all. The assets will not go back to May level.”

There was sensible quote which say “Also, the usual quarter-end phenomenon had an impact on treasury management schemes, as normally companies tend to spruce up balance-sheets ahead of every quarter”.

Finally, a credit policy worth writing about!

Tuesday, July 27th, 2010 July 27th, 2010 Rajiv Shastri

In Tuesday’s credit policy announcement the RBI hiked rates as expected. But for the first time in years, it hiked the reverse repo and repo rate unequally. This can only be good.

In times of surplus liquidity, the RBI borrows from the market at the reverse repo rate, the lower of the two policy rates. On the other hand, in a deficient liquidity scenario, it lends to the market at the repo rate. The difference between the two rates, which was 50 basis points (bps) at the time they evolved into policy rates was relentlessly widened to 150 bps during the governorship of Dr Y V Reddy.

The reasons behind this change were never explained fully, but then, Dr Reddy wasn’t inclined to explain most of his monetary policy actions. In use, however, this gap became a potent monetary weapon which could be wielded at any time to change rates dramatically without any apparent change in monetary policy. It gave the RBI power to change market conditions without changing policy rates and was used frequently, often with devastating effects.

The use of this weapon was considerably easy, using RBI’s almost complete control on systemic liquidity. Small changes in CRR can make the difference between a liquidity surplus and a liquidity deficient market. Moreover, with government tax collections being periodic and chunky, it is possible to turn a liquidity surplus system to a liquidity deficient one without an action. Since advance tax payments will be made as scheduled, by not taking any action to compensate market liquidity for such outflows, banks could move from lending to the RBI at the reverse repo rate to borrowing from the RBI at the repo rate.

Since such lending and borrowing operations decide the overnight rate, which is the foundation for the term structure of interest rates, it was possible for the RBI to change systemic interest rates by up to 150 bps without any monetary policy action. This allowed the RBI to conduct monetary policy in a covert manner, unbecoming of a government institution in a democracy. It also introduced uncertainty in the overnight rates, which resulted in higher spreads and consequently, higher rates for long term borrowers. How does one price a five-year loan/bond if one isn’t sure whether the overnight rate is 3.5% or 5.0%?

This first step in reducing the width of what is colloquially called the LAF “corridor” needs to be lauded despite the fact that this corridor is still too wide. More such steps will be needed which will, hopefully, reduce the gap to either 25 or 50 bps. This will stabilise overnight rates across liquidity conditions, stabilise overnight rate expectations and result in finer pricing for the term structure. Ultimately, it will lend more credibility to monetary policy actions by improving their transmission to the banking system and the real economy.

It’s easy to say that more could have been done, but to my mind, even if the credit policy statement consisted of just this one sentence, it would still be a good policy. Well begun is half done, the saying goes, and it’s apt in this context. At this time, we need to celebrate RBI’s tacit acknowledgement that this is a problem which needs to be corrected.

Another issue that needs to be addressed is the use of CRR as an instrument of monetary policy. Encouraged by China’s success in using CRR to manage system liquidity, recent statements by senior RBI officials show the inclination to use it here is rising. The width of the LAF corridor, no doubt, added to its attraction with one monetary tool influencing both liquidity and interest rates. However, considerable challenges exist in its use in India when compared to China. The banking system in China is characterised by its homogeneity in ownership and to a certain extent, size. In this environment, an increase in reserve requirements impacts all banks almost equally resulting in efficient transmission. This isn’t the case in India.

With banks of all size and ownership structures co-existing, changes in reserve requirements have an unequal impact which can result, and has historically resulted, in occasional existential problems for banks disadvantaged by such changes. And if this tool is used in place of, rather than along with other liquidity intervention methods, it can disrupt normal functioning of the banking system. This has been proved in the past, with October 2008 being the most extreme manifestation of its impact.

It is expected that a reduction in the width of the LAF corridor would reduce the attractiveness of using CRR as an all-in-one tool and result in distinct monetary tools being used for managing liquidity and interest rates. But this is merely an expectation. As in the case of narrowing the LAF corridor, we need to wait for evidence in either words or action.

The blogger is an independent macro-economic consultant and has been a part of the debt market for over 15 years. He also blogs at Views are personal

Fusion MBA

Tuesday, July 20th, 2010 July 20th, 2010 Lipi Mohapatra

Rohit Verma, a student at IILM – Business School New Delhi landed at Royal Estate through campus placement. In a brief time of one-and-a-half months, Verma was promoted as sales development manager and got a 50-per cent hike in salary. He is based out of Delhi now.

Nitish Madhur, a student of Rai Business School, New Delhi who graduated in 2006 joined Dabur through campus placement. After his 30 months experience he moved to Fab Miller. Currently, Madhur is with Pernod Ricard India, as a key accounts manager.

Both Verma and Madhur are fusion MBA grads. Their career best states that to get a foot in the door what matters is your managerial skills, how best you market and prove yourself during the job interview. Developing yourself during the two years MBA program is important.

A management programme is skill enhancement platform, which doubles your employability, facilitates a student with opportunities to meet the corporate requirement. The focus should be on the process, the quality of the delivery and then learning outcome of it.

MBA programs that combine full-time interactive classes, with a regular employability skills development programme and standard industry interaction and industrial visits, though the mode of degree is in distance learning, are gaining acceptance and popularity among B-school students.

Such fusion MBA programmes providing in-face interaction on a daily basis are quite similar to conventional MBA programs.  B-schools offering such programmes provide their autonomous certification besides providing an MBA degree through some reputed university affiliation. And the cost of this MBA is almost equivalent and sometimes more than a traditional MBA program.

This is because business schools running fusion MBAs do every sort of academic activity and industry related activities to stay at par with any regular MBA program.

Currently, hiring managers do not differentiate much between an MBA/PGDBM in regular mode and these fusion MBAs, unless the student fails to prove his mettle in either case.

Seeking views from one of my friends who is an HR manger at an MNC revealed that a full-time program with training programs and other live projects definitely has its own value. As long as it is not correspondence, which has rare contact classes, fusion programs are almost equivalent to a traditional MBA.

Recruiters feel that ultimately it all depends on the fact that how a candidate proves his strengths and eligibility for the job s/he is applying for. If s/he turns out to be most appropriate, then management learning from a government recognized institue or an autonomous institute can be overlooked.

There are enough examples of students who pursued MBA through ‘fusion’ mode and are have found ready acceptance in corporate.

The author is Director, IILM - Business School, Mathura Road, New Delhi

See Them Not, Don’t Hear Them Either

Friday, July 16th, 2010 July 16th, 2010 Praveen Bose

What happens in the legislatures is often news. Perhaps that’s why the Karnataka legislators decided to throw all legislative propriety and norms to the winds, and let their baser instincts take over, and let the drama play out in everybody’s drawing rooms..

The ruling party threw the book of legislative norms and rules into the waste paper basket. A democracy works through consultation and bills are passed in the legislatures by the MLAs who vote on party lines, depending on the party’s stand on a bill. What if there is a deadlock in the legislature which does not allow any work to go on i.e. from any bills being passed?

The easiest way out is to prevent even the minimal discussions on the bills. Discussions take time… too much of it. The ‘Argumentative Indian’ won’t let anything like passing a bill being done so fast and so easily.

A “government was about creative tensions” if you go by what Kamal Nath, the man in charge of our roads and highways, said.
But, too much of it means the ’state’ can turn comatose. Karnataka legislators succeeded in doing just that.

But, the ruling party ensured that the job had to be done, and on time. While the opposition MLAs protested and were on a dharna, as they had done for the past few days, the ruling party got the job done.

They passed 18 bills, yes 18 of them, at one go. Perhaps a stroke of genius people would say. All bills passed by voice vote… the ‘ayes’ and ‘nays’ being counted using some technology unknown to anyone yet.
Are they the ones people like me vote for? They did not discuss the bills… or probably did understand what the bills were all about. They had to pass it, and just passed it.

And, these are the people we expect to sort out our problems.

The CM and the opposition leader showed off their muscles in the House. Alas, the people who voted for them did not get to see their wrestling skills from being tested. Their respective partymen stopped them before they did. While the CM pulled up his pants and girdled his loins, challenging the opposition leader to a bout, the opposition leader Siddaramaiah showed of his biceps.

I have decided, the next time I vote it will not be a vote for the best educated or the least corrupt, but it will go to the physically strongest candidate. I, as a voter, will be able to gain most then.

Of politics and diplomacy

Friday, July 16th, 2010 July 16th, 2010 Aditi PhadnisAditi Phadnis

Most of us saw the joint press conference in Islamabad, addressed by Indian Foreign Minister SM Krishna and Pakistan Foreign Minister Quraishi.

Although the patience of both began to wear a bit thin towards the end, Krishna answered: “that’s your opinion” to a long question by a Pakistan journalist on the ‘rape by Indian Army which is an army of occupation in Kashmir”

My limited question is: would the press conference have gone the same way if it had been Shashi Tharoor in the chair instead of SM Krishna? Curious to know what you think…

Source of despair

Thursday, July 15th, 2010 July 15th, 2010 J Jagannath

Hours after the Stanley McChrystal story got published in Rolling Stone, Politico, a US-based news web-site remarked that the writer Michael Hastings was a freelancer and, ipso facto, could write such a no-holds barred piece. As usual, Politico got it wrong. Any editor would hack his or her right arm for such a damning piece. So what if the ‘sources’ might never be helpful again. My exhibits: Woodward and Bernstein were cub reporters, nowhere near the White House beat, when they cracked Watergate. Seymour Hersh was a freelancer when he broke My Lai. And as New York Times puts it, “It was uncelebrated reporters in Knight Ridder’s Washington bureau who mined low-level agency hands to challenge the slam-dunk WMD intelligence in the run-up to Iraq.”

What Michael Hastings did was old-school journalism. A senior journalist once defined it to me: “It’s calling and calling and tracking leads and this is what journalists used to do before they got used to being fed scraps and doing sting nakhras when their sources were caught in a weak moment (read drunken haze).” In the current times of fixing up appointments in a watering hole, Hastings instead hung around McChrystal and his coterie for a month, which was facilitated by Mt Eyjaffjallajokull’s explosion. You can’t expect McChrystal to say “Bite Me” instead of Biden at the spur of the moment.

Hastings’ interview was an unqualified anti-thesis of Mark Twain’s impression of an interview: “You (the interviewee) close your shell; you put yourself on your guard; you try to be colorless; you try to be crafty, and talk all around a matter without saying anything.”

And anyway, what sources is Politico referring to? Preserving your sources during journalism’s heyday was done by dropping in at their office and chatting them up instead of sniffing around for a story idea. Nowadays, journalists’ sources are restricted to either their gTalk list or, even worse, Facebook friends list.

Post-Twitter, major news stories are broken through the users’ unbridled exuberance to showcase their tweet-sized thoughts. One Mumbai-based tabloid even has a section called ‘cho-tweet’ to chronicle Bollywood celebrities’ garbage heap. The day is not far off when officially every mainstream daily and news channel has desk dedicated to tracking celebrities’ tweets.

HQ: Headquartering Inspiration

Wednesday, July 14th, 2010 July 14th, 2010 Ushamrita Choudhury

Last week, I was fortunate to view an entertaining, interesting and awe-inspiring programme on one of the ‘news and knowledge’ channels — fortunate, because of the dearth of sensible programmes on television these days.  The programme I’m talking about showcases engineering marvels around the world, and the one in focus on that particular day was the world’s first spherical structure, the HQ building in Abu Dhabi.

HQ is a high-end, ultra-luxe and uber-glamourous commercial building which has been developed by Aldar Properties PJSC, one of the foremost real estate developers and managers in the Middle-East. The company enjoys close affiliation with the Abu Dhabi government, and is supported by a nexus of strong financial sources.

HQ has been designed by internationally renowned firm MZ & Partners. It enjoys the status of one of the most innovative buildings to have graced the Middle-Eastern landscape. The prestigious ‘Building Exchange Conference’ recognised HQ as the ‘Best Futuristic Design’, a notable achievement for not only Aldar, but also the Middle East. The developers of this ultra-modern commercial premises have undergone unimaginable challenges to design and construct an edifice which has truly revolutionised the face of an already infrastructurally advanced region.

I watched the show with child-like curiosity, eager to know what was next. Such was the footage. The show began with the conceptualisation of the mega-structure, and ended with the intricate construction of HQ. What began as a designer’s playful fancy soon caught Aldar’s attention. The rest, as is rightfully said, is history.

Every stage of the development process was a daring confrontation of the unknown. Designers, engineers, contractors and specialists, from diverse geographical, cultural, lingual and philosophical backgrounds, converged at HQ’s blue-print. One can say that HQ almost ‘headquartered’ a team of innovative visionaries who sought to translate a simple idea into a serious product.
It was amazing to see the dedication and patience with which this project was dealt with. Abu Dhabi isn’t blessed with many of the resources that go into the construction of such a complex structure. Money is perhaps one of the only resources that are available in the Emirate region with ease, after oil ofcourse. Steel, cement, glass, aluminium and other assorted elements, including custom-built toilet blocks, had to be imported from around the world.
The atypical design of the HQ made construction tricky; engineers and architects had to redraw the external skeleton of the building, because natural elements like sunlight and wind, both of which are in abundance in the region, posed safety problems for the HQ’s glass and steel structure. Wind and glass engineers were regularly consulted before any decision was taken by the designers and architects.

‘Wind’ and ‘glass’ engineers came as surprise; I mean I have heard of sound engineers, but never wind and glass! The determination of those involved with HQ was a valuable learning. Owing to its spherical design, even the manner in which components like the triangular glass panes and circular steel super-structure were manufactured was unusual. A glass-pane manufacturing mini-plant was set-up in the periphery of the HQ compound. This was done to accommodate last minute changes to the specifications of every single pane, because even an inch here or there could disturb the strength of the entire building. Massive cranes were erected, and each crane had a special role to play- while one of the cranes lifted the panes for fitting, another one orchestrated the joining of steel panels. Yet another one pushed down toilet-blocks through an exact-measuring internal cavity of the building.

Coordination between the various departments was seamless. A 19-month deadline for developing such a massive structure, complete with interiors suited to every client’s individual requirements, is anything but practical. However, for MZ & Partners and Aldar, it was an opportunity to defy the norms, which they did in style.

The project was complete in all respects well within the stipulated deadline. As the show concluded, I felt agitated. I knew I wouldn’t get to see something as enlightening in a long time to come. It also made me wonder, in a familiar jaded manner, that if Abu Dhabi can achieve something as superlative as the HQ, with a scarcity of resources required for infrastructure advancement, why couldn’t India? We are more or less blessed with resources, raw and manufactured, to meet any infrastructural demand. However, enterprise, the most important resource in such cases, is amiss. Be it trained designers, architects or engineers, the spirit of enterprise is woefully missing in our country. While it is true that the Emirate nations can rely on sturdy financial bedrock, they do face substantial deficiencies in labour and raw materials, vital for infrastructure development. In India’s case, both labour and raw material is abundant. India’s dependence on raw material imports is much lesser as compared to that of any Middle-Eastern country.

It’s not even the ideas that are in short-supply; Indians are among the most innovative and intelligent people in the world. It is the entrepreneurial will that we lack. Along with some oil reserves and companies like Aldar…

Entrepreneurs or Managers?

Monday, July 12th, 2010 July 12th, 2010 Lipi Mohapatra

Some time ago I had an intern working with me who always asked me if he should start his own business.

I don’t know why, but I would always find it difficult to give him a straight “yes” or “no”. The intern had the drive and the zeal. But somewhere he still questioned his own abilities to become an entrepreneur. Probably he would succeed, only if he didn’t have temporariness, frivolity.

But who decides what it takes to become an entrepreneur? The entrepreneur himself?

Sample this. Arvind Pani, a BTech from NIT Rourkela has had extensive experience working for various companies. Having seen the nature of the corporate ladder, Arvind was convinced that that was not the path he wanted to tread. Entrepreneurship was his childhood dream and he started his own initiative to make unique software products based company. In a short span of time his organisation, Reverie Technologies, has established credibility in a niche segment. In 2009, their firm made it to the final list of companies under the ‘Power of Ideas” initiative driven by The Economic Times. Their organisation is contributing significantly to certain standardisation initiatives for mobile phones in India where they are working closely with TRAI and COAI.

Pani says that for becoming an entrepreneur, there are 3 traits that are absolutely essential-

a)      Extremely high ability to take risks.

b)      Hatred for straight-jacketed and conventional thinking.

c)       Put one’s entrepreneurial mission and passion above everything else as No.1 priority; including prioritizing above one’s family.

Rest of the traits can be acquired. But without the above three traits, entrepreneurship can lead to a disaster.

True. An entrepreneur is on his own, with his ideas and his successes and rewards are his own too.

Mitul Rustagi, a very successful manager in corporate India and currently the Director-Business Development, Automotive Experience, India Johnson Controls India Private Limited  says a good manager is one who is definitely accountable - will deliver to all assigned tasks, meeting all expectations for the assigned  tasks.

However, a good manager, 80% of the time (by Pareto’s principle), may not be a good entrepreneur.

For being entrepreneur, Rustagi feels an individual needs to take a step ahead and be “responsible” for the entire gamut of business - deliver results that are essential for the business outside his assigned tasks, a fact Pani agrees to.

Every successful company would have a unique collection of these manager-cum-entrepreneurs. One would find that these people are very well aligned to the vision of the corporation and are the people moving very fast within the organisation.

Somewhere all those I spoke to feel entrepreneurial zeal is innate to a person, but can be learned. One of the reasons why IIM – Ahemedabad always encourages students to take up entrepreneurship as a career. Probably it is one of the very few campuses that allows students to take a career holiday so that they can try their hands at their own ventures. In case the students decide otherwise some time later, they can always come back to avail the placement facilities on campus.

The author is Director, IILM - Business School, Mathura Road, New Delhi

Make way for something small

Monday, July 12th, 2010 July 12th, 2010 Rrishi Raote

In the lane behind the office is usually a long row of illegally parked cars. Most are drably coloured: grey, brown, white. Most days, however, the line is brought alive by a flash of mango — that is, a mango-shaped and mango-coloured Tata Nano. It’s a delight to see it there, seasonally correct on a sweltering day under a green tree.

The funny thing is: like some of the larger cars nearby, the Nano too comes equipped with a driver, who sits in the rear seat fanning himself with a newspaper.

Now, the car costs under Rs 2 lakh on the road; the driver probably costs Rs 60,000 a year, if not more. It’s amusing, don’t you think, that this car’s owner bought the cheapest car on the Indian road but also hired a chauffeur?

It’s like that in the world of the Indian small car. It has become intensely aspirational. Nissan’s new Micra was launched a few days ago, and there you had print, Internet and TV reviewers and commentators telling us about design, inside and out, the “eye-catchingness” of its roundish dashboard instrument panel, and either admiring or scoffing at the car’s peculiar little haunches. Things like seat height adjust and ergonomics and standard airbags were also mentioned, but almost as if such luxuries were only to be expected.

Before the Micra we had the VW Polo, and before that the Fiat Punto, the Maruti Ritz, Hyundai’s i10 and i20, the Honda Jazz, the Skoda Fabia… forgive me if I’ve missed a few. All of these new “small” cars, “affordable” hatchbacks, middle-class cars, come equipped with sundry luxuries that all boost the aspirational value of what was once the plain, frills-free 800-Alto-Zen cohort. They may have “climate control”, whatever that is, and extra speakers and split rear seats, and umpteen seat settings and adjustable steering and funny little lights and storage spaces and a rakish bonnet and “aggressive” headlights and a “stance” — whatever that is — yet they cater to something near the bottom of the automobile market. Thus mass-market becomes premium, small becomes big, affordable becomes aspirational.

Yes? Okay? Well, fine, if that is the case in the automobile market — and some of these new cars really are clever and desirable — can’t we take this interesting business lesson and apply it elsewhere?

For example, in real estate. Here in the metros as far as new residential building is concerned, we have highly expensive and enormous flats and “villas” (more accurately, row houses) in the nearer and more accessible suburbs; large, high-priced builder flats downtown; and, of course, handcrafted farmhouses. None will be available at a price under eight figures. These are the BMWs, Mercs and Bentleys.

At the lower end of the market we have medium-expensive and small flats in the further and less desirable suburbs, like Thane outside Mumbai or Ghaziabad outside Delhi. Some of them will have a decent level of finish, but most will not. All will be available at a price within seven figures. These are, with admittedly a few Ritzy exceptions, the 800s-Altos-Zens.

What’s in between, for the paying middle classes? Plenty, as far as cars are concerned; very little, as far as real estate goes. One can extrapolate from the shape of the car market that there is a huge, unserved market for mass-market yet premium, small yet big, affordable yet aspirational housing.

It’s just silly to say we don’t have space or can’t do it. Every city has underutilised space downtown. The central and state governments selfishly sit on tons of badly used Delhi land. And even a crowded city like Mumbai has hundreds of acres of mill land quickly being released to big builders. What do they build on it? Super-premium offices and eight-figure flats.

Silly. They should be building smaller homes to a higher specification for the middle classes. I may be imagining it, but it is the middle classes who spend more money within their own neighbourhood or locality, more than the very well-off. For the health of the local economy, for sufficient numbers and density, for a long-term residential ethos, go after the middle classes — the same notional demographic that happily buys premium small cars. The new, rather smaller, multiple-income Indian family. Try putting up hundreds of wisely designed studio and one- and two-bedroom flats downtown, and watch how much good that does the city.

Real estate still has not learnt to compete for the value-conscious Indian customer like the car industry has. In real estate, if you got the land you’ve got the customer by the nose. It’s not like that with cars. The current real estate paradigm of Nearby/Costly and Faraway/Cheap won’t last. A big reward almost certainly awaits the builder who can learn some auto lessons.