India's Manhattan Loses UBS, JPMorgan as Old Buildings Fall Into Disrepair.

The ING Groep NV logo is displayed on a new corporate building under construction in the Bandra Kurla Complex of Mumbai, last week.

Discolored paint and exposed air conditioners cover an office building in the Nariman Point financial district of Mumbai, last week.

A goat lies in the road at a junction in the Nariman Point financial district of Mumbai, last week.

New office buildings are built opposite the Peninsula Corporate Park in the Lower Parel area of Mumbai, last week. 

UBS AG and JPMorgan Chase & Co. are leading an exodus of finance companies from Mumbai’s Nariman Point financial district as they balk at paying double midtown- Manhattan rents for crumbling four-decade-old buildings.
UBS, Switzerland’s biggest bank, moved to a new complex on the site of a drive-in cinema about nine miles north. JPMorgan, the second-biggest U.S. lender, shifted to an adjacent suburb, while private-equity firm KKR & Co. went about three miles north of Nariman Point. Local lender Axis Bank Ltd. and broker Motilal Oswal Financial Services Ltd. are moving in the next year.
They are departing a district reclaimed from the Arabian Sea in 1940 that is marred by traffic jams and poor sanitation, and constrained by a 46-year-old law that limits building height. The city’s shortcomings and fragmentation may hinder Mumbai, with the fourth-most-expensive office space in the world, from establishing a financial center to rival Shanghai and Dubai.
“Transforming Mumbai into a world class financial center is very distant,” said Sunil Saberwal, chief executive officer of ay First, an organization ed on London First to work towards the regeneration of Mumbai. “We are at least 15 to 20 years away from something like that. Even then, Mumbai will not be as beautiful as Dubai, but it will be functional.”
If Mumbai doesn’t get its act together by 2030 by improving transportation, housing and water systems, and reducing costs, the city may lose out to places such as Dubai as Western companies seek a base in the time zone, Saberwal said. 

Dubai Showcase:

Pritzker Prize winners Norman Foster and Zaha Hadid have helped turn Dubai into an architectural showcase as much as a financial hub. The Dubai International Financial Centre, an 110- acre, tax-free business park that opened in 2004, is home to the regional offices of Goldman Sachs Group Inc., Citigroup Inc. and HSBC Holdings Plc. The 200-story Burj Khalifa, the world’s tallest tower, opened in Dubai in January.
Mumbai, which contributes to a third of the nation’s tax collections, was ranked 49 in the Global Financial Centre Index, according to a survey by consultants Z/Yen Group Ltd. and published by the City of London. The index uses external sources to determine property and occupancy costs to judge competitiveness, and an online questionnaire from 1,455 respondents. Dubai is ranked 23rd and Shanghai 35th.
Formerly, bankers at Nariman Point were within walking distance of each other; today, no single location represents the business district which now stretches in clusters over 20 miles. Today, a Blackstone Group LP banker, still based in Nariman Point, would spend at least 45 minutes in a taxi to attend a meeting at JPMorgan’s or UBS’s new office.
“As long as connectivity is sub-optimal, you will find clusters developing,” said Pranay Vakil, India chairman of Knight Frank LLP. “The day the government does something about connectivity, the need to develop clusters will decline.” 

Banks Expand:

Banks, brokerages and financial service companies are expanding in India, the world’s second-fastest growing major economy after China. The benchmark Sensitive Index has risen 41 percent in the past year, bolstering overseas investors’ appetites for the nation’s stocks, and investment banking fees are set to rise in 2010 as the government sells a record 400 billion rupees ($9 billion) of assets and takeovers accelerate.
Investment banks’ increasing reliance on computer systems has forced them to upgrade data centers in India and seek buildings that have efficient cooling systems and plenty of access to electricity, said Anusha Bhagat, chief operating officer at UBS’s Indian unit.
“Buildings in Nariman Point were incapable of providing this kind of infrastructure,” she said. “Nariman Point was never planned for the world we live in today.” 

Lower Costs:

Zurich-based UBS a year ago moved its 115 employees into 50,000 square feet (4,645 square meters), more than four times the space it had in Nariman Point, in Bandra Kurla, a planned commercial complex that was created to decongest south Mumbai. The complex, spread over 370 hectares, is built on low-lying marshy land on either side of the Mithi River. Its occupants include India’s largest bourse, the National Stock Exchange of India Ltd., and the stock market regulator.
Lower costs along with synergies in having all employees in the same building were considered in the move, Bhagat said.
New York-based JPMorgan cited the same reasons behind its decision to move in September 500 employees to an eight-story building in North Mumbai with twice the space it occupied before.
   “Location and ease of access for employees was a critical factor in selecting new headquarters for the firm in Mumbai,” said Mahesh Aras, JPMorgan’s chief operating officer for India. “We are able to provide employees with ample parking, spacious dining facilities. A gymnasium is also being planned on the premises.”

‘Swanky, Clean’:

North Mumbai developed as rising real estate prices in the south extended the city’s reach north. Today, the suburbs boast sprawling residential colonies, high-tech corporate parks, hip nightclubs and restaurants, multiplexes, malls and world-class hotels, and the domestic and international airports.
“Here we are in swanky, clean buildings,” said UBS’s Bhagat. The old business district was plagued with problems ranging from the quality of the building, the condition of elevators, attitude of the owners and lack of professional management, she said.
New York-based KKR moved into the Peninsular Corporate Park in midtown in March. The complex of five buildings includes a restaurant, library, siesta lounge, convenience store and fitness facilities, as well as a spa. 

Geographic Challenge:

Mumbai, a city of 18 million people, is the fourth-most- expensive office location in the world with an average rent of $125.76 per square foot, according to a survey by Los Angeles- based commercial property broker CB Richard Ellis Group Inc. Rents in New York’s office district rank 26th at $64.51 per square foot. London’s West End remained the world’s most expensive office market with Hong Kong ranking second and Tokyo third, the survey showed.
Nariman Point is located on the tip of Mumbai Island. That in itself is providing a challenge for the improvement of the area as a law passed in 1991 restricts development on land affected by the tide, prohibiting construction within 500 meters of the coast.
“Nariman Point could have burgeoned further if it had not been flanked by water on all three sides,” said Anuj Puri, chairman of Jones Lang Lasalle Meghraj, a property consultant in Mumbai. Additionally, new commercial hubs in Mumbai started offering state-of-the-art buildings with modern amenities, Puri said. 

Building Space:

Mumbai’s Floor Space Index regulations that stipulate the maximum building space for every square meter on a plot of land were introduced in 1964 and set at 4.5 times. The standard in cities with limited land is to raise the permitted FSI over time to accommodate urban growth, as in Manhattan, Singapore, Hong Kong and China, according to a World Bank report last year.
Instead, The Municipal Corporation of Greater Mumbai went the other way, lowering the permitted FSI to 1.33 in 1991. The result: almost all Mumbai’s buildings with an FSI exceeding 4.5 were built before 1964, and space consumption in the city averages 4 times, a third the 12 times in Shanghai. 

New Infrastructure:

Mumbai’s transformation into a “world class city” would require radical changes to transport, housing and sanitation, as well as a reduction in the slum population, consulting firm McKinsey & Co. said in a 2003 report. Mumbai occupies an area of 440 square kilometers (167 square miles).
An eight-lane sea-bridge connecting the northern suburbs with midtown was opened in July, a decade after the project was initiated with the costs overshooting more than five times the original budget. The 4.7-kilometer (2.9-mile) structure, more than twice as long as San Francisco’s Golden Gate Bridge, is intended to cut travel time by a sixth for commuters heading toward India’s financial hub.
The Mumbai Metropolitan Region Development Authority, which is responsible for the development of the city, has bought 700 buses, built five flyovers, installed modern traffic signals at 77 junctions, and added pedestrian bridges and underpasses at important junctions among initiatives, according to its Web site. 

‘War Room’:

“India has no choice but to make Mumbai into a global financial hub,” Ratnakar Gaikwad, metropolitan commissioner at the authority, said. “It has huge advantages over a Dubai or a Singapore as it has a robust securities and stock market and huge human capital. All we need is good infrastructure.”
The authority will complete a 146 kilometer metro rail project and build a 100 kilometer monorail in the city by 2014, Gaikwad said.
The development authority has set up a “war room” where it meets with other agencies including the ay Municipal Corp. to coordinate infrastructure projects and garner government support to clear up hurdles they encounter in their plans, Gaikwad said.
“There is a silver lining and light at the end of the tunnel,” said Knight Frank’s Vakil. “Things happen, only there is no sense of time here.”