Real estate owners woo insurance firms, shun dotcoms

Real estate owners woo insurance firms, shun dotcoms
DEV CHATTERJEE

MUMBAI, SEPT 6: Commercial property sector in the metropolis is suddenly buzzing with activity with landlords wooing insurance companies which are, after a long wait, finally gearing up to set up shops in India. However, at the same time, real estate owners are imposing tough conditions on dotcom companies which are facing liquidity crunch as fund flow is slowly drying up for new economy companies.

With reports coming in from Indian Silicon city Bangalore that over 13 dotcom companies have defaulted in their rental and other financial obligations, anxious landlords in Mumbai are asking for two-year rent in advance from dotcom companies. ``Dotcom companies are not as financially sound as other businesses and are considered as high risk. Hence, the landlords do not have any other option but to ask for hefty deposit and rentals in advance,'' said an official of multinational real estate firm.

Though the properties are available for outright sale to the dotcoms, landlords are asking for a Rs 1 crore net worth for dotcoms in order to get protection under the new rent control act.

``There is a high degree of risk with startups and it's quite natural that the landlords are asking for higher rent and in two years rent in advance,'' said a Cushman & Wakefield official. ``We, however, suggest our clients to look at case to case basis instead of taking any blanket decision on dot coms,'' he said.

But it is the insurance sector, which has been recently thrown open by the government to the private sector, is being wooed by the real estate industry as most of the companies are being started by top Indian and their multinational partners.

In the recent months, the established brick and mortar companies like Reliance and Enron, which are making huge inroads into infotech sector, have gone on a real estate buying spree in Central Mumbai and Bandra Kurla Complex.

Analysts say that the recent reports on dotcom companies failing to raise funds from venture capitalists and other sources due to lack of proper business plan and revenue models has also made the property owners reluctant in giving out properties on rental basis.

With the cash-rich insurance companies looking out for properties, analysts say demand for commercial property in the metropolis will go up substantially. As the insurance companies have already announced that they are here for `long term', property owners have sounded out their brokers to look for insurance sector clients, analysts add.