Hyd turning into a fastest growing metro India has not seen in its entire history

Kalisetti PB Naidu, the Founder & CEO of Hyderabad-based Yards & Feet Property Consultants, wears many hats. An expert in the real estate segment with an experience of more than two decades, he has handled retail commercial space deals totaling 1.7 million sft including malls and high street retail. As a first generation real estate consultant, he also facilitated transactions related to 250 acres of land parcels. Further, he, through his new venture Arise Capital, is now busy with the task of supporting startups and MSMEs to consolidate, scale up and achieve sustainable growth. A firm believer in the growth story of Hyderabad, Naidu tells Bizz Buzz in an exclusive interaction: "Given the kind of new infrastructure being created in Hyderabad, the city will turn into the fastest growing metropolis that India has not seen in its entire history. I am not surprised if 20 to 30 per cent of new unicorns in India come out from Hyderabad in the near future."

Why did you choose retail space in real estate as your focus area in Hyderabad?

When I was looking for a good opportunity in the real estate sector 20 years ago, I went around the city. I found that everyone was focusing on residential real estate, doing housing sales, arranging home loans etc. But not many people bothered to delve into the lifestyle of people in Hyderabad, who invariably indulge in the Nawabi culture. Not many people are aware of the fact that Hyderabad is a testing ground for retailers, retail brands and other brands. They believe that a retailing idea or any brand will be successful across India if it clicks in Hyderabad. For that matter, every product and service does very well in Hyderabad- be it luxury watch, value store, or departmental store. Retail space always does well in the city. A good example of that is that Hyderabad now has Diesel outlet and Lacoste store, which are luxury brands.

Why are such luxury brands doing well in Hyderabad? Is spending power more here?

Spending power is obviously more in Hyderabad, well above pan India average. The city has a cosmopolitan population which wants to spend more. Furthermore, as the city is affordable and rents are low, people have more disposable income compared to other metro cities. That's the reason why retail business flourishes in the city.

How big is the organised retail sector in India now? What kind of growth can we see in the next one decade or so?

Organised retail sector accounts for just 8 to 10 per cent of the total retail business in India. In the beginning, we had high street stores. Then the mall culture arrived. Later, we had multiplexes also. And then came the online segment. There are multiple avenues and platforms for organised retail segment now. So, the organised retail segment will continue to grow in India, driven by opportunities in smaller cities and towns.

How do you see the retail space segment doing in Hyderabad?

Apart from the world class infrastructure, the city already has everything that everyone needs. Hyderabad has 400 years of history. If you need Lebanese cuisine, you can find it. If one wants to buy a Rs 50 lakh saree, one can get it here. Given the kind of new infrastructure being created in Hyderabad, the city will turn into the fastest growing metropolis that India has not seen in its entire history. With Pharma City on one side and National Investment and Manufacturing Zone (NIMZ) on the other side, it will expand in all directions. Within the city also, several micro markets like Kukatpally, LB Nagar and Attapur are developing fast. Furthermore, Hyderabad is home to a diversified spectrum of industries, ranging from information technology and pharmaceuticals with MSMEs, aerospace and manufacturing sector in between. There are plenty of opportunities here. One just has to find it. The city will generate a huge amount of employment opportunities in the near future. Recessions and slowdowns will not impact the city.

Is there any excess supply of mall space in Hyderabad?

I don't think there is any excess supply of mall space in the city. The problem here is the mall developers are not educated enough to build a mall. They don't build a mall with proper designs and vision. They just build a mall to sell the space and wash off their hands. No consultants are appointed. So, what is happening here is that developers don't understand the mall mechanism which works in a very different way. Retail is all about customer experience, not real estate alone. Most of the malls are failing because there is lack of service and proper design. Most of the malls in Hyderabad have been developed by first generation developers who have first seen some malls overseas and tried to replicate them here. When sufficient land parcel is not available, they squeeze the chosen model and build the mall. So, only three out of 10 malls are doing well in the city.

Whether you agree or not, unaccounted or black money plays a key role in the real estate sector. What about the retail space segment?

The leasing part of the retail space segment is completely organised and there is unaccounted money there. When it comes to purchasing space, this practice of paying with unaccounted money is there all across the world. Cash is part of the majority of real estate deals around the world. So, it's not just confined to Hyderabad. Streamlining this practice is a Herculean task.

As for fractional property investments in malls, that investment will turn out to be a good one if a mall is developed properly and if the investment is for the short term. Maximum investment period should not be more than 60 months. But the returns depend on whether the particular mall is successful or not.

Coming to startups, what kind of services do you provide?

The startup ecosystem in Hyderabad has been evolving for the past six years or so. We support startups with regard to pitch decks, their cash flows and on sustainability of startups. We also help people translate their startup ideas into a reality. We help them with bootstrapping, sales & marketing, branding, positioning and what not. Furthermore, we help the startup founders to understand their startup's unique selling propositions (USPs). We educate them on how to go to an investor or investors. Now, we are working with CredHub, one of the biggest financial platforms of the country, to support startups and MSMEs. It has 12 NBFCs and 8 banks on board. Apart from that, we have angel investors who already invested and helped several startups scale up.

How many startups did you support so far?

We have so far provided our services to over 20 startups. Interestingly, half of those startups are from the retail side. As many as eight startups received funding and another four are in the pine line.

Some say it's not easy for startups to raise funds while operating from Hyderabad as most of the venture capitalists are located in Bengaluru. How is the startup funding ecosystem in the city?

It's a wrong notion that Hyderabad startups can't raise funds. Hyderabad is home to one of the biggest and world class startup ecosystems in India. T-Hub, which was set up after the formation of Telangana, has so far nurtured over 2000 startups. We have over 25 angel investors and venture capitalists based here. While Bengaluru is home to technology related startups, we have strartups from diverse sectors in Hyderabad, ranging from manufacturing, aerospace, aquaculture to IT. But there is a reason why many startups are not getting funds. Many startups don't have a critic on their side. And many startup founders just follow their instincts. They don't understand the market dynamics to present their idea.

Further, they don't know how to address risks and what is Plan B. They only talk about opportunity. But a funding guy is clear on two things – whether his or her investment is safe and whether it will yield results in the long run. This is where we help the startups and advise them on how to map their ideas to attract investments.

You are saying there is a world class ecosystem for startups in Hyderabad. But the city has not seen many big startups and unicorns emerging till now. Why is it so?

Our startup ecosystem is very young compared to other cities. Secondly, there was a myth that to be successful, startups had to be started in Bengaluru or other metro cities like Mumbai and New Delhi. As a result, even entrepreneurs from Hyderabad went there and founded startups. After the ecosystem evolved in Hyderabad, people, who are talented, are now coming here. I am not surprised if 20 to 30 per cent of new unicorns in India come out from Hyderabad.

There is talk of overvaluation of Indian startups. What do you have to say?

Valuation is a theory. Companies which have clocked exponential growth levels have this problem. If they don't cut their expenses, they will have to simply shut their operations.

Do you focus on any specific sectors in the startup space?

The startup space has as many as 18 verticals. But we want to focus on the retail segment and also on the startups that both manufacture products and sell them.