Tiruppur poised for potential grandiose

Tiruppur has been acclaimed as the "Knitwear Capital" of India. Since the 80's, this small town has contributed much to the exports ($3 billion as of last year) of the country including tie-ups with some of the world's largest retailers and designer brands such as Walmart and Tommy Hilfiger. Yet, apart from the lure of cheap, skilled labor, this town had little to interest anyone other than a textile manufacturer.

However, recently there has been more attention bestowed on the place by the government as well as, private parties. Prime Textiles, one the leading manufacturers of the area, have unveiled plans to develop 20 acres of land for residential and commercial purposes. Landmark Land Holdings, the property investment arm of the Dalmia's group has taken a 25% stake in this project. Landmark holdings have been acquiring stakes in tier II city projects such as Pune, Gurgaon, Bhubaneshwar etc. So, at first glance the Tiruppur acquisition seems to be outside of this strategy. So we chose to delve deeper into the potential for the project.

The Pros -

• Tiruppur has recently been accorded the status of a "district" with portions of nearby Coimbatore and Erode districts being carved out to form this. There is potential for overflow traffic from these well-to-do districts in residential areas.
• The ruling Tamil Nadu government, DMK, have claimed Tiruppur to be central to their existence and have allocated Rs. 5 crores for the development of the district including currently non-existent infrastructure.
• The textile industry contributes more than 90% of exports in the cotton knitwear segment and is likely to continue to be a major contributor to the world cotton exports.
• In line with the above, many of the textile plants, have expansion plans to increase capacity.
• The TEA, Textile Exporters Association, has plans of hiking prices by 15%.
• The region has a very high literacy rate (70%+) which harbors well for development plans outside of textile. Nearby Coimbatore already has a reputation of BPO setups and Tiruppur could potentially follow in its footsteps, increasing overall living standards.

Cons

• As mentioned, this is a DMK pet project and government patronage can drop significantly on any change in power.
• Current infrastructure leaves much to be desired and a drop in government funds can seriously harm growth.
• Exports from the region have seen a decline this year of more than 15%. With the US economy's future unclear, it is difficult to quantify any future valuation with accuracy.
• Human rights activists have voiced concerns on child labor in the region. Any material ruling supporting them will affect cost efficiencies in the factories.

Given the rising star status of the region, it potentially an interesting diversification of Prime Textiles and a good investment for Landmark if nothing unforeseen derails the plans sketched above. However, the success will depend on not just internal factors but also external ones such as economy and government involvement.

Nevertheless, for the next five years, the wheels set in motion are likely to bear fruit for property investors.