When Rachna Singh returned to her native India in early 2011 to start up Hachi Labs, after a seven-year career in Silicon Valley, she was staggered – and not by Bangalore’s horrendous traffic jams, infuriatingly frequent power shutdowns or shoddy roads, all of which she had come to expect. Instead Singh was stunned by a seeming cultural aversion toward entrepreneurship.

Hundreds of Bay Area returnees are getting off the plane in Bangalore to plunge straight into entrepreneurship, however, giving India an unprecedented innovation boost. This is a major shift from a few years ago, when returnees preferred safe-landing in multinational jobs and living in expensive, California-style gated communities. At the same time new batches of returnees have to deal with an entrepreneurial deficit alongside several other challenges. Things are changing certainly, but the new returnees are finding it prudent not to sever their umbilical cord with Silicon Valley.

In Bangalore the antipathy toward entrepreneurshipmanifests in many ways, Singh has found. As she started building a start-up team for Hachi, a ”meta connector” that mines social and other networks to find the smartest way to reach out to anybody, she encountered her first challenge. Skilled young candidates were not hard to find but, unlike their Silicon Valleycounterparts, they were unimpressed by offers of equity. These risk-averse engineers wanted market-value salaries, even though in India entry-level salaries are still only a fourth of what freshly minted engineers get paid in the United States.

To pass muster as a serious employer, Hachi had to allow parents of young prospective hires to physically inspect the startup’s office and meet the boss. Topping it all, Singh’s own family could not understand why she was in India launching a start-up. In a culture in which failing is taboo, they questioned her for giving up ”a fairy-tale life in the Silicon Valley, where I drove a fabulous car and lived in a sexy home.”

Singh’s experience as a Silicon Valley returnee echoes those of her fellow journeymen. Many Indians are forsaking their adopted land for fresh prospects. Drawn to the allure of India’s sizable talent pool, its low costs and a ready test market for all kinds of products and services, many are making the voyage homeward to plunge headlong into entrepreneurship. As they start getting their enterprises off the ground, however, they find that – unlike in Silicon Valley – the odds are stacked against risk-takers.

Still, many find plenty of positives to doing business in Bangalore. On the personal front, for example, returned professionals say that the ”social aspects” are immeasurably better, whether being on call for aging, ailing parents, reconnecting with family and friends or allowing their young children to experience the culture of their ancestors.

In the past five years, striking changes in the city are mimicking Silicon Valley’s early days. Talented professionals no longer feel compelled to go westward to seek a challenging career. That has dramatically improved the skill pool in India’s own technology hub, turning it into an underpinning of innovation.

Meanwhile, after years of blazing economic growth, the domestic market is evolving from merely cost-conscious to value-conscious consumers, making it a ready test bed for global products and services. All of this is a powerful magnet for returnees disembarking in Bangalore.

Roopa Hungund returned in early 2011, after spending 14 years with multinationals such as Cisco and Oracle in the Bay Area. Within a year of arriving, Hungund had founded an e-commerce start-up based on an idea that evolved during her Valley years: CostPrize is a geography-specific, context-sensitive deal-aggregator portal that gives customers deep discounts and cash-back offers. She describes India as still-virgin territory, unlike the crowded markets targeted by entrepreneursin the West.

Bangalore lacks the sense of urgency that pervades Silicon Valley, recent returnee Anshuman Bapna says. Bapna graduated from Stanford University’s business school and worked for Deloitte and for Google before returning to India in 2009 to set up MyGola, a travel Web site that focuses on the global market. MyGola has received funding from two Silicon Valley venture capitalists. Many Bangalore startups covet funding by Valley VCs because it opens up new networks and brings fresh expertise.

It may not be immediately apparent, but the influx of returnees represents a windfall for Bangalore’s entrepreneurial and innovation ecosystem. Going back and forth in an ultra-networked world, returnees are slowly spreading the Valley’s vigor and creative processes in Bangalore.

Bapna, for instance, has found it much easier to stand out as an employer with his work culture transported from the Valley. His start-up has a spacious, open workspace, paintings on the walls, free food, yoga classes, a foosball table and open vacation policies.

”All this may be standard stuff in the Valley,” he says, ”but continues to amaze folks who walk into our office for interviews.”

Many returnees see their homecoming not as a one-way ticket but as the inauguration of a more fluid situation whereby they can go back and forth, working the two disparate situations to their advantage. Bapna bristles at the term ”returnees,” in fact, and expects to shuttle back and forth every year.

In treading two worlds, he and other returnee entrepreneurs are rearranging the global innovation order a little at a time. They are soaking in the culture and comforts of home and family while partaking in the abundant and inexpensive skills of India’s young work force, even using its vast markets as a testing ground. On the other hand, they continue to have robust connections with Silicon Valley, returning there frequently to inhale its entrepreneurial air.

The Bangalore office market has absorbed close to 1 million sqft during the first quarter this year. The absorption was equally balanced between SEZ office and non-SEZ space. However, the challenges before the commercial property developers are the soaring input and labour cost. For Grade A warm shell building, the construction has now touched close to Rs 2,500 per sqft, according to industry sources.

The Central Business District (CBD) of MG Road, Richmond Road, Residency Road and Ulsoor Road witnessed absorption of around 40,500 sq ft of office space, primarily in the form of mid-sized transactions, in the first quarter of 2012, according to CB Richard Ellis’ first quarter report. Corporates continued to remain focused on properties in the peripheral and suburban business districts due to the minimal availability of grade A space in the CBD. Supply of around 26,000 sq ft was witnessed in this micro market while rental values remained stable when compared to the previous quarter.

The Extended Business District (EBD) of Indira Nagar, Koramangala, Inner Ring Road, and CV Raman Nagar did not observe significant project completions in this quarter. Absorption of around 43,000 sq ft was witnessed, while rental values remained largely stable in the present quarter. Absorption of around 45,000 sq ft was witnessed in the South Bangalore micro-market of Bannergatta Road, JP Nagar, Jayanagar and Mysore Road. Bannerghatta Road witnessed significant number of transactions in the built-to-suit format for large IT firms expanding their presence in the city. There were no significant project completions in this micro-market during the quarter. Rental values also remained stable compared to the previous quarter.

The Peripheral Business District (PBD) of Whitefield continued to be a priority destination for corporate occupiers, with absorption of around 0.18 million sq ft being reported in the present quarter, leading to a marginal dip in vacancy rates as compared to the previous quarter. Whitefield did not witness any supply during the review period, while Electronic City witnessed supply of about 0.30 million sq ft during this quarter. Absorption level remained unchanged in Electronics City while rental values were stable over the last quarter.

The Sarjapur Outer Ring Road (ORR) continued to remain in focus amongst corporate occupiers, as well as developers, with supply of around 0.80 million sq ft witnessed in this quarter. Absorption of around 0.18 million sq ft was witnessed and rental values remained stable compared to the previous quarter.

The North Bangalore micromarket witnessed supply of around 0.45 million sq ft, while absorption of about 0.10 million sq ft was recorded during the review period. Rental values increased marginally during the quarter due to limited availability of grade A office space in this region. This micro-market is currently being evaluated by large corporates as a significant quantum of office space is expected to be added to this market in the near future.

According to industry sources, developers continue to build speculative buildings on the assumption of healthy absorption of over 11 million sqft last year and simultaneously looking for clients during the development. And PE funds continue to evince keen interest for investment in the city’s commercial segment as the year-on-year absorption of office space is encouraging.

For instance, RMZ is building 7 million sqft, both SEZ and non-SEZ space, in a new project titled EcoWorld on outer ring road. “This is just one instance of the growing confidence in the city’s inherent potential for commercial property development”, says Juggy Marwaha, Director, Leasing, RMZ Corp. Besides Maple Tree’s new project, Salarpuria and Mantri Developers are said to be in the final stages of getting approval for large commercial development near Koramangala-Sarjapura road, according to market sources.

The combination of strong demand and restricted supply was instrumental in bringing the city’s overall vacancy rate down from10.6% in 4Q11 to 9.7% in 1Q12 and, in turn, perpetuated rental growth in the SBD and Whitefield sub-markets, says N S Srinivasa Reddy, Manager-Research, Jones Lang LaSalle. Rents in Whitefield submarket rose from Rs 32 per sqft to Rs 32.5 per sqft during the first quarter. This can be attributed to lack of ready-to-move-in office space in other sub-markets as well as increased interest from IT occupiers in this sub-market and availability of large floor plates and good-quality buildings.

As regards leasing, the IT/ITES sector accounted for the majority of the leasing with the major companies in the sector leasing office space in Bangalore including Net App, Intercall, Caterpillar Inc, Cisco, IXIA, LIARD Technologies, Enterprise Nube, Carl Zeiss, Time Warner, InMobi, Indegene, SmileInteractive, Flipkart and Quintiles.

Market Outlook

The city is witnessing a number of infrastructure developments such as signal free access from Sarjapur ORR to the Airport, Mass Rapid Transit System – Metro which will enhance connectivity within the city and elevated expressway along the Bellary Road, again to the airport in Bangalore. These projects would enhance connectivity from city centre to the peripheral markets which is expected to augment the demand for office developments in the North and South-East locations of the city. Overall, the city continues to retain its status as the lucrative office market both from the investors and corporate sector’s perspective.

Buying houses will become easier

As the curtains come down on 2011, the coming year brings with it a lot of promise for the realty sector. The real estate industry faced many setbacks in 2011, particularly with the RBI consistently hiking interest rates and the poor performance of the global economy, both having a direct impact on the real estate business.

However, buyers and developers will have something to look forward to and smile about in the New Year. Analysts predict the RBI would soften the home loan rates, which would come into effect by the second half of the year. “The RBI is likely to review and bring down the interest rates in January,” says MR Jaishankar, chairman & managing director, Brigade Group. The move would bring much relief to the sector.

With the property prices largely expected to remain range-bound, with slight negative bias, it could be the perfect time for home buyers to invest, says Aditya Verma, EVP & COO, Makaan.com. “This will give more opportunity to the home buyer to look for his dream house, without the need to worry about a price rise.”

Though the last year was a quiet one in terms of launches, 2012 will buck the trend, as developers are set to announce a slew of launches, particularly in the mid-segment of Rs40 lakh to Rs60 lakh, as well as luxury apartments. Plenty of choice to choose your perfect home! East, North, and South Bangalore are the areas to watch out for in 2012.

Govt may allow FDI to rescue aviation sector

Though the year 2011 marked 100 years of civil aviation in India, there was nothing much to write about the aviation sector.

One of the country’s largest private airlines, Kingfisher, scrapped its Kingfisher Red service, which was connecting smaller cities in the country. Besides this, services of the airline were also disrupted a few times with the ATF suppliers refusing to provide fuel as it had not cleared its dues.

To top it all, Air India pilots also went on strike in April in 2011. These are among the issues which will be under scrutiny in 2012. Passengers will be hoping that the airlines would keep up their promise and ensure that they would not be left in the lurch as they were several times in 2011.

The New Year could also see the possibility of the government allowing Foreign Direct Investment (FDI) in the aviation sector to bail out the bleeding industry, whose bubble seems to have burst after the initial euphoria witnessed in the second half of the last decade.

There is a possibility that the government may allow 24% FDI in the aviation sector.

The New Year will also see the expansion work of the Terminal-1 building at the Bengaluru International Airport. Though its completion is expected only in 2013, a majority of the work would be completed this year itself.

The state government’s dream of building airport in tier-II cities of the state will also be executed during 2012.

India’s defence sector to gain in strength

On the defence front, the year 2012 promises to be one in which home-grown technologies will take a centre stage in securing the future of the country.

Starting with the first flight of India’s first carrier-borne Naval flight aircraft—the Light Combat Aircraft (LCA) Navy, which is expected to take place in Bangalore in the very first week of the New Year—a number of indigenous efforts will be put to test in 2012.

Among them is the testing of the inter-continental ballistic missile, Agni-5, in February. The Agni-5 has a range of 5,000 kilometres, which means it can reach many of China’s major cities. Possessing this strategic capability will mean that India will be on par with its bullying neighbour as far as missile technology is concerned.

The suspense over who will emerge the winner (between the two short-listed vendors, the Eurofighter and Dassault’s Rafale) in the mother of all defence deals will be in public domain in the first week of 2012. The deal for medium multi-role combat aircraft (MMRCA) is worth about $10.4 billion.

The signing of the deal and the subsequent induction of MMRCA into the Indian Air Force would mean that apart from boosting air superiority over its adversaries, the loss of life and aircraft would be minimised as many obsolete aircraft would be phased out.

A controversial subject like the revoking of the Armed Force Special Powers Act in the trouble-torn Jammu and Kashmir and greater transparency in the numerous multi-crore defence deals along with higher efficiency of the defence Public Sector Undertakings would be among the topics of discussion in 2012.

Metro is likely to gain in strength

With Namma Metro and the BMTC working together in 2012, there seems to be a chance that more people would take to public transport.

Towards the end of 2011, the launch of Namma Metro saw enthusiastic response from Bangaloreans to the Metro. Although the initial euphoria surrounding it made it hard to predict the number of people who would actually use it for commuting purposes, rather than for joyrides, Metro’s ridership in its second month suggests that at least 2 lakh people, on an average, use the Metro regularly.

This numbers will increase as the Metro works towards providing better parking facilities at its Baiyappanahalli and MG Road stations. With the possibility of the Peenya-Swasthik line also opening towards the end of this year, more people are likely to take up the Metro for commuting.

The BMTC also has its fleet of feeder services ready. With the response to feeders for the Metro being tepid, the BMTC may have withdrawn a major chunk of its services, but as the Metro lines are completed, the number of these will only increase.

With talks about a bicycle lane coming up in Jaynagar and ATCAG, too, putting up three bicycle stands along MG Road, more people are likely to use bicycles to commute at least short distances.

City colleges collaborating with foreign varsities

The year 2012 will see introduction of new innovative courses for the students.

One of the most anticipated additions this year will be the introduction of subjects such as nanoscience and nanotechnology in science, engineering and medical courses. Announced by education minister VS Acharya in 2011, the course will also be an addition to pure science courses. However, the minister made it clear that it will take an entire year to work out the finer details regarding the course work, so chances are that the course may not make it into the syllabi of the coming academic year. Nanotechnology is currently being touted as the answer to the planet’s imminent energy crisis by top scientists like Prof CNR Rao, the scientific advisor to the prime minister. Another trend to watch for in 2012 is collaborations with foreign universities by city colleges. M Jayaramu, director of PG studies in Tumkur University, had earlier announced that to create a research-based university, there would be several collaborations with universities from the United States, Europe and the United Kingdom.

Even deemed universities such as Sri Devaraj Urs Medical College will be collaborating with universities such as the University of Minnesota, University of lllinois and more. Taking collaborations with foreign universities a bit further are bodies such as the Institution of Engineers (India), which has signed an agreement of cooperation with the Chinese Institute of Engineers.

Grand plans on paper to transform Bangalore

The BBMP has some grand plans for the year 2012. It has set a target to plant about 6 lakh saplings to make up for the loss of the city’s green cover owing to road widening and other development works. Also, the BBMP will develop 301 open spaces into parks, as the revised City Development Plan has reserved 15% open space of the city for developing parks. Work will be taken up to develop 183 lakes in and around the city. Rainwater harvesting is set to become mandatory for houses, government buildings, hospitals, hotels etc, which is expected to alleviate the city’s water woes. Also, work on remodelling drains will be undertaken in 186 critical areas in the city to avoid flooding in rainy season. The project would be taken up at a cost of Rs643 crore; JNNURM is providing the funds. The city corporation is introducing a new garbage policy for better solid-waste management. Also, 16 bio-methane-based plants are scheduled to come up in various places, which will convert garbage into electricity. Further, to ensure that Bangaloreans don’t have to go through a rough ride, the BBMP has procured a GIS-operated pothole-filling machine for its each zone. It is also planning to buy a machine from New Zealand that can reportedly fill potholes in 15 minutes. Also, to alleviate traffic congestion, the BBMP is planning to construct steel bridges at MTR, near Lalbagh, and at Shivananda Circle.