More space, bigger buildings but no takers: Why Surat’s Diamond Bourse is struggling
The Surat Diamond Bourse has 4,200 offices spread over nine 15-storey buildings. The area occupied by the bourse offers 67 lakh sq feet of office space, which is more than the Pentagon, the US’s massive defence headquarters.
It’s also empty, nearly five months after its inauguration.
Despite various efforts, almost all offices in the bourse have either shut down or are still to start operations. Even the 130 offices that the bourse management claimed were operational during the inauguration are closed.
The biggest blow came when Vallabh Lakhani, owner of Kiran Gems and former chairman of SDB,returned to Mumbai in just two months after shifting his Rs 17,000 crore business to Surat. Kiran Gems is the largest office space owner in the SDB and the move to Surat was expected to motivate other businesses to follow suit.
Now the Mumbai-based Bharat Diamond Bourse, its biggest competitor, is attempting to press its advantage by offering diamond businesses better facilities and more facilities. Diamond traders and bourse officials say a range of factors are to blame for the SDB’s slow takeoff, but remain hopeful the shift will take place.
No clear cut transition?
The efforts to get businesses to shift from Mumbai to Surat have been on for two years. Businesses starting operations in Surat after shuttering their offices in the Mumbai bourse were offered a year’s relaxation in maintenance.
It was believed that the situation would improve after the inauguration by Prime Minister Narendra Modi in December 2023, but that didn’t happen. The management committee of the SDB tendered their resignations in March.
It’s not just the Mumbai-based traders. Many diamond companies based in Surat have acquired offices in the SDB, but haven’t shifted operations.
More space, bigger buildings but no takers: Why Surat’s Diamond Bourse is struggling
Take the case of Kiran Gems. The firm is a prominent player in the diamond trade with over 45,000 employees across Gujarat and accounts for nearly 8% of the country’s cut and polished diamonds. It was also the first to close its Mumbai office with over 1,700 staff and relocate to the SDB in November 2023.
Sources said that the closure of Kiran Gems’ Mumbai office led to a significant loss of business to competitors, which prompted a rethink.
“Top buyers, who come from the Middle East and Australia, typically land in Mumbai, check their goods and leave. If they have to travel to Surat, it is an added inconvenience for them, and so Kiran Gems lost a few big buyers because of its shift,” said a SDB official, who didn’t want to be named.
The Surat airport presently has direct flights to Dubai and Sharjah. In contrast, Mumbai has direct flights to 39 countries.
The SDB is now telling diamond traders to keep part of their operations in Mumbai, but to also start an office in Surat. The bourse has been highlighting the availability of facilities required for a diamond trading hub, including a customs house, safe deposit vaults, and banking facilities.
On April 18, a team from SDB visited the Bharat bourse to meet around 1,000 traders operating from there. The team was led by Govind Dholakia, BJP’s Rajya Sabha MP and chairman of SDB, and Lalji Patel, the vice-president of SDB who bought PM Modi’s controversial monogrammed suit for Rs 5 crore. Dholakia and Patel are the founders of leading diamond firms Shree Ramkrishna Exports and Dharmanandan Diamond Diamonds respectively and have close ties with the diamond business in Mumbai.
Following the meeting, the committee announced that around 600 offices would become functional at the SDB from July 7, on the auspicious day of Ashadhi Beej.
“Traders who have furniture ready, or about to be completed, have assured us of starting their offices from July 7. Mahidharpura and Mini Bazaar traders from Surat are also ready,” said Patel.
A majority of the 4,200 offices have already been sold through auctions. “Prices of the offices have increased by three times,” said Jagdish Khunt, president of the Surat Diamond Association.
A new chapter in an ancient tug of war
At the heart of the reluctance to move are the roles Mumbai and Surat play in the diamond trade. While Surat is the manufacturing hub, where 90% of the world’s diamonds are cut, Mumbai has been the trading centre.
Market insiders say Mumbai is preferred by the traders who are Jains from Palanpur, while Surat is the base for top manufacturers who are largely Patidars from Saurashtra.
Traditionally, diamantaires have had links with both cities. Most large trading houses have a part of their operations in Surat but many moved to Mumbai decades ago since an international clientele could be better serviced from India’s financial capital.
Many in the industry see the tussle between the bourses as the latest chapter in the ancient Mumbai-Surat tussle in diamond trade. Diamond traders in Mumbai questioned the need for the SDB and said that moving to Surat with their families is unfeasible for most of them.
“Surat is the manufacturing centre and all diamonds eventually come to Bharat Diamond Bourse for overseas exports. Then what is the need to shift to Surat?” said a trader.
Another trader who has bought an office in the Surat bourse is still uncertain if making it operational is a good idea.
“As things stand, I have suspended the interior work in the office. International connectivity to and from Surat is still a concern and a big roadblock for the trade,” said the trader.
Traders also point to the fact that while Mumbai bourse is presently the preferred destination, it wasn’t when it opened in the northwest suburb of Bandra Kurla complex in 2010.
“At that time, there was poor response from the diamond traders who were operating from Opera House, Prasad chambers, and Panchratna (in south Mumbai) among other locations, but eventually all of them moved,” said a trader.
One trader said the resistance will reduce and the move to Surat will happen as the trade expands.
A decline in lustre
Another major factor is the fact that the diamond trade has seen its shine fade in the past few years.
“It is taking time for the SDB to become fully operational due to prolonged corrections in the natural and lab-grown diamond market,” said Vijay Mangukiya, regional chairman of the Gem and Jewellery Export Promotion Council.
“Even a minor improvement internationally will build the positivity in the market and all office owners will start operating from SDB,” he said.
Experts say the ongoing wars in Ukraine and Gaza, and the slowdown in markets like the US and China have hit trade. Cut and polished diamond exports from India in 2023-24 fell 27.58% compared to the previous year.
“The market was unstable for over one-and-a-half years before the inauguration of SDB, and in times of crisis businesses prefer to operate from existing premises to keep costs low,” said Khunt from the Surat Diamond Association.
It doesn’t help the SDB’s cause that the Mumbai bourse is doing everything it can to sweeten the deal for traders to stay.
The bourse has faced complaints of a space crunch from some of its 4000 members and has announced it will expand.
A revision of the Floor Space Index in the areas means the Bharat Bourse can add approximately 12 lakh square feet of built-up area, which will create space for 1000 additional offices and expansion of existing facilities. The bourse’s committee members say they are waiting for elections to end to seek permission to begin construction.