Gujarat Hardlook | Why the swanky Surat Diamond Bourse is struggling to attract diamond traders

Govind Dholakiya, newly elected Rajya Sabha member and Surat’s leading diamond businessman who has just taken charge as the SDB chairperson, and his team reached out to diamond traders in Mahidharpura market in a bid to convince them to relocate their business to the swanky new bourse.

Dholakiya was accompanied by SDB vice-president Nagji Sakariya, who had resigned from the post of SDB president within five weeks of the appointment earlier this year. Vice-chairman Laljibhai Patel, core committee member Mathur Sawani, newly appointed president Arvind Shah, and Ashesh Doshi were among others who were a part of the SDB team that visited the traditional market on April 4.

The Mahidharpura Hira Bazar is located on a narrow congested street in old Surat where trading and brokering of diamonds takes place. The functionaries of SDB met traders and brokers in the parking area of the Diamond Village building in Mahidharpura area. In his speech, SDB vice-chairman Laljibhai Patel – who bought Prime Minister Narendra Modi’s monogrammed suit in 2015 for Rs 5 crore and who owns Dharmanandan diamonds – was heard telling the traders, “We are seeking support from the traders of Mahidharpura to start their offices in SDB.”

Surat Diamond Bourse was inaugurated by Prime Minister Narendra Modi last December at a mega event; (left) At Hira Bazar in Mahidharpura. (File Photo)

“We have come up with a good office complex at the SDB… which is the world’s biggest. The SDB is not made by a single person but it is made up by a group of 4,200 people. So it is our duty to get it functional at the earliest, and we are also going to provide all the facilities to people coming up at SDB, including traders and brokers. We wish that over 500 offices in the SDB start functioning by June 2024,” he added.

However, a diamond merchant associated with SDB told The Indian Express that from over 130 offices, the number has come down to three in only three months. “Over 130 offices were opened during the inaugural ceremony last year and in only three months, these offices started shutting down. Currently, only three offices are running at SDB. The banks and other offices (non-diamond offices) are open but they are also passing their time,” the trader said on the condition of anonymity.

After the meeting with Mahidharpura diamond traders who own offices at SDB, the committee members Friday held another meeting with the diamond traders and manufacturers (who own offices at SDB) in the Bhat-ni-Wadi area of Katargam. The meeting was attended by a large number of diamond traders and manufacturers. An appeal was made by the committee members to start offices at SDB. Sources said that SDB committee members on April 18 will hold similar meetings with diamond traders from Mumbai who had purchased offices at SDB and request them to start their offices soon at SDB.

Dholakiya, Lalji Patel and other members of the core committee have planned to open their offices at SDB in the first week of July. Meanwhile, Dholakiya, who owns Shree Ram Krishna (SRK) diamonds, told The Indian Express that he plans to open his office on July 7 marking the auspicious day of Ashadi Beej. Nearly “500 traders are expected to open their businesses out of offices in SDB in July”, he added.

Core committee member Mathurbhai Sawani said, “When buyers come from Mumbai here in Mahidharpura bazaar area… there is no place for getting the buyers to sit and conduct business. The SDB has come up with a huge complex, why can’t business be done in a good office environment? We are also working on the transport facilities of the diamond traders and brokers at SDB.”

Surat & its diamond business

According to a veteran diamond merchant, the diamond business was brought to Surat in the early 20th century by some Jain businessmen who had returned from a foreign tour and saw potential in it. “Later, Jain traders from Palanpur and North Gujarat learnt about the business and came down to Surat and engaged in it, and thus it expanded. There were very few diamond factories during older times, and as the trading activities grew, there was a demand to increase the number of factories. The Jain diamond traders invited the Patidar community to come to Surat and work in these factories,” says Kirti Shah, who has seen the growth of the diamond industry through its ups and downs.

“Saurashtra was regularly facing droughts and irrigation sources for farming had dried up. The Surat diamond factories served employment opportunities for the youth of these agrarian communities. Later, many more youths from different villages in Saurashtra and North Gujarat came down and started working in the diamond factories after getting trained. They later started their own factories” he adds.

Today, there are over 4,500 small, medium and big diamond factories in Surat that give employment to
over six lakh people (File Photo)

Today, there are over 4,500 small, medium and big diamond factories in Surat that give employment to over six lakh people. “The people of the Patidar community who are majorly in diamond manufacturing activities and also in the trading activities, to some extent, are settled in Varachha, Kapodara, Katargam areas while the Jains who were in the diamond trading business settled in walled city areas and got mixed with local Surati people,” the veteran added.

The leadership setback

Vallabh Lakhani, the owner of Kiran Gems and a giant Patidar player in the diamond industry in terms of volume of the diamond exports, was made the SDB chairman by core committee members in October 2023. A familiar face in the diamond industry, Lakhani was into trading of polished diamonds from his multiple offices in the BDB and other jewellery markets in Mumbai.

After the SDB was ready, Lakhani purchased over 1 lakh square feet area in A block of SDB, and shifted this entire trading business from Mumbai to Surat at SDB in November. Sources said that Vallabh had taken such a step to inspire other diamond traders of Mumbai to expand or shift their diamond trading business at SDB in Surat.

Lakhani had also built thousands of flats to serve as accommodations for his Mumbai employees in Surat near SDB. However, he experienced a downfall in his business within one and half months. After consulting the committee members of SDB, he returned to Mumbai and reopened his old diamond trading offices at the BDB and other areas by mid-January. Besides, the response from other diamond traders of Mumbai to shift to Surat was said to be poor, as per people in the know.

The management committee claims that over 135 offices are open. Sources, however, say that some of them are already shut. After Lakhani resigned as the chairman and returned lock stock and barrel to Mumbai, Nagjibhai Sakariya also resigned as the SDB president in January.

One of the reasons for the leadership churn was believed to be the failure to fulfill the target of bringing the traders from Mumbai and Surat to help SDB become fully functional.

Shifting gears

Amid the leadership churn, SDB core committee members then formed a new management committee and appointed Govind Dholakiya, Rajya Sabha MP and the owner of SRK Diamonds, to the top post. Now, SDB has inducted four Jains in the new committee “balancing the management structure”, hoping to draw more crowds, says Laljibhai Patel.

Many diamond traders conducting business in Mahidharpura market have purchased offices at SDB. But the enthusiasm to shift businesses to the new location remains low.

Mahidharpura Diamond Broker Association president Nandlalbhai Nakrani says, “There are over 500 diamond traders and brokers who have booked their offices at SDB where furniture work is in progress. Loosely speaking, just 20 to 50 diamond merchants opening their offices in SDB will not be attractive enough.” “If over 500 offices are opened at one time, it would attract other diamond traders to open their offices. The SDB authorities started making facilities to start bus services from Mahidharpura, Varachha and Mangarh Chowk area to take diamond traders and brokers from these areas to SDB. Such buses will run every hour. Even the separate and free parking facilities have been prepared for the brokers and traders. There are some brokers and traders who have purchased offices at SDB and once they get fully functional, they will also open their offices,” he adds.

The Mahidharpura Hira Bazar is located on a narrow congested street in old Surat where trading and brokering of diamonds takes place (File Photo)

At the April 4 meeting, Dholakiya told the traders, “The market works only when all the traders, brokers and manufacturers come together at a single place. If traders open their offices and footfalls of brokers start coming up, it will definitely benefit the SDB and business will come. Those who don’t follow have no right to say anything. We are opening our offices at SDB and you should also come. It is the diamond traders who have developed BDB. We are seeing such development in SDB as well and I humbly request you to come to SDB and start doing business.”

Sources said that SDB’s new management team has also planned a trip to Mumbai to BDB and other places to request traders to visit the diamond bourse, and start doing business. Experts say that with the expansion of BDB, the interest among traders to relocate will further diminish.

Mumbai and its bourse

Mumbai is said to be trading hub of diamonds where BDB houses majority of traders who are said to be from the Marwadi and Jain communities. Surat, on the other hand, is known as a diamond cutting and manufacturing hub that is dominated by the Patidar community. A majority of the committee members in the old SDB committee were Patidars.

The BDB was opened at Bandra Kurla Complex (BKC) in Mumbai in October 2010. In the beginning, there was poor response from the diamond traders who were majorly operating from Opera House, Prasad chambers, and Panchratna among other locations.

After the bomb blast in the Opera House in 2011, the authorities of BDB gave more importance to the security measures for traders and visitors. Gradually, there was a quick rise in the footfall of traders who opened their offices at the bourse. Currently, there are over 4,000 members at the BDB carrying out trading, exports and imports of rough and polished diamonds. Almost all global diamond companies and pricing firms like Rapaport and IDEX operate their offices at BDB. The BDB is also represented in international associations such as World Federation of Diamond Bourses, the International Diamond Manufacturers Association, World Diamond Council, and the Kimberley Process. Everyday, BDB receives footfall of over thousands of people, including foreign buyers who are into the business of rough and polished diamonds.

Currently, the bourse is facing problems of space shortage. With the business flourishing, a need for expansion has emerged.

Expansion plans

As SDB struggles to attract businesses, the BDB is all set for a major expansion to create thousands of new offices at the same place with new FSI (Floor Space Index). Currently, BDB is spread across 8.1 hectares that houses 2,500 diamond trading offices, a customs house, banks, and other important offices.

The Mumbai Metropolitan Region Development Authority (MMRDA), according to people familiar with the matter, has proposed a global floor Space Index (Global FSI) of 4.0 for BDB at the Bandra Kurla Complex at G Block. The new FSI will allow BDB to develop over 10 lakh square feet of built up space. In the new space, thousands of new diamond trading offices can come up.

BDB vice-president Mehul Shah told The Indian Express, “Currently, BDB is built on 20 acres (around 8.80 lakh square feet area) with 2 FSI. Now, with new norms as the time changes, we will get 2 more FSI and we will get more such areas for construction. For that, we have to pay some premium amount to the government. As per the government norms, we will go ahead with construction on whatever land we get. Apart from this, we have an open plot area of around 8 to 12 lakh square feet at BDB and we have also planned to carry out construction on it. The original plan of BDB was put up in 1994 and at that time the FSI was 2. Today after so many years, as the industry has grown up, a lot more demands have come up and because of scarcity of space, the traders face a lot of problems. People may have to move to other places”.

Shah adds that things would move only after the Lok Sabha elections are over in June. “Once the election process ends, and normalcy returns in the government offices… we will strongly work on it and go for the expansion of BDB. Once we get the land and permission for construction, there will be over thousands of offices that are planned.”

The SDB vision

The SDB was planned with an intention to expand the diamond-trading activities from Mumbai to Surat. Designed by the Delhi-based architecture firm Morphogenesis, SDB has been built on an area of 66 lakh square feet at DREAM (Diamond Research and Mercantile) city. Morphogenesis has claimed it to be “bigger than the biggest office space in the world, The Pentagon in the US”.

SDB was inaugurated by Prime Minister Narendra Modi last year in December. It has a capacity of about 4,200 offices ranging from 300 square feet to 7,500 square feet each. The bourse has nine towers — each with ground plus 15 floors.The SDB aims to offer a one-stop shop starting from rough and polished diamonds, certification laboratories, retail outlets covering a comprehensive ecosystem of all aspects of the diamond trader.

The SDB also hosts 27 retail outlets of diamond jewellery who are nationally and internationally renowned. Apart from this, importance has been given in safety and security aspects.

The SDB already has permission to open customs houses and some banks have also shown interest in opening their branches to ensure better facilities.

Meanwhile, DREAM City, a greenfield project by the Gujarat Infrastructure Development Board (GIDB), is spread on 700 hectares at Khajod on Surat’s outskirts. Once complete, it will have all the social infrastructure like schools, hospitals, hotels, dining spaces, entertainment zones, Information Technology offices and so on, to support the SDB.