February 2014    
Thinking Aloud Podium We Recommend Standing Ovation
Real Estate in India: A New Dawn? – Jay Interview with Mr. Pradeep B. Ranka, Creative & Technical Director - Ranka Group


Conquering the Chaos - Win in India, Win Everywhere – Ravi Venkatesan Catalyst for Social Action (CSA) – Pune

Dear Reader,HR

The Real Estate sector is one of the country’s pillars of growth, which is driven by increasing globalisation and the government’s investor friendly policies, which are luring investors and developers to this sector. The industry achieved new heights during 2007 and early 2008, characterised by a growth in demand, substantial development and increased foreign investments. However, by mid-2008, due to the effects of the global economic slowdown, the industry took a turn for the worse.

Over the years, the importance of the Real Estate sector has grown making India one of the most favoured countries for investments. Increasing and growing demand from the education, healthcare, tourism and hospitality sectors coupled with urbanisation, demographic changes and easy access to financing options continue to drive the success of this sector. Further the momentum of this growth has been boosted by the fact that the government today allows for 100% FDIs in the development of projects for townships and settlements.

Amid the roller coaster ride, the Indian Real Estate sector continues to shine. ET this month takes a quick look at the challenges the sector faces.

Jay focuses on India's emerging Real Estate sector in the Thinking Aloud section. The Indian man’s dream of a home and an emblem of security remains a dream compounded by one sided contracts, corruption at different levels of government bodies, unnecessary expenses and poor quality. However, there is good news on the other side: amid new laws, the sector is heralding a new era with a new generation of builders coming into the market, wider supply of modern structures and a rise in quality standards. India’s Real Estate sector has been characterised by the influx of new players and investments and is likely to contribute more towards the economic and employment fronts.

On the Podium, Mr. Pradeep Ranka, who heads Bangaluru based Real Estate Company, the Ranka Group takes a look at the progress of the Indian Real Estate sector. The sector plays a pivotal role not only in terms of driving the economy but also fulfils the universal need of shelter. Over the years, the country has also progressed in shaping up the sector through its various incentives and conducive environment to lure investments. In line with the importance of this sector, the Ranka Group has also overcome the many challenges that the Real Estate sector faces today, with the Group’s commitment to serve both customers and investors alike.

In the We Recommend section, we review Ravi Venkatesan’s book ‘Conquering the Chaos: Win in India, Win Everywhere.’ The author, the former Chairman of Microsoft India, offers insights on how firms can overcome the unique challenges of the emerging Indian market. The Indian subcontinent is in fact an archetype for most emerging markets, many of which present similar challenges but not the same potential. The book offers details and real time examples of companies which have both succeeded and failed in India. Therefore, for companies to succeed in India, they need to get around the negatives and leverage the positives. This will eventually serve as a litmus test for a firm’s ability to succeed in other emerging markets. The author is of the opinion that if you can win in India, you can win everywhere.

Standing Ovation features Pune based Catalysts for Social Action (CSA), a social welfare organization established in September 2002 and dedicated to the cause of child welfare. CSA focuses on adoption and institutionalized-child care. The main aim of CSA is to optimize rehabilitation outcomes for institutionalized children and to influence change in adoption practice. The organization also helps to enhance the total number of adoptions and towards better child care.

In Figures of Speech, Vikram’s real estate agent acts pricey!

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Thinking Aloud

Real Estate in India: A New Dawn? - Jay
The definitive dream for most Indians is ownership of a home, the ultimate symbol of security for a person. Sadly, this remains a pipe dream for the vast majority, not just of those below the poverty line but also for the emerging middle class in the country.

Reasons abound for this misfortune. Looking for the root cause is akin to deciphering the proverbial chicken & egg question. The Real Estate sector is synonymous with the Builders’ lobby in India – in the eyes of the consumer – and the tribe has been pilloried for their rapacious tendencies. The primary issue has not only been the one sided contracts that consumers (aka buyers) have been subjected to but also the poor quality and inordinate delays that have tortured the consumer over the years.

The perspective of the Builders, however, is quite different. And, there is some merit to it. One of the reasons why the sector has been steeped in corruption is the archaic land & building policies of all the states, compounded by local body legislations & regulations. Corrupt officialdom at multiple levels of municipal corporations, electricity boards, and an army of minor mandarins with their whimsical interpretation of rules make the Builders squirm – until they pay to extract themselves from the clutches of these official extortionists. Invariably, the cost of these unnecessary expenses are passed on to the buyers – and the net result is higher real estate prices. This poignant story is not restricted to the large metros of the country but also is being replayed in all the emerging cities and towns across the country.

However, there is good news in the offing. The India growth story has attracted new investments into the sector. The influx of new players has not just meant wider supply of modern, built up structures but also rise in quality standards. Reports indicate that private equity investments in the sector have increased 13% in 2013, from USD 1.1 billion to USD 1.2 billion. This 13% increase may not seem very high but is indicative of the interest in the growth potential of the sector in India, particularly when one considers that there have been major hiccups in the overall gross domestic product (GDP) of the nation. And, expectations are high that Foreign Direct Investments (FDI) will show sharper surge post-elections when the new government provides a runway for economic stability.

And, this does not seem unlikely at all given the fact that this sector is the second largest employer of labour and contributes 6.3% of the GDP & some reports bullishly estimate that this sector will attract USD 25 billion worth of FDI by 2025 (up from the current USD 4 billion).

The projected growth is both in the residential & commercial segments, and as is widely recognized, is fueled by the rapid urbanization of the country. Therefore, while metropolitan cities will continue to be the focal point, they will be closely followed by newer cities, in the tier –II levels of the nation.

Lest we think that growth is only a story of quantitative numbers, we need to appreciate that the sector is expected to see revamps on multiple fronts. While the quest to improve quality standards has been initiated by the large builders who have undertaken prestigious projects, it has created a ripple effect that will lead to benefits all round. The government too has begun to wake up to its role of providing protection to consumers, culminating in new laws. Besides, the Competition Commission of India too has decided to step in and pull up some of the largest builders in the country for acts of omission & commission.

Truly, all this potentially heralds a new era for the Real Estate Sector in India & with a new generation of builders coming into the market, it is but natural that expectations abound of a quantum change in business practices in this sector.

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Podium

Mr. Pradeep Ranka, Technical Director-Ranka Group

Currently the Creative and Technical Director of Bangaluru’s prestigious property development name, the Ranka Group, Mr. Pradeep B. Ranka is the backbone of the design and construction activity of the Group. He has completed his graduate degree in Architecture and Industrial Management from Carnegie-Mellon University, Pittsburgh, USA. In the stipulated 5 years, he graduated with the equivalent of two majors (Architecture & Business Management) and two minors (Visual Communications & Computer Science). During this period, he was a part of the International Study Tour Team, attended four simultaneous part-time but strategically chosen on-campus jobs and actively participated in real projects involving the community at large. Mr. Ranka has personally pursued real world experiences by attending various AIA/CSI/industry trade shows and has travelled extensively seeking inspiration from people, places and events across the US, Europe, Australia, Asia and Africa.

Over the years, he has provided impetus to the designing skills of the Ranka Group through fully computerizing operations for complete in-house architectural work and project monitoring. Mr. Ranka has also showcased his skills at many international forums. His hobbies include photography, yoga and meditation, swimming, badminton, white water rafting and snorkelling.

ET:  What are the drivers of the Indian Real Estate sector, and in particular the reasons for growth of this sector in Bangaluru?

PR:   One of the drivers of the Indian Real Estate sector is a universal one - a home which fulfils one of the most fundamental needs of shelter. It is also an unparalleled security and investment – both reassuring and ever appreciating. The country also holds a very strong prospect of long term economic growth (inspite of the downturn during 2008-2014), and therefore there is a long way to go before shelter as a basic need and home ownership reaches the levels of saturation. The ever growing migration to increasingly urbanised areas and a rapid shift from joint to nuclear families has decreased the number of occupants per home.

In Bangalore – salubrious weather, the well-earned sobriquets of Garden City, Pensioners Paradise drove its growth in the past. Currently, though infrastructure is lacking, the landscape is not what it was decades back. Bangalore is still a favourite destination for its still better-than-other-cities weather, cosmopolitan people and culture which readily embraces newer concepts, products and services (most top brands launch in India through this open city), and huge skilled labour force which has made it the global capital for IT/ITES/BPO and financial services.

ET:  The Indian Real Estate sector has been on a roller coaster ride since the year 2000. How has the sector progressed after the Indian government gave the green signal to Foreign Direct Investment in this segment?
 
PR:  While the ‘up-down’ cycles are integral to this sector, the long term graph has been and will always exhibit healthy and attractive growth. After the recent downturn in all economies, the FDI green signal is most welcome as also the anticipated Regulations for Real Estate Investment Trust (REIT), Accountability of Builders, and, most importantly the simplification of the complex and time consuming process for clearances and reduction in disproportionate taxation of the sector – all of which will give a huge qualitative boost to the sector translating into tremendous benefits for home seekers and the overall economy.

ET:  Today, the sector has embraced technology and innovations to lure both investors and consumers to this sector? What are the different technological and innovative concepts used?

PR:  Several global best practices such as RMC, PMC and thorough documentation are no longer optional. Further emerging best global practices, products and services are rapidly sweeping into this sector – highest rated green buildings, complete concrete structures (including concrete walls giving unprecedented quality speed and savings), extraordinary consumer experience from online comparison shopping to exploring online customisation design and costing options to complete CRM support – this sector has indeed come a long way and will proactively go a long way in the years to come. Most importantly, the mind-sets are changing fast and surpassing global standards will become a norm in the near future.

ET:  What are the challenges faced by the Real Estate sector in India today and what protection lies ahead for consumers in the sector?

PR:  The fact is that, in the first five decades after independence, home seekers essentially had to choose between worse or worst as compared to today where they are spoilt for choice between the best or even better than global standards. However, the challenge has been for manpower and resources to keep up with this dramatic uptick in qualitative and quantitative demand over the last two decades. Protection for customers stems from track record of established players, the high standards set by industry bodies such as CREDAI, pro-consumer Courts and most importantly - extremely informed, intelligent and increasingly discerning customers who will settle for nothing but the best.

ET:  The Ranka Group has been a pioneer in the Real Estate sector in Bangaluru. Could you please share some insights about the Group and the pioneering steps taken that differentiate your Group from other, larger firms in the real-estate sector?

PR:  “Values that Create Valued Relationships” is not just our tagline but the essence of our existence and success. In our 5th decade of successfully serving over 10,000 satisfied families in the most central of locations in Bangalore - Ranka Homes are a testimony to the following that Ranka Group stands for:

  1. Decades of Track Record speak volumes of the Trust it enjoys and well established practices which have consistently delivered to the satisfaction of all;
  2. Sell Without Hype or Frills (Customers know for sure that when a Ranka Project is launched everything is in place – all titles are fool proof, clearances are in place, construction has begun, and will be completed in full compliance of the regulations. Hence, 30-40% of projects is sold on the day of launch to end-users - not investors);
  3. Solid Fiscal Foundation (with zero outside funding - equity, investment or debt of any kind - all our projects are funded from internal group and family accruals, and progress linked payments from home buyers; It is no small wonder that we have managed 10,000 homes with no borrowings whatsoever for our Real Estate Operations);
  4. Direct Personal Involvement (We put our name on the line and hence our projects are mostly dealt in-house, working like hands on craftsmen, easily and directly accessible to all stake holders – from heads of the largest corporates to the lowest ranks of workers)

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We Recommend

Conquering the Chaos - Win in India, Win Everywhere – Ravi Venkatesan

Former Chairman of Microsoft India, Ravi Venkatesan, through his book, ‘Conquering the Chaos - Win in India, Win Everywhere,’ gives readers an insight on how firms can succeed in a market like India – an emerging economy. The book reveals the secret of conquering in India and therefore serves as a litmus test for companies to win not only in India but in other emerging markets too.

India is a complex market - a market known for its corruption, the crumbling political system, poor infrastructure, chaos, bureaucracy and uncertainty. These problems would also exist in varying degrees in other emerging markets. Amid all these, India is a market that cannot be ignored. To succeed, one has to get past all these barriers, which is not easy and this is why only some companies succeed, while others lose out on the race. The author argues that India is in fact an archetype for most emerging markets, many of which present similar challenges but not the same potential. Succeeding in India therefore becomes a test for a firm’s ability to succeed in other emerging markets.

Combining his personal experience with in-depth research and interviews with CEOs and senior leaders from companies like Nokia, GE, JCB, Dell, Honeywell, Volvo, Bosch, Deere, Unilever and Nestle, the author drives home the answers on how to tackle slowing growth, policy uncertainty, corruption to enable a firm’s success in India. Country Managers will need to understand the nuances of the Indian market, the customer and the distribution system to be able to drive revenue and profitability. The winning move in India also lies at the middle and base of the famous NCAER consumption pyramid. According to the author, a winning company in India is one which doesn’t just stay at the top of the pyramid, but focuses on the middle market, developing products tailored for India that span different price points. They create localized business models, including a supply chain that overcomes local challenges and delivers margins even at aggressive price points. Moreover, winning companies take a long term view of setting up shop in India, trading short term profits for growth and leadership. These companies run India as a geographic profit center, while empowering local organizations to grow the business. Finally, winning companies develop the resilience to deal with the country’s corruption, uncertainty, volatility and proactively manage reputations and influence regulations.

The bigger challenge of multinational firms in emerging markets is also the internal culture and mind-sets at the headquarters. The unwillingness to make a long-term commitment to the new market or to adequately trust local leadership, combined with the propensity to rigidly replicate the products, business models, and operating systems that have worked at home drives many companies to a “midway trap” that results in India remaining an irrelevantly small contributor to global growth and profits. The author does not fail to mention the qualities required of a leader in emerging markets —ambition, passion, entrepreneurship with learning agility and people skills and also describes a model where everyone reports to the Country Manager who is in touch with the headquarters, while at the same time is committed to India and trust local leaders. Also the author opines that, local leadership is better able to tune to the uncertainty rather than home leaders who have different mind-sets on how to deal with political and legal environment in India.

With globalization and glocalisation, joint ventures in India have taken center stage and are necessary today. Often they fail when there is absence of complementarities. At times the MNC is not willing to adapt to the Indian situations. Globally, 60% of JVs have failed in emerging economies. Problems that vex such deals are absence of trust, payment of a high price with low value and poor governance.

Overall, the book is a great read especially for those who operate in the Indian market and for those who would like to explore emerging markets.

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Standing Ovation

Catalyst for Social Action (CSA)

Established in September 2002, Catalyst for Social Action (CSA) is a non-profit organisation dedicated to the cause of child welfare and adoption. CSA works as a “catalyst” focusing on a holistic approach to child welfare and optimal rehabilitation in the following realms:

  • Transforming lives of orphaned children via initiatives ranging from providing education and training, health and hygiene plans, nutritious meals and overall well being
  • Promoting and facilitating adoptions wherever possible

Aims & Objectives of CSA

  • To work towards awareness and promotion of the right to dignified living.
  • To provide information on issues related to adoption and child welfare.
  • To initiate research and documentation leading to publication of papers for increased awareness.
  • To network, assist, promote, encourage, and support agencies involved in social development.
  • To provide assistance to established agencies in the social sector in the areas of technology and automation, streamlining of procedures and practices, training and capacity building, leading to enhancement of performance.
  • To encourage partnerships and participate in alliance building efforts.
  • To provide a forum for interactive sessions between various segments of society.
  • To work towards sustainability of special causes of agencies by mobilizing funds through sponsorship, memberships, donations, exhibitions, contributions etc.

Adoption: CSA works with 25 rural agencies in Maharashtra, Orissa, Chattisgarh and Goa to assist in:

  1. Finding homes for children awaiting adoption.
  2. Enhancing the living, childcare and work-conditions in the agencies.
  3. Cultivating an adoption-friendly environment by networking with the Government, Judicial and other authorities that are a part of the adoption process.

Orphan care: CSA works with 9 destitute homes/orphanages, 4 in Maharashtra and 5 in Orissa. Vocational training, skills development and functional literacy are some of the areas of focus. Wherever possible, children are encouraged to seek admission in English medium schools. Educational support, recreation and health facilitation are extended to the children as well.

Apart from initiating the process of moving adoptable children from orphanages into the adoption stream, CSA has also achieved the finding homes for 171 children over a period of 3 years. Malnutrition often leading to acute health problems, a common phenomenon in many adoption agencies has been completely addressed in the agencies supported by CSA as well.

For more information on what CSA has to offer, you can visit http://www.csa.org.in/

CSA’s noble cause for the children of India deserves a standing ovation!

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