Bottom Line: There has been regulatory changes and the established corporate groups are increasingly entering into real estate business. Track2Realtywonders as to what extent would it change the functional professionalism of the business.
When the market sentiments were bullish and foreign investors were testing the Indian realty market, many of the relatively not-so-polished developers started hiring these white collared professionals to negotiate with their global counterparts in a language that they understood. Problem started when this skilled workforce started colouring the vision of the promoter and hence driving the management decisions.
The downturn, however, exposed many of them since they were enjoying the benefits of being in the right place at the right time. With sales nose-diving, many of these strategists and marketing experts had no answer to offer.
“Look at the branding aspect of the business. For a promoter it is a mix of short-term goal of selling the project as well as the long-term goal of creating top-of-the-mind-recall value. Whereas for a marketer, it is short selling the project which is the benchmark since he may not be looking forward to a long-term career in the same company,” says the developer.
A Vice President with a leading MNC points out that unlike other sectors like FMCG, where a continuous brand campaign is directly proportional to the sales graph, in real estate dynamics of selling either through brokers, under-writers or just plain marketing gimmick, is different. Most of the professionals who joined real estate from other organised and professionally managed industries never felt at home. And hence their vision was to sell the project, and not create iconic brand, and then move away.
However, what cannot be doubted is the fact that having a professional team adds to the overall reputation of the company, even in the eyes of private equity funds and other investors. But with private equity funds deserting and investors preferring to be directly dealing with the promoters of real estate companies, the dynamics of a professional management at the helm of affairs is also changing.
The debate over promoter driven versus professional driven also brings to the table the fundamental question as to whether the entry of corporates into the business has changed the outlook of real estate in India. Have they brought about transparency and corporate governance?
Changing professional standards?
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In the realty sector where a majority of operations are based on exchange transactions – adoption of transparency standards in interaction with investors and stakeholders alike, are major advantages that will help avoid a system break down.
With some regulatory changes having taken place in the sector over the last decade, there is increased investment in the sector, along with heightened competition and increased number of consumers that need to be catered too. Given the attractiveness of the sector to investors and businesses alike, over the last few years some large existing business houses and corporations have made foray into the sector and diversify their business lines.
Critics, however, assert for Tatas, Mahindras or Godrej, real estate had never been the real forte. Is it just greener pasture driving them? Experts believe there are various regulatory stipulations and hurdles that continue to exist in the sector; whereby company promoters, stakeholders, and business leaders continue to have to make complex decisions that direct the destiny of their overall business operations. In doing so, they may have to discharge some essential, inter-related tasks which are the foundation for building trust in corporate governance and addressing questions of corporate accountability.
Most of the corporate groups into realty are having a business model of tie-up with local developers. How far will this help in giving a facelift to real estate beyond their brand name? Sachin asserts reforms in the real estate sector are multi-faceted and call for combination of legal, regulatory, and market measures to be taken.
Changes along legal and regulatory lines envisaged for the sector, must take into account the enforcement capability of developers, which is often a binding constraint. Even as firms face competition and adapt themselves, they must operate within these institutional frameworks.
Some analysts believe it is profoundly in the self-interest of these real estate developers, be it through joint ventures, tie-ups and/or affiliations, going forward to implement a list of ‘to-do’s’ in order to convert the challenge of corporatization into an opportunity.
This comprises linking strategic goals to daily activities in order to establish a premise for corporate performance management; obtain timely, accurate and relevant information as and when needed; implement and enforce strategies and policies; assess and validate expectations; benchmark best practices; and develop key performance indicators.
By: Ravi Sinha