From ET Realty
If you are looking for a job or already working in real estate, you may get lucky as there are individual companies who are giving above average salary increases. This despite the fact that both residential and commercial market in this sector have not grown as aggressively as analysts or the industry have been hoping for after the Modi-led NDA government took over reigns.
“A lot of it is governed by macroeconomic factors and there’s less to do with the industry per say. For example, the GDP has not been very high which means surplus income at the household level has not changed much. This has led to lesser investments,” says Suryanarayanan R – Sr. Consultant, Rewards, Aon Hewitt.
However, this is not to say that this sector will see saturation anytime in future. It’s an evergreen sector and where Indians love to put their money if they can afford.
“The outlook for the industry would be moderate to strong. India is nowhere close to getting saturated whether it’s residential or commercial real estate we are talking about. Over the next 10-15 years, the industry will only grow. If you look at the corrections, prices are still largely the same in metro cities. It may have seen a dip with some of the premium builders taking cognizance of the demand and bringing it down, but for others it has remained largely unchanged,” he says.
Suryanarayanan further calls 9.8%, the number which reflects the salary increases projection for the Real Estate and Infrastructure industry for 2016 “a cautious number”, which he says would reach around the India average of 10.3% in the next 12-18 months.
For the infrastructure segment, meanwhile, the outlook is moderate since the various initiatives in the pipeline and their success is dependent on the progress on various regulatory and administrative dependencies such as Land Acquisition Bill, government clearances at a departmental level and funding/payment clearance to the vendors along with speedy review and closure of tenders.
Talking of key talent, Suryanarayan points out, that it is not available on the structural side in India, and so companies need to look outside of India.
“Within the industry, if your genesis lies in the corporate houses, you will borrow practices from there when looking at talent retention/ rewards as opposed to pure real estate players who are still coming up the curve in terms of looking at talent,” he says.
Precisely why there’s a clear trend where more and more organizations are moving towards a professionally managed approach which has enhanced focus on people and people practices in the short team leading to a clear impact on the overall morale, engagement, retention and growth opportunities for employees in the sector.
As of now, Attrition continues to be higher than overall India industry which is a reflection of the growing sector and multitude of opportunities available across the real estate sector. The infrastructure companies are observing a slightly lower rate of attrition given the current challenges the sector is facing.
Suryanarayanan says: “Sales is a highly transferrable skill set, therefore this section in the industry sees movement across sectors. However, employees in core functions like architects and engineers have specific skill set. Therefore, there is not high attrition level here.”
“On residential side, if GDP goes up, situation will become better. Also, if credit environment from banking perspective is relaxed and we see drop in loan prices even on a momentary basis, it can fuel growth,” he adds.
Moreover, emphasis on the improvement and enhancement of existing infrastructure across the country, initiatives such as smart cities, housing for all by 2022 etc are all positive steps which would create opportunities for the real estate sector to further grow. Additionally, the sector would get a strong boost if measures such as the land acquisition bill are passed to ensure that the urban infrastructure projects, highway corridors and all other projects which are dependent on easy availability of land can pick up pace. The growth of this sector would also create demand in other manufacturing industries such as cement and steel.
Meanwhile, Suryanarayanan says the demand for commercial spaces has continued irrespective of the sector overall. “Despite an overall economic outlook being moderate we continue to see continuous demand in this segment which is being driven by expanding organizations and global organizations who are setting up their offices in India.”
However one major challenge the big players may have to face is seeing the movement of talent to the regional players.
“Unlike other industries, Real estate is not controlled by handful big players. There may be 200 to 300 regional players. It is a very fragmented industry. Therefore, we will see spurt happening in pockets. Even as emphasis has always been on the tier 1 cities but there’s more focus on the tier II, III cities. Now, with the government announcing affordable housing for everyone by 2020, it’s going to drive demand at smaller locations. This may have several companies not doing well loose their talent to the regional players as demand there goes up,” Suryanarayanan says.
The long term outlook continues to be optimistic since the demand in the various segments for real estate is linked to the overall GDP growth and the existing demographics which are favorable over the coming decade. The improvement of the infrastructure segment has been recognized as a key driver for the uninterrupted growth of the GDP and industry.