NEW DELHI: Indian real
estate market, despite its opportunities, has seen a sharp drop in
foreign investments over the past two years, and in future, global
investors may be more cautious investing in markets that lack
international standards, says Sean Tompkins, global chief executive
officer of UK-based Royal Institution of Chartered Surveyors (RICS),
a professional qualification and standard setting body for land,
property and construction sectors.
The country’s real
estate sector saw close to $20 billion in investment between 2006 and
2009 but only about $2-3 billion of that has seen an exit yet, after
over six years of investment. India, he says, hasn’t really
delivered since 2005 on the promise that it held as an investment
destination and today most of the capital finding its way into Indian
real estate is really domestic capital.
Investors of all types are
a bit wary and cautious because of the global slowdown, and it’s
critical to create the right conditions to make an investor more
comfortable for investment.
“There will be an
expectation that standards would rise and I believe that those
countries that are able to provide safe and high standard environment
in real estate will benefit from significant investment flows,”
says Tompkins.
For a number of private
equity investors who invested between 2006 and 2009, returns have
been subpar from what they had hoped and been promised. Many expect
to lose money because many projects have not taken off and many
others are stuck in litigation with their investee companies.
Tompkins says India needs
to change its mindset and look at real estate and construction as a
proper profession like it is in the West if it has to come up to
global standards.
“The biggest challenge
for investors is that, though they love the attractiveness of markets
such as Brazil, Russia, India and China, the difficulty they have is
that there isn’t a profession to give them the advice or the
standards to give them comfort.”
For India to be a major
world economy with some great winning cities, Tompkins says it’s
necessary to train people in the real estate and construction
professions.
There is no shortage of
capital flow globally, but what’s dictating the flow of money is
professionalism and international standards, which India needs to
improve if it were to sustain its massive growth in urbanisation, to
the tune of 40%.
For Tompkins, India’s
biggest challenge is urbanisation.
Those countries that are
creating successful winning cities — where people want to live in,
work in and invest in — are thinking about everything.
“But the problem with
most governments is that they think in silos, so you will have one
bit thinking about housing, one about infrastructure, one about
finance, but all those need to come together, which is the challenge
in most major developing countries. How do you plan for that, cause
if you don’t, you might end up with big cities that don’t work,”
he says. “You need to get it right on paper and policy and
government has a massive role to play here.”
Then there’s the massive
demand-supply mismatch of skilled manpower in real estate and
construction.
According to an RICS
survey, close to 3-3.5 million professionals are required annually in
India, while our universities and colleges are producing only a
million of them.
“In all, there is 82-86%
skill gaps in India, which is a huge deterrent to growth,” says
Tompkins.
Source:http://www.indianrealtynews.com/category/real-estate-developers
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