T.C. Goyal, the managing director of India’s largest developer, DLF, made about Rs4.5 crore a year in 2006-07. That compares with a pay of Rs2-2.5 crore for senior executives in India’s top automotive companies. The salary of Jagdish Khattar, the former managing director of Maruti Suzuki India Ltd, which sells half the cars sold in India, was Rs2.4 crore a year. Neither figure includes employee stock option plans.
Smaller firms aren’t fighting shy either. Anil Kumar, CEO, Ansal API Ltd, a smaller developer, earned Rs42 lakh a year for the same period, excluding employee stock option plans which are offered as perks on top of pay.
It isn’t just chief executives; everyone in the real estate business is earning more. According to industry estimates, while salaries for fresh civil engineering graduates from reputed institutes can go up to Rs6 lakh a year in other industries, real estate firms do not mind paying between Rs12 lakh and Rs15 lakh a year for the same graduates. Vice-presidents in such companies earn Rs50-60 lakh a year. In comparison, senior managers in the automotive business earn between Rs18 lakh and Rs30 lakh a year.
Interestingly, even within the sector, there are surprises because it’s not always the top firms that pay the most. Mid-tier real estate developers, who are less established tend to offer higher salaries as it is tougher for these companies to attract experienced professionals who prefer top companies such as DLF.
More transparency
The boom in real estate salaries also arises from the fact that the business itself is changing, with several builders trying to become more organized and project the image of well-run professional businesses. Unlike other, relatively more mature industries such as manufacturing, the real estate business has been essentially entrepreneur driven and is not very organized, says N.S. Rajan, partner, human capital, business advisory services, Ernst and Young.
It still continues to be largely fragmented and unorganized, but the industry is moving towards higher levels of transparency with companies beginning to access capital markets.
“Earlier, a majority of real estate developers did not have a corporate structure,” says Parekh. “But now, with a large number of companies raising money to fund future growth, it has become extremely critical to have a strong corporate structure to show the company is being run by a team and not the promoters.”
“The fundamental problem in real estate is it was not looked at as a professional industry,” adds Anshuman Magazine, managing director, CB Richard Ellis, a real estate advisory. “When we started...in 1994, there was nobody with real estate experience. Nobody had a real estate degree. The closest we came to was someone with an architecture degree.”
That has changed since. Firms such as DLF are well known for working with top consultants such as McKinsey and Co. And there are at least some people in the market with significant experience in the real estate business.
The problem is, everyone wants these people.