New Delhi: Kaushik Sengupta is among the most wanted people in the country.
Sengupta, 47, has not broken any law though. He just happens to be in the right job at the right time.
“On an average, every day I get at least one call from a placement agency offering me a job at double my salary,” says Sengupta, vice-president, sales and marketing of Eros Group, a New Delhi-based real estate firm. He joined Eros three years ago from the paint industry, lured by higher compensation in what was then a booming industry.
Despite recent blips, the industry is still booming. And Sengupta’s story is fairly commonplace in one of India’s fastest growing sectors of the economy. Salary levels in the real estate business have been growing at 25-30% a year over the past two years, driven largely by the shortage of people at every level, as a hitherto predominantly unorganized business transforms itself into a more organized one.
Moving up the ladder: Omaxe chief executive officer, corporate strategy and finance, Arvind Parekh’s salary has doubled in the last one-and-a-half years since he joined the real estate firm. (Madhu Kapparath / Mint)
That’s evident from the number of real estate firms that tapped the capital market last year—developers, including DLF Ltd, Omaxe Ltd and Puravankara Projects Ltd, raised around $3.7 billion from share sales in 2007—and the number waiting to do so in 2008, with the initial share sale of Emaar MGF Ltd set to open either late January or early February.
Salary growth is relevant only to those people who stayed on in their jobs—those who switch end up making much more, sometimes almost three times their previous salary. In a context where real estate rates in some markets have tripled or quadrupled over the past three years, no one thinks such salaries are out of place.
According to the eighth annual Asia-Pacific salary increase survey by Hewitt Associates, a global human resources services company, companies in India reported the second highest average salary increase in the Asia Pacific region after Sri Lanka, with average salary increases of 14.8% in 2007.
“Real estate is a growing industry—it offers a lot of challenges and the salary levels are four-five times that of (the) manufacturing sector where I come from,” says Arvind Parekh, chief executive officer, corporate strategy and finance, Omaxe, also a new entrant to the industry. Parekh’s salary, for instance, has doubled in the last one-and-a-half years since he joined Omaxe.
Parekh’s previous job was with Jindal Stainless Ltd, where he was director, finance.
Salaries of chief executives in real estate firms range between Rs40 lakh and Rs4.5 crore a year, far higher than salaries for CEOs in more established sectors.
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.
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.
The situation has worsened after the entry of private equity players focused on real estate who are also in the race to hire real estate professionals, says Magazine. At the same time, developers have started scaling up and are expanding outside their home markets. The result is a war for talent between developers, private equity players and real estate consultancy firms.
The paucity means that companies are open to hiring managers and executives from other unrelated businesses. “These guys don’t know much about real estate,” says Sengupta, referring to such executives, “but what they do is help in making the company professional. The pay packet is outstanding—over and above the printed numbers they get a lot more.”
But the scramble for talent is also creating other headaches for developers themselves. No sooner have they groomed executives that the competition starts making overtures to them. Attrition levels in the industry are at 30-40%, according to industry estimates. And poaching is a way of life.
Recently, Munish K. Baldev, previously the head of retail at Unitech Ltd, moved to Indiabulls Real Estate Ltd as its president (marketing).
To address the talent gap, companies such as DLF, Unitech and Ansal API, previously strangers to campus recruitment, have started picking up talent from engineering and business schools.
Some schools have introduced specialized courses on real estate to prepare students for a career in the sector. For instance, the Hyderabad-based Indian School of Business has launched a course titled Property Finance and Investment. And the Pune-based Indian Institute of Real Estate, affiliated with the National Association of Realtors, a leading association of realtors in the US, offers certificate courses in the real estate business.
(Ammar Master in Mumbai and John Samuel Raja D. in New Delhi contributed to this story.)