Making graduates employable for the finance and real estate sectors

The writing can be seen clearly on the wall. India/s graduates are woefully equipped to take on executive, let alone management positions, in the fastest growing sectors in India. Government statistics show how even if one totals up all graduates (arts, science commerce, medicine, engineering etc) they account for just 3.6% of the country’s population. But even this figure is overstated because as McKinasey, Nasscom, TCS data shows, barely 15% of India’s graduates are employable. Thus, it is likely that those reading this column belong to the privileged 0.5% of India’s demography.

Last week, the Visa Global Financial Literacy Barometer underscored this problem by ranking India 23^rd from 28 countries surveyed – ahead of only Morocco, South Africa, Vietnam, Indonesia and Pakistan.

This is serious, because if India has to maintain a high GDP growth rate, it has to create employable graduates to man various positions. Moreover, these positions go a long way towards making organizations that much more professional and competent. Without employable graduates being made available the entire economic underpinning of the country could get jeopardized.

 

Kamlesh Dangi, Group CPO (Chief People Officer), Religare Enterprises Ltd; Sanjeev Dasgupta, President-Real Estate, ICICI Venture Funds Management Company Ltd; Devesh Kumar, Managing Director - Head Equities, RBS Global Banking & Markets (on audio-link); Ashok Mohanani, Chairman and Managing Director, Ekta World; Mahesh Mudda, Executive Director & CEO, New Consolidated Construction Co. Ltd; Joy Sanyal, National Director, Jones Lang LaSalle Property Consultants India Pvt Ltd; and Pankaj Wadhawan, CEO, Blueshift Education and Training Pvt Ltd

The session, moderated by DNA’s R.N.Bhaskar brought out some of the issues that confront the industry inparticular and the country in general.

Given below are some of the edited excerpts:

 

DNA: How bad is the situation?

Mudda: Skilled manpower is a big issue. Not just today. We have been discussing this for years. And we are from this construction industry and almost 47 job-sites in most of the states of this country.

The actual problem this industry is facing at skilled people. We are talking about mechanization because we visited most of the developed countries. We’ve seen how because they’ve been trying to cope up with, you know, these labor issues. But in our country, it is – volume is massive unlike any other countries.

 

So all said and done, whatever mechanization we bring, we still have to be largely dependent on the labor force. And slowly, slowly which is becoming because it’s very difficult and particularly when we come to the skilled area, it’s not just simple labor which is being used for shifting material and dumping the material here and there.

The skill segment we talk about particularly and in our industry, real estate, carpenters, fitter, shuttering people, masons. So here is that, this is absolutely because need at emergency level -- because it is becoming now essential to see that how we can truly develop the skill. For that, we have association called Builders Association of India also.

I happen to be the National Level Treasurer of the Association. And we have been discussing this issue. We have initiated this issue at the state level as well as central level. I’m trying to understand NSDC’s schemes which will definitely help us to overcome these issues.

There are many schemes out there. Then Labor Welfare Board, another board, where, again, because the industry is contributing 1% towards the welfare of the labor fund where again I happen to be the appointee member of labor from the state government on that board where, again, we are initiating training programs and develop the skills.

The skill shortage is critical.

DNA: Sanjeev, your views?

Dasgupta: Clearly, skill gaps and the lack of adequate skilled resources are a challenge definitely for construction and also for the finance sector. If one looks at the inflation of construction cost during the last five years – actually more than the input prices of cement, steel, etcetera, which have definitely gone up, I think the labor cost in percentage terms has seen the highest inflation and predominantly because of the fact that there is just not enough availability of skilled resources. Labor cost inflation over the last three to four years is almost 50-60%.

Wadhawan: I am in the education part. Real estate and construction contribute to a great part of India’s GDP. Some reckon it to be around 18% cumulatively. That’s a huge number. And today, my interaction is mostly towards higher education, mostly post graduate skills.

I have seen how, in real estate, there is no formal management education. And though, internationally, it is seen as a profession, in India it became a profession only after 2004 when FDI opened up. And before that, it was quite unorganized. And I think it has evolved a lot during the last eight years and I think many professionals are getting attracted towards this as a profession, which was not the case seven, eight years ago.

Possibly on account of its recent introduction, there is no formal management education today in real estate and so any option which an individual seeks is usually overseas. And the content there is quite global in outlook, while the Indian market requires content to be localized. So that gap is there.

As far as finance part is concerned, there are lot of financial institutes.  And the biggest problem now I think it’s been covered in the media as well, that the issue of MBAs has today become more of a placement issue rather than looking into the content and the quality of people.

 

And I’m surprised, in my MBA days or even today, finance, private equity, M&A etc which have been in the market for so many years, are still not being taught well in management schools. Students don’t discuss term sheets, asset purchasing agreements and the like in classes. So they expect corporates to train them on the job, and they believe they have some fundamental knowledge which will help them.

I don’t think formal education is bridging that gap, wherein the guy is employable or job-ready from day one. What happens that, you train people, and it takes one year for them to become productive.  And by the time they are productive, they go to greener pastures.  So retention becomes another problem.

So even in finance, though it’s an established field, domain knowledge that is required is not up to the mark. You can’t expose them to the client. You can’t put them in appraisal, if he’s joining a bank. That’s because he has not seen an appraisal form.  And he can’t do investment banking because he has not seen a private equity term sheet. Often, he doesn’t even know what the terms are.

Somehow, there is an expectation or a trend that work environment is different, academic environment is different. That could be because professors are lowly paid. The irony is that people expect the guy to go for a campus placement with the IIMs with 15 lakh as his monthly pay package when even the professors don’t get paid that much.

So you are expecting a trainer, who has not done a single deal, to train students. The same is true of real estate. Where the money should be spent, it is not being spent – namely the trainers. As a result, the content is outdated.  There is nobody focusing on preparing content afresh, or bringing in the deals.  Most of the case studies are totally away from the reality and are more academic.

So I think we need to focus on content. Unfortunately, most MBAs will think of specialization when they will fail to get a job to their expectation. We have some 3,900 MBA institutes in India, all AICTE recognized, which churn out 3.5 lakh students each year.  If you leave out the top end – because a student with an excellent IQ will do well with or without a good teacher – the rest of the Tier II institutes cannot even attract good visiting faculty.  Their content is outdated. 

Kumar:  Most MBA finance institutes are imparting theoretical knowledge

There are 3500 recognised MBA Institutes recognised with a capacity of 3,50,000 seats (source: AICTE). There must be further 2,50,000 capacity of unrecognised MBA seats. Based on experience, most of the freshers recruited out of these Institutes take one to two year to understand the domain related challenges as teaching is theoretical. MBA institutes are falling much short of expectations in terms of churning out quality content, attracting industry experienced faculty and accordingly end output falls short of expectations. Tier II Institutes face even more difficulties due to resource constraints. And thus don’t get good teachers.

Though the education business has become quite lucrative in India in last few years, however faculty in MBA finance institutes remains low paid. You can hardly think of a banker or private equity investment manager thinking of trainer/faculty as alternate career. Unless leading corporate and high profile people are not attracted for training, the end quality cannot match industry expectation.

Today if one were to train its professionals with 3-4 years experience in corporate finance related domain hardly there are any credible training firms with domestic foot print. One has to mostly rely on academic intuitions for their executive training programs which defeats the very purpose of domain based training. Hence mostly the outcome is dissatisfaction. Sometimes some organisations send their employees to attend seminars where the content is very light and coverage is mostly upto the discretion of the speaker hence that platform also does not meet the training requirements of the organisations.

Thus, there is an increasing need for and importance of career counselling and mentoring.

DNA: Joy, you represent one of the finest consulting companies in the real estate sector, and your analysis is highly respected. What’s your view?

Sanyal: I think India is getting more organized on the real estate sector. That’s why we are having this conversation. We would not be having this conversation probably five, six years back. That’s one good sign.

And, secondly, I agree that real estate is not being educated in India at all at any strata.

Thirdly, my point of view is that real estate is a very large subject. It’s not a very small subject. It starts firstly with land acquisition, title, understanding valuation, where many people have failed on the title side. Then you have the approval process, which is very tedious, difficult and cumbersome.

Then comes project conceptualization, which is about how a project should be done by a developer. Even if you are an engineer, project conceptualization is a different skill.

Then there is project management – which is a big issue. Most people are clueless about what project management means in the real estate business.

Investment management is the next big area, a component in the real estate strata. Then there is facilities management. Then, there is something which is extremely important, which is safety, how to keep the environment safe for everybody. This includes green building technology and environmental sustainability as well.

And then, you have labor, or workforce, management. When we say labor and workforce management, you will be amazed that 80% of the builders, the traditional type – and I’m not talking about Bombay, Delhi, Bangalore, Chennai,  I’m talking about the entire country -- would not have proper pension plans, proper PPF plans for their workforce.

Today, we are talking about health insurance and all those things. These become issues that need to be taught as a subject for real estate. If I am a project manager, I should at least be aware that these are the components. Most of them are completely unaware when getting into real estate.

DNA: Are there training institutes that teach these subjects?

Sanyal: No.

DNA: So do real estate managers learn on the job?

Sanyal: I think it is mostly learning on the job.

Let me give you two examples.

I take valuation as an example. Internationally, on the subject of valuation, there are quantity surveyors.  They are valuers. They’re just registered valuers. In our country, when you say registered valuer, it doesn’t mean much. There are government approved valuers, from whom you can obtain that valuation. You can get a certificate without much of an understanding of the market. And there are banks like the SBI [State Bank of India] who are also approved valuers, and there are some institutes like the Royal Institute of Chartered Surveyors.

What I mean is that there is no clear guideline on what the minimum qualifications of a valuer should be.

The second example I would like to give is that of project management.

Some of the institutes teach project management in their own way. Now, this is a kind of horizontal skill that they offer. It is not particular to real estate only. It is like a general course, and can cater to anything. It doesn’t focus on real estate.

So, as you can see, even in project management, you will not find a real estate focused project management being taught by any institute. There is a huge requirement in this industry for all such skills. And as said earlier, India is a very large country…

DNA: Kamlesh, your views – since you are from the finance sector.

Dangi: I think many of the problems relating to the real estate industry are there because it is, to some extent, a sunrise industry. I am sure, retail – if somebody would have represented the retail industry -- would have had a similar view coming out, because suddenly the industry players have multiplied and there is an expansion of these industries.  And obviously, our education system hasn’t caught up with that kind of demand or the need for professionals.

It is kind of funny that we have a billion-plus population. We still have huge unemployment, poverty, and a plethora of social issues. And we are still talking about skill shortage. Instead, we should be in a position of saying skill export.

As I see it, there are multiple issues.  And possibly I am adding on to the list, instead of repeating them. If I look at it from a student’s or a job aspirant’s point of view, the issue is 3.5 lakh management graduates, and over 30 lakh graduates. Now, I don’t think that this is a qualification needed for many jobs.

We are the only country in the world which wants a graduation as a minimum qualification. Even a bank teller must be a graduate. I used to work for ICICI Bank previous to this and I was based in the U.K. for two years. There a 10+2 is what a bank teller is. Very rarely does a a graduate become a bank teller.

But here we recruit MBAs from mainly Tier III institutes, but they are bank tellers today. So at the job aspirant level, and at a student level, the career choice decisions are  delayed [till he becomes a graduate]. 

Take my organization. We have different types of financial services. One such part we learn is retail broking. We often ask, “Do we really need graduates?” And every time the conversation ends with someone saying, “Yeah actually, we don’t need it. But since they are available, we might as well recruit them rather than recruiting a 10+2 because the attrition rates for people going in for further education are very high.” 

There is another aspect where parents think that it is all right for a kid to be not doing anything concrete till age 24, 25. And you’re not supposed to encourage a scenario where you start working as soon as you are 16 or 17, where a child becomes independent and begins to take those career decisions.

Thirdly, I think, at an organization level, you need to really define the skill. I know it’s a chicken and egg kind of situation there because you have graduates available, and so you end up recruiting graduates. But that also has a cost implication, because graduates are more expensive. If you start pushing and saying that I will take only 10+2, I think, over a period of time, things will settle at that level.

I’ve seen organizations like ICICI where there are lots of different innovations in terms of what can be done in terms of skill levels. And obviously, at a policy level, the whole aspect of vocational training in this country is abysmally low. Vocational training is seen as something which is meant for the people not academically proficient. It is perceived as a lower level, semi-skilled kind of occupation.

I think that a positioning shift needs to be done in terms of early carrier decisions and then, therefore, going into vocational space. And obviously the government has to facilitate the infrastructure around that, and organizations have to start looking at that qualification and age-group as an appropriate supply source.

Mohanani: Most of us are talking about an ideal situation.

But here we have to come to grips with ground reality, friends, which is something very different from what we’re talking about. Our approach is, “Okay. Now, with whatever people we have, whatever manpower we have, how do we do the best?” I mean, how do we convert them?

We don’t want to look inward now. Enough is enough. Now, how do we go outward?

I mean, what we are doing is we are looking at PE Funds  We tied up with them. We are trying to get their technology into India. I was in London just two weeks ago, and you should see the technology. You should see how they’re working.

They’ve got umpteen number of approvals like us – maybe, a little more, But despite that, they are able to construct a 36-storey building in 24 months. When I ask them “What is your cost of construction?”  They said 252 [British] pounds.  So I asked them again, what will it be after two years. He says 252 pounds. So that is the technology that we know we’ve got to bring now. Their processes are very tight and very effective.

We know we only have to gear ourselves up with whatever available resources that we have. We are talking about education, we are talking transformation, we are talking about transition. All this is good – absolutely good. But in the given situation, knowing that there are shortages, knowing that there is definitely a skilled gap in our country, what can we do to bridge that gap between A and B and make do with whatever resources we have?

In our company, we can’t send everybody for education. But whatever little we can do, we do. We bring in motivating and knowledgeable speakers like Santosh Nair, T. T. Rangarajan, engage them, and expose them to our top brass.

 I mean, we have to upgrade gradually.  You can’t live in that do-it-alone world any longer. So we need to upgrade ourselves. We need to bring the best of what we have.

Then, it is all about the three stakeholders in the industry – the government, the private sector as well as the academic institutions.  All these three have to work hand in glove for India to really grow.  And we’re hopeful that by 2020, we’ll be much better off than what we are today.

DNA: The banking industry began expanding at a furious pace some 10 years ago. Banks found the quality of graduates poor. So many banks, starting with ICICI, began roping in academic institutions – like Symbiosis – to train students to the exact specifications they wanted. Today most banks rely on such colleges or finishing schools. Why can’t the real estate sector do this?

Dasgupta:  In fact, there is something called an ICICI Leadership Program wherein people who are already employees of the bank and actually even, you know, people can recommend relatives and so on. But it’s predominately meant for graduates who have been employed by the bank, who work for about two years or so can apply for an MBA Program, which is run in partnership with a management school.

And basically what happens during that program is --  six months in the classroom, six months on the job, then again six months in the classroom, six months on the job. Of course, they keep getting appraised and assessed through this. At the end of it all, they get again reabsorbed at a certain level within the organization. So, I think, it really helps young people who may not have had either the financial means or the ability on day one when according to the organization to come in as a professional.

 

DNA: In fact, most banks have begun to tie up with a finishing school, who trains the candidate at his or her cost. The finishing school meets the bank’s minimum expectations by selecting the right candidate, and then training them. The bank then gets its candidates job-ready. But can real estate companies do that the banks are doing?

Mudda:  I think it’s high time

Because we have around 14,000 people across the country engaged with us.

We’ve been facing this issue that is affecting our 2work. We’re talking about cost overruns, jobs getting delayed, and labor cost is increasing day by day. So we have no other option but to get them skilled and get the maximum optimum utilization by way of output.

For that matter, today, we have the carpenter sitting at site, but his output is not even 40%. So you’re paying 100% for getting 40%. So we have asked an institution to help us out. It gives formal training to graduates and undergraduates and also to those low-level guys.

We are also in the process where we’re trying to form this kind of organization, which will train these guys, pick them up, train them, give them some sort of certification, and employment in that field.

I was in Germany last month and visited at least half a dozen of sites. You find less labor doing the job with the same output. That is only because of they are skilled in the true sense.

We have to give them the feeling that, yes, I know my job well and I can really give my company that kind of output. I think we have no other alternative but to do that.

DNA: Joy, is it possible to get the real estate industry to say this is the benchmark for this kind of skill and recommend it to the government either through the regulator; and insist that these certifications be made mandatory to make the real estate industry more professional, and more competent?

Sanyal: I think it should be done, but it will take some time. This is because, in India, we have many states, and each state has its own regulation of real estate, and its own style of real estate as well. Yes, there should be some organization, like a regulator, some national level institution, which should have set standardized benchmarked guidelines or particular skill sets, which should happen – probably, it should happen in a couple of years’ time.

But I think it could take much more longer because of the complexities in the states, because of the complexity of the stakeholders who are in real estate.

Who are the stakeholders in real estate today? We need to talk to the LICs, the government public sector, some big developers in big cities and also some of the big landlords and big manufacturing companies. That makes the job a bit difficult.

Then there is the second issue -- real estate in India is a very capital-intensive business, as land price in India is very, very high. It’s a property that you get. It’s not so simple as in many other countries. There, real estate is looked at as pure project management, with different agencies, and more as a service delivery to the customer. Here, real estate is looked at as a very, very capital-intensive, very high intense land play. So that’s the difference. Because of the scarce land resource and our high population and cities growing at a very high rate, the stakes become bigger.

Yes, we can bring in professionalism at the level of say Tata Housing or Godrej, who can do it for themselves. Large developers can do it for themselves. But I don’t know whether it will start happening at lower levels – probably in the next couple of years’ time.

Mohanani: See, I know so many countries where the realtor also cannot do business unless and until he doesn’t certify himself as a realtor. So why can’t it happen here?

Mudda: There is no qualification for anybody to begin in this country. We have been doing this business for 65 years. Tomorrow, the labor contractor who is associated with me can call himself a contractor and can compete with me.

We need some kind of prequalification, some sort of sanctity, some sort of regulation, otherwise anybody and everybody can start doing anything.

Sanyal: For example, in 1972, there was an Indian Architects Act.

It talks about many responsibilities, lot of duties, of an architect. You see in the U.S. an architect has got supreme responsibility in terms of building approval and all. Once the architect certifies a building it doesn’t go through excessive scrutiny. And the architect has a registered number. We need to do that in India as well.

Mohanani: In Bihar if architect says, this is the building plan, you can start construction and complete up to 50% without going to the corporation.

And the corporation comes only after 50% is ready, and then they would approve the plan.

Wadhawan: I have worked for both the industries, corporate finance as well as real estate. So till last year I spent time with firms like, Meghraj, PwC.

So, first, let me just take the real estate part of it. The question is: can benchmarks be standardized for certain skills?

Yes. There are certain professional skillsets, which need to be there, but today they are not there in terms of standardization. Now, which are these professions? One is valuation. Second are the people who do feasibilities. Third come the transaction guys, who do retail, office transactions.

Fourth is the project management team. There is a huge deficit in this area. Then there is property management or facilities management. There is a huge number of people in this sector.

We are already working towards standardizing these particular professions. And also, we have developed the content for those. And we are also working along with the industry. 

DNA: So does the industry accept it?

Wadhawan: We are working along with the industry. They are our knowledge partners. And we are trying to get them to accept these standards.

Dangi: So I sincerely believe in the theory of constraints. Banks began looking at this when they felt the need. I joined ICICI before they began expanding very rapidly. I remember the big issue then was – should we recruit a 55-year-old bank manager. If that’s not what you want to recruit, then where will you get 400 branch managers for your 400 upcoming branches? So it was really a constraint which you had to solve. 

Real estate is different for another reason. For real estate land cost comes first. People come next in the order of priority. In the service industry like banking, if you don’t have people you’re nothing. You got to have seven people to start the branch. Otherwise you can’t start the branch, right?

So the constraint then was: what do you think branch manager job is? How can you get a fresh  graduate and make them branch managers with some six months of training. And we knew that there was a risk of frauds. The person had to really understand the Banking Act. Yes, all of that had to be dealt with. People had to be trained, but it all started with the theory of constraint.

You have a constraint and you have to manage it. Real estate -- I’m not the person from that industry – but as I see it, it is moving closer to that. Yesthe constraints are beginning to be felt now. Secondly, banking, there are fewer players. Eight people could make a call. In real estate we have over 8,000.

And getting 8,000 people to decide that benchmark of minimum qualification is going to be much more tougher situation as against eight players deciding. So I think it will take little more time. But yes, one can see the industry is moving towards that.

Mohanani: We all must come together, all the stakeholders, including the financial sector, and make that effort to upgrade. It cannot be done in a simple way. 

Kumar: In real estate, and even to a large extent in finance, I have not come across any credible organisation offering career counselling as it is a very important function. There are so many people who are looking for clarity as to what sort of career options they have in case they choose finance stream as a career.

In this context I have some suggestions: First, the trainer should have practical domain experience. Second, knowledge partnership/association with leading corporates of the industry can be formed to enrich the content of domain based training. Third, MBA colleges whose candidates appear for campus placement should involve domain based training firms in imparting the domain based real life skills so that they can fare better in campus placement and can also become job-ready.

DNA: Do you think regulatory methods will work?

Sanyal: It’s very difficult.

Mudda: It’s not easy. There are dual issues of state and center. And land is a state subject. It is very difficult…

DNA: It will have to be industry-driven.

Mudda: We need a regulatory authority. Like the medical sector has a regulator. The pharmaceutical sector has one. Telephone have a regulatory authority. The real estate industry is quite unorganized. That is why at the end of the day, it is the common man who pays for all these delays.

DNA: When you look at the financial sector, All the players had a professional body of cost accountants or chattered accounts, banking examination. So you had a regulatory framework, before the industry came in and grew.

That regulatory framework was missing from the real estate sector. The finance sector benefited because a regulatory framework was already in place.

Mohanani: I think it’s an interesting point. 

But now it has become more complex, and since there are a lot of -- competition has also come. So, obviously, people need to have a cutting edge. So real estate has now become complex. You need to understand financing. You also need to understand project structuring. So many issues have come in now.

DNA: In real estate, you start with the architect. That is a professional body. But the industry has outgrown that profession.

Mudda: We did Hindustan Unilever’s corporate office at Andheri. We had no option, but to follow A, B, C, D, E, F – nothing else beyond that. It is the developer who calls the shots on standards. But nearby there is another building being built where anything and everything is happening. So, with Hindustan Lever, it got ready in 18 months. We could deliver the property. They were willing to pay that kind of price too -- extra price for safety, for quality, for material and for processes.

So we need to really change that. And it will change. Five years ago, we never used to talk about million square feet at one place. Today, nobody is talking below that. Smallest development is 1 million, 2 million, 3 million. So to cope with size and to deliver and to really get the best out of you, you need professionals now. 

DNA: Pankaj, how is your annual progress rate in terms of your candidates who come to you for training.

Wadhawan: We are just a nine-month-old company. We are focusing more on the higher education. So we are training people in corporate finance, equity capital markets, advisory, banks and all and similarly in real estate valuation, feasibilities, project management, property management.

So we are yet to take a plunge in the vocational training part of it.

But in terms of higher education, we do feel that people now need proper domain experts. Since the founders of this firm have worked only in corporate finance and the real estate space, we are focusing only on these two domain areas. And the people which are coming to us are MBAs who are going for campus placements in October-November. They are feeling jittery because today the job market is bad, and they need to differentiate themselves.

So I have been approached by a lot of tier II institutes. 

DNA: So you’re like a finishing school?

Wadhawan: We’re a finishing school. We become relevant because Tier II institutes have content that is quite old. Secondly, they do not get the right visiting faculty, because they are a tier II institute. Similarly, in real estate, a lot of people are now considering this as a profession. Earliernobody thought of specialization in real estate as as a career.

I’m talking about mid-management and junior-management in terms of, say, somebody is considering project management – an engineer wants to get into the real estate in the project management side or valuations, capital markets, strategy consulting or property management and all. So they obviously need a training. And we have training programmes ranging from thre days to three months and then we absorb them in the industry.

We are getting into Executive MBAs also. We are planning to launch Executive MBA for real estate and similarly for Masters in Finance. So, obviously, these are one year away. But right now, this is what we are offering.

Mudda: And change is the name of the game. We have no other option but to look seriously from that angle. To give an example, three months ago, we sent eight supervisory level people to Germany. They stayed there for 10 days, got some training, and came back. Next month, again, we are sending dozens of them. This is because we cannot work with guys who are not qualified. And when the guys return, their output has gone up.

Yes, it will cost us. Somebody has to pay for it. So to move forward is to get ourself educated first, to understand the need, then we can educate the whole organization, then society, then you know everybody. So I think there is no other alternative.