Track2Realty Exclusive: The debate of promoter versus professional driven realty companies gained momentum in the year 2012 because high attrition at the top level of realty sector has been in the news throughout the year. The Managing Directors of Indiabulls Real Estate and Peninsula Land quit in the month of October. So did the real estate heads of two property funds, Indiareit and Everstone Capital. Most of them either moved to other realty companies, starting their own ventures or shifting streams to join consultancies.
Vipul Bansal, the Joint Managing Director of Mumbai-based Indiabulls Real Estate, who spent seven years with Indiabulls group, joined another developer DB Realty in Mumbai as its Chief Executive. Rajesh Jaggi, Managing Director of Ashok Piramal Group Company Peninsula Land who was with the group for 14 years, moved to Everstone Capital, a fund management company promoted by Sameer Sain, as Managing Partner of the real estate business.
Among the real estate funds, Ramesh Jogani, Managing Director and Chief Executive of Ajay Piramal Group’s Indiareit, quit the firm to set up a venture. Jogani was a property developer before joining the fund manager.
Shishir Baijal, Partner, Everstone Capital, joined Indian arm of global real estate consultant Knight Frank as Country Head and Managing Director after its Chairman Pranay Vakil retired and its Vice Chairman Pranab Dutta was made the Chairman.
Even consultants have seen top level changes. In May, Sanjay Dutt, the Chief Executive at Jones Lang LaSalle (JLL) quit to join another consultancy Cushman & Wakefield as Executive Managing Director. In June, JLLI announced it had hired Cushman’s Anurag Mathur as its new CEO, Project and Development Services and Head, Emerging Businesses.
The question is why so much churn in a sector that craved for professionals to bring on board in its quest to emerge professionally driven only recently? E Balaji, Chief Executive and Managing Director at human resources company Randstad India, links the churn with the slowdown in the sector.
“One broad inference is that when a sector is going through difficult times, when sales are down and profitability is under pressure, companies make managements accountable for that. They expect quick turnaround and such churn could be a result of that,” Balaji adds.
Some others say the growth and maturity in the sector is responsible for the churn. At least half-a-dozen big realty companies, namely DLF, Oberoi Realty, HDIL, Godrej Properties among others have tapped capital markets in the last six years and listed on the stock exchanges.
“The industry is getting deeper and wider. It has really developed over the last seven years. Earlier talent used to come from outside. Now it has grown large enough that talent within is moving around,” says Dhanpal Jhaveri, Partner and Chief Executive at Everstone Capital.
According to Pranay Vakil, former Chairman of Knight Frank India, “Though I do not have an answer for the sudden churn in the sector, I believe the sector has matured now and enough talent with adequate experience is available now.”
V Hari Krishna, Director, Kotak Realty Fund, refers to the churn in the property funds as a “seven year itch”. “Since lives of most funds are coming to an end after their 7 to 8 year fund life and most of the guys had been there for that long, churning is bound to happen,” Krishna adds.
Why then are top executives hopping from realty companies to private equity and from PEs to consultancies?
Says Vakil, “Developers, funds and consultants are very well related and it depends on what side of the table you sit. If you sit on one side of the table, you can understand how the other party reacts.”
Having a professional team adds to the overall reputation of the company, even in the eyes of private equity funds and other investors. But with private equity funds deserting and investors preferring to be directly dealing with the promoters of real estate companies, the dynamics of a professional management at the helm of affairs is also changing.
The debate whether promoter-driven or professional-driven is a never ending one in the Indian real estate since promoters are mostly first generation entrepreneurs and have tested the professional management only in the last few years. Some of them still have a positive outlook, while many others seem to have burnt their fingers as well during the downturn.
Many of these developers are hence making strategic shift in their management policy with decisions yet again being vested with the promoters and pink slips to those who proved to be of mere ornamental value to the company.
