Best practices & professionalismPresentation Transcript
Institutionalizing best practices andprofessionalism in Indian Real Estate Sachin Sandhir Managing Director and Country Head RICS India
Why change? “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one [most responsive] to change.” Charles Darwin
We need to realize and appreciate that the world of property is changing …it is becoming More global More efficientMore advanced
From traditional mud and bricks…to lighttransmitting concrete that helps save energy!
From traditional apartments… ...to all kinds of portable modular units 1 2 High density trailer4 parks in the sky 3
2 Smart1 Augmented Reality for Windows that Real Estate generate electricity You can select settings from bright to dark and the windows will actually generate electricity from sunlightImagine pointingyour mobilephone camera at 3 Self-Healinga property for saleand being able to Concrete forcall up all the Safer, Morerelevant listing Durableinformation InfrastructureNow possible! A concrete material that can heal itself when it cracks. When its strained, theUsers can point a Layar-enabled cellphone concrete bends and many micro-crackscamera at any Parisian building to show the are formed instead of one large crack thatestimated financial value of that property causes it to fail.
Masdar City – the world’s first zero carbon city A £14bn zero-carbon, zero-waste city. Covering 6km sq, it will rely entirely on renewable energies. Home to 50,000 people, 1,500 businesses, 40,000First section of Masdar City has been completed daily commuters• Meticulously planned to be highly functional and low consumption• Narrow streets to increase shading and tall wind towers that funnel air - will make the city feel 20ºC cooler and halve its energy needs• 90% of electricity from photovoltaics• Other renewable sources of power – geothermal, hydrogen & wind• 80% of water will be recycled• An underground network – for computer-driven electric cars
Shreepati Arcade2002153 m From tallest building of 150 m height in 2002… ….to tallest tower of 450 m height by 2014 Under construction Completed Proposed Planet Godrej 2004-2006 181 m Palais Royale 2005-2011 est. 320 metres The Imperial skyscrapers 2005-2010 210 m World One 2014 est. 442 metres Rising aspiration of putting India on the global world map
Beyond imagination…Sky-Terra skyscrapers – a network of interconnected towersThis envisioned skyscraper superstructure provides a new city layer – covered in publicparks, amphitheaters, fields, and public pools and bathhouses
Looking within - India Real Estate - today• Poor image• Low consumer confidence• Increasing skepticism• Tightening liquidity• Delayed project delivery• Increasing input costs• Increasing shortage of labour• Import of skills for sophisticated projects What solutions have the potential of changing all this? What will drive change and help us achieve our ambitions?
Possible solutions How will we achieve all this?• Winning consumer confidence • Many things.. – Sourcing capital• Enhancing professional skills for – Innovative & efficient better delivery construction techniques• Managing and reducing project costs – Use of technology• Completing projects on time • Things that I will focus on today• Winning trust of banks and investors – Higher standards of professional practice• Thinking long term investments – Specialized skill-sets and instead rather than short term profit professionals• Rising to be a national or international player of repute
What kind of standards – some examples• Standards that will increase confidence in consumers (and lenders)• Brokerage standards• Standards in area measurement• Complaint redressal – eg Ombudsman service in UK• Developer’s service standards – eg consumer code for home builders• Transparency and Information – eg Home buyer report• Standards that will win investor confidence & improve functioning of the property market• Property valuation• Construction cost estimation – eg NRM,BCIS• Sustainable development throughout property lifecycle, SKA ratings
Standards that will increaseconfidence in consumersand lenders
What will help increase consumer confidence?The basic ingredients Additional measures• Quality product (property) and price• Reputation of the developer• Good home buying experience• A professional broker• Accurate and complete information
Good home buying experiencesupported by real estate agency and brokerage standards RICS Blue Book RICS Global Residential Standards for Applicable in UK estate agency Real Estate standards Applicable in India Brokerage Detailed practice Focus on core standards with principles & good legislative practice across the requirements world• Follows the workflow of an estate agent • Comprises high level principles - a and set out mandatory requirements of culture of fairness and transparency in the relevant legislation (Estate Agents all agent activities Act 1979, the Property Misdescriptions • Agents, and companies providing Act 1991) agency services, must approach all their• Provides guidance to agents on good activities in accordance with the practice overarching principles.
Good home buying experiencesupported by complaints redressal mechanismExample – Ombudsman Schemes for Estate Agents in UK• Consumers, Estate Agents and Redress Act 2007 (CEARA), makes it compulsory for residential estate agents and property developers to belong to a complaint redress scheme approved by the Office of Fair Trading• Surveyors Ombudsman Service (SOS) – approved by OFT, set up by RICS to provide a dispute resolution service to its members – Deals with complaints made against RICS members as well as non members – Ombudsman provides independent redress if the complaint cannot be resolved between the firm and the consumer – Any failure or refusal to implement the remedies is reported to RICS, which may bring disciplinary action on the member or firm in question – Service is run by an independent Council that appoints ombudsman and reviews performance A similar self regulatory model may be considered for brokers and development firms in India…
Accurate and complete informationsupported by area measurement standardsVarious ambiguous definitions RICS Code of Measuring Practiceopen to subjectivity and • Clear explanationinterpretations • Shows areas included/excluded • Practical advice for applyingCarpet Area: This is the area of the apartment that does notinclude the area of the walls i.e. the area of the apartment that • Full illustration examplesa carpet can cover.Built-Up Area: This is the area of the apartment that includesthe area covered by the walls.Super Built-Up Area: This includes the built-up areas suchas the lobby, lifts, stairs etc. This term is therefore onlyapplicable for multi-dwelling units, such as flat complexes. RICS is assisting Dubai’s Real Estate Regulatory Authority with a Code of Measuring Practice so as to streamline the Used for accuracy in multiple uses process within Dubai. • Building cost estimation An MoU has also been signed aimed at • Estate agency improving the quality of real estate • Valuation professionals and enhancing the • Property management standards of regulation. • Town planning
Standards that will win investorconfidence and improve functioningof the property market
What will ensure timely delivery of high qualityprojects and within costs?Skilled professionals!• Experts in different areas…evaluating economic feasibility of development projects, planning, design, execution, cost management, project management, monitoring quality• Qualified for these specialized jobs• Constantly learning from experiences and advancements in their respective It is the skills and expertise of fields professionals that helps realize the• Adhere to good practice guidelines – developer’s vision in any project precision and performance in their work
Developer’s professional teamall specialists in different areas• + development surveyor; • + mechanical, electrical and public• + project management surveyor; health services engineer;• + valuation surveyor; • + structural engineer;• + planning surveyor/consultant; • + environmental consultants (including• + accountants; specialists in acoustics, traffic• • management and planning); + legal and tax advisers;• • + information technology consultants; + land agents;• • + archaeologist; + architect;• • + marketing consultants; + landscape architect;• • + public relations consultants; + construction (design and management) (CDM) co-ordinator; • + insurance consultants; and• + interior designers; • + facilities management.• + quantity surveyor;
Property valuationunderpinned by uniform RICS Red Book: Valuationglobal standards StandardsValuation for development appraisal and feasibility• Property valuation is required for development • Compliant with International Valuation appraisals (Gross Development Value) to test Standards (IVS) the viability of proposed projects • In harmony with national legislation • RICS ethical requirements• Project success depends on accuracy • Mandatory rules and best practice• Essential for lenders & investor confidence guidance for RICS members • Voluntarily adopted by non-membersProperty valuation also required for:• Acquiring public land or disposing private land• Secured bank lending• Internal accounting • Large valuation professional firms• Capital gains/ wealth tax, etc undertake valuations in accordanceHuge amount of transaction volumes are with the IVS compliant Red Bookunderpinned by valuations • Is recognized by international clientsTrust and Confidence in and investors – considered the gold standard – instills trust and confidencevaluation is essential…
Example 2 - Project cost and risk managementunderpinned by quantity surveyors and supporting tools RICS New Rules of Measurement Standards • Used by most global cost consultants • Deal with ‘total’ costs of delivering a building project; ‘Not’ merely construction costs • Define the information required by cost manager to prepare order of cost estimates and cost plans. • Divide cost estimates into ‘five’ principal cost estimates: 1. Works estimate 2. Project/ design team fees estimate 3. Other development/ project costs estimate 4. Risk allowances estimate and 5. Inflation estimate • Step by step guidance on how to calculate each facet Use of the rules to frame cost estimates will give greater confidence to banks and other lenders that requests for funds have been properly considered
Example 2 - Project cost managementsupported by Building Cost Estimation Service (BCIS) • Leading provider of cost information to the Data used by consultants, construction industry - a technology clients and contractors platform that enables the following: to produce • Structured database environment to – specific estimates for maintain standardised Schedules of Rates appraisals – business case • Construction price book customised for development, construction work – budget and • Analyse e-procurement system data to benchmark projects provide: cost anaylsis creation from tenders; benchmarking; regional indices; – early cost advice, cost economic indices; inflation indices; planning analysis of rate data and; key – Benchmarking, whole performance indicators (KPIs) relating to life costing, cost and programme, etc. – value engineering, • Statistics based upon tender returns from – facilities and suppliers maintenance budgeting
Example 3 – Energy efficient fit-outs in buildingsunderpinned by facility managers, energy managers andgreen rating toolsSka Rating rewards organisations for green fit-outs• Ska is a standard method for environmental impact assessment and certification of fit-out, refurbishment and retrofit projects in non-domestic buildings• Anybody interested in fitting out an office building in a more environmentally sustainable way can use the method to: – Carry out a free, informal self assessment of the environmental performance of their fit-out – Commission a quality assured assessment and certificate from an RICS accredited Ska assessor Some of the global – Obtain clear guidance on good practice in fit-out and organisations who are how to implement it using Ska: GE, – Benchmark the performance of fit outs against each Westpac, Bank of other and the rest of the industry. China, Gazprom, WPP, PwC, Macquarie, RFIB, Morgan Stanley
Sustainable propertydevelopment And many other best practices and guidance that helps professionals deliver better Construction procurement
Valuing change….to water..to trees apart from propertiesLandsurveyingand GIS Facilities management
Where does India stand?• Do we have the necessary skilled professionals? – No, huge shortage of skilled manpower across levels – RICS research to be released shortly will highlight the magnitude of this problem and recommend way forward• Do we have any institutional set up for knowledge transfer, compiling and sharing best practice? – No, only few individual efforts by forward looking firms – Institutional efforts need to be strengthened • Endorsed by Government and regulators • Supported and adopted by industry
Last words…Higher standards of Encourage your staff toprofessional practice adopt home grown as well as international best practices Help institutionalize good practice in Indian industrySpecialized property Invest in learning andprofessionals development of your staff Help in building specialized skills within the country