Why India needs realty education

Real estate is a significant part of the economy. The sector contributes nearly 10% to GDP in the U.S., India and Pakistan and well beyond 10% in some other countries such as Bhutan.

Residential real estate is considered a key to the wellbeing of people whereas commercial assets are a must for other economic activities.

Most developed nations acknowledged the importance of real estate expertise a long time ago and have well-developed real estate curricula at the bachelor, masters and doctoral levels. It is a pity, however, that real estate is not an integral part of business/ economics curricula in less developed countries like India. We not only need to introduce real estate into the mainstream social sciences, we must also add this as a specialisation to business and economics curricula.

Some people argue that the real estate education is absent because the real estate sector is disorganized. It is a travesty. Actually, the causality is reversed. The disorganization itself –at least in part–stems from the absence of formal education.

The disorganized real estate sector adversely hits the economy in three ways.

First, it sows the seeds of corruption in a sector which is extremely capital-heavy, and constitutes the single-largest component of citizens’ hardearned wealth. The sheer size of this sector helps corruption spread into other sectors.

Second, residential property bubbles are often exacerbated by irrational household behaviour, resulting from ignorance on subjects related to property. Such behaviour often mis-allocates household wealth to the wrong assets benefiting the few individuals who know how to exploit such an unfounded home-buying craze. The resulting price bubbles also compromise the consumption and wealth-creation potential of the “common man”.

More importantly, the lack of real estate knowledge either underwhelms or misinforms policy implications.

Real estate education will reduce wealth disparity across the haves and have nots.

The good news is that some recent government policies in India have recognized this issue through measures such as the RERA and the REIT Act. REITS, in particular, allow an individual to invest in commercial assets. However, due to market players’ lack of knowledge about REITS, we see scant industry activity in this domain.

Top-tier schools in India do not offer real estate studies as a major or even minor.

Yet, the appetite for such expertise – both at the household and professional levels – has increased markedly in recent years.

Real estate expertise is often sourced from business/hospitality management schools in Europe, the U.S. and Singapore. This indigenous expertise, which is borrowed from other sectors such as general finance, economics and urban planning, is often underprepared to address the nuances. This needs to change.introducing real estate education will have a farreaching, positive impact on the national economy and the wellbeing of people.

The author is an associate professor of real estate finance at EHL (Ecole hôtelière de Lausanne) LARGE UNEMPLOYED POPULATION IN INDIA

The latest report by the Center for Monitoring the Indian Economy claimed that the unemployment rate at the end of February, 2018 was 6.1% or about 3.1 crore in absolute terms. Skill development programs have managed to bring to par a significant number of unemployed youth in terms of training and skill. However, those numbers still remain a minuscule proportion of the actual number of unemployed persons. Agrarian distress is driving greater number of domestic migrants to urban centers in search of work. This continuously adds to stress on unemployment numbers. Manufacturing, which is often touted as a sector with the greatest potential to absorb new entrants to the workforce, is witnessing jobless growth despite buoyant ‘Make in India’ initiatives.it is estimated that the Indian economy would have to generate at least 10 lakh jobs every year if it is to successfully reap the much talked about demographic dividend.

NEW ENTERPRISES WILL BE THE KEY DRIVERS

It is said that new enterprises are the backbone of any economy with their ability to generate employment in a self-propagating manner. A market economy thrives when there is competition, growth and innovation. New enterprises are the engines of innovation and consequent growth. New businesses tend to shake established methods of product conceptualization, design, delivery and competition. The end result is that consumers benefit from either improved competition or an improved product. The industry benefits from capital inflow and society benefits through transformational progress. These are processes necessary for sustaining healthy market dynamics. NASSCOM reported that India added 1000 new tech startups in 2017. Fields of business for these startups vary from healthtech and fintech to e-commerce and aggregator services. While urban metropolises retained their pre-eminent status as the focus of India’s startup ecosystem, tier 2 and tier 3 cities accounted for about one fifth of all new enterprises. Modern business incubators, accelerators, investors and angel groups have been a big part of this success story. Those catering to other businesses made up 40% of all startups reported. Healthcare technology witnessed a significant number of new entrepreneurs at 320 while accumulating a total funding of $ 160 million in the first half of 2017.

A WORD OF CAUTION

A report titled ‘Entrepreneurial India’ by the IBM Institute for Business Value and Oxford Economics cautioned that 90% of Indian startups fail within the first five years of their existence. This was attributed to lack of new technologies in Indian new enterprise and failure to create new business models. Poor workforce funding, the absence of a good mentor and poor busi-

GOVERNMENT INITIATIVES

The government is a major contributor to the ecosystem by its efforts to increase ‘ease of doing business’. With the ‘Startup India’ initiative, the government hopes to mentor, nurture and facilitate startups throughout their life cycle. The Atal Innovation Mission is a grand scheme to set up world class innovation hubs within academia and institutions of learning.

The Support to Training and Employment Program for women (STEP) has the noble goal of empowering women with no access to formal training facilities with skills essential for self-employment and entrepreneurship.

Along with these a host of other policies to make institutional finance available to the needy have been put in place. However, it is the performance on the ground that has failed to impress. Unemployment and lack of job creation opportunities continue to deter new entrepreneurs.

Entrepreneurship consists of envisioning a major problem to