Wednesday, May 25, 2011

Real estate courses: EduMark announces dates for admission


Real estate education institute 'EduMark' has announced dates for the next batch of its various real estate courses. These courses include certificate in real estate management, diploma in property sales & transaction and planning & starting property Consulting Business. While, these courses will start from 15th June, 2011, last date for admission is 05th June, 2011.
EduMark realty education services offers these courses in association with national institute of real estate management (NIREM), which is the leader and pioneer of real estate education in India. Admission has already been started and is offered on first-come-first-served basis.
Certificate in real estate management is targeted at both existing real estate professionals and professionals from allied sectors as well as those who want to understand the various aspects of real estate market. Course covers legal aspects of real estate, property marketing, valuation, property transaction & sales process etc. among others. This is a part time one-month course.
On the other hand, diploma in property sales & transaction is aimed at candidates who are looking for real estate jobs. In other words, if you want to start your career in real estate then this three-month part time course is for you. Like previous batches, all the successful candidates of this course/batch will be placed with leading real estate companies. 
Planning & starting property consulting business is a two-month course for those who want to start their own property consulting business. This highly focused course covers topics such as legal aspects of real estate, property sales & transaction process, valuation, customer handling, dealing with property developers, sales & promotion, sales channel development etc. in addition to topics such as formation of company, tax issues, hiring employees, office management etc.

Monday, May 23, 2011

Understanding Residential Property Investment


The fundamental aims of any residential property investment should be to maximise yield as well as capital gains and to reduce the risk as far as possible. To illustrate, renovating and embellishing a property makes it eligible for a higher rent, which means maximised yield. Property investment aimed at capital gains involves buying real estate cheap and selling it at a higher rate, thereby maximising one’s ROI. An astute investor will also buy a well-located property at a high price if the rental market is booming, since this makes it possible to rent it out for as long as it takes price to rise again.
The risk factor in residential real estate investment lies in the possibility of buying at a higher price and having to sell at a lower one in a depressed market. It is also risky to try time the market to discern the ‘best’ time to invest. Much like in the stock market, it is impossible to predict the point of lowest ebb in the real estate market. The danger in delaying investment too long is two-fold – firstly, one may lose out on the best properties, and secondly, the market may pick up ahead of one’s predictions, meaning that the lower rates may no longer be available.
Professional residential property investors with an eye on capital appreciation look for bargains on the property market. It is possible to find such bargains even in a boom period, since there are always property owners who need to sell their holdings quickly for financial or other reasons. To know whether or not one is picking up a bargain requires some basic insight into the current state and inherent nature of the property cycle. This cycle takes approximately seven years for one complete revolution.
Having a good knowledge of the local residential property market – meaning the market in the area one wishes to invest in – is also important, as is sufficient insight into the national and global markets. This is because the trends that drive the global market influence the national market, which in turn has a significant bearing on the local market.
In the current scenario, the Indian residential property market is sluggish because property prices have gone through the roof in cities like Mumbai, while there has been an increasingly slower-selling build-up of residential property developers’ inventories in Delhi NCR, Pune and other cities. Another reason is the recent hike in lending rates. This has made it harder for intending home buyers to acquire property, thereby giving a fillip to the rental market. Purchases on the residential property market pick up when lending rates or property prices reduce, because people would rather put their money into self-owned property rather than spend on rent.
For individual investors, real estate is always a good long-term risk diversifier that has the potential to generate very satisfactory risk-adjusted returns. Real estate has a low volatility quotient, and also low correlations with stock markets and debt. Investors with a long-term view should continue to include property in their investment portfolios.
In Short:
  • Establish your investment goals and strategy
  • Keep your focus on maximizing yield and capital gains
  • Reduce risk as far as possible
  • Do not attempt to time the market too accurately
  • Know the local market and also keep abreast of developments on the national and international markets
  • Invest for the long term

Realty Estate Sector Witnessing Labour Shortage


Real estate firms are feeling the pinch of skilled and unskilled labour shortage as infrastructure growth picks up and workers get tapped by retail and other service-oriented industries. Cost of acquiring and retaining talent is going up too. “Delays are high in finishing stage. Shortages of carpenters, painters and electricians are even more severe than masons. It is inevitable that there will be delays in project completion unless the shortfall in these skills is overcome,” said Aroon Raman, vice-chairman of CII-Karnataka & MD of Raman Fibre. Mr Raman says the infrastructure industry right now employs 30 million workers of which 50% are in real estate. In Bangalore alone, the shortfall in people with slightly more advanced skills in the real estate segment including infrastructure creation and minor repair and maintenance projects — both residential and commercial — is expected to be of the order of 50,000 workers.
A World Bank study also says that India is staring at a labour crisis in the construction sector. The supply of skilled and semi-skilled workers will barely keep up with the pace of growth and will fall short by 18-28% under medium growth scenario. However, under a high-growth scenario, the shortage will be to the tune of 55-64% over the next eight years. To boot, contractors are finding it difficult to hire even migrant labourers for projects. “There is problem sourcing people, as these workers are migratory. It has become difficult to retain people too,” said Solomon JP, CEO, LabourNet, a firm that aims at improving earning opportunities of workers in the unorganised sector. And shortage of labourers has hit the construction industry at a time when real estate business is on a rebound. Mr Solomon says the shortage is forcing contractors to pull out workers from one site and park them in another. LabourNet has 20,000 blue-collar workers, majority of whom are employed in the real estate sector. Most of the skilled and unskilled labourers come from Tamil Nadu, Orissa, Rajasthan, Uttar Pradesh, West Bengal and Bihar and North Karnataka.
“Demand surge has consistently outstripped supply. Companies are taking certified people on contract. It is difficult to find skilled workers,” said Rajesh AR, vice-president of Bangalore-based staffing firm, TeamLease Services. To retain talent, builders are loosening their purse strings, upgrading technology, offering joining and retention bonuses, salary payments in advance, bringing labourers from rural areas and providing them accommodation and crèche facilities in the city. The wages have increased by 20% year-on-year. For example, Chartered Housing has taken a small number of electricians, carpenters and plumbers on its payroll and has also set up a team of in-house project management consultants to mitigate these problems, said Balakrishna Hegde, MD, Chartered Housing. The firm has six projects under execution. “Labour will become biggest constraint going ahead. Adopting new technology is the only way to eliminate labour shortage,” said Ravi Ramu, director, Puravankara Projects. The firm has adopted technology where it can complete a single floor in six days and reduce manpower requirements.
Sobha Developers too has set up a skill training institute for blue-collar workers. “Significant spurt in the construction activity is leading to shortage of workers. We train people who are PUC-qualified in our academy for a month and onsite for two months. And we retain most of our workers by offering regular increments,” said JC Sharma, MD, Sobha Developers. The firm, currently, has 11,000 workers onsite and will require an additional 6,500 with new projects coming up.
Nitesh Estate has tied up with multiple contractors to tide over labour shortage. “Shortage of construction workers is an inherent predicament in our industry. It is difficult to hold workers as they are migratory in nature and shuttle between jobs, said a spokesperson. Staffing firms Adecco and TeamLease have also moved in to ameliorate the crisis. “Companies are looking at migrant labour from industrially backward states to fight the shortage,” said Sudhakar Balakrishnan, managing director, Adecco India. Adecco and TeamLease currently have 7,000 and 8,000 blue-collar temps, respectively, on their payrolls across different industries.

Friday, May 20, 2011

India Inc faces talent shortage: Manpower


NEW DELHI: Talent shortage is again becoming a worrying factor for Indian employers, said a survey conducted by HR consulting firm Manpower.

According to the survey, 67% of employers in India are struggling to fill jobs, second only to Japan, where 80% employers reported struggling to fill positions. The India figure is almost double of the global average, which stood at 34%.

The survey further revealed that Indian employers are experiencing difficulty filling critical positions within their organisations, which includes positions in research & development, sales managerial positions and IT staff, compared to last year's jobs of skilled trades, cleaners & domestic staff and accounting & finance staff. In fact, one in three employers world-wide is struggling to fill key vacancies.

"While not all employers are feeling the pain associated with the global talent shortage, external forces mean it is likely that they will soon feel pressure," said Manpower Group India MD Sanjay Pandit. "Businesses need to adopt a long-term approach to ensure they have the talent they need to achieve their objectives."

Monday, May 9, 2011

Education Biz: Are PE Players Ready To Add Tangible Value?


BY SOUMITRA CHATTERJEE, VCC
The education sector has huge potentials for PE funding, but one must follow the rules of value-addition to stay ahead.

There is little doubt that the Indian education sector offers significant long-term opportunity, illustrated by the widely quoted statistics that Indian consumers spend $40 billion (3 per cent of the GDP) on private educational services and institutions. Then, there is the widespread venture capital and entrepreneurial involvement in the sector. The world’s largest education company Pearson has recently spent $140m for a 76 per cent stake in TutorVista. Also, data from VCCedge, the financial research platform from VCCircle, suggests that from CY08 to CY11YTD, there have been 51 PE investments in the Indian education sector with an investment of $417 million and 9 exits fetching $114 million to the PE players.
What Ails Education Space?
But in spite of such potentials, there are certain issues that ail the Indian education system. The first phase witnessed the dominance of ICT@schools and multimedia content in private schools. Indeed, for a company like Everonn, ICT@schools was the key revenue generator till FY09. However, this space suffers from high upfront capex and debtor days, and has remained FCF negative for companies (at best FCF neutral in some quarters).
When it comes to multimedia content in private schools, the introduction of digital content for those institutions has been a revolutionary step by Educomp and it has definitely enjoyed the first-mover advantage till CY09. However, this model is now faced with several challenges including commoditisation of content, as it is easily replicable, and price wars resulting from this commoditisation, as new and smaller players have come in with new pricing models. On top of that, there is high capital intensity, an area where PE players do not venture often.
Who Can Serve Best
We must look for these five aspects in an education company – the business has to be asset-light; there should be strong competitive advantages and high entry barriers; the business model should be scalable; there should be very little regulatory hassles and there should be tangible benefits to students (in my opinion, this is perhaps the most important aspect as students are the clients of an education services company).
Businesses that fit into any of these criteria include education allied services companies like pre-school companies, test prep and tutoring companies; institutions providing vocational training; companies managing brick-and-mortar K-12 schools and the higher education segment.
Tangible Benefits Take You Ahead
For education allied services companies, the opportunity is huge, since the market share for a small segment like the pre-school currently stands at $1 billion. Similarly, for the test prep segment, the market size is close to $1.5 billion while the tutoring market is expected to be around $5 billion, thus showcasing huge opportunities for the players. Although the business model is asset-light and there are no regulatory hassles, the companies suffer from lack of competitive advantages and scalability challenges. While pre-school suffers from competition from mom-and-pop shops, test prep and tutoring business is a highly fragmented market with a strong local preference. The vocational training segment is still in a nascent stage and is mostly dominated by low-price point courses like English vocabulary, personality development and a few other which are highly fragmented and suffer from stiff competition.
I have also mentioned above that I look for tangible benefits to students as one of the key criteria for the business to do well in the long term. In a pre-school segment, this tangible benefit means tie-ups with quality K-12 schools. As a result, parents won’t feel hassled to find a good school for their kids when the young ones are out of playschool. In the test prep and tutoring segment, the tangible benefit is the presence of good teachers in that region, as students generally opt for coaching classes based on faculty quality. Similarly, in the vocational training segment, tangible benefit amounts to job guarantee, which can excite students to enrol for high-value course.
While I don’t rule out that most of these companies tend to do well in the initial part of their journey, over a longer term period, overall shareholder value creation will depend on the presence of tangible benefits which can help them tide the competitive landscape.
Building Value In The K-12 Segment
Companies managing K-12 schools and collaborating with well-known brands mostly dominate the education space. In fact, one of the best options to lead the education sector is to own and/or manage K-12 schools. With a significant shortage in quality schools, firms that own, lease or manage schools can benefit directly from defensive recurring fee revenues. As owning land and building leased to schools is often highly capital-intensive, PE firms generally do not invest in companies which plan to raise money and put it in real estate.
As schools need to be run as ‘not-for-profit,’ firms typically monetise schools by leasing infrastructure and land to an independent trust and charging management fees. This is an attractive business as indicated by the relatively high IRRs (28-32 per cent) in setting up schools. Education companies can practically avoid the real estate part of the school and explore the K-12 schools opportunity by partnering with land-owners or real estate developers to manage schools. In this case, the education company doesn’t make capital investments and earns profits based on the profits generated by the school after paying for the cost of the lease and a per cent of profits to the landlord. Moreover, profit margins are significantly higher in such businesses than owning schools. Given that most firms are looking to set up schools, companies such as Educomp, Career Launcher and Everonn have roots as suppliers to schools. Their strength lies in running the schools better rather than managing real estate.
Another thing that I value is the association with well-known brands. While new schools do resort to advertising, long-term patronage is built by word of mouth as parents choose schools based on the trust in the brand name. Setting up and managing K-12 schools is not easy and schools typically need 6-8 years to reach peak capacity from scratch. But this is a long tenure even for long-term investors. As such, we prefer companies who manage schools having a strong brand name, as a school typically starts as K-5, since it is difficult to attract high school students without a good track record. Indeed, Sequoia Capital and Song Advisors invested $15 million in K-12 Techno Services (Gowtham brand of School), which was already running more than 50 schools at the time of first-round investment. Educomp also partnered with Padma Sheshadri Bal Bhavan (PSBB) brand of schools and this helped add more than 7,000 students to its total tally of about 26,000 students.
Educomp owns real estate of around 30 of the 50 K-12 schools that it runs. It did a QIP of Rs 6 billion in FY10 and 57 per cent of that went into buying land and another 25 per cent is expected to go in construction of the building, making the business very asset-heavy. The private equity participation in this case is expected to come in a very late stage when these schools will be operating at 75-80 per cent capacity and listing of Educomp School Management (a subsidiary) after two to three years of PE investment will provide an easy exit for investors.
Higher Education May Ensure High Profits
Another segment that has immense potential is the higher education segment. Of course, there are no listed players in this segment due to regulatory issues. But the below-average performance of the state and the central government in this segment makes me quite optimistic that this segment will open up soon in a much bigger way for private players. Indeed, three of the large four PE deals in the education sector has been in the higher education segment which includes investments by PremjiInvest Fund in Manipal Universal Learning Pvt Ltd and investments by Navis Asia Fund in ITM Trust.
While for PE players and angel investors varied options are available in this sector, depending on what suits their requirements, for retail investors, there are a few ways to play the education theme – notably done by Educomp, NIIT and Everonn. In the early years of their listing, this scarcity benefited the public companies. In the first three years of its listing, Everonn traded at an average P/E of 40x while Educomp has traded at >60x, driven by the hype around exponential growth expectations. The shares of all the listed companies have since underperformed, as inflated expectations were not met with. The sector’s time will come though, as more and better companies come out with IPO, hopefully with scalable businesses having strong competitive advantages.
(Soumitra Chatterjee is a Technology analyst with Execution Noble).

Wednesday, May 4, 2011

Venture Financing and Entrepreneurial Success

by William Kerr  

Does high-quality venture financing increase the success of funded ventures? My co-authors, Josh Lerner of HBS and Antoinette Schoar of MIT, and I define venture finance here to include professional investors in high-growth ventures like venture capitalists and angel investment groups. Other forms of entrepreneurial finance include credit cards, banks, friends and family, personal savings, and so on.
At first glance, this seems obvious — of course. A large fraction of companies that go public receive venture funding early in their life cycle. Moreover, within the venture capital industry, the odds of success improve with the quality of the investor. So, it would seem to follow that obtaining the backing of a top-tier financier is an important stepping stone for high-growth entrepreneurs.
Many entrepreneurs, however, would beg to disagree. Venture funding comes with a high price tag, and many start-ups want to avoid it or at least delay as long as possible. While Google, Facebook and Genentech took on venture funding early in their lifecycles, Dell, Microsoft and Honest Tea made amazing progress through bootstrapping and early non-professional investors.
A Tricky Problem
Evaluating the importance of venture investors for start-up success is a tricky problem. Most importantly, there is a great deal of assortative matching in these markets — that is, great business plans get paired with great investors, and not-so-great with not-so-great. How successful would these high-potential start-ups be absent these investors? At the very least, we should not attribute all of venture's success to the investors.
We study start-up companies that approached prominent angel investment groups to identify the extent to which backing by prominent investors is important for venture success. Angel investors are a central source of start-up funding, greater in deal counts and dollar volumes than venture capital. These investors are increasingly organizing into groups to make their investments. Banding together offers many gains: better deal flow, larger investment size potential, shared due diligence, and similar.
These groups also offer a rare research laboratory for evaluating the impact of high-growth, professional investors. Entrepreneurs make investment presentations to the full angel group. Each angel records his or her interest in the venture individually. The polling and record keeping involved in this process provide a wealth of information on the investment decision process — and its impact on the venture's success.
The Duds, the Homeruns, and the Ones We Study
Most potential deals receive no interest (the duds). A select few receive massive interest (the homeruns). These two groups are of limited use because the funding decisions and subsequent investment outcomes are so closely linked to observable venture quality.
In between these extremes, however, are a group of investment opportunities that carry tremendous information. The funding choices of angel groups display discontinuities or breaking points, where a small change in the collective interest levels of the angels can lead to a discrete jump in the probability of funding for otherwise comparable ventures.
As an example, 90% of the 2000+ ventures that approached Tech Coast Angels (TCA) between 2000-2006 garnered the interest of fewer than 10 angels. The probability of receiving funding in this group was basically zero. On the other hand, 2% of ventures received interest from more than 35 angels, with a maximum of 191 angels expressing interest. The funding probability is in this group was over 40%.
In between these extremes, the funding probability consistently grows, but it is non-linear. TCA was twice as likely to fund a venture if 20-24 angels are interested (38% probability) compared to if 15-19 angels are interested (17% probability). This breaking point is not due to a specific investment rule imposed by investors. Instead, it is an outcome of the their decision-making processes and the collection of sufficient interest around a deal.
Critically, however, one cannot find any statistical difference between the start-ups in the 15-19 group and those in the 20-24 groups in terms of venture sector, amount of funding sought, number of employees, and so on. Thus, the start-up companies in the 15-19 and 20-24 groups are initially comparable in quality but, due to idiosyncratic factors, have very different funding probabilities.
What Happens Next?
What happens to these two groups next says a lot about whether venture financing helps high-growth start-ups succeed or not. Comparing the groups just above the funding border with those just below, we find venture financing increases the probability of venture survival. It also increases venture performance and growth as measured through growth in web site traffic and web site rankings. The improvement gains typically range between 30% and 50%.
Interestingly, we do not find consistent evidence for venture financing leading to better access to follow-on financing by other investor groups, which is often cited as a benefit. Access to capital per se may not be the most important value-added that angel investment groups bring. Some of the "softer" features, such as angels' mentoring or business contacts, may help new ventures the most.
The Fine Print
Two caveats are important to note. First, angel investment groups are very heterogeneous, and our data come from groups that are professionally managed. These performance gains thus may not extend to everyone. More importantly, we are unable to consider the costs to entrepreneurs in terms of equity granted. The deal terms can't be too onerous or taking the money won't be worth it for the entrepreneurs no matter how successful the venture ultimately is.
William Kerr is an Assistant Professor at Harvard Business School, where he teaches the Entrepreneurial Manager course in the first year of the MBA program.