Friday, November 30, 2007

Growth pangs: too many firms, not enough architects around

Chinmaya P., a 25-year-old designer-architect at Srushti Associates, is on a roll. His annual salarywas Rs60,000 when he joined the profession in 2004. In the last three years, his salary has risen to Rs2.4 lakh and he’s been chased by at least four other firms.

India’s changing urban landscape—dotted with glistening buildings and towers of concrete—has spawned a shortage of architects.

Builders cashing in on three years of galloping real estate values are creating developments that have moved beyond stand-alone commercial blocks and residences—they are converting vast swathes of land into townships.

And that’s set off a race for architects and fattened pay packets. Some say, however, that not even well-wadded wallets are enough to attract talent, and even with a doubling of salaries almost every year, there just aren’t enough specialists going around.

In part, that’s mostly because the construction industry in India, helped by a booming economy, is growing at about 30% a year while the number of architects that join the industry is growing by just about 10% each year, said Prashant Karwe, chief architect, Rustomjee Group.

There are 86 architecture schools in the country, from where 3,000-4,500 architects graduate every year. This is barely sufficient to meet the demand. What’s alarming, according to a survey conducted by E2e Business Solutions, a people management company, is that architectural firms in India are having a hard time stemming attrition. The survey estimated an attrition level of close to 50% in firms at the entry level, especially over the last three years.

According to a report published by Cushman & Wakefield in October, foreign developers are showing an interest in the realty industry in India. Some of the prominent multinational developers present in India are Tishman Speyer (US), CapitaLand Ltd and Ascendas (Singapore), Salim Group (Indonesia) and Emaar Group (the United Arab Emirates).

Traditional Indian construction companies and Indian conglomerates have also indicated their keenness in real estate. Some of the prominent construction and diversified corporates venturing into real estate include Shapoorji & Pallonji, GMR Group, Lanco Group, Reliance Industries Ltd, Pantaloon Retail Ltd, Godrej Industries and the Tata group.

The Indian real estate was pegged at $16 billion (Rs73,584 crore then) in 2006-07 and is likely to reach $60 billion by 2010, growing at a compounded annual rate of 30%, according to an Ernst & Young report.

The rush for buildings has also led to consultants escalating salaries and poaching staff, leading to a never ending cycle of job-hops and attrition.

“The growing pains of Indian architectural and consultancy firms are not new, as they have been experienced in many markets around the world in similar boomcycles. Our advice to the India construction world is not to be fooled by the hype andbuild for the long term,” said Jeffrey M. West, director, project management services,DTZ India.

The rush for talent is so acute that firms are getting in architects from overseas— from locations ranging from nearby Singapore to far-off North America, if they can afford it.

“We have tied up with Hok, a leading architect company in the US. This has helped create newer designs, in terms of space management in our forthcoming SEZ (special economic zone) venture in Chennai,” says S.S. Asokan, executive director, Shriram Properties Ltd.

Others have joined the fray.

Unitech Ltd, the country’s second largest real estate developer by market capitalization, behind DLF Ltd, has just assigned one of India’s most expensive commercial buildings that will come up in Mumbai. The complex will be designed by Skidmore, Owings & Merrill Llp., which designed Burj Dubai, which is currently under construction in Dubai, United Arab Emirates, and will be the world’s tallest building when it’s finished in 2009. It is also Unitech’s first commercial project in Mumbai.

While hiring well-known overseas firms is possible for well-established, top rung firms, it’s mostly the middle level firms that are facing a crisis, because salaries are getting pushed through the roof.

Irfan Razack, chairman and managing director, Prestige Group, explains, “The challenge lies in trying to retain good talent. This may not be difficult for leading names, but smaller ones are busy training newcomers and this is anongoing process.”

As a result, smaller firms are facing a problem. Projects are getting delayed as they try to juggle training architects and hiring new ones almost as soon as the trained ones leave for bigger and better offers.

“Leading construction companies are even willing to pay Rs4 lakh per month to hold on to skilled professionals,” explains Subrata Kumar Ghosh, chief architect, Ansal Housing and Construction Ltd.

Successful construction firms are also doubling the numbers of architects they employ year on year, for the last few years.

“This places enormous strain on firms to maintain quality and achieve growth. Unless there is a very clear and conscious attempt to stay focused and small (in terms of employees), the long-term survival of the firm gets somewhat difficult,” says Yeshasvini Ramaswamy, a director at E2e.

Karun Varma, local director, Jones Lang LaSalle Megraj, a real estate consultancy, says that one of the ways of dealing with the shortage of architects is by ensuring that the quality of teachers in architecture colleges is maintained.

“With good teachers, the standard of education is high, thereby the calibre ofstudents is also good,” says Varma. Easier said than done though.


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