The US-based Jones Lang LaSalle is one of the largest real estate companies in the world and has been in India for the last 25 years. In an interview with Business Line, its Global President and Chief Executive Officer, Colin Dyer, talks about how the company views the economic situation in the world and its impact on the real estate sector.
How do you read the current global economic situation? What impact will it have on the global real estate sector as well as in India?
The two things that I draw from my recent Europe visit is that the activity is surprisingly good and I think that beneath all the headlines, actually people are beginning to understand life has to go on and activities are carried on. Second thing is that the European situation is not grave and not as bad as we feared.
US is different and actually it is good at the moment. Corporates are taking space, housing market is growing, we see tech sector very active. (As far as) US economy (is concerned), things are going pretty well. This means, it will be positive for BPO, IT sectors in India. Because, before you can do BPO, you have to take decisions. With the economy growing, US companies will take decisions that will be a compelling case for moving work to India.
There is increasing opposition to outsourcing of jobs to India and during an election year in the US, it is only getting stronger. If fewer jobs are shipped to India, will it start affecting the real estate sector here?
First of all, it is just an election year in the US. There is noise around elections and it is political. But it does not make practical difference to business. These are big decisions and they are not emotive decisions. A case for outsourcing is compelling, particularly with the rupee having eased to an extent, inflation and wage rates slowing down. Hence, there is a strong case for Indian outsourcing.
How different is real estate in India compared with the US or Europe? Also, the Indian real estate sector is not seen as being transparent. Does it affect the way you do business here?
Compared to Europe or America, India is a strongly developing market in terms of new constructions. But in Europe and the US, there is a strong focus on licensing, permissions, land purchasing, development activities, initial leasing which is not there here.
India still has challenges in transparency. We carry out every two years an index of transparency, and interestingly, India has moved backwards over the last two years. Transparency is made up of number of elements like visibility of price returns (economics of real estate), level of security that the law offers (India is pretty well placed, but slow).
Then there are government regulations and bureaucracy and there is corruption. I think two things have happened in India in the last two years – corruption agenda has been clearer, may not be different, but much talked about. 2G, coal and the general noise Indian people themselves made on corruption issue. Second issue is of regulation and bureaucracy – Vodafone case on retrospective tax changes. Investors do not know what the rules are any more. FDI in retail is another issue. That’s the difference between mature markets and developing markets like India.
The middle-class in India buys property or land not just to live there but also for investment. Is the pattern same in the US and Europe?
Buying property for investment purposes is not unique but fewer people do that (in Europe and the US). In Europe and the US, they buy their first apartment in their early 30s so that they can settle down.
Then they buy typically one home to live in and sell when they change jobs or move cities. Sometimes, their second homes may be a vacation place or somewhere in a town they grew up. But they do not generally buy for investment purposes. In a rapidly growing economy like India, you could be pretty sure of your house to appreciate over five, 10, 20-year period.
Frankly in the US, (one) can’t be sure. In India there is a store of wealth, because so much urbanisation is happening and major cities are growing rapidly. As the economy is growing over six per cent year-on-year, it can be only one-way ticket to wealth creation and it will be a smart thing to do.