‘Education sector is lucrative as well as recession proof’

High rate of return on investment coupled with huge demand-supply gap is attracting realtors to this sector,who will be comfortable setting up the required infrastructure.

Express Estates finds the issue debatable : ”With real-estate players getting into education sector,will they be able to do justice to it? Will it be an inequitable distribution of attention,education sector being a non-core business for most of them?”

Speaking for such developers is SANJEEV J AEREN,MD of AEZ Group. The group has recently announced a tie-up with Mother’s Pride,a chain of schools,by investing Rs 500 crore in the company.

Debating with him is PROF PSN RAO,head,department of housing,School of Planning and Architecture,New Delhi. He is also the founder-chairman of National Association of Realtors-India (NAR-INDIA).

FOR THE MOTION

SANJEEV J AEREN,MD of AEZ Group

I understand that the real estate industry has been reeling under low demand and increasing debt and hence critics may condemn the industry for diversifying out of compulsion to keep the show going. However,it is an established fact that even when there was a bull phase with market sentiments appearing very promising,many of the realty companies had diversified into telecom and other sectors. So,as an industry,I must reiterate that we have the conviction to believe that we are diversifying because we feel there is a need to grow beyond our core area of competence as well.

Moreover,it is also true that every enterprising business house is always in the look out for greener pastures,whether or no slowdown. We have to be a part of the holistic infrastructure development of the nation. What better way to go ahead for that than create infrastructure for the education sector. It makes business sense and at the same time it makes the industry become mature and also contribute to the social concern.

When we thought of buying 50 per cent stake in leading school chain Mother’s Pride,we were pretty clear that our diversification won’t distract us from our core competence area. Rather it will only add value to it. We will provide infrastructure to them and let them take care of the operational part of the business of education. So,both of us are pooling our synergies for better business sense as well as contributing something to the society.

So,for many of the realty companies this diversification has been a well thought-out strategy and they had started working on it even before the market had witnessed slowdown. And diversification into education makes more sense as this is a sector which is more or less recession proof with good cash flow. This also reflects that real estate has been a sector with vision and foresight. This may not be true for everybody but many of the developers have always been forward looking in their approach to the business. That is precisely the reason why the industry is forming the union with various school and management institutions. This partnership will combine the strengths of both the sectors synergistically. We are pooling our assets holistically to have access to better resources,be it manpower,intellectual capital,infrastructure or finance. Actually both the sectors compliment each other with their respective expertise.

Let’s not forget the fact that the realty sector in some other parts of the world has successfully provided infrastructure to the academia. The model has worked successfully in some countries like US and Canada. With diminished demand for housing and a cash constraint,it’s a natural progression for many developers with available land banks. I feel that this is the right sector for investment which is upbeat,risk free and where revenue is growing at more than 50 per cent across the industry.

However,I must say that those realtors who are determined to take the quality Indian education forward to the international platform will emerge victorious. l

(As told to PKS)

AGAINST THE MOTION

‘They need to concentrate in their core business activity’

PROF DR PSN RAO

Head (Housing),School of Planning & Architecture,New Delhi

If there are any two areas which are recession proof,they are education and health,at least in the Indian context. Set up an education shop or open a health care centre and you are bound to have a lot of footfalls and loads of money of course. We live in a socio-economic system where we do not mind spending good money in getting our children the best of education. The question today is whether these mushrooming private educational institutions really deliver what they promise. The education policy of India clearly provides a role for the private sector in education service delivery. However,not all players are serious ones. More often than not,people get into the business of education for business,not for education! This is something unfortunate in a country which is badly in need of quality education at virtually every level,be it primary schooling or higher education. There have been trends in the recent past when real estate developers have made forays into the education sector. In fact,in our country,people from various other areas too,such as large industrialists,bankers and so on have all entered into the education sector. A distinction needs to be made between (a) a private party which is fully dedicated to education,(b) a private party which enters the education sector as a part of corporate social responsibility (CSR),and (c) a private party which looks at education as an area of diversification,purely for profit making. In all of these cases,the central issue is that when the private party invests money in education,the question of control comes in. The experience has been that wherever private control is high,educators feel stifled and education ultimately suffers.

There are several cases in point. The Tatas and Birlas have many educational interests for a long time. In a different way,so do the Manipal Group,the Apeejay group or the Amity group. While in the former case,values and philanthropy has been the riding motive,the latter have dedicated themselves largely to education alone.

However,there are many cases where the picture is not as rosy. There is,more often than not,the situation where the promoter has little interest in education per se. Education is perhaps seen more as a commercial venture for making money. The recent forays of many real estate developers into the education field has made us sit up and think seriously. Education is a noble cause. Education and the profit motive make a heady mix. The business of the real estate industry,or any industry for that matter,is to concentrate in its core business activity,rather than enter into areas beyond their core competency. In fact,there is so much for them to innovate in their core business itself.

Therefore,education,particularly with realty players eyeing lucrative propositions,particularly in an era of shortages,needs strong state intervention so that the quality of service delivery does not suffer. Appropriate structures and systems are urgently needed to be put in place so that the larger public good is protected. l

(As told to PKS)