If you are wondering why such trading hasn’t taken off in India, it is because these transactions need a lot of ground work to be put in place first.

“Why don’t we have a futures contract on real-estate to hedge the risk of land prices going down?” asked Rahul, a quiet but sharp student. Professor Nicky was taken aback by his question. Where most of the students in her class had difficulty understanding the basic concepts of hedging, this young boy was asking about an instrument which was, well, not so simple, to say the least.

Professor Nicky turned the question to the class to test how much the class knew. And she was in for a pleasant surprise. There were a few hands in the air.

Rachna: “It will be difficult to introduce real-estate futures because the valuation of the underlying product would be difficult. The real-estate market in India is highly fragmented. The prices of land differ widely based on factors such as location and usability, that is commercial, industrial, residential or agricultural”

Praveen added: “Besides, such a market would be very illiquid in India as only prime commercial and residential properties would probably be traded.”

Index of prices

“But, what is the problem here?” interposed Rajshree. “Can’t we create an index of real-estate prices? Just like we have stock indices? We can club the properties belonging to a particular city according to property types”.

Professor Nicky saw a few perplexed looking faces and decided to intervene even though she was happy with the way the discussion was proceeding. She took over from where Rajshree had left.

“See, just like we have an index for FMCG companies or IT companies or banks, similarly, we can create an index of real-estate Prices. Of course these indices will be city or region-wise indices. We would need to determine a base year”.

“Since it would be very tiresome to include all residential property transactions in the index, we take transactions that are above a minimum amount of, let’s say, Rs 25 lakh. Now we can take a weighted average of all the transactions on a weekly or a fortnightly or monthly basis to find the changes in the index.

“However, the index may not give a true and fair picture as the recorded value of these transactions with the government is generally very low to save taxes. But then, it will still be better than having nothing. And slowly, as we move ahead and learn, the issues of heterogeneity and pricing will be sorted out”.

“Ah! If I recall correctly, Chicago Mercantile Exchange and Chicago Board of Trade have such futures traded on such contracts for cities such as New York and Los Angeles. In fact, they also have futures contracts on Real Estate Investment Trusts” exclaimed Richa.

“The students have really started reading,” thought Professor Nicky. “With the job scenario being bleak, many students have become serious and are trying to read more so that they can have an edge over their batch mates in an interview”!

Benefits of futures

“Yes, both the US and the UK have real-estate futures traded on their commodity exchanges for most of the major cities in the country. But can somebody tell me what the benefits of real-estate futures are?” asked Nicky.

Before Nicky could point towards a raised hand, Rohit rattled off, “Hedging for investors and builders, diversification, price discovery, increased information availability and flow, investment tool…”.

“Okay…okay…enough…so all of you are aware of the benefits of real-estate futures. But who has heard of the London Fox?” Thankfully no hands went up this time. Nicky was almost beginning to feel that she was not required in the classroom at all as the students had answers to all her questions.

Keeping them at bay

“London Futures and Options Exchange (FOX) started trading in four property futures contracts in May 1991 and had to suspend trading in October 1991. The reasons were mainly that these contracts were not economically viable. Arbitrage was not possible as short-selling is not allowed in the underlying spot market, which is true in India also.

“Also, the housing indices for various cities would be highly dependent on each other, albeit with lagged effect, due to the cascading effect in the real-estate markets. The transaction costs were also huge, which kept the investors and hedgers at bay.

“Hence, before introducing these futures, the government will have to do a lot of ground work to ensure that they work efficiently and provide the desired benefits to investors and hedgers”.

The class looked satisfied. Everyone had contributed something and everyone had learnt something new. Nicky looked proudly at her students and called it a day.

By Nupur Pavan Bang with inputs from Praveen, Rachna, Rahul, Rajshree, Richa and Rohit.

About the contributor: Nupur is a Post-Doctoral Fellow at the Indian School of Business. She obtained her Doctoral degree from Icfai University, Dehradun. Nupur is a Fellow of the Association of Chartered Certified Accountants, UK. She has also taught Theories of Corporate Finance to undergraduate students at Syracuse University. Nupur writes regular columns for Hindu BusinessLine, DNA Mumbai and rediff.com.

(Praveen, Rachna, Rahul, Rajshree, Richa and Rohit are all alumni of IBS Hyderabad, class of 2009.)

The academic year in B Schools is coming to an end. Students in most B schools have been successful in securing placements . The knowledge and skills gained in the two years of the post graduate program will certainly be handy at the time when the students are embarking on their respective corporate careers. At this stage, I would like to share a quote with the students which will make them reflect on their attitudes, approach
and will make them aware of the realities of the world. This quote is attributed to Mr M Damodaran , former Chairman of SEBI , it reads thus,

“ Young MBAs think they have arrived . Yes, they arrive but only at the beginning of a long learning curve . A management qualification gives one an opportunity to learn.”

Fresh MBAs will find their qualification as a spring board in the corporate world. But a lot more learning has yet to take place. Application of the knowledge gained is very critical and that’s what is to be learned now onwards.

by Dr Dhananjay Keskar (Director, IBS Pune)

Life is made up of choices.

Every day we need to make different choices.

Getting into an MBA is such a choice that will shape how you spend next 1 or 2 years of your life.

Here is what you can expect when you get into an MBA program.

• You can expect meeting new people.
• Expose your brain to new challenges.
• Get you ready for a job or an entrepreneurial career.

The rigour and quality of these inputs may vary depending on the institution you choose.

But you will find them to some degree in most of the programs.

If you spend your time well while in campus – you can expect a bright future ahead.

Now companies – mostly in private sector but also in public sector, though to a lesser degree – hire MBAs.

The opportunities for all professionals (including MBAs) are on the rise. This is because many multinational corporations – enthused by positive sentiments for BRIC (Brazil, Russia, India and China) are now entering India. Many are already here. They want to use large Indian middle class which is getting richer by day – to keep their growth going, as most of the

So opportunities are there. But do not think of MBA as a golden ticket to heaven.

Think of an MBA as a boot-camp for life which will give you a chance to broaden your horizon and get you ready to make a mark but you need to spend your time wisely, work hard, be consistent and stick to a plan.

You can get an MBA degree or diploma with lesser effort also but if you want to create a solid foundation for life then – be ready to exert yourself.

Take up leadership activities while you are at campus. Do not wait for somebody’s permission to do right things. Do what feels right. You may end up making some mistakes, but will come out richer with experience.

If you aim to work outside India then spend time honing your foreign language skills. All good institutions offer such classes for students who want to learn them.

Join extra-curricular activities. Play sports so that you remain focused and energetic.

Academics

On the academic side, a business administration program is designed to develop competencies in people to handle business, resources, and activities – to work collectively towards a certain outcome – like increasing revenue or profitability.

The idea is that people who study in an MBA come out equipped with skill sets and knowledge – to help businesses stay competitive in ever changing business environment.

With the expansion of business and industry, there are a wide variety of career options available these days. Many departments / functions have come into being which were absent till recent years. People nowadays play specific roles in the workplace rather than handling almost everything.

Individuals now have more choices and one can choose a specialisation according to their liking, which results in increased job satisfaction and faster growth. Some of the general careers options available include the following-

Marketing and Sales: This function is about reaching out to your audiences with your offering. The end result is more revenue for the organisation. Here there are varied functions like promotions, advertising, selling, public relations etc.

Human Resource Development: The human resources functions involves every activity right from recruiting / hiring people to retaining them, tracking their performance, training them and to ensuring their well being / satisfaction.

Operations: The professionals working in this function ensure that business operations (production, services etc) happen efficiently. However the function entails different responsibilities in different industries. In retail the operations manager might mean the head of a store or the entire business, same is true for hospitality. In production specific industries, the operations manager oversees the quality of output and ensures compliance.

Finance: The take care of the numbers and track the inflow and outflow of money, do budgeting and track the spending of various departments.

Besides all these you may also be working in production, client servicing, liaising and other specialised functions which are industry specific.

An MBA provides you with the right skills to perform in the workplace.

Hope this post shared some insights.

If you have some questions please feel free to ask in comments.

 

You are the creator of your own Destiny!!

My life in IBS is like a dream come true, I joined IBS as a commerce graduate from Indore coming all the way (650 kms) having few dreams in my heart, mind and soul.

The B school which gave me everything Name, fame, Job, recognition, awards, rewards and most important life time experiences. Got Recruited in Radio City – India’ number 1 Radio channel.

Achievements

23 July 2011,was the day that changed everything for me and the most satisfying, self-improving journey of finding out the best in me that leaded to be the Sponsorship Head of IBS Mumbai later,begin when I enrolled myself in SAP. Started as a Star achiever became a Platinum achiever and Mr. Conference at 16 All India SAP Achieivers Conference.

Extracurricular Focus

The best part of IBS is that the management gives the opportunities to explore a future manager in what he/she is best in at. More than 15 dedicated club, if few are to be named Finance, Marketing, Creativity, E Cell, 4^th Wall(Dramatics), Dance, Music, Technical club  tops the list which not only helps in improving the skills but also provides some very fruitful insights by conducting seminars and workshops by industry professionals.

The Annual event of IBS – KONFLUX 2012 was bigger than any previous Konflux held, having the association of few big names like Maruti, Hero, Reliance, Spykar, Hiranandani Hospital was a grand success.

Every few months there are SAP conferences, picnics which refreshes the students from the hectic study schedule, be it a trip to Shangrilla water resort, sightseeing day at conference is a fun can’t be put in words.

The lovely atmosphere, very positive competition with batch mates and lovely Juniors(Batch 2013), IBS promises to give the best in class Managers to the industry.

In the End few lines which have inspired me over the years:

Successful people don’t relax on chair…They relax while they work…
They sleep with a dream…. Wake up with a commitment…
As they believe they are the creator of their own destiny…..

Yes I can…. Yes I can…!!!

by Ayush Gupta Team Leader – SAP (IBS Mumbai)

It was during a evaluation of a project that I realized that I need to develop Financial management skills to get the cutting edge over other after having decent knowledge in the field of Engineering and hence I decided to quit my job and join MBA. It just started from a thought and my subordinates and mentors in JSW Steels encouraged me to go on with my decision, and then it was the time to bring the thought on ground reality and target a B-School, which not only give me a knowledge but also a competitive job profile during the placements wrt what I had in JSW Steels. And the name came out to be IBS-Mumbai.

IBS Mumbai

IBS-Mumbai course selection, teaching methodology, case studies, presentations, Summer Internship Program are the few points which differentiate it from the lot of B-Schools, and to add cherry on the top is the International Scholarship Program. International scholarship is something gave me the opportunity to go study the British market and something which was always in books in front of me viz. Globalization, came into reality. To study a very different market was itself a great experience and when you get the opportunity to get close to the Indian business giant in other country it gives immense pleasure, the business giant was Tata Group. During the tenure of the scholarship program we did a case study on Tata-JLR (Jaguar- Land rover) and also went for a industrial visit to their plant and see the practical application of what we had been studying in IBS-Mumbai.

Internship

The internship program that comes under the curriculum of IBS-Mumbai gives the opportunity to the students to get practical knowledge in the sector they want to work in, 3 months in a corporate world gives the real feeling how the things go and this also highlight the grey areas on which the candidate need to work on till he/she actually get placed.

Placements

The SIP placement, Final placement is something which would not be possible without having a dedicated Placement department which IBS-Mumbai have. The placement department takes care of each individual when it comes to the final placements and even in the case on SIP placements.

When we think of daily learning with joy, then SAP Department of the college comes into mind. The whole lot of theory we study in our Learning Halls can be applied here, and whose application is fairly rewarded.

For me it was great experience being associated with IBS-Mumbai & SAP as well for last two years.

Shashank Kapoor,
Batch 2012