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Building Facilities in China and India
Issue 30 - May 07
With China and India’s startling growth cementing their place as the world’s economic powerhouses, countless corporations are looking to establish in themselves these markets. Anyone involved in these exciting areas needs to be aware of the hurdles that must be overcome.
Guangzhou, China
project onset
With rising rents and an overheating construction environment, creating facilities in China and India is not an easy task. Projects often suffer from time and cost
overruns with common causes being a lack of proper planning, poor infrastructure support, vast bureaucracy and lack of consistency and information within the
building industry. These challenges can be overcome, provided that the right steps are taken from the very beginning of the project planning process.
Randy White, Senior Director, DTZ Global corporate Services, Asia Pacifi c says “In Asia we feel like we are herding cats, everybody wants to be involved in the
project from the administrative offi cer to the people in the headquarter offi ces but if these people are not properly coordinated the project can go down hill pretty
quickly.” He suggests that the best alternative is to assign those involved in the project clear roles because the more people are involved in the project the less you
accomplish.
location, location, location
Choosing “the perfect location” for your project is an impossible task as ideal location caracteristics are variables that change overtime. White says “you look at a city like Shenzhen, it isn’t the same place like it was twenty years ago”, he says that one needs to take account of the numerous emerging new submarkets and the effects of upcoming government driven projects on the market landscape. With this extremely turbulent operating environment, it is important to ask how long term plans can be made.
Shagufta Anurag, Founder and MD, Space Matrix, suggests that the fi rst thing to do is to understand the local market, as in both India and China there are many challenges due to the growing economy. She says that, in her experience, “it’s important to know the place and its regulations but also to fi nd out what the local working styles in different regions are, as they do vary. Dealing with local taxation, getting approvals and fi lling mountains of forms represents a constant challenge in both countries. White also highlights that in China, “the government pushes for growth, but sometimes slams the breaks once in a while without any warning”. For example, the Chinese government tried slowing growth last year, posing diffi culties for those involved in project planning because they now couldn’t project which direction their business was going to take over the next 20 years.
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Five points for fast planning
• Know your location as China and India are very diverse
countries and sub-markets equally diverse
• Be aware of the local approvals and taxation
• Be culturally sensitive
• Plan around the calendar to avoid delays during
festivals and holidays
• Assign all project stakeholders clear roles as early as
possible
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choosing the right model
Different projects require different approaches. Anurag considers three different project delivery models, highlighting that there are advantages and disadvantages
for each model (see table below).
Table above: Three different project delivery models highlighting the advantages and disadvantages
Communicating information is also a key requirement. From a contractor’s perspective, a model that has proved to be very successful is one where the architect acts as a “conduit,” serving as a fi lter of information between
the client and the construction management team. Loren M. Smith, Vice President, Asia Pacifi c, Structure Tone Asia, explains how this model worked for his company’s Adobe Systems projects in Beijing, Hong Kong and Taipei.
The traditional model where the owner and architect complete the concept before engaging the contractor risks incurring a time and effi ciency cost, especially
when dealing with China and India projects. By using the “architect as a conduit model”, the owner received more support upfront. In this model, the architect acted
as a fi lter of information between the owner and the construction manager. The result was early material sourcing and submissions, concurrent pricing and costing, thus the project was delivered at speed.
avoid headaches, know local practices
In comparison, both countries can be diffi cult places for delivering projects. Similarities can be found in lease terms but as White points out, “sometimes you get more fl exibility in China.” Differences can be seen when looking at fi t-out conditions. For example in China, the landlord adheres to the rules by the book and will hardly ever give anything more than the standard fi t-out i.e. ceiling, lighting and HVAC. However, in India, “landlords are more amenable and sophisticated” to doing fi t-outs and analysing the costs, says White, further adding that Indian landlords will usually give both a warm shell and a cold shell pricing.
Signifi cant differences in the countries’ local practices are the rent deposits. In India the requirement is six to twelve months rent while in China it is normally two to three months rent plus management fees. Additional costs include government fees such as stamp duties. India has costly stamp duties while China has a nominal amount. White’s advice is to “never forget” these hidden extra costs, otherwise it could cost your company a lot of money. Reinstatement requirements are not so much of a problem in India as there is a hot market for fi tted space and landlords are normally fl exible. However, in China this is a big issue as tenants are required to bring the space back to bare shell and landlords will not be willing to comprise.
Anurag highlights the importance of specifi c local knowledge. When approaching a
project in a new area, avoid being complacent even if you have completed projects
successfully in the same market. In India in particular, it is important to remember that different states and cities have unique requirements for all incoming goods. For example Maharashtra has an “Octroi system” while West Bengal has a “Way Bill bill” whereby approval for all incoming goods has to be obtained well in advance of goods shipment. A typical requirement is that of Mumbai, where Municipality approval is required prior to commencement of tenancy improvement works. Anurag advises to be well informed on all aspects of your project as taxation could take up to 15 percent of the project costs in some situations. She also says that those involved in project delivery should pay attention to individual by-laws, taxation structures and building codes because they vary across the country.
success factors
Anurag suggests that, for India, a focus on imported, long lead period items and material selection is crucial. While in China everything can be manufactured locally, in India procurement is not simple at all. She stresses that in India “surprises are quite common” and PMs need to micro-manage the procurement stages of imported, lead-in items. Working with a common communication platform is crucial to any project success, points out Anurag. Technology and tools need to be adopted for clear information transfer and all vendors need to have access to all information.
In both India and China, the industry is characterised by being based on “construction companies having the requisite fi nancial strength to carry out certain projects”, advises Malcom Lai, Director of Architecture and Construction Department, Asia Pacifi c, AIG Global Real Estate. As there is weak statutory supervision in both countries there are many unlicensed fi t-out companies
and buyers should be aware of ‘fl y by night’ companies, he explains. It is important to “ensure a thorough prequalifi cation is carried out on tendering companies” he
continues, and adds that this should include a visit to recent projects and previous clients.
the right fi t-out
Lai points out that “the Indian and Chinese fi t-out industry has been through an overwhelming growth since 2000”, saying that this is largely due to “the influx of multinational corporations requiring grade A offi ce premises major cities.” In China, there is an estimated 300,000 registered fi t-out companies, with 92 percent of these privately owned. In India, fi nding the requisite skills can often be a challenge, Anurag says, pointing out that many contractors have gone to work on enticing projects in the Middle-East. Lai believes that these types of issues should be taken into account during the project planning, where it is a good idea to allow time for mock-ups.
China and India’s rapid development poses countless challenges and opportunities for the industry of the built environment. In these dynamic environments the rewards available are matched only by the diffi culties of operating in them. By ensuring that the right planning is done, the best partners are selected, and that the project is being managed correctly, you can ensure that your organisation is not left behind. RFP
For more information about Facility Media Conferences or to purchase
full conference materials contact Shinah Lunty on +852 2851 9923.
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End user “To-do list” for managing projects in China and India
1. Check fi re escapes, even in grade A premises.
2. To ensure quality, allow time for mock-ups and push to have them completed to fi ne
tune design and construction workmanship.
3. Make regular site inspections and take on a full time project manager or PM
company to carry out the day to day supervision.
4. Be fair to your contractors. It’s a team effort.
5. Understand local culture, customs and standards to mitigate cultural infl uences.
6. Encourage and instigate fi re drills to promote fi re safety awareness as soon as the move is completed.
7. Settle any contractual disputes via commercial negotiation and settlement, avoid
litigation. |
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