We are a global facilities management (FM) industry player managing operations across the Middle East, Africa, Europe and South and Central Asia. Having a firm foothold with 75 million square meters serving over 150 global majors, we made our early inroads in India in 2012, though we remained a cautious player. We have now completed 15 years, having operated in integrated facilities management across 60+ cities; I must say that we gained significant insights into the market. During this period, we had our triumphs and trials, but our cautious mode guided us in navigating our journey. Because of its industry’s inherent challenges, we focused on carefully expanding our footprint in a measured mode. However, we could not see a silver lining in the necessitated reforms that the FM industry badly needed.
However, instead of waiting for the FM sector to realise its full potential, we carefully crafted our India strategy in a focused manner to continue our expansion.
Despite a promising growth trajectory, marked by a Compound Annual Growth Rate (CAGR) of over 13%, the industry continues to grapple with a plethora of challenges. I believe these are shaped by the country’s unique economic, infrastructural, and cultural realities that require a significant overhaul.
Here’s a closer look at some of the most pressing issues based on current trends and first-hand industry insights.
1. Chronic Underspending and Low FM Benchmarks
A key macroeconomic challenge is the chronic underinvestment in FM due to outdated and minimal spending benchmarks.
In the following, I touch upon certain factors that rule the perceptions behind these chronic mindsets on low FM benchmarking and how these impact the FM industry.
A. Cost-Sensitive Market Dynamics
India’s primary FM driver, the real estate sector, remains heavily cost-conscious. As a common practice, developers and property managers in commercial, residential, and industrial spaces allocate minimal FM budgets to optimise short-term operational margins. As reports like Mordor Intelligence (2024) highlight, the focus remains on upfront construction costs, sidelining lifecycle maintenance.
B. Global vs Local Benchmarks
While global FM standards typically allocate 1–3% of asset value annually, Indian projects, especially outside Tier-I cities, often spend between 0.5–1.5%. This gap is symptomatic of a mindset focused on immediate savings over long-term asset health.
C. Influence of the Unorganised Sector
The dominance of unregulated FM providers operating at rock-bottom prices skews expectations. This puts pressure on organised firms like our company to deliver quality under tight margins. Various reports indicate that the industry often erroneously factors these informal rates in prevailing FM cost benchmarking, undermining industry standards.
D. Sector-Wise Trends
Residential FM spent is particularly low, often managed by resident welfare associations with tight budgets and limited FM know-how. Commercial spaces like IT parks show better allocations but still fall behind international norms. Industrial and retail segments display inconsistent FM practices, oscillating between cost-cutting and critical maintenance investment.
E. Impact on Industry Performance
Compromised Service Quality: it is very obvious that underspending on FM limits investment in preventive maintenance, skilled personnel, and technology. This reactive approach leads to increased long-term costs and depreciating asset value.
These low FM benchmarks often factor these informal rates due to budget constraints that hinder the adoption of sustainability practices, IoT, and predictive maintenance tools.
F. Profitability Concerns for Organized Players
They have to squeeze their margins, forced to choose between quality and price.
While EFS manages through scale and efficiency, smaller firms often cut labour costs or compromise standards.
G. Underlying assumption of FM as a Cost Center
Unlike mature markets, where FM is seen as a strategic asset, many Indian stakeholders still view it as an operational burden. This perception is slowly shifting, especially in premium commercial development. High-end commercial projects are increasing FM investments to align with international standards, often driven by multinational tenants. Companies like EFS benefit from this, serving global clients with stringent expectations.
H. Regulatory Push
Emerging ESG regulations and updates to the National Building Code mandate developers to allocate more funds toward FM, aligning with safety and sustainability goals.
I. Client Education Efforts
FM firms and industry bodies advocate for lifecycle-based cost models, showing how a modest FM investment can reduce long-term costs by 15–20%.
There are various other challenges besides the low FM benchmarking impacting the FM in India:
1. Workforce Shortages and Skills Gaps
The FM sector faces a critical talent crunch, both technical (e.g., HVAC, electrical) and non-technical (e.g., housekeeping, security). The rise of smart facilities demands new skills like IoT integration and data-driven maintenance, yet the skilled workforce pipeline is limited. This mismatch impacts service delivery, especially for complex, tech-driven FM operations. Organisations like EFS have had to invest heavily in upskilling to meet evolving demands. India has a severe crunch of tech-savvy FMs as only fewer colleges or the course curriculums factor in newer built environment ecosystems.
2. Fragmentation and Informality
India’s FM market remains fragmented, dominated by small, unorganised providers who often bypass compliance to stay competitive. This drives down pricing and dilutes service standards, particularly in Tier-II and Tier-III cities.
Though consolidation is underway, the organised sector still competes on quality while battling a market that often doesn’t recognise the added value.
3. Infrastructure Challenges
Ageing infrastructure with a lower maintenance history, inconsistent utility setup, or poor urban planning between facilities design, parking, and traffic often complicates FM operations. Service Providers must adapt to local constraints, increasing complexity and costs.
For example, managing assets in big metros differs significantly from managing assets in rural towns where workforce and other logistics availability are limited. Though the Smart Cities Mission aims to address these disparities, progress remains slow.
4. Cost Pressures and Margin Squeeze
Rising labour costs, material inflation, and logistics inefficiencies compound the pressure on FM firms. Clients demand high-quality service at low costs, often resulting in deferred maintenance, overreliance on low-wage labour, or unsustainable cost-cutting. Firms like EFS, which prioritise sustainability and employee welfare, face the challenge of maintaining standards while staying competitive.
5. Slow Tech Adoption and Data Gaps
While technologies like IoT, AI, and FM software are revolutionising the industry, adoption in India is sluggish. High initial costs, skill shortages, and change resistance slow the progress. Manual processes hinder predictive maintenance and real-time management, impacting efficiency. Firms that lag in digital transformation risk being left behind by tech-savvy competitors.
6. Complex Regulatory Environment
Navigating India’s evolving regulatory framework, including labour laws, health and safety standards, and ESG compliance, is resource-intensive. Compliance adds operational costs, particularly for multinationals like EFS, which must align local operations with global standards.
7. Competitive Real Estate Market
Developers often prioritise aesthetics and short-term returns over FM investment in a fiercely competitive real estate landscape. This is especially true in Tier-II and Tier-III cities, where budgets are tighter and market returns modest.
8. Low Awareness of FM’s Strategic Value
Many developers and property owners still fail to see FM’s role in enhancing energy efficiency, regulatory compliance, and long-term asset value. Without awareness or mandates, spending on FM remains conservative.
9. Sustainability Demands vs Ground Reality
While clients increasingly expect green practices and energy efficiency, implementing these is costly, especially with legacy infrastructure. FM firms must retrofit buildings or install renewable systems with little short-term ROI. EFS, recognised in Forbes’ Sustainable 100, has made strides here, but scaling such efforts nationwide is difficult.
The Road Ahead: Strategic Recommendations
To succeed in this dynamic and challenging industry landscape, FM companies must adopt strategic, lean and forward-looking approaches:
Focus on Niche Clientele: Build a client base that understands FM and upends the necessary governance and quality standards required to achieve excellence, workforce retention and innovation.
Invest in Workforce Development: Establish in-house training academies or partner with vocational institutes. Leverage schemes like Skill India to enhance employee skills. Provide clear career paths and competitive wages to attract and retain top talent.
Differentiate Through Professionalisation: Offer integrated services, including standardised processes, certifications, and transparent pricing. Promote compliance and quality as key differentiators. Consider forming partnerships or making acquisitions to expand market share.
Adapt to Infrastructure Variability: Develop flexible service models tailored to local contexts. Employ portable technology and modular solutions to address ageing infrastructure. Conduct site-specific audits to optimise maintenance strategies.
Optimise Cost with Operational Efficiency: Adopt lean operations, predictive maintenance, and workforce scheduling tools. Focus on maximising output while preserving quality and ensuring employee welfare.
Integrated Service Offerings: Combine hard services (like technical maintenance) and soft services (cleaning, security, landscaping) with digital solutions. Adopt a client-centric approach to offer customised FM solutions that cater to industry-specific needs, including corporate offices, hospitals, and residential communities.
India’s FM industry undoubtedly struggles under the weight of low investment, fragmented markets, and evolving client expectations. While premium segments show promise, the broader landscape remains challenged by outdated benchmarks and short-term thinking. But still, the opportunity is humongous for those who can carefully map these challenges and curate a business model to address them. However, for firms like EFS, where we aim to combine scale with innovation, people-first centricity, and strategic execution, the opportunity is massive. FM companies must navigate these challenges by leveraging the potential against a vast market potential with a projected market size of USD 159.61 billion by 2030. However, its success depends on its influence on educating stakeholders, raising FM benchmarks, and embracing the future.