Jones Lang LaSalle’s 2012 Global Real Estate Transparency Index (Jones Lang LaSalle’s Global Real Estate Transparency Index is a unique survey that quantifies real estate transparency across 97 markets worldwide. The Index is updated every two years) revealed that there has been some improvement in transparency across the world’s real estate markets. Although India improved its overall transparency rating, its Tier I cities (Delhi NCR, Mumbai and Bangalore) were ranked lower at 48 in 2012 compared to 41 in 2010. Tier II cities (Chennai, Hyderabad, Kolkata and Pune) were stable in 49th place globally, and Tier III cities (Ahmedabad, Coimbatore, Kochi, Bhubaneswar and Visakhapatnam) improved their ranking to 50 in 2012 compared to 55 in 2010. This shows that other countries are moving up the transparency ladder faster than India, with the Tier I and II cities of China and the Philippines moving ahead of India in 2012. Under such circumstances, what is India planning to do to improve its real estate transparency in the coming years?
Real estate transparency is one of the key criteria for investment decisions, which is why India’s government and regulatory authorities are working to improve the investment climate through market transparency, albeit at a slow pace. The relaxation of FDI laws, an improvement in the availability of data and the strengthening of regulations in the real estate sector are a few of their initiatives. The Real Estate Regulation Bill is a key policy that is expected to improve India’s transparency score; it is likely to be tabled in the upcoming winter session of the parliament in 2013. Some more aspects that are expected to make India more transparent by 2014 are noted below:
- Performance Measurement – The availability of time series data and indices on real estate returns will improve with the increase in the number of listed real estate companies and institutional investors in India.
- Market Fundamentals – The availability of accurate time series data on market fundamentals (demand, supply and real estate prices) for the office, retail and residential sectors is expected to improve. Data availability on the industrial and hotel sectors is still opaque but is expected to improve marginally over the next few years.
- Regulatory and Legal – The introduction of the GAAR (General Anti-Avoidance Rule) and the CLR (Computerisation of Land Records), and the further strengthening of real estate regulations is expected to improve transparency in the application of tax and building codes, and the availability of title records.
- Transaction Process – With the increase in multinational occupiers in India, the clarity of contracts in occupier services is expected to improve further. The presence of international property consultants and their better client services are improving the professional and ethical standards of property agents in India. Therefore, transparency scores in this sub-index are also expected to increase.
As both international and national developers in India are penetrating deep into the cities, transparency scores are expected to improve further. By 2014, India’s Tier I cities are likely to be close to transparent (The cities are scored at a scale of 5 where 1.00-2.59 is transparent, 2.60-3.76 is semi-transparent and 3.77-5 is opaque), with the availability of more accurate data on returns and market fundamentals. Tier II and III cities will continue to be lower down the semi-transparent tier, albeit with higher transparency scores.
