Indian real estate market transparency among most improved globally: Report
Owing to the series of policy decisions including the implementation of the Real Estate (Regulation & Development) Act, 2016 and digitization of land registries and market data has helped Indian real estate market’s transparency level move upwards.
The transparency level in the county’s real estate sector is now amongst the top ten most improved markets globally and is part of the semi-transparent category at 36th spot out of 94 countries, showed JLL’s 2022 Global Real Estate Transparency Index (GRETI).
India’s improvement in transparency score between 2020 and 2022–from 2.82 to 2.73–is higher than some of the highly transparent markets, due to digitization and data availability for transaction processes in addition to overall market fundamentals.
The improvement in transparency is reinforced by increased institutional investment and the growing numbers of real estate investment trusts (REITs) helping to broaden market data and bring more professionalization to the sector to complement regulatory initiatives like the Model Tenancy Act.
“The move towards greater transparency in India will intensify investor interest and bolster occupier confidence. As a result, we will see more capital deployment into the country as it demonstrates consistent efforts to make accurate data available, enforce legal protections for property ownership, and enhance the regulatory environment to facilitate the transactions,” said Radha Dhir, CEO and Country Head, India, JLL.
Regulatory changes in the Indian real estate sectors like RERA and digitization in all transaction processes have led to a more sanitized and transparent data availability, helping the country make robust progress in the transparency in a sector that was known for its opaque ways of functioning.
“Sustainability continues to be the key focus for the world going ahead. We have seen India take great strides in sustainability in the past years, however, there is a need for a more concerted and congruent thought process and action plan to bring sustainability into the mainstream,” Dhir added.
To be able to move to the coveted transparent list, from the present semi-transparent list, the country needs to improve sustainability tracking. Sustainability has not been one of the major areas for change over the last couple of years for India, but investors and occupiers are driving this change.
Several initiatives are underway at either the national or local level including the National Guidelines on Responsible Business Conduct from 2021, with reporting for the largest 1,000 companies by market cap to be compulsory from 2022-23, and local plans such as Mumbai’s Climate Action Plan, released in 2022, which is expected to establish a system to conduct regular energy performance benchmarking of buildings by 2025, and mandate a building energy management system in all new buildings.
Making green certifications/ratings and adherence to the Energy Conservation Building Code (ECBC) a mandate would give a greater push to sustainability. The regulatory impetus for mandatory tracking and reporting is still lacking but should get a major push following India’s call for Net Zero by 2070.
India’s score improvement was the highest on the parameter of improvement in transaction process. Given the regulatory initiatives, and better and deeper data availability, access to asset information has improved in a significant way. With reforms also creating the push for better professional standards for property agents and an environment for weeding out illicit finance through stringent anti-money laundering regulations, the transaction process in India has become more transparent and meaningful.
India’s improvement in this parameter was just behind Vietnam and Malaysia among other APAC countries.
“India’s investment performance parameter has held steady with a conducive investment environment in place and healthy opportunities for investors. The last two years have also been marked by upheaval and a reset in investor strategies. Some countries have found increased favour from investors and have moved up the rankings. India has kept its ranking steady, though it has improved its composite score in this parameter,” said Samantak Das, Chief Economist and Head of Research, REIS, India JLL.
Diversification remains a core theme for many investors in the Asia Pacific. Institutional capital, such as that controlled by asset managers, pension funds, and sovereign wealth funds, is active in alternative real estate sectors in nearly two-thirds of the markets tracked. That means expectations for transparency across niche property types like lab space, data centers, or student housing have grown.
India has made rapid strides in the availability of high-frequency data across its big cities and core asset classes through the intervention of tech platforms and regulatory reforms. It needs to replicate for other cities and alternative sectors with the work already underway through a mix of both private sector participation and government push towards digitization of land and property records.
As market transparency improves through access to data, better corporate governance practices, and more publicly listed REITs creating more publicly available datasets, the sustainability agenda needs a greater push for India to rapidly ascend to the transparent tier.
The road from regulations to putting them into practice–across financial regulations, land-use planning, taxation, anti-money laundering and eminent domain–will be necessary to increase transparency levels and match heightened expectations.