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RERA, digitisation of real estate transactions push India’s score on Global Transparency Index: JLL

Moneycontrol logo Moneycontrol 05-07-2022 Moneycontrol News
RERA, digitisation of real estate transactions push India’s score on Global Transparency Index: JLL © Moneycontrol RERA, digitisation of real estate transactions push India’s score on Global Transparency Index: JLL

India’s real estate market is among the top ten most improved countries in JLL’s 2022 Global Real Estate Transparency Index (GRETI) and now stands at the cusp of entering the ‘Transparent’ category, an upgrade from the previous ‘Semi-transparent’ rating. This is primarily due to regulatory processes such as the Real Estate (Regulation and Development) Act, 2016, (RERA) and digitisation of real estate transactions, according to the study released on July 5.

India’s improvement in transparency score between 2020 and 2022 (from 2.82 to 2.73) is better than some of the highly transparent markets due to digitisation and data availability for transaction processes in addition to overall market fundamentals. This helped India outpace markets like the UK, Australia, Canada, Ireland, Sweden, New Zealand, Belgium and Japan when it came to improvement in its composite transparency score between 2020 and 2022, taking the country to the 36th rank.

Apart from digitisation and better overall market fundamentals, a developing REIT or real estate investment trust market and new sustainability regulations have been key to India’s push in transparency, it noted.

All this has led to a more sanitised and transparent data availability, aided by better reporting of beneficial ownership, anti-money laundering regulations, Model Tenancy Act and digitisation of land records through the Dharani platform, according to the GRETI report.

Besides RERA, regulatory initiatives from previous years like the rollout of the goods and services tax, Benami Transaction Prohibition (Amendment) Act, 2016, and the Insolvency and Bankruptcy Code continue to be improved upon. Such reforms are now being supplemented by access to better data across most asset classes including alternatives, it said.

Improvement in transaction process was the parameter on which India’s score improvement was the highest in GRETI 2022, which noted that access to asset information has improved to a great extent. 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, it said.

India’s improvement in this parameter was just behind that of Vietnam and Malaysia among other Asia-Pacific countries.

“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. Regulatory changes in the Indian real estate sectors like RERA and digitisation in all transaction processes have led to a more sanitised and transparent data availability helping the country make tremendous progress in the index,” said Radha Dhir, CEO and country head, India, JLL.

Sustainability biggest driver of transparency improvements: JLL’s 2022 index

To be able to move further up the coveted ‘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 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, the report said.

“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.

Interest in alternative real estate assets

Diversification remains a core theme for many investors in the Asia-Pacific region. 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 centres 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 digitisation of land and property records, the report said.

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 improve its ranking.

The biennial GRETI, published by JLL and LaSalle Investment Management, provides a benchmark of market transparency for property investors, developers and corporate occupiers. A transparency ranking is assigned based on the availability and quality of performance benchmarks and market data, governance structures, regulatory and legal environments, transaction processes and sustainability markers to help investors and occupiers make informed, risk-based decisions.

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