India still has a lot to do to improve real estate transparency

A number of measures are being taken in India to improve transparency in the country’s real estate markets, according to experts, but real improvements are unlikely to kick in until 2014.

Real estate transparency is one of the key criteria for property investment decisions but the pace of change is slow in India. The latest Global Real Estate Transparency Index from Jones Lang LaSalle shows that although the country improved it overall transparency rating, its top cities of Delhi, Mumbai and Bangalore were ranked at 48, lower than their 2010 ranking. Tier II cities of Chennai, Hyderabad, Kolkata and Pune were stable at 49 and the Tier III cities of Ahemedabad, Coimbatore, Kochi, Bhubaneswar and Visakhapatnam improved from 55 in 2010 to 50 in 2012.

But other emerging markets such as China and the Philippines are moving up the transparency ladder faster than India, and this should be a cause for concern, according to Trivita Roy, senior manager of research and real estate intelligence service for Jones Lang LaSalle in India, based in Hyderabad.

‘India’s government and regulatory authorities are working to improve the investment climate through market transparency, albeit at a slow pace. The relaxation of Foreign Direct Investment laws, an improvement in the availability of data and the strengthening of regulations in the real estate sector are a few of their initiatives,’ explained Roy.

The Real Estate Regulation Bill is regarded as a key policy that is expected to improve India’s transparency score but it is not due to be tabled until later this year.

Roy points out that other improving areas include the availability of time series data and indices on real estate returns which will improve with the increase in the number of listed real estate companies and institutional investors in India.

‘The availability of accurate time series data on market fundamentals such as 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,’ said Roy.

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.

With the increase in multinational occupiers in India, the clarity of contracts in occupier services is also 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,’ explained Roy.

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 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,’ added Roy.