Structural reforms, greater transparency lead to higher capital flows into real estate

The impact of key reforms and steady improvement in Indian real estate has enthused global investors.

Spurred by structural reforms, enhanced market data and progress in REIT framework, India’s real estate sector has registered one of the largest improvements in transparency globally and bagged the 34th position on the JLL’s Global Real Estate Transparency Index 2020, leading to higher investments.

Amid the COVID-19 pandemic, the nation has also shown appreciable progress in terms of green buildings and wellness led by IGBC Health and Well-being Rating, and made its entry into the elite club of top 20 for Sustainability Transparency through the active role of organizations like IGBC and GRIHA in developing green building certifications, a net zero energy buildings standard and a people-centric health and well-being certification.

At the same time, India’s rank in World Bank’s ‘Ease of Doing Business Ranking’ improved significantly from 142 in 2014 to 63 in 2019. Amongst the indicators used to measure the ease of doing business, the country’s ranking for ease in obtaining construction permits witnessed the highest jump from 182 to 27 during the same period.

This significant jump is a testimony to the fallout of the several reform measures introduced by the government to remove red tape and increase efficiency in undertaking business. Within the realty sector, key structural reforms such as the Real Estate Regulation and Development Act 2016 (RERA), GST, Benami Transaction Prohibition (Amendment) Act, 2016, Insolvency and Bankruptcy Code, digitization of land records etc. have brought about greater transparency in what was an erstwhile largely unregulated sector a few years back, according to JLL.

Thus, the present government has introduced several reforms and policies for a holistic improvement in the overall transparency of the business environment. These reforms and measures have aided to re-instill the investor confidence and thus played a vital role in attracting higher capital flows into the sector. The impact of key reforms and steady improvement in Indian real estate has enthused global investors.

Institutional investments, in fact, created a new benchmark of $5 billion annually in the last three years. Global investors have formed investment platforms with marquee developers to invest in specific segments, signaling the increased confidence and improved risk perception. The government’s objective of providing ‘Housing for all’ by 2022 is being achieved through regulatory and fiscal incentives as well as providing tax benefits to sovereign wealth funds for investments in affordable housing.

As per JLL Research, as governments, businesses and communities grapple with the impacts of COVID-19, the pandemic has brought the issues of transparency and trust into even sharper focus. During times of such uncertainty, the need for transparent processes and accurate, timely data becomes more important than ever.

“Our latest survey of 99 countries and territories reveals that improvements to real estate transparency are being made across the globe, but overall progress is still not fast enough for a society demanding higher ethical standards and businesses being held to account to invest and operate transparently and sustainably. Yet, there are reasons to be optimistic and the current disruption may well force the pace of change. We fully expect the mass adoption of technology, together with advancement in data availability and sensor technology, to accelerate the integration of proptech, helping to boost real estate transparency,” says Christian Ulbrich, Chief Executive Officer, JLL.