Moves up on the Jones Lang LaSalle Global Real Estate Transparency Index
New Delhi, India, December 08, 2008 – India’s rating as a destination for real estate investment has steadily improved over the last six years, graduating from a low to a semi transparent level, as per the latest Jones Lang LaSalle - 2008 Real Estate Transparency Index. India scores highest with regard to the presence of listed vehicles. Its greatest challenges lie in the limited provision of high quality market information and investment performance indicators. The result also underline however, the areas of further work and there is still much to do to transform India’s transparency such that it can sit alongside other major world economies.
Jones Lang LaSalle has been measuring real estate transparency since 1999 in an effort to help real estate market participants understand opportunities across the globe. The importance of transparency as a factor in the growth and success of international commercial real estate markets is well accepted and is gaining visibility as the forces of globalization continue to encourage the free flow of capital and corporates across the world. As per their findings, differences in transparency level between the major metros and India’s secondary and tertiary cities are remarkably narrow, particularly when measured against differences within China. The main differences among Tier 1, 2, and 3 cities are in the availability of market information and the transparency of the transaction process. Over the next decade, the research findings predict the increasing transparency via the introduction of sector regulators, professionalism and international best practices in real estate. This is a reassuring factor for investors, amidst the global slowdown, seeking to enter India’s secondary and tertiary cities .
Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj, says, “Present consolidation underway has accelerated a welcome transparency into the Indian real estate market. Real estate sector is gaining maturity. The transparency Index helps the investor to asses the risk that can be associated against the expected returns across developing nations. India ranks the highest among BRIC nations in the “Listed vehicles” parameter due to large numbers of listed real estate players that adhere to the stringent guidelines by SEBI.”
The steady improvement in transparency in India has been attributed to various factors including
• Exponential growth in the number of real estate funds (investors) seeking to invest in India in search of higher risk-adjusted returns,
• Rise in the number of international occupiers and developers eager to tap into India’s fast growing economy led by cost effective, skilled labour and higher returns on investment
• Modifying of operating practices and processes of developers to conform to international guidelines and be FDI compliant, in order to compete for available domestic and foreign capital.
• The movement of capital and corporations around the world creating an incentive for governments to streamline bureaucratic practices that hinder foreigners from injecting capital and opening up offices, stores or manufacturing facilities.
• Presence and efficiencies of listed vehicles, primarily due to the presence of the Stock Exchange Board of India (SEBI) that regulates real estate listed securities on the equity market.
• Exponential growth in the number of real estate funds (investors) seeking to invest in India in search of higher risk-adjusted returns,
• Rise in the number of international occupiers and developers eager to tap into India’s fast growing economy led by cost effective, skilled labour and higher returns on investment
• Modifying of operating practices and processes of developers to conform to international guidelines and be FDI compliant, in order to compete for available domestic and foreign capital.
• The movement of capital and corporations around the world creating an incentive for governments to streamline bureaucratic practices that hinder foreigners from injecting capital and opening up offices, stores or manufacturing facilities.
• Presence and efficiencies of listed vehicles, primarily due to the presence of the Stock Exchange Board of India (SEBI) that regulates real estate listed securities on the equity market.
Abhishek Kiran Gupta, Head of Operations, Research, Jones Lang LaSalle Meghraj says, “The India Real Estate Transparency Survey not only details the reasons between the historic improvement in transparency from 3.9 in 2004 to 3.34 in 2008, but also looks well into the future to showcase further improvement identifying the key reasons for the same. This is reassuring for investors who are looking at India as a long-term investment destination compared to other nations. The paper appreciates the improvements made by India to move up a tier from low transparency to semi transparency but provides a view and suggests methods to improve further.”
Transparency in 2010 – Opportunities for Improvement
Over the next few years, the survey findings anticipate further improvements in transparency in India’s real estate market. Improvements are expected to be made across the board in all major sub-indices. However, the greatest improvements are expected to be made in the regulatory and legal environment, the availability of investment performance indicators. Projection suggest an improvement by 35–50 basis points which would get the transparency results in the range between 2.8 and 3.0 by 2010, approaching the current transparency levels in Russia and Brazil.
This improvement will be led by a range of factors including the introduction of REITs (Real Estate Investment Trusts) and REMFs (Real Estate Mutual Funds), greater availability of market information, increased foreign investment, improved accounting standards and financial disclosure, the possible introduction of a real estate regulator and advances in the legal and regulatory environment.
Over the next few years, the survey findings anticipate further improvements in transparency in India’s real estate market. Improvements are expected to be made across the board in all major sub-indices. However, the greatest improvements are expected to be made in the regulatory and legal environment, the availability of investment performance indicators. Projection suggest an improvement by 35–50 basis points which would get the transparency results in the range between 2.8 and 3.0 by 2010, approaching the current transparency levels in Russia and Brazil.
This improvement will be led by a range of factors including the introduction of REITs (Real Estate Investment Trusts) and REMFs (Real Estate Mutual Funds), greater availability of market information, increased foreign investment, improved accounting standards and financial disclosure, the possible introduction of a real estate regulator and advances in the legal and regulatory environment.
Notes to editors
1. The Global Real Estate Transparency Index is jointly compiled by LaSalle Investment Management and Jones Lang LaSalle and covers 82 countries, territories and administrative regions on six continents. It is compiled from a transparency survey that assesses five key attributes of real estate transparency – investment performance measurement, market fundamentals information, standardized and efficient reporting of listed vehicles, legal and regulatory environment, and open and fair transaction process. The scores range between one and five, with one being the highest level of transparency and five being opaque. Countries are grouped into the following broad bands: Highly Transparent (Tier 1), Transparent (Tier 2), Semi-Transparent (Tier 3), Low Transparency (Tier 4) and Opaque (Tier 5).
2. LaSalle Investment Management and Jones Lang LaSalle take a broader approach to transparency than equating ‘low transparency’ with ‘corruption’. The presence or absence of corruption is only one component of real estate transparency. Other components include consistently applied and interpreted laws and regulations, the respect of private property rights, the access to and time series of investment performance indices and market fundamentals data, and ethical standards of professionals in the commercial real estate market.
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