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This article has been written by Binal Shah, pursuing the Certificate Course in Real Estate Laws from LawSikho.

What is the Global Real Estate Transparency Index

Global Real Estate Transparency Index (GRETI) is an important guide for companies operating in foreign markets and an exclusive benchmark of real estate market transparency. It is a vital guide for investors, developers and corporate occupiers globally. It is a useful tool for companies operating in foreign markets as it gives a quick read about how the global real estate market works at international level. 

Background of Global Real Estate Transparency Index

The two large firms Lasalle Partners, a leading investment management firm, and Jones Lang Wootton, a London based auctioneer, having expanded into the United States’s real estate market, merged in 1999 and formed Jones Lang Lasalle Incorporated (JLL). JLL specializes in the real estate sector. It is listed on New York Stock Exchange and is a Fortune 500 Company with annual revenue of $18.0 Billion in 2019, and global workforce of nearly 93000 as of 30th June 2020. JLL operates in 10 major cities (Mumbai, Delhi NCR, Bengaluru, Pune, Chennai, Hyderabad, Kolkata, Ahmedabad, Kochi and Coimbatore) and over 130 tier II and III markets with a strength of approximately 12000 professionals in India.

The investments of Lasalle Partners were exposed to many diverse countries. Therefore, there was a need to standardize the differences in the emerging markets and developed markets, before they could invest. It was important to calibrate and quantify whether data was available, whether property rights were consistently enforced, how are the regulatory bodies operating, and so on in different countries in order to get the correct picture of the market that becomes suitable for the purpose of investment/doing business, etc. The said information is useful for tenants, occupiers, governments, NGOs, investors, lenders, banks and everyone who is interested in the real estate market.

Research Parameters for GRETI 

The Global Real Estate Transparency Index works on multiple parameters. The current i.e. 2020 Global Real Estate Transparency Index covers 99 countries and territories and 163 cities. The index evaluates transparency based on 210 indicators, having been extended to include additional data on sustainability and resilience, health and wellness, proptech and alternatives. These parameters are further evaluated on six areas – performance, measurement, market fundamentals, governance of listed vehicles, regulatory and legal frameworks, transaction process and environmental sustainability. It is an exclusive index of real estate transparency and a guide for companies operating in foreign markets. The survey is carried out every two years. 

The reports of these Index have direct correlation between investment flows and transparency levels as data quality through technology as an enabler, governance and regulatory reforms, are all essential parameters that prospective investors/business developers evaluate while looking for a potential investment avenue. The level of transparency plays a very important role in attracting new investment and business activity, enabling long-term planning, enhancing community well being and safeguarding the environment. 

The GRETI in its every edition, mentions in detail about the real estate perspectives of the world’s most dynamic cities. 

Impact of GRETI on Real Estate Industry World Wide

As explained above, it is clear that the research conducted by JLL for the purpose of GRETI is extensive. The report issued gives the glimpse of the work to be conducted in the territories and their level of transparency. The level of transparency is very important because it gives confidence to the investors to invest their money on a particular project in a particular country. For example, there is an investor willing to invest 100 crores in an infrastructure project. The first thing that an investor will evaluate is the regulations governing the project and the stability of the government. If the government is stable in a particular territory then the chances of investment increases. No one would like to invest in a market where the regulations change now and then. The investor will first see how he can safeguard his money, his rights and then only he will be willing to invest. Where the money is not safe, no one would invest.

Also, with the help of GRETI, the beneficiaries also evaluate the prospective investment hub and thereby contributing to the growth of the real sector in that particular territory.  

As per the latest report, the world’s most transparent real estate market is London and also, it is most active in the cross border real estate market.  

Global Real Estate Transparency Index India

India is at 34th position in the 11th edition of the Global Real Estate Transparency Index 2020. This index reveals that transparency is progressing across most countries and territories, however, the overall improvement is the weakest since the period directly following the Global Financial Crisis. 

From the below table, it is admissible that Indian real estate market is gaining swiftly in international credibility and this in turn is boosting investor’s confidence level.  

Market

Rank

2008

2010

2012

2014

2016

2018

2020

India Tier I

50

41

48

40

36

35

34

According to JLL, important developments such as fair compensation to land owners, protection of home buyers and removal of procedural bottlenecks in REITs have been instrumental in improving transparency levels. The structural reforms such as Real Estate Regulation and Development Act, 2016 (RERA), GST, Benami Transaction Prohibition (Amendment) Act, 2016, Insolvency and Bankruptcy Code and digitization of land records have brought greater transparency in a largely unregulated sector. 

According to the report, India is very close to the top 20 for Sustainability Transparency because of the active role of organizations like the Indian Green Building Council and Green Rating for Integrated Habitat Assessment. The impact of such important reforms and consistent improvement in Indian real estate market has inspired investors around the globe. In the last three years, the investments made by investment made by family offices, foreign banks’ real estate investment desks, pension funds, private equity firms, real estate investor-cum-developers, sovereign wealth funds and foreign firms have created a new benchmark of USD 5 Billion annually. 

Analysis

GRETI is a boon for the real estate market. The in-depth analysis carried out by GRETI is not only useful to investors to figure out the best market for investment but is also useful for the growth of the real estate market. If all the builders, developers, stakeholders in the real estate industries pay attention to these reports, then it becomes easy for them to understand the scope of growth and thereby helps them to expand their work to different promising locations. The lawyers who are in the real estate market should also go through these reports to understand the depth of the industry. By going through these kinds of reports one can enhance his knowledge for the real estate industry, thereby helping their client to provide a better outlook. For example, say a builder has approached a lawyer with the development plan of a town within a particular region in a foreign country. However, he is unaware about the new regulations that are going to be implemented in that foreign country. If a lawyer is going through such  reports regularly then he/she shall be able to guide his client with the valuable information. 

Conclusion

This is the first time I have gone through the Global Real Estate Transparency Index for preparing this article. However, while reading various reports I realized one thing that if a lawyer goes through these kinds of reports regularly then it will definitely be very useful and effective. One shall be able to remain updated about the real estate market within the nation and globally. This will eventually help in building a strong relation with the client and thereby elevates a lawyer with immense knowledge to the top radar.

Reference

  1. JLL (company) – Wikipedia
  2. Company Profile for Jones Lang LaSalle Inc (reuters.com)
  3. Global Real Estate Transparency Index 2020 Rankings (jll.co.in)
  4. Jones Lang LaSalle Meghraj, Abhishek Kiran Gupta, Research & REIS, Business Wire India, Press Releases
  5. India Improves In JLL’s Ninth Global Real Estate Transparency Index (jllapsites.com)
  6. India Excerpts and Perspectives: Global Real Estate Transparency Index July 2020 (jll.co.in)

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