Transparency in real estate has long been an issue within the market, however, JLL reveals that new regulations are working to improve the real estate market on a global scale. 

With Thailand taking steps to upgrade the property tax system and digitise its land registry, and Macau cracking down on money laundering, countries around the world have introduced policies aimed at reducing red tape, curbing corruption and improving legal process across the board. 

The efforts have followed mounting concerns among investors and the public after the Panama Papers and Paradise Papers leaks.

But the true benefit of these regulations, according to JLL and LaSalle's biannual 2018 Global Transparency Index, is more nuanced because in some cases, enforcement has been falling short.

Mind the enforcement gap

Of the 100 countries surveyed for the index, 85 registered an overall improvement from two years ago.

Yet not all the new policies are being put into practice, creating a potential minefield for investors, says Jeremy Kelly, Global Research Director, JLL.

“There is a significant disconnect between regulation and enforcement in some markets,” he says, “China has made progress on enforcement in some areas, such as greater consistency in tax collection efforts, but still has work to do in others.”

Across all markets, enforcement is weakest in ensuring the availability and quality of land registry information, land-use planning regulation, and legal processes.

“While some transparency issues are a result of outright corruption, others are a symptom of “selective enforcement,” whereby the norm may be to ignore legal requirements until political pressure is applied,” says Jacques Gordon, Global Strategist for LaSalle Investment Management.

In China, for example, it’s become difficult to predict land-use in some provinces because of recent planning regulation changes around redevelopment and revitalization projects. Taxation and land-use planning is run “by the book” with high levels of transparency in some provinces, but not in others. 

Mounting pressure

While many markets have made steady advancements in transparency in recent years, they “need to address issues of enforcement if they are to progress,” says Gordon.

As institutional investors increase their allocations to real estate, the pressure is mounting on governments worldwide to not only introduce new regulations but to implement them.

India is one market that has made impressive progress on this front.

Private equity investment into the nation’s real estate sector has increased three-fold since 2014 and the introduction of the Real Estate (Regulation and Development) Act, or RERA, in 2016 is expected to further boost its transparency ranking.

“Reforms in bankruptcy policy, cracking down on pseudo-ownership of properties, and consistent measures to improve the ease of doing business, have significantly boosted the confidence and sentiments of buyers and investors alike,” says Ramesh Nair, India Country Head and CEO at JLL.

The 11 markets categorized as ‘Highly Transparent’ in the JLL index attracted 75 per cent of global commercial real estate investment over the last five years.

It’s clear that “transparency is critical to the operation of efficient markets,” says Richard Bloxam, Global Head of Capital Markets, JLL.

Click here to view JLL Global Real Estate Transparency Index 2018.

For more information or to discuss the report, email Jeremy Kelly, Global Research Director of JLL via the contact details listed below.

Source: JLL Investor

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