By: Brotin Banerjee, MD & CEO, Tata Housing
Track2Realty Exclusive: A report released by BNP Paribas earlier this year on realty firms found that each of them performed poorly on one or more of the parameters. Some of the assessment parameters include compensation structure, ability to retain key personnel, financial stability, pending litigation and trading in own stock.
India’s real estate sector has often faced criticism for poor corporate governance standards and lack of transparency. Regulators, analysts, investors and even employees now want to understand more about how the company oversees and entrenches sound corporate governance concept across its subsidiaries. Corporate Governance once focused mainly on the caring and feeding of the main board and corporate record keeping. Today, the world of the Corporate Secretary is evolving into a key strategic player in corporate decisions and matters of governance.
There is not a great deal of space between a company’s culture and its governance systems. Both imply a combination of rules and procedures that drive behavior. There really should be a close resemblance between the Code of Ethics of a company and the principles that guide its corporate governance. In some cases they may be one and the same.
From a sector steeped in murky deals to the one led by corporate entities, the Indian realty industry has undergone a tremendous change in the past few years. The transformation started since 2005, when government allowed FDI in real estate, which saw lot of interests from corporate and MNCs in the realty space.
The real estate industry has undergone drastic changes in the last decade or so, with the arrival of large, respected and responsible corporates. There have also been radical changes in the dealings of the sector, which previously lacked ethics, but is now investor-friendly with the onset of corporate governance, transparency and an increased sense of accountability.
A major reason is also the entry of Private Equity and Venture Capital, which ease access to funding, but insist on absolutely clean balance sheets. As more and more developers realize the importance of PEs and VCs, corporate governance will become a way of life for the sector.
On the residential real estate sphere, the supply of homes is expected as aggressive as it has been in the past. The policy discourse that will materialize due to the implementation of two crucial bills, Real Estate Regulation Bill and Land Acquisition Bill (which recently became an Act) will boost the sentiment of all stakeholders.
…to be continued
