The organized segment of Indian real estate is only about two decades old. It could be seen as understandable that true governance is too much to ask at this early point. However, matters reached a decisive point in 2010, which was indisputably a year of scams. These scams marred the reputation – and therefore also the profitability – of Indian real estate. The echoes of these negative market sentiments can still be heard clearly as we approach the end of 2011.
It is very evident that more governance and regularization is called for. There are arguments against stronger, more centralized regulation, the premise of which seems to be that the diversity of the country, the fragmented political structure and the control of different states by different political factions calls for localised rather than centralized governance. A single unifying body would, it is claimed, not serve the purpose.
However, it is necessary to create a focal point of governance. In the corporate sector, tried and tested best practices in governance are already being applied in India. It is time to bring Indian real estate up to those standards, as well. Despite the numerous players involved at all levels, many of our services industries are already well regulated.
The challenge now is to find and enforce ways in which the government and developers reach a clear understanding of what constitutes fair business practices, and what does not. In terms of bribes, both the givers and receivers must take responsibility for their actions. The government is clamping down on corruption within its ranks, and now the real estate sector looks towards the country’s developers. Can they achieve a sufficient level of self-governance to clamp down on questionable practices?
As more refined and focused regulations are brought into play by the government, it is to be hoped that the real estate community clearly sees the chain of cause and effect. The ultimate goal of the sector is and must be a cleaner, more transparent and more attractive real estate market place. The sector needs to be able to present itself as credible and trustworthy enough to warrant the considerable foreign funds that are awaiting greater transparency on the market.
Nor is this just a matter of reshuffling of business objectives, which has no real bearing on people. The final loser in an insufficiently regulated real estate market is the consumer – be he a residential unit buyer or multinational commercial space occupier – whose interests must be protected in order to safeguard the sector’s performance and future as a whole.
By considering the safeguarding of consumer interests and confidence as important as attaining business objectives, developers can help ensure that the Indian real estate market remains attractive to its primary source of sustenance and growth. Ignoring the consumer is the business equivalent of biting the feeding hand. It is also ultimately self-defeating. In the final analysis, it is the confidence levels of consumers that dictate market sentiments, and it is market sentiments that dictate profitability.
The author, Anuj Puri is Chairman & Country Head, Jones Lang LaSalle India
