Preamble
The pandemic has highlighted the importance of real estate transparency in the urban environment. As real estate transparency continues to increase globally, the rate of growth in this transparency is not quick enough. The Iqbal Institute of Policy Studies (IIPS) discusses how real estate transparency can be achieved in light of society’s demands for sustainable and ethical practices in this blog.
Research Questions
- What is the importance of transparency in the urban environment?
- How to overcome the real estate industry’s transparency challenge?
Introduction
Real estate transparency is an essential part of a well-functioning economy and society as it covers multiple aspects of an individual’s life. A transparent real estate market is where stakeholders have ready access to high-quality market data and performance benchmarks (WEF, 2020). The market should also be characterised by certainty, consistency, and rigorously enforced rules and regulations. Transparency in real estate not only helps governments in making smarter decisions for urban infrastructure, but it also helps public bodies and the private sector to enable sound and long-term urban planning, attracting new investments to a city, boosting business efficiency, and raising employee well-being and productivity. Therefore, public policy must focus on introducing measures that facilitate transparency and protect citizens property rights through the enforcement of rules and regulations.
Importance of Transparency in the Urban Environment
The real estate market is considered transparent when it becomes clear how the market mechanisms and the variables behind these mechanisms work. A strong indicator of transparency in real estate is the ability to capture transactions and process information. Transparency in the real estate sector can be achieved by rigorously enforced laws and regulations, high-quality products, easily accessible market information, performance benchmarks, and high professional standards. Once information and processes are made transparent, government institutions and private businesses can make better decisions with more confidence. This also allows governments to function effectively and provide long term benefits to local communities and the environment. The real estate sector can act as a powerful driver of a city’s success. The sector plays a role in transforming neighbourhoods, providing productive public spaces, and attracting new businesses to a city. To achieve all this, the real estate sector requires high levels of transparency. 85 out of 100 countries surveyed under the JLL and LaSalle’s Global Transparency Index have recorded improvements since 2016, whereas Pakistan ranks 73 out of 100 on the JLL transparency index (JLL, 2020). Therefore, Pakistan needs to adopt certain steps to enhance its transparency in the real estate sector.
Global Position of Transparency in Real Estate
Improvements to real estate transparency are being made throughout the globe. But overall progress is not high enough as societies are continuously demanding higher ethical standards, and businesses are being held accountable for operating transparently and sustainably. More than 70 per cent of countries have seen an improvement in transparency over the last couple of years, but many are struggling to maintain progress (UN, 2020). Those at the top of the transparency index are setting new benchmarks for other countries to follow. Real estate transparency has been boosted in these countries, mainly by the use of proptech and new data, sustainability initiatives, and anti-money laundering regulations. The most significant progress has been made in components of sustainability, where an increased focus on corporate social responsibility has led to the introduction of green building certifications and energy-efficient standards widespread in higher-income countries. Several countries have also developed national frameworks for net-zero carbon emissions.
Overcoming the Real Estate Industry’s Transparency Challenge
Technology is likely to play an increasing role in driving transparency change in the future. As the world experiences increased technological innovation, public demand for more transparent systems will increase and motivate governments to introduce policies that enforce such laws and regulations. Real estate markets have always been slow to adopt technological changes, but recently, due to the introduction of artificial intelligence and IoT technologies, property technology has experienced rapid growth. The mass adoption of technology is likely to play an increasing role in driving transparency movements globally, helping boost real estate transparency too. The real estate industry is harnessing huge amounts of data, but it will be needed to ensure that privacy and security are protected by ethical behaviour.
As these technologies become more widespread, the private real estate industry will need to work in close collaboration with governments and civil society to achieve greater transparency. There should be active policy engagements to determine how this data will be made readily available. The UK’s digital street program is one of the best examples of running research programs and funding local authorities to trial digital property solutions. Another step could be to incorporate a global mandate to tackle climate change by building a decarbonised economy leading to new transparency pressures. Mandatory sustainability standards are likely to take greater prominence in the real estate industry, and the adoption of building resilience standards will also increase transparency. Lastly, transparency cannot be achieved without the collaboration of public and private sectors and the establishment of a transparent market that ensures the delivery of sustainable, resilient, and healthy cities.
Conclusion
Transparency is becoming an area of considerable attention for governments and industries around the world. The role of the real estate industry plays a crucial part in the development of individuals and societies. It helps create a more competitive, efficient, and flexible environment for investors and consumers. Access to market information, performance benchmarks, and high professional standards are what makes the real estate industry transparent. Transparency increases accountability and quality of governance in a city and leads to greater standardisation in areas related to property, city planning, and environmental reporting. Therefore, measures are required to be taken to introduce greater transparency in real estate by incorporating more technology in the real estate sector.
Key Takeaways
Real estate transparency is an essential part of a well-functioning economy and society as it covers multiple aspects of an individual’s life.
A transparent real estate market is where stakeholders have ready access to high-quality market data and performance benchmarks.
The market should also be characterised by certainty, consistency, and rigorously enforced rules and regulations.
Transparency in real estate not only helps governments in making smarter decisions for urban infrastructure, but it also helps public bodies and the private sector to enable sound and long-term urban planning, attracting new investments to a city, boosting business efficiency, and raising employee well-being and productivity.
Transparency in the real estate sector can be achieved by rigorously enforced laws and regulations, high-quality products, easily accessible market information, performance benchmarks, and high professional standards.
More than 70 per cent of countries have seen an improvement in transparency over the last couple of years, but many are struggling to maintain progress.
Real estate markets have always been slow to adopt technological changes, but recently, due to the introduction of artificial intelligence and IoT technologies, property technology has experienced rapid growth.
The mass adoption of technology is likely to play an increasing role in driving transparency movements globally, helping boost real estate transparency too.
The real estate industry is harnessing huge amounts of data, but it will be needed to ensure that privacy and security are protected by ethical behaviour.
