Need of the hour: Protecting the built environment sector
Nimish Gupta, RICS in conversation with Realty+ talks about the importance of focusing on the built environment sector in India.
RICS has a strong focus on the built environment sector (Real Estate, Construction & Infrastructure) – how is this being mapped to the PM’s vision of Housing for All, Smart Cities, Infrastructure Development etc?
RICS promotes and enforces the highest professional qualifications and standards in the valuation, development and management of land, real estate, construction and infrastructure which encompasses the built environment sector. At RICS, our royal charter requires us to work in public interest and we are committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice affecting business and society, in the field of built environment. We offer the preeminent qualification – MRICS – for professionals, who are subject to our quality assurance.
With a 150-year history, 135,000 qualified professionals; presence across 148 countries, and with offices covering the major political and financial centres of the world, RICS’ market presence means we are ideally placed to influence policy and embed professional standards.
- Solutions to Affordable Housing – RICS has the knowledge and the key expertise to provide an implementation framework that will aide in the delivery of affordable housing in India. We are in the midst of a detailed market research which indicates the viability of INR 16,000 crore financing that will aide in the Hon’ble Prime Minister’s vision of ‘Housing for All’.
- Global Research supporting Affordable Housing and Smart Cities: RICS, as a knowledge manager and think tank, has conducted significant and substantive global research that can aide in the delivery of affordable housing, when adapted to India. RICS is also committed to the development of smart and intelligent cities and has available extensive work that can aide cities to adapt to urbanisation, climate change and disruptive technologies, while driving economic, environmental and social value
- Education and Skilling leading to employment generation: All of the above tools can also provide a much-needed framework to generate employability in the country with a direct link to the real estate and construction sector. Additionally, RICS is nurturing talent and encouraging the younger generation to opt for “careers in built environment”, by providing them with the right education and skills through the RICS Schools of Built Environment, with campuses in Noida and Mumbai.
Given the focus of the Government on anti-money laundering, RICS has produced a professional statement on countering bribery and corruption, money laundering and terrorist financing. Research by the International Monetary Fund (IMF) estimated that the amount of money laundered, globally, in one year could be between 2 to 5% of global GDP, equivalent to US$800 billion to US$2 trillion.
The risks of bribery and corruption; money laundering and terrorist financing cut across the built environment profession, regardless of geography. Considering the sector is vulnerable to this sort of activity, the RICS has published a professional statement with respect to this, to provide a clear description of how to manage the risks, and set out professional and ethical behaviour, providing practitioners and firms with clear and consistent principles on what constitutes a breach of conduct.
Recent developments of stimulus packages being announced to boost the realty sector are an indication of the Government’s intent to promote the sector – what more is needed than just stimulus to overcome the liquidity challenges that the sector faces – especially residential development.
While the government has taken several initiatives to boost residential housing in the country, we believe that there is room for more steps.A decisive Government at the Centre, which has taken a collaborative approach to include key sector stakeholders in the policy &reform agenda and focus on reforming the business environment, does indicate the Government’s intent to promote the real estate sector.
However, the Government needs to take further key collaborative actions with Authorities, Financiers, Developers and Customers to ensure that the financial market evolution goes through a system which is well regulated, creating some necessary checks and balancesto reignite the residential sector within the ambits of the macro-economic and legal framework., with the help of modern or innovative financial tools to mitigate the financial crisis in the country.
On November 4th, at the 1st National RERA Conclave that took place in Lucknow, RICS unveiled a joint report with NAREDCO on “Breaking the Barriers: Reinvigorating the Real Estate Finance Sector in India”, which details some radical solutions to the current liquidity challenge. The report lists certain key parameters as a way forward in creating a robust Real Estate Financial System. These include:
- Credible property appraisals and valuations being undertaken in accordance with International Valuation Standards (IVS) and carried out by chartered/qualified valuers as per approved methods
- Adequate measures be taken for risk management including credit & collateral risk assessment, analysis, and mitigation evaluation basis credit information and transparency
- Identify and use mortgage-related securities to fund housing. Mortgage securities improve housing affordability, fund flows to the housing sector, better risk allocation, help tap new funds for housing, resulting into reduced risk and risk premiums.
- Scale-up skills and capabilities in the BFSI sector with respect to real estate and project management
- Embrace and adopt the use of technology for data storage, analysis, appraisal and credit scoring
- Evolve the BFSI sector by embracing new / alternative sources of funding in order to create greater transparency and participation of wider sources of capital (Mortgage Securities & Bonds; Rental Housing Finance; Housing Micro Finance & Finance Subsidiaries; Contractual Savings Schemes for Housing; Housing Provident Funds; Troubled Asset Relief Programme in the form of Revolving Funds; and External Commercial Borrowings for Troubled Assets)
- Professionalising the sector – entry barriers for qualified stakeholders; employing third party project administrators
- Policies and regulations to support lower strata financing
How can regulation and standards bring in much needed market assurance and build investor confidence – the role that RICS can play in promoting international standards
As an entity representing public interest, RICS is mandated to maintain and advance technical, professional and regulatory standards covering all aspects of built environment.
We are committed to setting and upholding highest standards of excellence and integrity – providing impartial, authoritative advice affecting business and society. Internationally, we are working with coalitions to promote and enforce standards that will bring about transparency and consistency of practice across borders. These relate to valuation (International Valuation Standards), ethics (International Ethics Standards), Construction (International Construction Measurement Standards), property (International Property Measurement Standards) and land (International Land Measurement Standards).
RICS Regulation which works at arm’s length – provides assurance to members, markets and the public that RICS members and firms operate to the standards set out in of RICS’ Rules of Conduct. Members demonstrate this by maintaining professional ethical standards and through continuous professional development. Firms showcase the same by ensuring procedures are in place to provide for the protection of their clients, such as having complaint handling procedures that includes an independent redress mechanism.
Why is it important for regulators to collaborate and work together for the betterment of the sector?
RICS propagates an ecosystem where a culture of trust flourishes between regulators leading to the identification of best talent to work in and work within the sector.It is important for regulators to collaborate and work together as it helps in sharing best practices. People are evaluated on common ground and common competencies. This leads to enhanced public and stakeholder confidence.
It is also important to ensure regulatory compliance, consistency of practice, ability to undertake data assimilation & analysis; monitor & control project progress, across states and build transparency and assurance among stakeholders/investors. While RERAs are independently regulating the real estate sector, the sector itself has got a very strong integration with the financial market.
If there is no collaboration or information sharing between the financiers/investors or real estate regulators or for that matter, valuation sector regulators there will always be gaping holes, which we have already witnessed in multiple examples, impacting the industry. So that’s the reason there must be a platform that amalgamates technology wherein the information exchanges can happen between the regulators, encouraging them to collaborate more efficiently and effectively to regulate the industry.