A recent article in The Economist outlined the importance of land use planning in emerging cities. Highlighting peri-urban sprawl in Hangzhou and Dar es Salaam, the author remarked at the increasing pace at which rural areas were turning into suburbs – and the lack of oversight involved. In many cases, regulation is unable to keep up with the rapid pace of change.
With the global urban population set to increase by 2.5 billion by 2050, the safe, secure and well-planned growth of our urban areas is a vital issue across Africa, the Middle East, Latin America and Asia. Around 330 million households struggle with sub-standard housing and this may reach 440 million by 2025, with informal settlements continuing to proliferate. The real estate industry will play a crucial role in preparing for well-planned urban growth in the future.
The Importance of Transparency
Discussing transparency in the real estate market is more often associated with cross-border investment and multinational occupiers, but the basic building blocks of transparency are central to the lives of ordinary people. Across the globe, we see examples of collapsing buildings, unlawful evictions and demolitions, inadequate infrastructure and corruption scandals having devastating impacts on people’s lives. The issue of real estate transparency clearly has everyday impacts.
There is wide recognition that security of property ownership; safe housing and workplaces; and being able to trust agents to abide by strong ethical standards are all key ingredients of well-functioning and stable communities. These can only be secured through an accessible land registry system, strong planning rules and building codes, and regulatory oversight. Right now, however, 70% of land and property in the world is unregistered and outside of formal markets, according to the RICS.
Progress Through Technology?
Technology is often seen as a tool which can help improve transparency. For example, high transparency nations, such as the UK, the United States and Germany, are harnessing their innovative capabilities towards developing a new proptech sector, which is helping redefine transparency through online marketplaces and databases, flexible real estate platforms and tools to improve the transaction process.
But how can lower-income nations harness technology to effect change without this level of innovation? A number of countries have taken steps over the past two years to digitise their land registry systems, strengthening the transparency of land ownership. We have seen this in Ecuador and India, while Ghana is even trialling a system to record title deeds using blockchain technology. In Nairobi, a city well known for the widespread use of mobile banking and payments, land rate and stamp duty payments can be made online. Technology, therefore, is an important tool for progress across the transparency spectrum.
The Path Towards Improvement
However, many markets at the bottom end of the transparency spectrumace geopolitical and economic challenges. Transparency issues and regulatory reforms are often relegated to the backburner.
However, there is widespread lobbying to reduce corruption, improve transparency and reform national regulatory frameworks. Transparency International (through their Corruption Perceptions Index) and the World Economic Forum are two of the major actors in the wider world of transparency, with both cooperating closely with governments to improve their transparency. At the same time, an international coalition of real estate bodies, including RICS, is working to improve and standardise land measurement standards.
Even when regulation is in place, enforcement must be robust in order to be effective. In the ‘Semi-Transparent’ tier, we see the biggest disconnect between the existence of regulations and the practical enforcement of the legal framework. As frenetic urbanisation continues and cities grow rapidly, it is the enforcement rather than the regulation itself that will be key to creating safe and secure urban communities.
Dealing successfully with urban growth in an organised, safe and transparent way is vital to the future success of cities across the globe. Rapid, uncontrolled urbanisation is seen as a ‘risk’ or, more accurately, cities are sites where multiple risks converge. Higher levels of real estate transparency can help mitigate these risks and provide the foundations of a more positive urban future.