On the cusp of transparency – the next big opportunity?

The world’s major emerging economies – with huge scale and dynamic growth – represent ’the next big’ opportunity for real estate investors. However, a relative lack of transparency continues to hinder progress and limit activity in many of these markets. Despite continued improvements, these countries – including China, India, Brazil and Russia – remain concentrated towards the top of the ‘Semi-Transparent’ tier. What will it take for these markets to step up, and what are the implications?

Markets move within striking distance of ‘Transparency’

Accounting for almost 50% of global population, the ‘Big 8’ emerging economies - Brazil, China, India, Indonesia, Mexico, Russia, Thailand and Turkey – are concentrated just outside the ‘Transparent’ tier . This group of emerging markets accounts for just over 25% of the total GDP across the 100 markets covered by the index, but is set to drive almost 50% of economic growth in the next three years.

These markets, therefore, present huge opportunities for the real estate industry going forward. However, relatively low levels of transparency have dampened investor confidence and activity, with investment volumes amounting to just 15% of the total across the 100 markets covered.

India leads the way

India is the most notable member of this group, ranking among the most improved markets in the Index. The country continues to make incremental progress up the rankings thanks to proactive government efforts to transform the real estate industry. Ambitious new initiatives – most notably, the Real Estate Regulation (and Development) Act (2016) – have gone hand in hand with soaring investor demand.

Where next for the ‘Big 8’?

Continued regulatory reforms are needed for these markets to make further progress. However, it’s imperative that enforcement must be strong and match the scope and ambition of any regulation put in place. Regulation without enforcement will do little to bring about real change.

New technologies have the potential to help these markets ‘leapfrog’ their peers and their emerging vibrant proptech sector will prove critical in overcoming challenges in markets, where traditional sources of data may be lacking

Disparities between primary hubs and regional cities is an area of concern in many of these countries. The real estate industry is often concentrated within a small number of easily identifiable gateway (e.g. Shanghai, Bangkok, Istanbul, Moscow), and there remains a lack of a mature commercial real estate sector and data availability in secondary and tertiary markets.