Emerging issues in property in Asia
Welcome to the Ebook on Emerging Issues in Property and Infrastructure in Asia – Pacific. This Ebook is a select collection of research that was presented during the 21st Asian Real Estate Society Conference at the beautiful campus of the Indian Institute of Management, Bengaluru (India) from 13-15 July 2016.
A useful starting point for discussion on property and infrastructure is a reminder that the sector faces challenges related to non-competitive markets, huge sunk cost, heterogeneity, asymmetric information and significant government interventions. Gandhi and Walton (2012) have argued that a huge proportion of private wealth that the recent reforms in developing countries have generated is from ‘rent-thick’ sectors (property, construction, infrastructure or ports sectors, media, cement, and mining) where potential for ‘economic rents’ is huge. The Economist (2014) defines “an economic rent is the difference between what people are paid and what they would have to be paid for their labour, capital, land (or any other inputs into production) to remain in their current use”. No doubt perfect competition would eliminate economic rent but ‘rent thick’ sectors lack ‘perfect’ competition. Further, The Economist (2014) emphasizes that the “common examples of rent-seeking (which may or may not be illegal) include forming cartels and lobbying for rules that benefit a firm at the expense of competitors and customers.” Transparency and availability of market information would eliminate rent-seeking behaviour. Jones Lang LaSalle (JLL) prepares an annual Global Real Estate Transparency Index and ranks countries on the basis on this index. The index is computed with 139 variables relating to transaction processes, regulatory and legal frameworks, corporate governance, performance measurement and data availability. Higher transparency is associated with stronger investor and corporate activity in property sector. JLL has been tracking the performance of property markets across developed and developing countries since 1999. While there have been substantial improvements in the availability of information and transaction processes associated with property, the sector is still dominated by opportunities to seek substantial economic rent particularly in the developing countries.
The seven papers in this Ebook examine aspects that would enhance efficiency and competition in property and infrastructure in Asia Pacific. For efficiency, transparency in system for registering property rights is crucial. Efficient price discovery in property markets requires transparent information for sellers and buyers. For public infrastructure development requiring land, governments have resorted to compulsory acquisition of private property leading to dissatisfaction among landowners whose lands are taken. Besides compensation, the process of acquisition also generates dissatisfaction. Of the many mechanisms for developing infrastructure projects, one of them is public private partnership (PPP) which leverages the strengths of public and private sectors in delivering infrastructure. However, the path for development of infrastructure through PPP has been challenging with mixed results on its success. The editors have tried, therefore, to include interesting papers that not only examine efficiency in property and infrastructure sector but also try to propose what would deliver efficient outcomes in this sector.
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