AHMEDABAD: A section of analysts believe that micro-market businesses must adopt global best practices uniformly, to give a facelift to the sector and make the business more transparent. One such recent attempt has been made to standardise property measurement globally and the premise has been that the major demand drivers, like international investors and global occupiers, make it necessary to adopt uniform global norms. How far is this feasible?
This is an attempt that should have ideally made the recipients, occupiers and end-users of the real estate sector happier; yet, it has gone unnoticed by and large. As a matter of fact, it has raised more questions rather than addressing some perennial problems in measurement. In August 2013, leading property professionals from around the world were appointed to create the first global standard for measuring property.
The International Property Measurement Standards Coalition (IPMSC) selected 19 real estate experts from around the world, to join its Standards Setting Committee, to develop a global standard for measuring property. The Standards Setting Committee includes experts with first-hand knowledge in 50 countries, across five continents. It will act independently and is tasked with the job of drafting and consulting with the industry on a global standard measurement methodology.
The IPMSC was established at a meeting hosted by the World Bank in Washington on May 1-2, 2013. Members of the IPMSC are: the American Society of Farm Managers and Rural Appraisers (ASFMRA); The Appraisal Foundation (TAF); Appraisal Institute (AI); Asia Pacific Real Estate Association (APREA); Asociacion Profesional de Sociedades de Valoracion (ATASA); ASTM International; Australian Property Institute (API); Building Owners and Managers Association International (BOMA); China Institute of Real Estate Appraisers and Agents (CIREA); Commonwealth Association of Surveying and Land Economy (CASLE); CoreNet Global; Council of European Geodetic Surveyors (CLGE); International Consortium of Real Estate Associations (ICREA); International Federation of Surveyors (FIG); International Monetary Fund (IMF); International Real Estate Federation (FIABCI); Open Standards Consortium for Real Estate (OSCRE); Property Council of Australia (PCA); Royal Institution of Chartered Surveyors (RICS) and South African Property Owners Association (SAPOA).
Currently, the way property assets such as office, residential, retail and industrial, are measured, can vary considerably from country to country. With so many different methods in use, it is difficult for global investors and occupiers to accurately compare space. With the implementation of a global property measurement standard, properties will be consistently measured, creating a more transparent marketplace, greater public trust, stronger investor confidence and increased market stability.
The standard will have a significant impact on the way property is measured, leading to improvements in valuation and financial reporting consistency, across international markets. The Standards Setting Committee members include academics, real estate funds and asset managers, residential professionals, valuers and specialists in development and construction.
“Property is a global business for international investors, corporate occupiers and their advisers but floor space measuring practices vary from country to country, and even between markets in the same country. Encouraged by our first meeting at the World Bank, we intend to create standards of measurement that will not only complement international financial reporting and valuation standards but also enable the collection and use of reliable data, across worldwide markets,” shares Max Crofts, chair, Standard Setting Committee.
“The committee has been set to meet the challenging task of drawing together the intelligence that has gone before us, across the world, over the past decades and then creating what must be regarded as the world’s best practice for the measurement of buildings. There are many standards in existence, across the world but this has been largely uncoordinated. There remain inconsistencies in the manner measurements are carried across countries. For example, in India, the concept of super areas has been used to include outdoor swimming pools, stairs, common areas such as pavements; in parts of the Middle East, floor areas can include the hypothetical maximum number of floors that could be built on the existing foundations and in Australia, measurements have included outdoor parking spaces, even when they are not physically adjoined to the property itself.
The committee members are focussed on ensuring that the standard is the world’s best practice. We will know that we have succeeded when the new standard is embraced globally by the property industry,” adds Allen Crawford, vice-chair, Standard Setting Committee. The Standards Setting Committee will work on drafting of the new methodology immediately and aims to have a draft ready for widespread consultation in early 2014. This brings to the table, the discussion as to whether property norms can be standardised across the world despite it being a micro-market business and at the operative level. Everyone within the sector is not convinced that the idea of standardised global property norms is feasible.
Sunil Mantri, vice-president, NAREDCO and chairman, Mantri Realty, however, has another take on the matter as he explains why, “We cannot totally standardise global property norms. However, there are some norms such as speedy approval, contractors’ obligation towards project completion, real estate brokerage standardisation followed by RERA, Dubai, which should be implemented. In India, there are bylaws governed by the local administration. I believe that amendments are required to these bylaws, based on the laws passed by the central government. If European development models are better than our current one, there is no harm in adopting it, as at the end of the day, it would help in developing the Indian real estate segment. We can pick and choose the policy, based on our requirement. However, it is difficult to have a standardised body across the world that sticks to these guidelines. A standardised body can be region specific.”
Sachin Sandhir, managing director, RICS-South Asia, differs in opinion when he says that the importance of global standards is truly astounding as investors could more easily compare issuer’s disclosures, regardless of whatever country or jurisdiction they come from and could easily weigh investment opportunities in their own countries, against competing opportunities in different markets when there is a common valuation benchmark supporting accounting standards. “Despite their significance, adoption of global standards is perhaps not possible across all functions,” he says. There is a general perception that a global committee often seems to focus more on organised investor community and not vulnerable end-users in respective countries. The purpose is hence, defeated more often than not.