Ethical business practices vital for long-term players: JLL India

The real estate industry in the country is becoming more and more transparent and that is a step towards ethical business practices, according to Anuj Puri, Chairman and Country Head, JLL India. In his latest report, Puri says the real estate market is changing rapidly because larger property consultancies are handling anumber of international clients who are eager to enteror expand operations on the Indian subcontinent. Such clients, he says, have high standards in terms of service quality and clarity, and are often worried about being taken for a ride by unscrupulous operators. And the only thing they can depend on is the “tangible,verifiable ethical approach” of their real estate partners on this end.

The following is the text of the report:

We keep talking of ethical real estate business. Is a ‘code of ethics’ just a fancy manifesto you put on your office wall? Does itmean that the company merely steers clear of illegal dealings? If that was all there was to real estate ethics, it wouldn’t be saying much.
After all, thanks to India’s rather unclear legal system, it ispossible to follow the path of dishonesty and self-interest withoutactually doing something illegal. I have always thought that in realestate, the legal way can often be the lowest standard.

The fact is, unethical practices in real estate are the product of ashort-term, mercenary approach to the business. This phenomenon is most evident in smaller brokerages, which often have no more than a singledealing with many of their customers.

I’m not saying that all small brokerage houses are unethical (I personally know a number of small operators whose business methods arecompletely above reproach. They know that good ethics equals goodbusiness). What I’m saying is that a professional real estate companythat takes ethics seriously views and treats every new prospect aspotential long-term client. When every real estate deal is regarded asthe first of many to follow, ethical conduct tends to become a naturalby-product.

An ethical mind-set cannot be enforced. It comes as a result of a higher awareness of how business works best in the current times. The Indianreal estate market was notorious for its lack of transparency, but thatis changing rapidly. The larger property consultancies are handling anumber of international clients now – clients who are eager to enteror expand operations on the Indian subcontinent. Such clients have highstandards in terms of service quality and clarity, and are oftenjustifiably worried about being taken for a ride by unscrupulousoperators. All they initially have to depend on is the tangible,verifiable ethical approach of their real estate partners on this end.

So, what constitutes ethical real estate business practices in realtime? I can’t cover all facets of ethical business conduct here; somepertain to clients, others to employee conduct and yet others to Government authorities. However, it is the way in which one deals withclients that makes or breaks vital business relationships. To be brief,I’ll focus on this aspect here.

Among other things, an ethical real estate company ensures that allbusiness information is honestly and accurately recorded and reported incompliance with applicable laws. It also has strict rules against bribes, kickbacks and bartering arrangements, or any other incentivesoffered to obtain or retain business. In addition, it scrupulouslyavoids all improprieties or conflicts of interests, and has a strongpolicy against insider trading.

Ethical business practice also means that a real estate company does notseparate the purchaser and the buyer to create additional business advantages. Likewise, it will not attempt to pressure a client intomaking a decision, or provide any kind of misleading information toprompt a desired decision.

I think it’s clear that this narrows down the field quite a bit –such parameters, when adopted and enforced, certainly eliminate a lot ofoptions for unscrupulous profiteering.

However, ethics must often go beyond the requirements of clients. Afterall, there are always elements that seek to recruit professional help inexploiting the immense potential of Indian real estate withoutnecessarily adhering to ethical business standards. I would be the lastto deny that, even with the new spate of guidelines and legislativeamendments in place, there are enough loopholes and inconsistencies inthe system to make that possible.

“I DO NOT BELIEVE MAXIMIZING PROFITS FOR THE INVESTORS IS THE ONLYACCEPTABLE JUSTIFICATION FOR ALL CORPORATE ACTIONS. THE INVESTORS ARENOT THE ONLY PEOPLE WHO MATTER. CORPORATIONS CAN EXIST FOR PURPOSESOTHER THAN SIMPLY MAXIMIZING PROFITS.” – JOHN MACKEY_

A real estate company does not only have a responsibility to its clients– it is also accountable for the state of the market it operates in.Is this important? For long-term players with a clear view of thefuture, it certainly is. After all, unethical business practicescontaminate and weaken the market, and in the long run harm business foreveryone.