Real-time ethics in real estate business
We keep talking of ethical real estate business. Is a ‘code of ethics’ just a fancy manifesto you put on your office wall? Does it mean 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 is possible to follow the path of self-interest without doing something illegal. I have always thought that in real estate, the legal way can often be the lowest standard.
The fact is unethical practices in real estate are the product of a short-term approach to the business. This phenomenon is evident in smaller brokerages, which often have no more than a single dealing 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 are completely above reproach).What I’m saying is that a professional real estate company that takes ethics seriously, treats every new prospect as potential long-term client.
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 Indian real estate market was notorious for its lack of transparency, but that is changing. The larger property consultancies are handling a number of international clients now who are eager to enter or expand operations on the Indian subcontinent. Such clients have high standards in terms of service quality and clarity, and are often worried about being taken for a ride by unscrupulous operators. 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 business practices in real time? I can’t cover all facets of ethical business conduct here; some pertain to clients, others to employee conduct and yet others to government authorities. However, it is the way in which one deals with clients that makes or breaks vital business relationships. To be brief, I’ll focus on this aspect here.
Among other things, a ethical real estate company ensures that all business information is honestly and accurately recorded and reported in compliance with applicable laws. It also has strict rules against bribes, kickbacks and bartering arrangements, or any other incentives offered to obtain or retain business. In addition, it scrupulously avoids all improprieties or conflicts of interests, and has a strong policy against insider trading.
Ethical business practice also means that a real estate company does not separate the purchaser and the buyer to create additional business advantages. Likewise, it will not attempt to pressure a client into making a decision, or provide any kind of misleading information to prompt a desired decision.
I think it’s clear that this narrows down the field quite a bit – such parameters, when enforced, certainly eliminate options for unscrupulous profiteering.
However, ethics must often go beyond the requirements of clients. After all, there are always elements that seek to recruit professional help in exploiting the immense potential of Indian real estate without necessarily adhering to ethical business standards. I would be the last to deny that, even with the new spate of guidelines and legislative amendments in place, there are enough loopholes and inconsistencies in the system to make that possible.
“I do not believe maximising profits for the investors is the only acceptable justification for all corporate actions. The investors are not the only people who matter. Corporations can exist for purposes other than simply maximising 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. For long-term players with a clear view of the future, it certainly is. After all, unethical business practices weaken the market, and in the long run harm business for everyone.
The author is chairman & country head, JLL India