Reforming Land and Real Estate Markets

Land and real estate reforms have not
been effective at achieving their objectives, in part
because of how they have been designed and implemented. To
be successful, reforms must become comprehensive in design,
argue the authors, although implementation may be phased
over time and take local conditions into account. Reform
must include three elements: 1) Institutional reforms that
better define property rights, reduce information asymmetry,
and improve contract enforcement. 2) Capital market reforms
that make mortgage finance available at reasonable rates,
especially for the poor. 3) Market reforms that reduce or
eliminate the main distortions in the prices of goods and
services produced by land and real estate assets. In their
review of land and real estate reforms supported by the
World Bank, the authors find that such reforms receive less
attention at the conceptual stage than they should,
considering their great impact on poverty, growth, and
stability. They base their conclusion on the limited
coverage of land and real estate issues in country
assistance strategies, the main vehicle for identifying
priority areas for reform. Most Bank-supported projects do
not address all three elements critical for reform. And most
provide no justification for excluding them, and no plan for
follow-up. The Bank's Operations Evaluation Department
rates Bank-supported land and real estate projects
relatively well on outcome and sustainability but not on
institutional development. But land and real estate reform
is institutional by nature. The authors urge the Bank and
policymakers to change course. After a comprehensive
assessment of the status of real estate institutions and
markets, all actors in this sector should be pulled together
to develop a comprehensive approach to land and real estate reform.