Corporate social responsibility and ethics in real estate: Evidence from Turkey

Abstract

Many countries have experienced real estate bubbles due to unethical appraisal practices and a limited base of real estate industry skills. Since the real estate industry is subject to a series of uncertainties and therefore speculation, a responsible method of real estate appraisal reduces the risk involved in property transactions. In the absence of a credible real estate appraisal method, investors are prone to experience swings in property values and suffer as a result. Financial crises tend to have an adverse impact on the real estate industry. This is more so when a country's financial system relies too heavily on its banking sector, the chances of systemic vulnerabilities increase. Social change can be achieved through the quality of the service provided by the financial markets. Banks which are aware of the importance of CSR in their lending decisions are more likely to operate in a more socially responsible manner. Turkey, as a bank oriented country, suffered from the last banking crisis of 2001. The economy started to recover in 2003 and since then the rate of inflation has increased and interest rates have declined. This provided a basis for a mortgage lending market and consequently the need for improving the standards of real estate appraisal emerged. This can be accomplished by establishing professional standards of appraisal, education requirements, and ethics in developing real estate markets. This paper attempts to evaluate the current state of real estate appraisal process in Turkey from an ethical view point. It provides a case study of real estate appraisal in Turkey. It points out the consequences of fraudulent practices that could have a devastating impact on the economics of real estate investment. It seeks to draw attention to the role of real estate agents and real estate appraisers who could contribute to society in a responsible manner. It is hoped that this paper provides some insights into CSR practices and ethics for real estate investment in emerging markets, namely Turkey. © 2010 Springer-Verlag Berlin Heidelberg.