Real estate professionals regularly face ethical dilemmas as they negotiate commercial land deals in the United States. Domestically, there are laws and ethical standards in place that govern transactions, such as fair housing, real estate lending, disclosures, and hazardous materials (lead-based paint and asbestos, for example). As soon as their businesses venture beyond U.S. soil, they may be faced with additional ethical dilemmas such as land grabs, unfair labor practices, workplace safety, and pollution.
Here are five of the most predominate ethical dilemmas in global real estate:
Commercial Land Exploitation
In many under-developed countries, where land is cheap and attractive to investors, “land grabs” are conducted by private investors from industrialized nations. These can wreak havoc on land intended for agricultural use. As a result, indigenous populations—often in need of food—can find themselves with even-more limited agricultural resources1. According to Oxfam International, two-thirds of foreign land deals between 2000 – 2010 took place in countries with predominantly-starving populations2. It is a problem that has captured the attention United Nations and community-minded watchdog groups that have called upon the World Bank to intervene, investigate, and even freeze the investments of groups involved in land grabs in order to protect local populations in developing countries2.
Commercial real estate professionals should be aware of this issue and know there are many organizations that support sustainability and environmental protection when doing business overseas. In 2012, the UN drafted voluntary guidelines as a reference for businesses that outlines, among other things, responsible land purchase practices when working abroad.
In the 1990s, American clothing brands owned by Liz Claiborne, Kathie Lee Gifford, Nike, and Wal-Mart all came under fire for unfair labor practices in sweatshops3. This led to a slew of legal suits and the formation of organizations such as the Fair Labor Association (FLA), which helps set standards through its Code of Ethics. This organization provides support and guidance to companies and workers around the world, doing business overseas, and holds companies accountable by monitoring and reporting on their working conditions.
Property developers, international real estate investors, and construction companies that work outside U.S. borders all face the ethical dilemma of paying fair wages for a day’s work. In 2014, the FLA reported that Turkish companies were paying Syrian refugees below minimum wage because they lacked work permits and were desperate to earn money for their families3.
U.S.-based real estate developers must face the ethical dilemma of workplace safety when developing land and building structures in other countries that do not have an Occupational Safety & Health Administration (OSHA) to set health and safety standards for employees4. OSHA International has signed agreements with Mexico, China, and countries in Europe, Latin America, and Asia that outlines agreements for the way foreign workers will be treated in the U.S.
American real estate professionals doing business in other countries should familiarize themselves with labor standards set forth by the International Labor Organization, as well as the Foreign Labor Act.
Property developers, investors, and managers face ethical dilemmas when laws governing pollution, waste, and contamination are looser than they are in their home countries. According to data reported by the World Health Organization5, Pakistan, Afghanistan, Bahrain, Senegal, and Qatar are the five worst polluted countries. Dense urban populations, lack of emissions controls, and air traffic are among the contributors to air pollution.
In Qatar specifically, the country’s booming construction industry has contributed to the country’s poor air quality, and the WHO called for the country to develop strict guidelines and hold public, private, and governmental entities accountable.
When pursuing a real estate investment in an emerging market, developers need to understand that country’s social and business customs. It is best to take heed of cultural customs practiced in your country that may not align with other cultures, and exclude them from all business and social interactions.
If ignored, dilemmas can manifest in many ways. According to Inc., punctuality, knowing when to talk business vs. keeping it social, and misinterpretations about personal space are capable of causing friction in international business relationships6. If cultural preparations are not made in advance, a lack of awareness on both sides can lead to misunderstandings or worse, irreparable issues that doom a project.
Global real estate developers should consult trusted advisors familiar with the business customs of other cultures to ensure compatibility is working for, not against their investment.
Studying Cross-Cultural Ethical Dilemmas
Students in Georgetown University’s Master's in Real Estate online program spend a semester studying Ethics in Action, which includes exploration of ethical dilemmas that arise during international property sales and development. In addition to the Ethics in Action course, the online program weaves international and cross-cultural considerations into courses that cover real estate markets and globalization, preparing real estate professionals for careers in a global real estate market.
If you would like to learn more about the online master’s in Real Estate program offered by Georgetown University’s School of Continuing Studies, request more information or contact an admissions representative at (202) 687-8888. If you are ready to enroll, simply apply now.