Who Controls Real Estate Prices in India?

In India, real estate has always been a safe haven for parking ill-gotten money. I feel it is a well-organized scam. All the previous governments were part of the scam. The scam was to allow the parking of black money in immovable property and allow land prices to rise considerably as the black money was getting converted into the land. Land as an asset class--- Nobody can steal it nor it requires any maintenance.

When the population was in control, land prices were still rising, When the population went out of control, it offered a valid reason for the increase in the land prices. Land mafia in India can be traced as a loyalist to a particular political party. Their loyalty to that party was very strong and in fact, they were also their financers. Hence, all the erstwhile governments did NOTHING, literarily NOTHING to curb the land prices. They let the artificial rise in land price to happen, This, in turn, boosted the government exchequer in the form of various taxes related to land. This started happening more intensely after 2003. Then there came the financial meltdown of 2008. I received 100+ calls from various real estate holders in early 2009 who promised huge returns to gullible investors.

In the United Progressive Alliance era, we Indians came to know a jargon "AFFORDABLE HOUSING" Hats off to the then governments who converted housing into a LUXURY. They considered housing (a necessity for millions in India) a luxury and a new word was coined AFFORDABLE HOUSING. In India, all the Governments including the current one have deliberately held huge land banks. May I ask -- Why temples, wakf boards, and churches need to hold land bank? Why central and state governments need huge land banks for their offices when the govt's role is shrinking day-by-day. TRUST ME, this is a well-planned scam. An arrangement where all the dirty politicians are involved. Why the govt bodies such as the army, railways, etc need to hold huge land banks?

People are desperately searching for AFFORDABLE HOUSES all over India. My close relative is desperately looking for a house in Rs. 25-30 Lacs range in Nagpur, MH. We had almost finalized a 2BHK. But, the real estate developer declined to sell it to us when we insisted on a particular format of payment. Just look at the sheer arrogance of the property developers/builders in India. These bastards enjoyed a lot in the INC era. Now with the RERA and other laws, they are blaming it on the government for killing their entrepreneurship spirit. On the other side, the rouges in the state/central Govts are trying hard to create situations in which the land prices will rise. These palace rats make various announcements (most of which are aimed at artificially jacking up the land prices). Their subjects/agents market it in a big way (knowing that nothing is going to develop) in next 10/15 years. This way a piece of land worth Rs 100 per square feet is sold for Rs.500 per square feet. It is ultimately the politicians who gain from this situation.

When developers purchase land at a high price, they pass it to buyers. The inventories of 1/2/3/4 BHK flats were sold without pain when the job market was in good shape in India, But, now when people are getting job-less, the builders are staring at sky-rocketing inventories. I still remember Niranjan Hiranandani's smiling photo in Economic Times in 2007-2008, when the Urban Land Ceiling and Regulation Act was repealed. He uttered, "Its victory of the common man". That time I had to digest the fact that NH's common man is the one who can afford a 6/7/8/9K per square feet house.

Note that among the 3 major factors of production, land, labor, and capital, except land, the other two factors are getting cheaper but not land. We don't have a mechanism to decide the price of land across India, unlike a stock market that decides the prices of securities. Rather, such a mechanism was deliberately not devised/brought fore. So the million-dollar question is-- Who controls real estate prices in India?. Undoubtedly, its the politicians who have a stronghold on these prices.

The irony is, when the population was virtually exploding, no politician thought on the population mix. Among every 100 newborns in India, approximately 60-70 belong to the lower strata, 30-20 in middle-income class, and maybe hardly 0-5 in the tax-paying community. On one hand, we have the likes of D. Shibulal of Infosys who owns more than 700 properties across India. On the other hand, we have crores who aspire for a small home. India is systematically going towards anarchy.

STILL, THE GOVERNMENTS ARE DOING NOTHING SO THAT HOUSING BECOMES TRULY AFFORDABLE.