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Want to recover black money? Contact your nearest broker

MHADA’s crackdown on cash-rich investors who buy multiple homes shows how Mumbai’s housing sector is a parking area for black money, making a mockery of ‘affordable housing.'

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Fifty-four-year-old Shrikant Paradkar (name changed), a state-cadre government official, owns nine flats in Mumbai - four in the western suburbs and four in Navi Mumbai, besides a three-bedroom apartment in Andheri, where he lives.

He is fast running out of relatives in whose names he can buy homes. On the other hand, there is 34-year-old Deepak Pillai, who first rented a house in Vashi after getting married in 2005. He subsequently shifted to Nerul in a cost-cutting move, eventually landing up with a lease in Kharghar last year.

Paradkar and Pillai together embody the acute pathology of the Mumbai housing market. While a privileged few hoard up on homes, a vast majority are having to surrender their dreams of owning a home in the city. It is this stark contrast between endless black money and making-ends-meet white money that defines the housing scenario in Mumbai.

“There are at least 3 lakh homes in the city that are owned by investors, as opposed to home-users. Only half of these are rented out. The remaining 1.5 lakh homes are lying vacant,” says the residential realty head of a leading MNC consultancy, adding, “All talk about demand and supply is an eyewash. There is no economics at play here, only politics and dirty business. There is a limited stock of real estate in the city and plenty of black money being pumped in to keep it inflated, to keep the prices artificially high.”

Indeed, housing experts are unanimous that, as long as cash-rich investors continue to pick up the bulk of the residential real estate - right from the booking stage to resale - the genuine end-user will struggle to find a truly affordable home.

But why do cash-rich individuals prefer to park all their excess funds in real estate - going on to buy third, fourth and fifth homes — instead of exploring other investment options? Just what makes real estate such a compelling investment option?

“It’s a great avenue to park black money, since practically half the price of the flat is paid in black. This is not possible with investment options like stocks and mutual funds, where payments can be made only through cheques, and PAN numbers are mandatory,” says industry expert Sunil Bajaj.

Another factor that makes real-estate the preferred option even for those burdened with excess white money is its relative stability vis-à-vis the highly fluctuating stock markets. “During the worst of times, say, during the 2008 economic slowdown, the stock markets collapsed by nearly 50%, but the residential realty prices came down by just 20-25% in most locations,” says Bajaj.

‘Affordable’ home is a joke
The builders would have us believe that even a Rs1-crore 2-BHK in Chembur is an affordable home, as also a Rs 2-crore 2-BHK in Prabhadevi. After all, affordability is relative. “An affordable home is a home that one can afford,” quips Bajaj, adding that the concept of ‘affordable homes’ was a slick marketing strategy devised by developers to woo home buyers during the slowdown in 2008.

Indeed, what’s unaffordable for Pillai is easily affordable for Paradkar. “Real-estate is a solid long-term investment that has historically given good returns on investment,” justifies Paradkar.

For every home that the likes of Paradkar add to their portfolio, people like Pillai get further marginalised. As per the standard global definition, affordability is usually 60 times the monthly income or five times the annual income.

“The average monthly income of a middle-income household in Mumbaikar is Rs30,000 and by this yardstick, a home that’s priced at Rs18 lakh can be considered affordable,” says architect Neera Adarkar, adding that, going by the benchmark calculations and the prevailing market rates, Mumbai is a city only for the rich and those with limited resources are being alienated over the years. As much as it seems like a skewed situation, the current realty reality is unlikely to change.

“There will always be a disparity between people who have money and those who don’t. And as long as real estate continues to be a good investment option, the disparity will also be reflected in the housing sector,” says Mayank Gandhi, secretary of Remaking of Mumbai Federation, an NGO working for sensible planning and redevelopment of Mumbai.

According to Gandhi, one way to bridge the gap as well as generate more housing stock in the city, is to implement policy changes that will encourage home owners to rent out their flats.

“While the world over, a large percentage of housing stock is rented out, in Mumbai, the rent control laws are so antiquated that home owners choose to keep the homes locked up rather than risk losing them to tenants.” Citing the case of the 11-month leave-and-licence arrangement, Gandhi says that it is inconvenient for both, the landlord as well as the tenant. tate prices too.”

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