Email
Print
ShareRs30 lakh and Rs70 lakh. This means only those in the salary range of Rs40,000-1,00,000 a month can hope to own one -- assuming they can raise a 20-year loan. In the last 10 years, the market for housing -- meaning the number of people who can afford a home in cities -- has fallen from a few million to lakhs.
The reason is lack of affordable land, as HDFC chairman Deepak Parekh reminded prime minister Manmohan Singh the other day in Mumbai. His remedy is to speed up the availability of land freed from urban land ceiling laws. Most of this land is still stuck in legal disputes. It is difficult to see how the PM can do much about litigation.
Making more land available could conceivably ease prices in the short run, but it is not going to be a solution in Mumbai, or, for that matter, any other city. If this were so, higher FSI (floor space index) should also have done the trick. An increase in FSI from one to two should theoretically increase availability of land by a factor of two, but have we seen prices fall anywhere?
India's urban population is already 350 million and more, and is growing frenetically. Relative to population, urban land is always going to be in short supply and this is not going to change even if all the land freed from urban ceiling comes to the market.
So what is the solution? Before we look at that, we need to see the problem for what it is: while pressure of population relative to land supply is certainly the crux of the issue, there is also an institutional reason for it. Land has become the key currency of politics.
Wherever you look, if there is a land problem, there's politics behind it (Singur, Nandigram, the SEZs). Conversely, wherever you see politicians, you will find land being held hostage. Every politician worth his salt (and now, even some high court judges, it seems) is hoarding land.
Think of any major infrastructure project and you will find politicians buying up land in advance. Names like Sharad Pawar, Deve Gowda and the late YSR have invariably been linked to land and land deals in the media.
On the face of it, this is surprising. Unlike cash or gold or even shares, land gives you no anonymity. It's physical, and it can't be hidden. You have to defend it from encroachment, and you have to guard it from predators. So theoretically, politicians should hold less of their wealth in land, and more in anonymous assets.
But look closer, and this is the real picture. A close nexus has developed between politicians, criminals, bureaucrats, builders and businessmen whereby land is kept in benami names and held for mutual benefit.
Criminals are used to grab and guard the land, businessmen and builders develop it and add value, and politicians and bureaucrats help bend laws to skim the cream. The ordinary home buyer is, in the end, forced to pay a prince's ransom for his 800-sq-ft or less of private space.
This is the main reason why urban land ceiling laws never worked. The land cabal worked to keep land out of the hands of the law. Ironically, the original purpose of these laws was precisely to ensure the availability of cheap land for the poor.
Now we have done the opposite: abolished the ceiling laws to make land available cheap. But land is never going to be cheap as long as this unholy nexus between businessmen, politicians, goons and builders is broken decisively.
Is there a way out? Like anything involving politicians, there is no easy answer. But clearly we need to enact a national law -- and similar ones at the state level -- focused on achieving four ends.
First, one needs to find out actual ownership by recording the titles of whoever is currently shown as owner. This will force benami owners to come out of the woodwork. Second, owners will have to disclose the source of funding for land bought in their names. If they can't show it, the land should be confiscated for public housing projects.
Third, there could be a general amnesty scheme for all benami owners -- their ownership can be regularised if, say, they surrender half their holdings -- after a punitive tax is paid.
This will, at least, bring some of the available land out in the open. Fourth, stamp duties should be abolished or rationalised like they have been for shares. This will revitalise the market for property and bring down rates. Affordable housing for millions is years away. But we need to make a beginning somewhere.
