Monday, May 31, 2010

Bail out the hotbed India cities real estates

Says Chetan Bhagat:

Some excerpts

  • In Lutyens’ Delhi alone, there’s potentially a thousand acres of land occupied by bungalows, MP residences, various offices and quasi-government entities. Additionally, we also have dozens of ‘thinktanks’, occupying super-prime real estate. These thinktanks presumably add enlightenment to our society, though it is difficult to tell even one or two solid contributions they have made in the past few decades.
  • To do quick cost calculation, an acre-sized bungalow in Lutyens’ Delhi sells for around Rs 100-150 crore. A thousand acres, at the low end of the range, is Rs 100,000 crore. Slap on a big FSI, and the number can be ten times as much. Even conservatively, at half the amount, we arrive at Rs 500,000 crore. This is the blocked capital cost of running our wonderful government where MPs claim to make a pittance. Anyway, a replacement complex in Gurgaon, to replace this entire setup, with modern housing, offices (and the fountains for thinktanks) is unlikely to cost more than Rs 20,000 crore, or only 4% of the blocked capital. The remaining amount can be used to reduce our staggering government debt. This in turn leads to saving enormous actual cash interest costs every year. (If the Rs 480,000 crore of debt is reduced, we can save at least Rs 40,000 crore of interest costs every year.
  • These are just the possibilities in Delhi. Similarly, every state capital has enormous government land in prime areas kept in sub-productive uses. The surplus railways and defence land is another level altogether. If all that capital is released, the Indian government finances will finally begin to look healthy. The dreaded inflation, a common Indian feature, will also come under control.
  • There are other benefits of off-loading real estate as well. There is something wrong about a government servant and his family living in massive two-acre bungalows costing Rs 200 crore in a low income democracy like India. It reeks of colonialism and has no place in 2010. Another benefit would be development of new areas, where the new offices and residences are located. Newer construction also means more high-tech buildings that will improve government efficiency. The move will also release land, thereby easing pressure on real estate prices as well.

And he conclude:

  • One could argue against the practicality of this move, but if there is a will, it is partially doable. Frankly, doing this is far more practical than running a 20% inflation economy, which makes the poor and middle class spend their lives chasing inflation and never be able to accumulate real wealth. To sit on assets at the expense of the common people is called feudalism, and we are supposed to have ended that 62 years ago. This move could be inconvenient for the lawmakers for a while, but not impossible. Most importantly, it will be good for Indian people. After all, our politicians are meant to serve us, right?

1 comment:

  1. There's nothing wrong with buying properties as long you know that you worked hard for the money you will be using to acquire the investments.