Monday, December 04, 2006

Government of India: The biggest real estate agent in the world

The Indian Government is forcing farmers across the country to give up their lands to wealthy industrialists at throw-away prices. The Government wants to create Special Economic Zones, an idea which the Business Standard newspaper did not find appealing.

Many say the SEZs are real estate plays in disguise.

The above data is from the print issue of Business Today. It is odd that none of indian newspapers and magazines have really useful web sites. It all looks like an extension of the print edition, an afterthought. It is pity. This good article must have been made available to a larger audience for comments and addition. All that stuff is hedden behind a pay wall. The pay concept is fine for business analysis, but this?

You can wonder how much money is going into the politicians’ and bureaucrats’ pockets. The primary duty of a government is to provide law & order. It is sad that the Indian Government, all these 60 years has dose everything but that. For that, Indians have had to pay heavy price – we lagged behind for long Now, in the name of faster development and to catch Chine, the government is forcing valuable land to the same old rich business houses which have well-funded lobbies and ‘pairvi-people’ working fulltime in New Delhi and the state capitals.

If you look at the SEZ rules and regulations, you will find they allow building shopping malls, apartments (purportedly for the workers) and worst, after all that heavy land discount, they get a tax holiday as well. These may have severe repercussions on the economy in times to come. The government had made sure that the ‘inspector raj' returns too – meaning the SEZs will pay off the inspectors for looking away from all the law-violations that happen within that gated compound.

Ideally, we should just have lessened the cumbersome paperwork and time it requires to start a business in India. We must have left the rest to market forces.

I could have titled this story as ‘India Tanking #4: How the government is selling our land for cheap’, but why rub it in?

Related reading:
SEZ: Tax Scam?

Sunil Jain's SEZ article


At 2:08 PM , Anonymous Abhishek Sharma said...

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Abhishek Sharma.

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At 12:16 PM , Blogger Realty Rider said...

Hey Pramit very well written, really like people like you sharing their valuable thoughts.Its true that in the Indian real estate market its the government which is making maximum money, the point made by you related to politicians getting the major chunk of money running is very true which doesnt get highlighted.Its the amount of black money which is spreading leaps and bounds .
Huge amounts of black money has been pushed into real estate. And now a lot of money/surplus has been an impetus for prices in the real estate sector to rise. Even though the price could be paid in cash as in the market value of the property, in order to avoid taxes on stamp paper or other govt levied taxes one would deal in black money, ergo fuelling the demand for "hot" real estate properties. Spanish and India have been quoted as examples. Increase in prices of real estate means more demand for sectors/products/services related to realty. Like steel,cement and credit. As quoted here "A lot of distortions exist in Indian economy due totax evasion and black money, etc. Real estate is the safest and best place to park black money" Also my dumb reasoning: If there is huge amount of black money in the system it means that the govt. would initiate measures in order to sterilize black money. It may be in the form of : 1. Tax saving: a. By reducing the taxes b. Widening the areas through which one can save taxes like an ELSS, increasing STD. 2. Expenditure: By inducing expenditure on services/goods that would induce more expenditure in related areas which would cater to the process of diverting money into sectors that would eventually generate returns through the trickle down theory. 3. Price Rationalisation : Black market may induce people to relook at prices. If a product is supplied at a certain price through a controlled mechanism and if the product is available at a cheaper price in the black market, it may play a role in stabilizing the prices. If let say people evade octroi, and use black money or a bribe to get away, one may consider whether the amount of octroi incurred is reasonable or not….. 4.. The money is away from govt. hands, so would be better utilised 2.How can a blind man recognise the difference between bangkok & Kaula lumpur when stationed at those places? Is it Time? And now one can alos know if he is in Bangkok cause of the panic, either cause of the coup or the fact that their share market has just crashed by 10% […]
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At 3:37 PM , Blogger Sichermove KL said...

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