Real Estate during 60 years of Independence

The evolution of the real estate sector in India since independence reflects what happened to the Indian economy as a whole — the government becoming a monopoly provider in the 1950s; shortages and abysmal quality during the 1960s, 1970s and 1980s; and finally, the government loosening its grip on the economy and allowing a role to the private sector in the 1990s. In this decade, while supply has improved, Prices of Properties in India have skyrocketed in most major cities, posing a fresh set of challenges to policymakers.

At the time of independence, India’s population was 35 crore, of which only 14 per cent lived in urban areas. In the years that followed, rural to urban migration increased so that the pressure on existing urban housing and infrastructure became immense. The government then decided to take charge.

Till the 1950s, private developers were allowed to operate in cities. Following the Delhi Development Act of 1957, they were forced out. Government agencies like Delhi Development Authority (DDA) became the sole developers in the city. Many also established their own development agencies.

This Left turn in the economic management of the country was accompanied by the promulgation of several laws that were meant to safeguard people’s interests, but which ended up having the opposite effect. The motive of the Rent Control Act, 1958, for instance, was to prevent landlords from exploiting tenants. But so heavily was this Act skewed in favour of tenants that it killed all incentive for investment in rental housing.

In 1976, the Urban Land Ceiling Regulation Act (ULCRA) was enacted, which curbed individual holding of vacant land to a mere 500 sq m. The goal was to free up land lying with large landowners and use it for developing mass housing. In reality, owners took advantage of the exemptions in the Act, or went to the courts, so that the government could obtain very little land. It was in the 1980s that Haryana took the step of allowing private developers to accumulate land banks and develop integrated townships.

The reforms of the 1990s, by increasing the pace of industrial and service sector growth, enhanced income levels and, thereby, the demand for housing. Falling interest rates on home loans and liberal tax exemptions too helped. However, between 2003 and today, property prices in most large cities have risen 100-300 per cent, taking housing away from the common man. The only way to change this: “By increasing supply,” said CB Richard Ellis MD Anshuman Magazine.

Three steps need to be taken - One, increase floor space index (FSI) and allow high rises within cities (after providing the infrastructure). Two, provide better infrastructure and connectivity to suburbs, where affordable housing can be developed. And three, government agencies, which have been hoarding land, need to release more of it.

Source: http://www.indianexpress.com/story/210302.html