The pursuit of basics

It was not so long ago in 2008 that real estate developers were hard pressed to sell their overpriced property. A long overdue semblance of a correction followed in 2009. Not even a year has passed since then and we are already witnessing the return of the crazy price levels that were prevalent in 2007. The sharp rise in stock markets seems to be the culprit, with gains from stocks being invested in property.

Take the case of Ghatkopar West in suburban Mumbai. In 2008, the Kalpataru group was finding it difficult to sell flats at its under construction 'Aura' project @ Rs. 6,800 per sq ft. That too, when possession was to be given in less than a year. Now, barely a year later, comes the Wadhwa group which launched 'The Address' at the steep rate of Rs. 9,000 per sq. ft., with possession in 'three and a half' years. Wow! The projects are barely 100 metres apart on the same side of LBS Marg. A 2BHK flat at 'Aura' cost around Rs 75-80 lakh last year. A 2.5BHK flat at 'The Address' costs twice that now. The stock market rally and the rescheduling of their own massive bank debt has made the developers forget one small component of the market, the end user. Its another matter that these flats might get lapped up by cash rich investors eager to park their stock gains. For an end user like me, I would never like to spend Rs. 1.5 crore to buy such a hopelessly overpriced piece of property, with possession almost 4 years down the line.

Why is it that this industry is allowed to get away with super-supernormal profits? How would you like if tomorrow HUL were to sell a bar of 'Hamam' at Rs. 50? Alright, there is a lot of difference between the two industries, real estate and FMCG. Developers always complain about 'high land cost' when asked about runaway property prices. The complaint is valid, but only to an extent. How come prices tanked upto 35-40% last year for the same overpriced properties on the same 'high cost' land, when faced with a demand slump? How many end users can actually afford to buy a Rs. 1.5 crore flat in Ghatkopar? Not many.

The signals are very clear. The middle class has no place in the real estate scheme of things. On a separate note, it is such capitalistic excesses that have given rise to the regressive philosophies of communism. When a basic commodity like housing is priced out of the reach of almost the entire population, barring a very small elite minority, it is bound to give rise to strife in the long run across all levels, be it political, social, family or individual. One of the first dreams of young men in India is to buy a house so that they can have a roof above their heads - so that they can marry, so that they can have kids, who in turn will worry about buying a roof for their own heads, when their time comes. With entire lifespans spent chasing the fulfillment of basic requirements like housing, is it a surprise that no significant progress, whether scientific, technological or artistic is achieved by the majority of Indians living in India?