Very few songs survive the test of time. One such song is ek akela is shehar main from the 1977 movie Gharaonda, written by Gulzar, set to tune by Jaidev and sung by Bhupinder Singh. As the lines from the song go:
ek akela is shehar main
raat main aur dopahar main
aabodana dhoondta hai
aashiyana dhoondta hai
(aabodana = food and water. aashiyana = a home)
This iconic song has an iconic scene which most people miss. Some 3 minutes and 26-27 seconds into the song there is a shot of what looks like Marine Drive. The road is full of Premier Padminis (or Fiats as they were better known as) and Ambassadors. If you look carefully enough there is even a white Mercedes somewhere.
The movie Gharaonda was released in 1977 and those were the days when Indians had the option of buying either the Ambassador produced by the Birlas at Uttarpara near Kolkata or the Premier Padmini produced by the Doshis at Kurla in Mumbai. The situation was akin to the early days of the American automobile. Henry Ford, the pioneer of the assembly line system of manufacturing remarked in 1909 that: “any customer can have a car painted any colour that he wants so long as it is black.”
In short the customer did not have any choice. The same was true about India in 1977. If one were to paraphrase Ford, “ any customer could buy any car that he wants so long as it is a Padmini or an Ambassador.”
But things have changed since then. Some 37 years later in 2014, a similar shot of the Marine Drive would show so many models of cars that it would be difficult to count the number quickly. This is the impact of competition and a largely free market which operates in the Indian automobile sector with very little interference from the government and in turn politicians. The companies compete with each other in order to offer the best possible features to consumers at the best possible price. This wasn’t the case in 1977 and the Indian consumer had a choice of two models of cars. The free market has clearly changed that.
Now let’s go back to the 1977 song that we started with—ek akela is shehar main. The song is about the inability of a man to buy a home in Mumbai in 1977. Thirty seven years later nothing has changed on that front. In fact, things have only gotten worse.
And the reason for this is very simple. Most homes across Mumbai and large parts of this country remain unaffordable for the same reason as the Indian consumer had a choice of only two cars in 1977. There is no free market in real estate.
Most real estate companies are fronts for politicians. What makes this very clear is the fact that even though there are thousands of real estate companies operating across India, there is not a single pan India real estate company. Forget pan India, there are very few companies that operate across large states. Most of the big real estate companies have an expertise in a particular part of the country. Why is that the case?
The answer lies in the fact that for any real estate company to operate in any part of the country it needs the cooperation of local politicians. And politicians in every area have their favourite real estate companies. This effectively ensures that even though there are many real estate companies there is very little genuine competition among them to offer the best possible home at the best possible price to consumers. Also, it limits the ability of a real estate company to grow in different parts of the country. It is not possible for the same real estate company to manage politicians everywhere. In short, the free market is not allowed to operate.
There is huge government interference in the sector to ensure that the favoured real estate companies continue to benefit. As Bombay First points out in a report titled My Bombay My Dream “Government and the land mafia in fact do not want more land on the market: after all, you make more money out of the spiraling prices resulting from scarcities than you could out of the hard work that goes into more construction.”
Over the years, the major infrastructure projects in Mumbai like the Bandra-Worli Sea Link or the Versova-Ghatkopar metro link, have addressed areas that have already been built up. The Sewri-Nhava Sheva link, which will open up a lot of land for housing is yet to see the light of day.
One excuse that is constantly offered by the real estate companies to justify spiralling prices is the lack of land. While this may be true about a city like Mumbai it is not true about most other Indian cities.
The Indian Institute for Human Settlements in a report titled Urban India 2011: Evidence esimates that “the top 10 cities are estimated to produce about 15% of the GDP, with 8% of the population and just 0.1% of the land area.” So clearly scarcity of land is not an issue.
This situation can be improved significantly if some of the land that the government has been sitting on can be made available for affordable housing. KPMG in a report titled Affordable Housing – A key growth driver in the real estate sector points out “The government holds substantial amount of urban land under ownership of port trusts, the Railways, the Ministry of Defence, land acquired under the Urban Land (Ceiling and Regulation) Act, the Airports Authority of India and other government departments.”
Over and above this the end consumer has almost no access to price and volume trends. He has to go by what brokers and real estate companies tell him. And for these insiders the real estate prices are always on their way up. In this scenario the real estate market is completely rigged in favour of brokers, real estate companies and politicians. This is what the Nobel prize winning economist George Akerlof called a scenario of “asymmetric information”.
As Guy Sorman writes in An Optimist’s Diary “Economic actors don’t all have the same information at their disposal. Without institutions to improve transparency, insiders can easily manipulate markets.” This is precisely what is happening in India—politicians and real estate companies acting as their fronts, have been able to manipulate the entire system in their favour.
And unless this changes, the dream of owning a house will continue to be just a dream. Until then we can thank Gulzar, Jaidev and Bhupinder Singh for this beautiful song and hum it…ek akela is shehar main…
The article originally appeared on www.Firstbiz.com on August 4, 2014
(Vivek Kaul is a writer. He tweets @kaul_vivek)