Paving or Blocking Ways for India’s Dynamic Growth?

May 22, 2007	(Be the first to rate this story!)  Loading ...
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Despite having a bullish economy, India requires sustaining a growth of 8% or more. Choking off every type of fund flow into real estate can bring a bad impact. The failure of the government not to summon the political courage required to fix the root problem of artificial shortage of urban land keeps treating the underlying depression.

In an endeavor to prevent the flow of private equity and venture funds into real estate, the government brought stringent guidelines for venture capital regime thereby affecting entrepreneurship across the board.

Indeed, the Reserve Bank of India has put a restriction on external borrowings and increased the sector’s risk weightage as well, effectively increasing the cost of lending to real estate.

As per the 2001 Census, 72% of Indians are settled in rural areas. In wake of the fact that no economy can make growth with the urban population staying limited at 28%, the challenge to grow more than 8% has created tough situations for Indian economy.

The country is in a dire need to make huge investments to develop new towns and improve existing ones. For investors, they seem eager to invest in real estate. If such is a situation, why government is changing its stand so frequently? The answer can be mere profits. Money is flowing into real estate chasing unsustainable levels of capital increase.

Currently, converting agricultural land into commercial is a form of prohibitive, arbitrary patronage doled out by state-level politicians. An acre of farmland worth a few lakh may fetch crores of rupees, is utilized for commercial purposes. Since this is done to make a good killing, urban lands remain in short supply, feeding the frentic flow of funds into a resource whose insufficiency drives its large profits.

Another bothersome question is whether land conversion lead to a shortage of cropland. On the other hand, it may lead to more effective farming, higher output and generalized prosperity. However, the question still remains same: What is more significant for the government? – Collective Welfare or Developer’s Profit.

News Published Under:   Real Estate India |

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