Last week, a six-acre plot in Wadala, located in central-east Mumbai, was sold for Rs 4,052 crore. Wadala is an upcoming but not a particularly posh area. The stunning price was possible because of the floor space index (FSI) of 20, allowing the builder to go vertical and sell as much as 20 times the area of the land plot.
Three weeks ago, in separate news, Parliament’s joint committee on MPs’ salary and allowances pitched for a five-fold increase in the MPs’ current basic salary of Rs 16,000 a month. Indian MPs are underpaid compared to their global counterparts, or when compared to the level of talent required in terms of intelligence, leadership and professionalism. They make far less than the civil services officers who report to them, which makes little sense.
However, despite the MPs getting less cash in hand, our lawmakers and the rest of the government administration are not exactly a low-cost proposition. This is due to the opportunity cost of the biggest dead asset they sit on — the land.
In Lutyens’ Delhi alone, there’s potentially a thousand acres of land occupied by bungalows, MP residences, various offices and quasi-government entities. Additionally, we also have dozens of ‘thinktanks’, occupying super-prime real estate. These thinktanks presumably add enlightenment to our society, though it is difficult to tell even one or two solid contributions they have made in the past few decades.
Anyway, whatever their purpose, i am not proposing to shut them down. All i am saying is if we, respectfully, move a portion of government housing, non-essential government offices, and the thinktanks out of super-prime areas to Gurgaon or Noida, which is considered part of the NCR. The move doesn’t mean the MPs have to slum it (and they won’t, we know that). The new government complexes can be state-of-the-art, airconditioned, wi-fi buildings. The residences can be luxurious in size and construction. We can have personal statues of each MP in every room of their house if they want (especially if they move to Noida, where the state government specializes in tax payer-funded statues). With the move, the MPs can get their pay hikes too.
Of course, our lovable thinktanks can also have new buildings with fountains outside where they can sit and scratch their heads all day and do…i am sorry, not do anything, but think. They can do this in Gurgaon or Noida just as well as they do in Delhi. I’m sure being next to Golf Links and Khan Market, as at present, is not particularly helpful in thinking thoughts of social welfare.
To do quick cost calculation, an acre-sized bungalow in Lutyens’ Delhi sells for around Rs 100-150 crore. A thousand acres, at the low end of the range, is Rs 100,000 crore. Slap on a big FSI, and the number can be ten times as much. Even conservatively, at half the amount, we arrive at Rs 500,000 crore. This is the blocked capital cost of running our wonderful government where MPs claim to make a pittance. Anyway, a replacement complex in Gurgaon, to replace this entire setup, with modern housing, offices (and the fountains for thinktanks) is unlikely to cost more than Rs 20,000 crore, or only 4% of the blocked capital. The remaining amount can be used to reduce our staggering government debt. This in turn leads to saving enormous actual cash interest costs every year. (If the Rs 480,000 crore of debt is reduced, we can save at least Rs 40,000 crore of interest costs every year.
These are just the possibilities in Delhi. Similarly, every state capital has enormous government land in prime areas kept in sub-productive uses. The surplus railways and defence land is another level altogether. If all that capital is released, the Indian government finances will finally begin to look healthy. The dreaded inflation, a common Indian feature, will also come under control.
There are other benefits of off-loading real estate as well. There is something wrong about a government servant and his family living in massive two-acre bungalows costing Rs 200 crore in a low income democracy like India. It reeks of colonialism and has no place in 2010. Another benefit would be development of new areas, where the new offices and residences are located. Newer construction also means more high-tech buildings that will improve government efficiency. The move will also release land, thereby easing pressure on real estate prices as well.
Of course, some caveats apply. Certain heritage buildings need to be protected and should be. However, there is plenty of land still left and not every old building can or should be preserved. To keep harping on heritage beauty at the cost of running a high-deficit, high-inflation economy is silly, unsustainable ostentation. If it prefers, the government can offer long leases rather than sell outright (the Wadala land sale was also a long-term lease). Environmental damage, of course, should be minimal.
One could argue against the practicality of this move, but if there is a will, it is partially doable. Frankly, doing this is far more practical than running a 20% inflation economy, which makes the poor and middle class spend their lives chasing inflation and never be able to accumulate real wealth. To sit on assets at the expense of the common people is called feudalism, and we are supposed to have ended that 62 years ago. This move could be inconvenient for the lawmakers for a while, but not impossible. Most importantly, it will be good for Indian people. After all, our politicians are meant to serve us, right?
Three weeks ago, in separate news, Parliament’s joint committee on MPs’ salary and allowances pitched for a five-fold increase in the MPs’ current basic salary of Rs 16,000 a month. Indian MPs are underpaid compared to their global counterparts, or when compared to the level of talent required in terms of intelligence, leadership and professionalism. They make far less than the civil services officers who report to them, which makes little sense.
However, despite the MPs getting less cash in hand, our lawmakers and the rest of the government administration are not exactly a low-cost proposition. This is due to the opportunity cost of the biggest dead asset they sit on — the land.
In Lutyens’ Delhi alone, there’s potentially a thousand acres of land occupied by bungalows, MP residences, various offices and quasi-government entities. Additionally, we also have dozens of ‘thinktanks’, occupying super-prime real estate. These thinktanks presumably add enlightenment to our society, though it is difficult to tell even one or two solid contributions they have made in the past few decades.
Anyway, whatever their purpose, i am not proposing to shut them down. All i am saying is if we, respectfully, move a portion of government housing, non-essential government offices, and the thinktanks out of super-prime areas to Gurgaon or Noida, which is considered part of the NCR. The move doesn’t mean the MPs have to slum it (and they won’t, we know that). The new government complexes can be state-of-the-art, airconditioned, wi-fi buildings. The residences can be luxurious in size and construction. We can have personal statues of each MP in every room of their house if they want (especially if they move to Noida, where the state government specializes in tax payer-funded statues). With the move, the MPs can get their pay hikes too.
Of course, our lovable thinktanks can also have new buildings with fountains outside where they can sit and scratch their heads all day and do…i am sorry, not do anything, but think. They can do this in Gurgaon or Noida just as well as they do in Delhi. I’m sure being next to Golf Links and Khan Market, as at present, is not particularly helpful in thinking thoughts of social welfare.
To do quick cost calculation, an acre-sized bungalow in Lutyens’ Delhi sells for around Rs 100-150 crore. A thousand acres, at the low end of the range, is Rs 100,000 crore. Slap on a big FSI, and the number can be ten times as much. Even conservatively, at half the amount, we arrive at Rs 500,000 crore. This is the blocked capital cost of running our wonderful government where MPs claim to make a pittance. Anyway, a replacement complex in Gurgaon, to replace this entire setup, with modern housing, offices (and the fountains for thinktanks) is unlikely to cost more than Rs 20,000 crore, or only 4% of the blocked capital. The remaining amount can be used to reduce our staggering government debt. This in turn leads to saving enormous actual cash interest costs every year. (If the Rs 480,000 crore of debt is reduced, we can save at least Rs 40,000 crore of interest costs every year.
These are just the possibilities in Delhi. Similarly, every state capital has enormous government land in prime areas kept in sub-productive uses. The surplus railways and defence land is another level altogether. If all that capital is released, the Indian government finances will finally begin to look healthy. The dreaded inflation, a common Indian feature, will also come under control.
There are other benefits of off-loading real estate as well. There is something wrong about a government servant and his family living in massive two-acre bungalows costing Rs 200 crore in a low income democracy like India. It reeks of colonialism and has no place in 2010. Another benefit would be development of new areas, where the new offices and residences are located. Newer construction also means more high-tech buildings that will improve government efficiency. The move will also release land, thereby easing pressure on real estate prices as well.
Of course, some caveats apply. Certain heritage buildings need to be protected and should be. However, there is plenty of land still left and not every old building can or should be preserved. To keep harping on heritage beauty at the cost of running a high-deficit, high-inflation economy is silly, unsustainable ostentation. If it prefers, the government can offer long leases rather than sell outright (the Wadala land sale was also a long-term lease). Environmental damage, of course, should be minimal.
One could argue against the practicality of this move, but if there is a will, it is partially doable. Frankly, doing this is far more practical than running a 20% inflation economy, which makes the poor and middle class spend their lives chasing inflation and never be able to accumulate real wealth. To sit on assets at the expense of the common people is called feudalism, and we are supposed to have ended that 62 years ago. This move could be inconvenient for the lawmakers for a while, but not impossible. Most importantly, it will be good for Indian people. After all, our politicians are meant to serve us, right?