Saturday, April 14, 2012

Blackmoney_caste (Housing)


Global house prices

Searching for solid ground

An era of frothiness is over

Aug 18th 2012 | from the print edition


AFTER years of dizzying ascents, a big dose of gravity has hit residential-property markets around the world. According to The Economist’s latest round-up, year-on-year prices are now falling in 12 of the 21 countries we track; in five of the other nine, prices are rising at a slower rate than they were a year ago.
Earthbound prices are returning many markets to “fair value”, defined as the long-run average ratio of house prices to disposable income and to rents. Housing is now around or below its fair value in eight countries. But reaching this mark does not mean prices will stop falling. After dropping by a third from their 2006 peak, prices in America now stand at 19% below fair value. The bottom of the market is close, however. The month-on-month Case-Shiller index of 20 cities increased for the fourth consecutive time in May, by 0.9%. Housing sales are picking up, although they remain below their long-run average, and the number of mortgages in foreclosure has fallen to its lowest level for three years. Financing is cheap, too: real 30-year fixed mortgage rates are at 30-year lows.

Other markets are still in free fall. Property prices in Ireland, at the foot of our table since April 2010, continue to plummet. They have now halved in value, after a fivefold rise between 1995 and their 2007 peak. The pace of decline in Spain, a fellow euro-zone sufferer, quickened in the second quarter. Although prices have already fallen by 23% from their peak, they remain well above fair value and the dire state of the Spanish economy, where a quarter of the workforce is unemployed, suggests that prices will keep diving.
Such drops would be more precipitous still were it not for the cushioning effects of ultra-low interest rates on European mortgage-holders. Prices in Britain fell by 0.7% in July, compared with the previous month, taking the total fall since the market peak to a rather modest 13.1%. With many lenders hanging back, sales remain subdued, at around half their 2007 level. The market is heavily reliant on London and the south-east: 47% of residential transactions took place in this part of the country in 2011.
Once-wild Asian markets are also muted. Prices in Hong Kong are now rising at a manageable 6% a year, as opposed to 28% a year just 12 months ago. Price rises in Singapore have slowed in recent months, too. Our index of Chinese prices fell year on year for the fifth month in a row in June. (That may not last, however: prices of new homes rose month on month in 25 of the 70 cities tracked and there is plenty of room for growth.)
Explore and compare global housing data over time with our interactive house-price tool
Indeed, so subdued is residential property at the moment that the list of the world’s bounciest housing markets has an unusually Germanic flavour. Austrian house-price rises are the only ones in double digits; the Swiss market sits in fourth place. As for Germany itself, prices there have increased by a ground-breaking 5.7% over the past two years after nearly two decades of stagnation. Hopes that a German property boom will unleash spending are slight, however. German regulators are watchful, and owner-occupation in the country stands at just 46%, so any rise in prices has a fainter “wealth effect” than in Britain, say, where 66% of homes are owner-occupied.
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Minimum wage-Housing chart (30.3.12)


Minimum wage
Country
Minimum wage
Gross annual wage
(Intl. dollars)[1][2]
% of 2009 GDP
per capita[1][3]
Effective

N/A; varies according to the state and to the sector of industry; state governments set a separate minimum wage for agricultural workers[10]
N/A
N/A
N/A
4,330 Russian rubles per month; essentially an accounting reference for calculating transfer payments[10]
2,812
19
2008
R1,041 a month for farm workers in urban areas and R989 a month in rural areas; for domestic workers employed more than 27 hours per week it ranges from R1,067 a month to R1,167 a month[10]
2,471
24
N/A
800 Lithuanian litas per month[32]
5,759
35
January 1, 2008

HK$3,740 per month for foreign domestic workers[10]; bill for city-wide minimum wage introduced[31] (see Minimum wage in Hong Kong)
7,932
19
N/A

270 Bulgarian leva per month[14]
2,880
33
January 1, 2009

€9.22 per hour; €1,398.37 per month for 151.67 hours worked (or 7 hours every weekday of the month)[26]
17,701[27]
53
December 23, 2011

NZ$13.50 per hour for workers 18 years old or older, and NZ$10.80 per hour for those aged 16 or 17 or in training.[45]
17,440[9]
62
April 1, 2012

570.00 Australian dollars per week; set federally by the Fair Work Australia[8]
20,027
52
July 1, 2010

none; wages normally fall within a national scale negotiated by labor, employers, and local governments[10]
—
—
—

€1,387.49 a month for workers 21 years of age and over; €1,424.31 a month for workers 21 and a half years of age, with six months of service; €1,440.67 a month for workers 22 years of age, with 12 months of service; coupled with extensive social benefits[10][11]
18,813
53
October 1, 2008

not in law; however, the law requires all employers, including nonunionized ones, to pay minimum wages   agreed to in collective bargaining agreements; almost all workers are covered under such arrangements[10]
—
—
—

£6.08 per hour (aged 21 and older), £4.98 per hour (aged 18–20) or £3.68 per hour (under 18 and finished compulsory education), £2.60 per hour (apprentices)[66]
18,830[9]
66
October 1, 2011

none, nationally; set locally according to standards laid out by the central government[10] (see Minimum wage law#People's Republic of China)
—
—
—

NT$17,280 a month; NT$104 per hour[10]
12,175
38
July 1, 2007

€633.30 per payment.[59] Note that the monthly minimum wage is paid 14 times a year in Spain, i.e. in order to compare with other countries the monthly figure to consider should be 633.30*14/12=738.85, more than a 16% over.
11,426[29]
39
January 1, 2010

none; minimum wages are negotiated in various collectively bargained agreements and applied automatically to all employees in those occupations, regardless of union membership; while the agreements can be either industry- or sector-wide, and in some cases firm-specific, the minimum wage levels are occupation-specific[10]
—
—
—

none by law; instead set through collective bargaining agreements on a sector-by-sector basis[10]
—
—
—

approximately 47.5 percent of the average wage, or 3,850 Israeli new sheqel per month[10][35]
12,493[36]
44
July 1, 2008

N/A[10]
N/A
N/A
N/A

4,580 South Korean won per hour; reviewed annually[40]
9,988[9]
42
January 1, 2012







none; however, a majority of the voluntary collective bargaining agreements contain clauses on minimum compensation, ranging from 2,200 to 4,200 francs per month for unskilled workers and from 2,800 to 5,300 francs per month for skilled employees[10]
15,457
38
N/A

set by each province and territory; ranges from C$9.00 to C$11.00 per hour (see List of minimum wages in Canada)
16,710[6]
44
November 1, 2001

none, nationally; instead, negotiated between unions and employer associations; 103.15 kroner per hour, according to statistics released on March 1, 2009[4]
23,573[23]
66
2009







none, nationally; 350 Malaysian ringgit per month for plantation workers; raised to 700 ringgit by productivity incentives and bonuses[10]
4,735
34
N/A

€1,398.60 per month, €322.75 per week and €64.55 per day for persons 23 and older; between 30-85% of this amount for persons aged 15–22[44]
19,335
48
July 1, 2009

€350 a month [28]
11,454[29]
38
January 1, 2008

the federal minimum wage is US$7.25 per hour; states may also set a minimum, in which case the higher of the two is controlling[67] (see Minimum wage in the United States, List of U.S. minimum wages)
15,080[9]
33
July 24, 2009

none; instead, nationwide collective bargaining agreements set minimum wages by job classification for each industry; the accepted unofficial annual minimum wage is €12,000 to €14,000[4]
14,101
37
N/A

€485 per month (14 months) for full-time workers, rural workers, and domestic employees ages 18 and older[10][54]
9,756[29]
40
January 1, 2011

none, except for construction workers, electrical workers, janitors, roofers, painters, and letter carriers; set by collective bargaining agreements in other sectors of the economy and enforceable by law[10]
—
—
—

€8.65 per hour[33]
18,965[34]
49
July 1, 2007

ranges from 618 Japanese yen to 739 yen per hour; set on a prefectural and industry basis[10]
11,254[9]
35
N/A






















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Owner's nightmare, realtor's fantasy

A. Srivathsan

Home buyers, affected by the court''s decision on land acquisition in Noida Extension, take out a peace march in Noida in July, 2011. File photo
PTI Home buyers, affected by the court''s decision on land acquisition in Noida Extension, take out a peace march in Noida in July, 2011. File photo
By not resolving the definition of ‘public purpose,' the Land Acquisition Bill keeps the door open for misuse
It has taken more than 110 years for the government to draft a new Land Acquisition, Rehabilitation and Resettlement Bill. But despite mounting evidence of widespread misuse of government authority in taking over farm land and the increasing protests against the legal ambiguity that abets such exploitative practices, the revised legislation remains dubiously vague on these counts.
The most contentious issue in land acquisition is the definition of public purpose, and the Bill does not address this. Worse, the provisions of the new bill legitimise land acquisition for-profit private companies. In this context, the Parliamentary Standing Committee, which recently reviewed the Bill and stakeholders' views, was right in asking the government to tighten the public purpose definition.
The government's indifference to public concern at these issues becomes clear when you compare the clause in the Bill pertaining to land acquisition for private companies with the one in the existing archaic Land Acquisition Act 1894. Under Section 3.za (vii) of the Bill, “acquiring land for private companies for the production of goods for public or provision of public services,” would constitute legitimate public use. This dismal vagueness is no different from what is in the 1894 Act. Section 40 (1b) enables acquisition for companies for the purpose of “construction of some work and that such work is likely to prove useful to the public.”
To argue, as the Ministry of Rural Development did, that the compensation and the process of acquisition are more important than ‘who acquires' is simplistic, and overlooks the social and political reasoning that underpins the legislation. Unlike a voluntary property transaction where there is a wilful buyer and a wilful seller, when the government acquires land using state powers, the transaction is by its very nature forced, and there is only a wilful buyer. The political argument that would persuade — or when persuasion fails, compel — an unwilling seller to part with his or her property is the pre-eminence of societal good over individual rights, and the need to sacrifice private property rights for larger public gain. Acquiring land to lay roads or erect other infrastructure facilities can present a convincing case with respect to direct public use, but acquiring land for private commercial development does not.
State & commercial development
One of the most cited property acquisition cases, Kelo v. City of New London, is an instructive example of the pitfalls involved in the state acquiring land for private commercial development. The city of New London in the U.S., which was economically struggling, encouraged the multinational pharmaceutical company Pfizer to build a $300 million research facility in the neighbourhood of Fort Trumbull. It presented this project as the key to the region's economic rejuvenation. In 2000, the City Council decided to redevelop 90 acres around the Pfizer facility to promote the revitalisation of the area and to meet the demands of the company for “a new employee housing and overall redevelopment of the Fort Trumbull area.” The redevelopment proposal included the construction of a waterfront hotel, a conference centre, a marina for tourist and commercial vessels, and 80 high-end residences. The existing properties were to be acquired and handed over to a private economic redevelopment corporation for this purpose.
Susette Kelo and other residents, whose properties were earmarked for acquisition, challenged the public-use content of the project. In 2005, the U.S. Supreme Court, in a 5-4 verdict, ruled in favour of the City of New London and the residents were evicted. Public outcry followed, and as many as 43 States subsequently amended their legislation to limit the takeover of private property for commercial development.
The story did not end there. The Fort Turnbull redevelopment project failed to take off. In 2009, as its tax incentive period was coming to a close, Pfizer wound up and left the city. Even five years after the residents were evicted there was no construction at the site.
In Noida
Closer home, the Supreme Court in 2011 scrapped the acquisition of 156 hectares in Greater Noida to build luxury flats. It sternly rejected the ‘pubic purpose' argument put forth in defence, and cautioned that taking land “from one side and [giving] it to the other” is a “development of one section of society only”, and “has to go” .
Even the National Advisory Council's Working Group on Land Acquisition, Resettlement and Rehabilitation, after deliberating on whether land can be acquired for private companies or not, decided against it, with two members against one.
In Australia
Australia has an excellent land records system that keeps track of transactions and provides all valuation information. Fairly accurate values of land marked for acquisition can be obtained and the compensation amount payable can be computed easily. Despite this, States such as New South Wales, for good reason, place restrictions on land acquisition. While compulsory purchase of land for a variety of public purposes is allowed, forced takeover for resale is not. Whenever there has been a dispute, as in the case of R&R Fazzolari Pty Ltd v. Parramatta City Council (2009), the High Court of Australia has upheld the restrictions.
The United Progressive Alliance government at the Centre will do well to ask why even such developed countries seek to restrain forced acquisition for private commercial development. The interference of the New South Wales Parliament to amend the legislation in order to bypass such restrictions to favour private development, and the constitutional challenges it had thrown up, constitutes another story.
Taking the compensation route to justify acquisition for private purpose has other problems. The proposed Bill makes no distinction between land acquired for clear-cut public use, and land forcibly taken over for private enterprises. It proposes that the amount of compensation payable for all kinds of land acquisition should be the same. This is in contrast to what legal scholars such as Richard Epstein have stated. The amount of compensation payable must be proportionate to the degree of public interest. More compensation for acquisition involving a low degree of public interest is one of the legal positions. The proposed bill is oblivious to these settled legal positions.
Arbitrariness of compensation
At a more fundamental level, cash compensation always involves ‘a degree of arbitrariness', and seldom includes benefits that would come after acquisition. The concept of fair market value, as Thomas Merrill, a well-known legal expert on Eminent Domain, observed, “is essentially a fiction in the context of takings of property”. In countries such as India, where land records are dismally managed and property transactions are often undervalued, it is worse than fiction. Registered values are way off the market value, and post-acquisition benefits are hardly taken into account. Realising this, the proposed Bill recommends, though randomly, that the registered values of land identified for acquisition be increased twofold to arrive at the compensation amount. Rural properties were to get six times the maximum registered value, but it has now been reduced to four.
If commercial projects are held up because of property title issues, they can be addressed on a case-to-case basis. This is no excuse to blur the distinction between the private and the public purpose of land acquisition. On the other hand, what is needed is the ‘enhancement of public-use determinants and rigorous tests to validate them'.
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Published: May 26, 2012 15:12 IST 

Rentals through the roof

Sujay Mehdudia

Precious office space: The Gurgaon skyline. Photo: Kamal Narang
The Hindu Precious office space: The Gurgaon skyline. Photo: Kamal Narang
NCR and Mumbai are among the costliest office locations today
In the latest Asia Pacific office market report by Cushman & Wakefield – that compared the rental values of Central Business Districts (CBD) across Asia Pacific – National Capital Region (NCR) and Mumbai were ranked the fifth and the tenth most expensive location respectively by the CBD.
As has been the trend, expensive office destinations in Hong Kong, Singapore and Tokyo continued to hold the top three positions respectively. Among a total of 25 cities across Asia – Bangalore and NCR saw the highest value rise in office market rentals in the first quarter of 2012. Bangalore CBD recorded an increase of 18 per cent while NCR CBD recorded an increase of approximately 14 per cent over the previous quarter ended December. Jakarta (11.4 per cent), Shenzhen (7.5 per cent) and Adelaide (6.4 per cent) completed the top five fastest growing office rentals.
Ravi Ahuja, executive director, Cushman & Wakefield India, said CBD locations across most cities of Asia, particularly in Hong Kong, had witnessed a significant run up in rental and capital values over the last year. “There has been a clear preference for cost efficient locations which is the reason why traditional high cost locations have seen a slight correction,” he remarked. 
Similarly, according to latest RICS India Commercial Property Survey, an easing in global strains has led respondents to upgrade their expectation in both the occupier and investment markets in the country.
With real estate clearly feeling the effects of the softer macro environment in the previous two quarters, the market is now witnessing improved results across several indicators, which could signal the beginning of a turnaround.
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NEW DELHI, May 26, 2012
http://www.thehindu.com/todays-paper/tp-national/article3457684.ece

Housing prices on the rise


P. Sunderarajan

If anyone had doubts about Chennai being a boom city, the National Housing Bank's Residex index, which has been tracking housing prices in different parts of the country since 2007, puts them to rest. The index for the city leapt up by 39.5 per cent in the last quarter [January to March 2012] of 2011-12 compared to the same period last year [January-March 2011]. This is the highest jump for any city for the period.
In Bangalore, in contrast, the index for the same period has gone up by just 4.5 per cent, while in Hyderabad the growth has been even slower at 3.6 per cent. In Kochi, the only other city in South India to be tracked, the growth has been negative: minus 16 per cent, the lowest for any of the 15 cities which are being monitored across the country on a regular basis.
Delhi clocked a robust 32.5 per cent growth, the second best, followed by Pune [22.3 per cent], Bhopal [22.15] per cent, Jaipur [19.4 per cent] and Surat [12.4 per cent].
Mumbai registered a growth of 8.6 per cent while Kolkata had a slump, with the index registering a negative return of minus 9.5 per cent.
Lucknow recorded a growth of 4.5 per cent, while Patna had a slump, registering a negative growth of minus 13.4 per cent. In Ahmedabad, the index has fallen marginally at minus 0.6 per cent.
Releasing the latest data for January-March 2012, the National Housing Bank said that from January 2012 the NHB-Residex has been expanded to cover Bhubaneswar, Guwahati, Ludhiana, Vijayawada and Indore, taking the total number to 20. Interestingly, all five cities have shown a robust growth in price over the past five years. In Indore, the prices have more than doubled – from the base of 100 in 2007 to 208 during January-March 2012, while they have increased by 84 per cent in Vijayawada, 63 per cent in Ludhiana, 61 per cent in Bhubaneswar and 57 per cent in Guwahati.
In contrast, only nine out the 15 cities crossed the 50 per cent mark during the five-year period: Chennai [204 per cent], Faridabad on the outskirts of Delhi [117 per cent], Bhopal [104 per cent], Kolkata [91 per cent], Mumbai [90 per cent], Pune [81 per cent], Delhi [68 per cent] and Ahmedabad and Lucknow [64 per cent each]. Of the rest, Surat and Patna had a positive growth of 44 per cent and 29 per cent respectively, Bangalore had a negative return of minus 8 per cent, Hyderabad minus 14 per cent, Jaipur minus 20 per cent, and Kochi minus 28 per cent.
The NHB launched the index in 2007 with a view to bringing greater uniformity and standardisation as well as greater transparency in the valuation of properties across the industry.


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http://www.thehindu.com/news/national/article3474223.ece

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Published: May 31, 2012

Airport concessionaire made a fortune out of land acquired at Rs. 4 per square yard from Delhi farmers

Gaurav Vivek Bhatnagar
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Farmers whose land was acquired at a meagre Rs. 4 per square yard in South West Delhi way back in 1955 in the name of undertaking planned development have now seized upon the opportunity raised by the report of the Comptroller and Auditor General of India — on the loss caused to the exchequer by leasing away of some of this very land by Indira Gandhi International Airport concessionaire Delhi International Airports Limited to commercial enterprises — to demand higher compensation.
For the farmers of Mahipalpur, Nangal Dewat and Rangpuri villages near the airport, many of whom have over the last nearly 57 years been fighting legal battles for enhanced compensation, the report was a godsend.
“I was pursuing the land acquisition case and the airport privatisation issue for getting higher compensation for the farmers through the Supreme Court. But when this CAG report came out, I decided to share the documents which had been procured by me from the Ministry of Civil Aviation and the Delhi government,” said Colonel (retd.) Devender Sehrawat, who had filed applications under the Right to Information Act on these issues.
Col. Sehrawat, who is also secretary of the Delhi Gramin Samaj and co-convener of the Kissan Mahasangh, a federation of farmers' organisations, said the CAG draft report had also noted that the government exchequer had incurred a loss of Rs.24,000 crore due to manipulation in the original agreement and undue benefit worth Rs.1,63,557 were granted to the Delhi International Airports Limited through transfer of land.
Thus, he said, as per the CAG, the loss was around Rs. 34 crore per acre — as 4799 acres of land was transferred to the concessionaire — and this worked out to a rate of nearly Rs.70,000 per square yard. However, Col. Sehrawat said the farmers had only been paid a fraction of this for their land.
With 13 hotel projects envisioned on the airport land, the Kissan Mahasangh is now viewing the land transfer deal as a bonanza for the concessionaire and has urged the Civil Aviation Ministry to adequately compensate the farmers for their land and initiate resettlement and rehabilitation measures.
Col. Sehrawat, who had gathered the information to seek higher compensation for the farmers through the Supreme Court, decided to come out with the information in hand following the CAG report.
As per the information accessed by him — and copies of which are with The Hindu — under the Operation, Management Development Agreement (OMDA) between DIAL and the Airports Authority of India, the concessionaire was allotted 4,799 acres on Rs.100 annual lease rent for 60 years.
Even for commercial use, 190 acres were allowed to DIAL at a price of Rs.31 lakh while in the original contract, out of the total of 4,799 acres, only 240 acres or 5 per cent was earmarked for commercial use.
The transfer of land to the airport concessionaire took place after the matter of land use was considered by the Empowered Group of Ministers (EGoM) in June 2005.
The EGoM had then directed the Civil Aviation Ministry to take the opinion of the Attorney-General on “use of airport land and limit on commercial use of land at airport complex by the JVC [joint venture company]” and legality of permitting the proposed concessionaire to develop the airport for commercial uses unrelated to the airport under the provisions of the Airports Authority of India Act, 1994.
Giving his opinion on the issue on June 17, 2005, the then Attorney-General Milon K. Banerji, had said: “It would not be lawfully permissible for the AAI to grant a lease to any person in respect of any airport property for the purposes of commercial activities listed in Schedule 19 of the draft OMDA like building of golf courses, business parks, hi-tech parks, commercial offices, leisure facilities, commercial arcades, sports complexes, shopping complexes and convention centres etc. unconnected with the scope of airport development and management, including provision of passenger facilities and amenities.”
He had further noted that “if it was considered necessary to permit lease of land to the concessionaire for undertaking commercial activities that go beyond the provision of passenger facilities at the airport, then it must be done only after an amendment was made to the AAI Act, 1994.”
The EGoM  had accordingly decided in its meeting held on June 22, 2005, that all commercial activities unrelated to the airport included in Schedule 19 of the draft OMDA be omitted from the final bid document. Thereafter two major Indian real estate firms — DLF Limited and Hiranandani Properties — who had initially shown considerable interest in the proposed airport modernisation projects withdrew from the bidding process.
But the decision on the transfer of land for commercial activities was later reversed by the Civil Aviation Ministry to the advantage of the concessionaire.
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http://www.economist.com/node/21556584/print

Property in Mumbai

The minimum city

Is the world’s weirdest property market strangling the city that hosts it?

Jun 9th 2012 | MUMBAI | from the print edition


IN THE minds of Mumbai residents, whether they sleep on streets or silk sheets, property developers loom large. In films and novels, skyscraper-erecting baddies bring wealth and renewal—and often misery and violence. Yet in reality, buildings do not loom as large as you might think in Mumbai.
Take the view from one of the towers clustered in midtown, owned by Abhisheck Lodha, a razor-sharp American-educated tycoon making billion-dollar bets on transforming the city. The odd skyscraper erupts out of low-rise clutter. There are pockets of tall buildings on old mill land and along the city’s west coast. But much of Mumbai—supposedly a rival to Hong Kong, London and New York—looks flat and knackered. To the east the vista is of derelict factories, rotting low-rise rent-controlled buildings and the odd slum. To the south lies the ossifying old city centre, with its ageing port, colonial showpieces and Soviet-style offices and bureaucrats’ flats. The nearest green spaces are a racecourse and a club on whose ample lawn members feed stray dogs buttered toast.
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Mumbai has perhaps the most extreme statistics of any metropolis. Its land mass is small, stuck like a crooked blade into the Arabian Sea. It has poor transport links, so people who work in the city live near it. That in turn means it has the highest population density of any big city. But it is also low-rise. Panama City has a taller skyline.


The result is tiny living spaces of 4.5 square metres (48 square feet) per person, compared with 34 square metres in Shanghai. And prices are high. Mid-town flats cost $1m-3m. The average price of a 1,000-square-foot pad in the city is perhaps $250,000, or 90 times GDP per head. With flats out of reach, the share of people in slums has risen to perhaps 60%, compared with 20% in Rio de Janeiro and Delhi. Of the rest, about half live in rent-controlled digs, sometimes propped up by wooden staves, or flats for public-sector employees.
Other cities confined by the sea, from New York to Hong Kong, have soared upwards. Many think Mumbai has had an epic building boom. There has been dense activity on old mill land and in some suburbs where rules are laxer. But the city has 31 buildings over 100 metres high, versus more than 200 in Shanghai and more than 500 in Hong Kong and New York. Perhaps $10 billion-20 billion has been spent on land and building in the past decade, not much given that the population has risen to 12m. At the current rate it will take over six decades to build everyone a home.
Much of the building has targeted the well-off with often magnificent complexes. But are there enough wealthy people? “It’s hard to find homeless millionaires,” says a developer. At the current pace of sales it would take three years to clear the stock of 28,000-odd unsold flats in the city which are complete or being built, according to Ashutosh Limaye, of Jones Lang LaSalle, a property-services firm. Pankaj Kapoor, of Liases Foras, a research firm, puts the figures at 38,000 and four years.
So inefficient and cartelised is the market that prices are still rising, despite the overhang, a weak economy and the debt troubles of some builders. (Listed Indian firms which make public their accounts, and are about a fifth of the industry, are often in poor shape.) One builder, from his private drinking den in the city’s north, is full of foreboding about his trade. “All the bad karma is coming back. All the Porsches and Lamborghinis, all the bodyguards and security details; it’s all coming back.”
Flat-packing humans
Three things explain Mumbai’s predicament: regulations, financing and graft. The city, reckons Edward Glaeser of Harvard University, has “some of the most extreme land-use restrictions in the developing world”, designed to deter new migrants but which have backfired. In much of the city the ratio of a new building’s floor space to the plot it is built on is capped at 1.3 times (compared with over five times in New York and Hong Kong). Rules inhibit new construction near the coast. Because of the thicket of red tape and litigation, only 3% of 15,000 rent-controlled buildings have been redeveloped, says Subodh Kumar, who retired as Mumbai’s top official in April. Bits of idle land, including the old port, lie stranded because of vested interests. Rare free plots can command staggering prices.
Finance also plays a role. Mortgages are common but banks cannot fund land purchases. Developers finance construction by forcing customers to pay upfront, often without redress if the project stalls. The industry says it has cleaned up its act and attracted institutional investors. Still, it is not unusual to make an under-the-table cash payment of at least 20% in addition to the stated price. The limited role of banks protects financial stability, but has other costs. If builders are nervous about demand or short of cash, they can halt construction, having already got customers’ cash. And non-bank finance is not always kosher. One fraud expert reckons 80% of money-laundering in India uses property.
In Navi (or “New”) Mumbai, across the bay from the city, lots of newish flats have empty balconies and no air-conditioning units—clues they are vacant. Local agents say they are held as investments. Without banks breathing down their necks, developers and owners sit on empty flats, rather than cut prices; this is a housing market where more borrowing might be helpful. And if illicit money is involved, there is little impulse to sell since the only thing it can easily be recycled into is more real estate.
Corruption adds a final twist. Many firms say times have changed and things are above board. But it is clear that some builders still bribe officials and politicians. The prizes range from being allowed bigger balconies to the support of politicians with “vote banks” in slums being redeveloped. Mr Kumar tried to clean things up after finding that “builders and architects worked the system”. Another official says, “politicians and all kinds of manipulators are made sleeping partners” in projects. One boss says the height rules are “the biggest mafia scam in India” and are a vital source of funding for political parties.
The only way is up
The textbook solution for Mumbai is better transport and many more high-rises, to increase the supply of flats and lower prices. It might help if the city had more political autonomy, as Delhi does. (At the moment Mumbai is part of Maharashtra, a giant, partly rural state.) That is some way off. Still, there are rays of hope. The first overhead metro line, in the north of the city, and a short stretch of monorail running north-to-south, should open in a couple of years. Ajay Piramal, who began the redevelopment of mill land two decades ago and who is re-entering the industry, says graft has fallen since Mr Kumar’s crackdown. Officials say they are trying to spur pockets of redevelopment. And a new national property regulator is in the works.
Yet, says P.K. Das, an urban planner, the system is just too rotten to allow a Hong Kong-style building frenzy. The industry is “feudal”, has “subverted” the law and may need to be nationalised. While the city needs more skyscrapers, an unregulated building spree would be counterproductive unless the state gets cleaner, and better at planning and providing infrastructure such as roads, sewage and water. Already many feel the city is falling behind Delhi and Bangalore.
Great cities are not built by prudes—New York had its share of crooks and fat cats once. But Mumbai is already four times more populous than New York in 1900, and is in a hurry. The conspiracy theory, held by the man on the street and captains of industry, is that transport projects are delayed and arcane rules survive because a small elite finds the status quo lucrative, even while the city’s development is strangled. If Mumbai is to become a global hub and offer more people a decent life, its politicians, officials and builders must prove the conspiracy theory wrong.

_________________________

http://www.ndtv.com/article/india/relief-in-every-window-but-global-worry-too-234684

Relief in every window, but global worry too

Updated: June 22, 2012 13:59 IST


Relief in every window, but global worry too


In the ramshackle apartment blocks and sooty concrete homes that line the dusty roads of urban India, there is a new status symbol on proud display. An air-conditioner has become a sign of middle-class status in developing nations, a must-have dowry item.

It is cheaper than a car, and arguably more life-changing in steamy regions, where cooling can make it easier for a child to study or a worker to sleep.

But as air-conditioners sprout from windows and storefronts across the world, scientists are becoming increasingly alarmed about the impact of the gases on which they run. All are potent agents of global warming.

Air-conditioning sales are growing 20 percent a year in China and India, as middle classes grow, units become more affordable and temperatures rise with climate change. The potential cooling demands of upwardly mobile Mumbai, India, alone have been estimated to be a quarter of those of the United States.

Air-conditioning gases are regulated primarily though a 1987 treaty called the Montreal Protocol, created to protect the ozone layer. It has reduced damage to that vital shield, which blocks cancer-causing ultraviolet rays, by mandating the use of progressively more benign gases. The oldest CFC coolants, which are highly damaging to the ozone layer, have been largely eliminated from use; and the newest ones, used widely in industrialized nations, have little or no effect on it.

But these gases have an impact the ozone treaty largely ignores. Pound for pound, they contribute to global warming thousands of times more than does carbon dioxide, the standard greenhouse gas.

The leading scientists in the field have just calculated that if all the equipment entering the world market uses the newest gases currently employed in air-conditioners, up to 27 percent of all global warming will be attributable to those gases by 2050.

So the therapy to cure one global environmental disaster is now seeding another. "There is precious little time to do something, to act," said Stephen O. Andersen, the co-chairman of the treaty's technical and economic advisory panel.

The numbers are all moving in the wrong direction.

Atmospheric concentrations of the gases that replaced CFCs, known as HCFCs, which are mildly damaging to the ozone, are still rising rapidly at a time when many scientists anticipated they should have been falling as the treaty is phasing them out. The levels of these gases, the mainstay of booming air-conditioning sectors in the developing world, have more than doubled in the past two decades to record highs, according to the National Oceanic and Atmospheric Administration.

And concentrations of the newer, ozone-friendly gases are also rising meteorically, because industrialized countries began switching to them a decade ago. New room air-conditioners in the United States now use an HFC coolant called 410a, labeled "environmentally friendly" because it spares the ozone. But its warming effect is 2,100 times that of carbon dioxide. And the treaty cannot control the rise of these coolants because it regulates only ozone-depleting gases.

The treaty timetable requires dozens of developing countries, including China and India, to also begin switching next year from HCFCs to gases with less impact on the ozone. But the United States and other wealthy nations are prodding them to choose ones that do not warm the planet. This week in Rio de Janeiro, Secretary of State Hillary Rodham Clinton is attending the United Nations Conference on Sustainable Development, also known as Rio+20, where proposals to gradually eliminate HFCs for their warming effect are on the provisional agenda.

But she faces resistance because the United States is essentially telling the other nations to do what it has not: to leapfrog this generation of coolants. The trouble is, there are currently no readily available commercial ozone-friendly alternatives for air-conditioners that do not also have a strong warming effect - though there are many on the horizon.

Nearly all chemical and air-conditioning companies - including DuPont, the American chemical giant, and Daiken, one of Japan's leading appliance manufacturers - have developed air-conditioning appliances and gases that do not contribute to global warming. Companies have even erected factories to produce them.

But these products require regulatory approvals before they can be sold, and the development of new safety standards, because the gases in them are often flammable or toxic. And with profits booming from current cooling systems and no effective regulation of HFCs, there is little incentive for countries or companies to move the new designs to market.

"There are no good solutions right now - that's why countries are grappling, tapping in the dark," said Rajendra Shende, the recently retired head of the Paris-based United Nations ozone program, who now  runs the Terre Policy Center in Pune, India.

An Unanticipated Problem

The 25-year-old Montreal Protocol is widely regarded as the most successful environmental treaty ever, essentially eliminating the use of CFC coolants, which are highly damaging to the ozone layer. Under its terms, wealthier countries shift away from each harmful gas first, and developing countries follow a decade or more later so that replacement technologies can be perfected and fall in price.

Concentrations of CFC-12, which had been growing rapidly since the 1960s, have tapered off since 2003, thanks to the treaty's strict phaseout schedule. In 2006, NASA scientists concluded that the ozone layer was on the mend.

But that sense of victory has been eclipsed by the potentially disastrous growth in emissions from the newer air-conditioning gases. While a healthier ozone layer itself leads to some warming, far more warming results from the tendency of these coolant gases to reflect back heat radiating off the Earth.

When the treaty set its rules in the mid-1980s, global warming was poorly understood, the cooling industry was anchored in the West, and demand for cooling was minuscule in developing nations.

That has clearly changed.

Jayshree Punjabi, a 40-year-old from Surat, was shopping for an air-conditioner at Vijay Sales in Mumbai on a recent afternoon. She bought her first one 10 years ago and now has three. "Now almost every home in Surat has more than one," she said. "The children see them on television and demand them."

Refrigeration is also essential for these countries' shifting food supplies. "When I was a kid in Delhi, veggies came from vendors on the street; now they all come from the supermarket," said Atul Bagai, an Indian citizen who is the United Nations ozone program's coordinator for South Asia.

In 2011, 55 percent of new air-conditioning units were sold in the Asia Pacific region, and the industry's production has moved there. Last year, China built more than 70 percent of the world's household air-conditioners, for domestic use and export. The most common coolant gas is HCFC-22. In 2010, China produced about seven times the amount of that gas as the United States.

With inexpensive HCFC-22 from Asia flooding the market, efforts to curb or eliminate its use have been undercut, even in the United States. For example, although American law now forbids the sale of new air-conditioners containing HCFC, stores have started selling empty components that can be filled with the cheap gas after installation, enabling its continued use.

Trying to Adapt the Treaty
During a four-day meeting in Montreal in April, about 200 representatives attending the protocol's executive committee meeting clashed over how to adapt to the changing circumstances. Should they be concerned with ozone protection, climate change or both?

As developing countries submitted plans to reduce reliance on HCFCs in order to win United Nations financing for the transition, delegations from richer nations rejected proposals that relied on HFCs, because of their warming effect. Canada raised a proposal that countries should use only compounds with low impact on global warming.

Phasing out HFCs by incorporating them into the treaty is one of the most cost-effective ways to reduce global warming, said Durwood Zaelke, president of the Institute for Governance and Sustainable Development.

But India, China and Brazil object that this could slow development and cost too much. All the acceptable substitutes under development for air-conditioners are either under patent, demand new equipment or require extensive new regulation and testing procedures. "This appears simple, but it's not standard, and it imposes a new burden," said Wang Yong, of the Chinese delegation.

Said Suely Carvalho, the Brazilian-born chief of the United Nations Development Program's Montreal Protocol and Chemicals Unit: "The developing countries are already struggling to phase out, and now you tell them, 'Don't do what we did.' You can see why they're upset."

Commercial interests foster the stalemate. Though the protocol aggressively reduces the use of HCFC-22 for cooling, it restricts production on a slower, more lenient timetable, and as a result, output has grown more than 60 percent in the past decade. Even in the United States, HCFC-22 is still profitably manufactured for use in older appliances, export and a few other industrial purposes that do not create significant emissions, like making Teflon.

Politically influential manufacturers like Gujarat Fluorochemicals in India, Zhejiang Dongyang Chemical Company in China and Quimbasicos in Mexico (of which Honeywell owns 49 percent) have prospered by producing the coolant. They even receive lucrative subsidies from the United Nations for making it.

For their part, manufacturers are reluctant to hurry to market new technologies that are better for the climate, until they get a stronger signal of which ones countries will adopt, said Mack McFarland, an atmospheric scientist with DuPont.
Othmar Schwank, a Swiss environmental consultant who has advised the United Nations, said: "In many countries, these targets will be very difficult to achieve. With appliances growing in India and China, everyone is making money, so they want to delay this as much as possible."

Technologies Stalled

The Montreal Protocol originally gave the developing countries until 2040 to get rid of HCFCs, but its governing board accelerated that timetable in 2007. "We saw consumption going through the roof," said Markus Wypior, of the German government agency GIZ Proklima. The new schedule says developing countries must "stabilize" consumption of HCFCs by Jan. 1, and reduce it by 10 percent by 2015.

But the industry is growing so fast that meeting the targets, which were based on consumption in 2009-10, would now require a 40 percent reduction from current use in India. Many countries, including India, are trying to satisfy their 2013 mandate with one-time fixes that do not involve the cooling sector - for example, replacing HCFC-22 with another gas in making foam. Meeting the next reduction target, in 2015, is expected to be much harder.

In the meantime, the Montreal Protocol has started using its limited tools to prod developing countries moving from HCFCs toward climate-friendly solutions, offering a 25 percent bonus payment for plans that create less warming. Experts say that is not sufficient incentive for the drastic changes needed in machine design, servicing, manufacturing and regulation.

Promising technologies wait, stalled in the wings. In China and a few other countries, room air-conditioners using hydrocarbons - which cause little warming or ozone depletion - are already coming off assembly lines in small numbers but have not yet been approved for sale, in part because the chemicals are flammable.

Yet in Europe, refrigerators that cool with hydrocarbons have been in use for years, and some companies in the United States, like Pepsi and Ben and Jerry's, have recently converted in-store coolers from HFCs to hydrocarbons as part of sustainability plans.

In a statement, the United States Environmental Protection Agency said it had recently approved some of the new climate-friendly gases for car air-conditioning and refrigerators and is "evaluating additional alternatives for other air-conditioning applications," most notably a newer HFC variant called R32.

But when will they be on the market? Even small steps forward have been frustrated.

Last year the European Union began requiring automakers to use climate-friendly coolants in cars, considered a relatively simple transition. A chemical called 1234yf was deemed suitable, and the tiny amounts of coolant in car air-conditioners make flammability and high cost less of a deterrent.

But this year, the European Union postponed the plan: Chinese factories that make the compound are still in the process of obtaining government registration. The patent, owned by Honeywell, is being disputed. And the German government has still not finished safety testing.

Said Mr. Wypior, whose agency is trying to promote climate-friendly air-conditioning industries in India and China: "The technologies are available. They're well known. They're proven - though not at scale. So why aren't we moving?"

______________________________


New York Times
http://www.nytimes.com/2012/06/21/world/asia/global-demand-for-air-conditioning-forces-tough-environmental-choices.html?_r=1&emc=eta1&pagewanted=print

Relief in every window, but global worry too

Updated: June 22, 2012 13:59 IST

Relief in every window, but global worry too


In the ramshackle apartment blocks and sooty concrete homes that line the dusty roads of urban India, there is a new status symbol on proud display. An air-conditioner has become a sign of middle-class status in developing nations, a must-have dowry item. 

It is cheaper than a car, and arguably more life-changing in steamy regions, where cooling can make it easier for a child to study or a worker to sleep. 

But as air-conditioners sprout from windows and storefronts across the world, scientists are becoming increasingly alarmed about the impact of the gases on which they run. All are potent agents of global warming.
Air-conditioning sales are growing 20 percent a year in China and India, as middle classes grow, units become more affordable and temperatures rise with climate change. The potential cooling demands of upwardly mobile Mumbai, India, alone have been estimated to be a quarter of those of the United States.
Air-conditioning gases are regulated primarily though a 1987 treaty called the Montreal Protocol, created to protect the ozone layer. It has reduced damage to that vital shield, which blocks cancer-causing ultraviolet rays, by mandating the use of progressively more benign gases. The oldest CFC coolants, which are highly damaging to the ozone layer, have been largely eliminated from use; and the newest ones, used widely in industrialized nations, have little or no effect on it.

But these gases have an impact the ozone treaty largely ignores. Pound for pound, they contribute to global warming thousands of times more than does carbon dioxide, the standard greenhouse gas.

The leading scientists in the field have just calculated that if all the equipment entering the world market uses the newest gases currently employed in air-conditioners, up to 27 percent of all global warming will be attributable to those gases by 2050.


So the therapy to cure one global environmental disaster is now seeding another. "There is precious little time to do something, to act," said Stephen O. Andersen, the co-chairman of the treaty's technical and economic advisory panel.


The numbers are all moving in the wrong direction.


Atmospheric concentrations of the gases that replaced CFCs, known as HCFCs, which are mildly damaging to the ozone, are still rising rapidly at a time when many scientists anticipated they should have been falling as the treaty is phasing them out. The levels of these gases, the mainstay of booming air-conditioning sectors in the developing world, have more than doubled in the past two decades to record highs, according to the National Oceanic and Atmospheric Administration.


And concentrations of the newer, ozone-friendly gases are also rising meteorically, because industrialized countries began switching to them a decade ago. New room air-conditioners in the United States now use an HFC coolant called 410a, labeled "environmentally friendly" because it spares the ozone. But its warming effect is 2,100 times that of carbon dioxide. And the treaty cannot control the rise of these coolants because it regulates only ozone-depleting gases. 

The treaty timetable requires dozens of developing countries, including China and India, to also begin switching next year from HCFCs to gases with less impact on the ozone. But the United States and other wealthy nations are prodding them to choose ones that do not warm the planet. This week in Rio de Janeiro, Secretary of State Hillary Rodham Clinton is attending the United Nations Conference on Sustainable Development, also known as Rio+20, where proposals to gradually eliminate HFCs for their warming effect are on the provisional agenda.


But she faces resistance because the United States is essentially telling the other nations to do what it has not: to leapfrog this generation of coolants. The trouble is, there are currently no readily available commercial ozone-friendly alternatives for air-conditioners that do not also have a strong warming effect - though there are many on the horizon.


Nearly all chemical and air-conditioning companies - including DuPont, the American chemical giant, and Daiken, one of Japan's leading appliance manufacturers - have developed air-conditioning appliances and gases that do not contribute to global warming. Companies have even erected factories to produce them.


But these products require regulatory approvals before they can be sold, and the development of new safety standards, because the gases in them are often flammable or toxic. And with profits booming from current cooling systems and no effective regulation of HFCs, there is little incentive for countries or companies to move the new designs to market.


"There are no good solutions right now - that's why countries are grappling, tapping in the dark," said Rajendra Shende, the recently retired head of the Paris-based United Nations ozone program, who now  runs the Terre Policy Center in Pune, India. 

An Unanticipated Problem


The 25-year-old Montreal Protocol is widely regarded as the most successful environmental treaty ever, essentially eliminating the use of CFC coolants, which are highly damaging to the ozone layer. Under its terms, wealthier countries shift away from each harmful gas first, and developing countries follow a decade or more later so that replacement technologies can be perfected and fall in price.


Concentrations of CFC-12, which had been growing rapidly since the 1960s, have tapered off since 2003, thanks to the treaty's strict phaseout schedule. In 2006, NASA scientists concluded that the ozone layer was on the mend.

But that sense of victory has been eclipsed by the potentially disastrous growth in emissions from the newer air-conditioning gases. While a healthier ozone layer itself leads to some warming, far more warming results from the tendency of these coolant gases to reflect back heat radiating off the Earth.


When the treaty set its rules in the mid-1980s, global warming was poorly understood, the cooling industry was anchored in the West, and demand for cooling was minuscule in developing nations.


That has clearly changed.


Jayshree Punjabi, a 40-year-old from Surat, was shopping for an air-conditioner at Vijay Sales in Mumbai on a recent afternoon. She bought her first one 10 years ago and now has three. "Now almost every home in Surat has more than one," she said. "The children see them on television and demand them."


Refrigeration is also essential for these countries' shifting food supplies. "When I was a kid in Delhi, veggies came from vendors on the street; now they all come from the supermarket," said Atul Bagai, an Indian citizen who is the United Nations ozone program's coordinator for South Asia.


In 2011, 55 percent of new air-conditioning units were sold in the Asia Pacific region, and the industry's production has moved there. Last year, China built more than 70 percent of the world's household air-conditioners, for domestic use and export. The most common coolant gas is HCFC-22. In 2010, China produced about seven times the amount of that gas as the United States.


With inexpensive HCFC-22 from Asia flooding the market, efforts to curb or eliminate its use have been undercut, even in the United States. For example, although American law now forbids the sale of new air-conditioners containing HCFC, stores have started selling empty components that can be filled with the cheap gas after installation, enabling its continued use.

Trying to Adapt the Treaty

During a four-day meeting in Montreal in April, about 200 representatives attending the protocol's executive committee meeting clashed over how to adapt to the changing circumstances. Should they be concerned with ozone protection, climate change or both? 

As developing countries submitted plans to reduce reliance on HCFCs in order to win United Nations financing for the transition, delegations from richer nations rejected proposals that relied on HFCs, because of their warming effect. Canada raised a proposal that countries should use only compounds with low impact on global warming.


Phasing out HFCs by incorporating them into the treaty is one of the most cost-effective ways to reduce global warming, said Durwood Zaelke, president of the Institute for Governance and Sustainable Development.


But India, China and Brazil object that this could slow development and cost too much. All the acceptable substitutes under development for air-conditioners are either under patent, demand new equipment or require extensive new regulation and testing procedures. "This appears simple, but it's not standard, and it imposes a new burden," said Wang Yong, of the Chinese delegation.


Said Suely Carvalho, the Brazilian-born chief of the United Nations Development Program's Montreal Protocol and Chemicals Unit: "The developing countries are already struggling to phase out, and now you tell them, 'Don't do what we did.' You can see why they're upset." 

Commercial interests foster the stalemate. Though the protocol aggressively reduces the use of HCFC-22 for cooling, it restricts production on a slower, more lenient timetable, and as a result, output has grown more than 60 percent in the past decade. Even in the United States, HCFC-22 is still profitably manufactured for use in older appliances, export and a few other industrial purposes that do not create significant emissions, like making Teflon. 

Politically influential manufacturers like Gujarat Fluorochemicals in India, Zhejiang Dongyang Chemical Company in China and Quimbasicos in Mexico (of which Honeywell owns 49 percent) have prospered by producing the coolant. They even receive lucrative subsidies from the United Nations for making it.


For their part, manufacturers are reluctant to hurry to market new technologies that are better for the climate, until they get a stronger signal of which ones countries will adopt, said Mack McFarland, an atmospheric scientist with DuPont.

Othmar Schwank, a Swiss environmental consultant who has advised the United Nations, said: "In many countries, these targets will be very difficult to achieve. With appliances growing in India and China, everyone is making money, so they want to delay this as much as possible."


Technologies Stalled


The Montreal Protocol originally gave the developing countries until 2040 to get rid of HCFCs, but its governing board accelerated that timetable in 2007. "We saw consumption going through the roof," said Markus Wypior, of the German government agency GIZ Proklima. The new schedule says developing countries must "stabilize" consumption of HCFCs by Jan. 1, and reduce it by 10 percent by 2015.


But the industry is growing so fast that meeting the targets, which were based on consumption in 2009-10, would now require a 40 percent reduction from current use in India. Many countries, including India, are trying to satisfy their 2013 mandate with one-time fixes that do not involve the cooling sector - for example, replacing HCFC-22 with another gas in making foam. Meeting the next reduction target, in 2015, is expected to be much harder. 

In the meantime, the Montreal Protocol has started using its limited tools to prod developing countries moving from HCFCs toward climate-friendly solutions, offering a 25 percent bonus payment for plans that create less warming. Experts say that is not sufficient incentive for the drastic changes needed in machine design, servicing, manufacturing and regulation. 

Promising technologies wait, stalled in the wings. In China and a few other countries, room air-conditioners using hydrocarbons - which cause little warming or ozone depletion - are already coming off assembly lines in small numbers but have not yet been approved for sale, in part because the chemicals are flammable.


Yet in Europe, refrigerators that cool with hydrocarbons have been in use for years, and some companies in the United States, like Pepsi and Ben and Jerry's, have recently converted in-store coolers from HFCs to hydrocarbons as part of sustainability plans.


In a statement, the United States Environmental Protection Agency said it had recently approved some of the new climate-friendly gases for car air-conditioning and refrigerators and is "evaluating additional alternatives for other air-conditioning applications," most notably a newer HFC variant called R32.


But when will they be on the market? Even small steps forward have been frustrated.


Last year the European Union began requiring automakers to use climate-friendly coolants in cars, considered a relatively simple transition. A chemical called 1234yf was deemed suitable, and the tiny amounts of coolant in car air-conditioners make flammability and high cost less of a deterrent.

But this year, the European Union postponed the plan: Chinese factories that make the compound are still in the process of obtaining government registration. The patent, owned by Honeywell, is being disputed. And the German government has still not finished safety testing. 

Said Mr. Wypior, whose agency is trying to promote climate-friendly air-conditioning industries in India and China: "The technologies are available. They're well known. They're proven - though not at scale. So why aren't we moving?" 

 

_______________________

http://www.economist.com/node/21559655/print

The Economist

Air conditioning

Cool innovation

An upstart hopes to make rival cooling companies sweat

Jul 28th 2012 | NEW YORK | from the print edition

ON A hot July day in 1902, the world’s first air conditioner was switched on in Brooklyn. Since then, air conditioning has saved lives, raised productivity and made the American South liveable in the summer. Yet as it turns 110, critics fume that the technology cooks the planet even as it cools homes. As Stan Cox points out in his book, “Losing Our Cool: Uncomfortable Truths About Our Air-Conditioned World”, America uses more energy for air conditioning than Africa uses for everything. Enter Advantix Systems, a firm that makes air-conditioning systems that consume 30-50% less energy than conventional ones.
Many air conditioners work something like this. First, cool the air to well below the desired room temperature. Then, blow it over a metal plate to make the moisture in it condense (and rain on the heads of passers-by, if the cooler is in New York). Then, warm the dry air back up to the desired temperature.
Advantix’s “liquid desiccant” technology, by contrast, passes the air through a brine solution to dehumidify it, without the need to waste energy overcooling it. Its machines are especially effective in humid places, which is where much of the world’s growth is.

In this section
Advantix, which used to be known as DuCool, stumbled on the technology. It was founded in the 1980s by Israeli brothers who built ice rinks in the Middle East. They found that many coolers could not cope well with the humidity there, so they created ones that could. MatlinPatterson, a private-equity firm, bought a stake in 2010 and brought in managers who concocted an ambitious plan to sell cooling systems for commercial and industrial buildings. Advantix recently announced a big deal to air condition a Procter & Gamble factory in India that makes laundry liquid pods.
Competition will soon heat up, however, as rivals develop their own liquid desiccant air conditioners. In this business, you have to sweat to keep up.
_________________


Forum for housing rights launched

STAFF REPORTER
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On the occasion of World Habitat Day, which is celebrated on the first Monday of October every year, the National Forum for Housing Rights (NFHR) was officially launched here in the Capital. Simultaneous press meets were also held at Vishakapatnam, Bhopal, Allahabad, Mumbai, Indore and Lucknow to launch chapters of the NFHR.
Indu Prakash Singh, convenor of NFHR and head of the urban poverty programme at Indo-Global Social Service Society, said the NFHR was a coalition of organisations, networks, institutions, social movements and individuals across the country committed to working at multiple levels to promote the rights of human beings to adequate housing and protection against forced evictions.
Bipin Rai, co-convenor of NFHR said that since 2005 the absence of a national forum to voice the demand for housing rights was felt and finally at a national meeting of like-minded groups held in Indore in August 2012, the NFHR was formally constituted with seven co-convenors from different parts of India.
The NFHR will focus on five thematic areas of work through research, publication, information dissemination, advocacy and strategic campaigns: homelessness; forced Evictions; security of tenure; in-situ upgradation; and resettlement and rehabilitation.
Over the next year, NFHR will organise state-level consultations and work to expand its membership and develop a position and strategy on the five issues, the organisers said.

________________________________



News » National

Published: October 8, 2012 00:11 IST | Updated: October 8, 2012 15:31 IST

Behind Robert Vadra’s fortune, a maze of questions

Shalini Singh
The Hindu
Property empire was built on soft loans handed out in unusual circumstances, documents show
In February, as rumours of the ambitions of Congress president Sonia Gandhi’s son-in-law swirled amidst the heat and dust of the election campaign in Uttar Pradesh, her daughter Priyanka moved to scotch speculation about Robert Vadra’s possible political future.
“He’s a successful businessman,” the younger Ms. Gandhi said of her husband, “who is not interested in changing his occupation.”
Even though Mr. Vadra has increasingly emerged in the public eye, there has been little information on just how successful a businessman he is — and how his empire was built.
Last year, The Economic Times first wrote about his “low-key entry into the real estate business” with the help of DLF Ltd, India’s largest commercial property developer. And on Friday, Arvind Kejriwal and Prashant Bhushan of India Against Corruption (IAC) released documents which showed how Mr. Vadra has acquired land assets in and around the National Capital Region worth hundreds of crores of rupees, sometimes at prices below market value — funded by interest-free loans disbursed to him by DLF and other companies for no apparent reason.
Though the documents reveal no illegality or impropriety on the part of Mr. Vadra, they do raise the question of why DLF — which is a publicly traded company — would enter into multiple business transactions with him on terms that appear highly preferential. The company on Saturday issued a lengthy press release setting out its side of the story but questions of corporate governance remain and minority shareholders are likely to ask the company for the rationale behind its arrangement with Ms. Sonia Gandhi’s son-in-law and whether similar soft loans (or “advances” as DLF prefers to call them) and deals have been transacted with companies owned by other prominent individuals. The answer to the second question may help explain why a normally feisty Opposition has been remarkably silent on the DLF-Vadra connection since the story first broke in 2011.
In 1997, the year Mr. Vadra married Priyanka Gandhi, he incorporated his first, modest business — Artex, which dealt with brass handicrafts and fashion accessories. From 2007, there was a surge in his activities. Inside of a year, he founded five other ventures, spanning the real estate, hospitality and trading sectors.
Ms. Gandhi maintained a distance from these companies: in 2008, she dissociated herself from the sole business in which she was involved, aircraft charter firm Blue Breeze Trading.
From balance sheets and directors’ reports released by IAC and additional papers obtained by The Hindu, which relate to six group companies, it is clear that Mr. Vadra’s rise was meteoric. In 2007-2008, his companies started out with promoter funds of just Rs. 50 lakh.
However, the companies succeeded in acquiring 29 high-value properties by 2010, armed with loans and advances of Rs. 80 crore from DLF,… as well as Bedarwals Infra Projects, Nikhil International and VRS Infrastructure. These included a Rs. 31.7 crore acquisition of a 50 per cent share of Saket Courtyard by 2010, armed with loans and advances of Rs. 80 crore from DLF, as well as Bedarwals Infra Projects, Nikhil International and VRS Infrastructure.
These included a Rs. 31.7 crore acquisition of a 50 per cent share of Saket Courtyard Hospitality, which owns the 114-bed Hilton Garden Hotel in New Delhi; a 10,000 square foot penthouse, number B1115, at the DLF Aralias complex for Rs 89.41 lakh; 7 apartments in DLF Magnolia for Rs. 5.2 crore; apartments for Rs. 5.06 crore at DLF Capital Greens; and a DLF-owned plot in Delhi’s ultra-posh Greater Kailash II area for Rs. 1.21 crore. Though DLF’s press release said some of these prices were “completely incorrect,” the investment numbers are all stated in the balance sheets filed by Mr. Vadra’s companies with the Registrar of Companies.
Then, at the end of 2010, Mr. Vadra’s companies also picked up a bouquet of rural properties: 160.62 acres of agricultural land in Bikaner for Rs. 1.02 crore, and Rs. 2.43 crore for an additional 5 parcels of land of unknown acreage; land at Manesar, on Delhi’s fringes, for Rs. 15.38 crore; land at Palwal for Rs. 42 lakh, land at Hayyatpur, in Gurgaon, for roughly Rs. 4 crore; land at Hasanpur for Rs. 76.07 lakh; land at Mewat for Rs. 95.42 lakh; unidentified agricultural land for Rs. 69.09 lakh; and two ‘other real estate bookings’ worth Rs. 9 lakh.
From just Rs. 7.95 crore in fiscal 2008, Vadra’s fixed assets and investments grew to Rs 17.18 crore in fiscal 2009, jumping a staggering 350 per cent in a single year to Rs 60.53 crore in fiscal 2010, the year in which most of these properties were acquired with promoter funds of just Rs. 50 lakh along with interest of Rs. 255.46 lakh earned on advances and loans and zero group activity or profitability.
Despite the high market value of these listed assets (properties), though, the declared investment portfolio in Mr. Vadra’s balance sheets remained a meagre Rs. 71 crore at the end of fiscal 2010 with accumulated group losses of Rs. 3 crore.
Mr. Vadra’s companies did not respond to e-mails sent by The Hindu seeking clarifications on the details of these transactions. In particular, it remains unclear why DLF and other major corporations would have made him large loans, since this is not in the nature of their business. Nor did Mr. Vadra’s companies have any apparent prior specialisation in real estate business.
Financial wizardry
The financial information available from the balance sheets and directors’ reports of Mr. Vadra’s companies — Sky Light Hospitality, Sky Light Realty, Blue Breeze Trading, Artex, Real Earth Estates and North India IT Parks — raise hard questions about what business it is they actually do, and how this business is conducted.
Each of the companies has 268, Sukhdev Vihar, New Delhi, as its common address, and Mr. Vadra and his mother Maureen Vadra as directors. Mr. Vadra, the documents show, receives remuneration of Rs. 60 lakh per annum from just one company, Sky Light Realty. The payment, the company’s auditor states is “remuneration in excess of the limit prescribed under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975.”
There are no other employee costs in the books, either to his mother or to others. However, in the documents, both directors “place on record their deep sense of appreciation for the committed services of executives, staff and workers of the company.”
Strangely, while assets balloon in each subsequent balance sheet, there is no account of the corresponding enhancement of visible business activity. For example, the balance sheets raise a current liability of Rs. 50 crore against the Manesar land, though it was registered for just Rs.15.38 crore in the same financial year, defying all commercial and financial prudence and raising doubts about whether this was an income rather than a current liability.
A senior chartered accountant told The Hindu on condition of anonymity, given the individuals involved, that masking incomes as loans/current liabilities in this manner is an unorthodox accounting device. “Using short term funding of this kind to create long-term assets defies financial prudence as it constitutes a high business risk, unless they are not really ‘current liabilities’ and are not payable in the short term, which means they are nothing but incomes which have been disguised,” he said. Vadra’s auditors consistently overlook this in all six firms, while accounting firm Khurana & Khurana in its Auditors Report for Real Earth Estates Pvt. Ltd. for the year 2010, actually opts to gloss over this by stating: “Based on the information and explanation given to and on an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on short term basis which have been used for long term investment.”
The auditor’s accounting rigor comes into further question with its statement that according to the information and explanations given to us, the company has, during the year, not granted any loans, secured or unsecured to companies, firm or other parties covered in the register maintained under section 31 of the Companies Act 1956, excepting the advances under business obligation accordingly paragraphs 4 (iii) (a) (b) (c) and (d) of the order are not applicable. However, the balance sheet shows loans and advances of Rs 2.89 crore for the company in 2010.
Many such loans, which reflect as total current liability of Rs. 72 crore in the accounts, are invested in long-term assets like land. Curiously, no one appears to be pressing for the return of these loans — which are, according to the documents, interest-free.
Additionally, all of Mr. Vadra’s companies show interest income from fixed deposits, claiming tax deducted at source for this interest without accounting for the fixed deposits themselves in the balance sheets. The six companies’ profitability, which grew from zero in 2007-8 to Rs. 20.94 lakh in 2008-9 to Rs. 255.46 lakh in 2009-10, was not from any business activity in these companies but purely from interest on 23 elusive fixed deposits amounting to roughly Rs. 5 crore.
There are other unexplained gaps in the financial information. As of March 31, 2010, the group profit and loss account shows that only Sky Light Realty made a profit, and that too in one single year. Yet, while the others show losses, they continue to make investments. This profit of Rs. 244.98 lakh was despite a complete absence of business activity or liquidation/reduction of fixed assets, investments or other bookings. However, the accumulated losses of Rs. 3 crore from the other 5 firms in the RV Group’s 2010 balance sheet wipe out Vadra’s capital and reserves, raising questions about his ability to buy so many high value properties with zero capital.
DLF’s fortunes
Perhaps the key to the relationship could lie in DLF’s troubled fortunes since 2008 — the very time its dealings with Mr. Vadra acquired significant scale. According to a March 1, 2012 report by the respected Veritas Investment Research Corporation, DLF Ltd is an organisation under duress, with its management scrambling to consummate assets sales, rationalize its land bank and divest non-core operations.
Since a May, 2007 Initial Public Offering, which sold at Rs. 525 per share, the stock price declined by 46 per cent in March 2012 compared to a roughly 30 per cent gain in the Sensex over the same period with the stock presently trading at Rs. 241.80, a steep 54.13 per cent dip.
Veritas points to questionable related-party transactions, aggressive and conflicting accounting policies, self-enrichment and inability to deliver on promises, and a balance sheet stretched to the limit, with no free cash flow and no credible plan to de-lever its balance sheet. “If your investment decision incorporates management integrity, then bypassing DLF will be an easy choice,” the Veritas report states.
In addition, Veritas does “not believe the disclosed book equity and asset base of the company,” stating that via its dealings (merger) with DLF Assets Ltd (DAL), from FY 2007 to FY 2011, the company inflated sales by at least Rs. 11,236 crore and its profit before tax by Rs. 7,233 crore.
A slowing real estate market in a high inflation environment and over-exposure to Gurgaon — among India’s most speculative real estate markets — is further expected to create tremendous pressure on the company’s balance sheet. “In the end, we believe DLF will seek assistance from financial institutions to restructure its loans,” the report affirms, urging investors not to buy DLF stock. DLF dismissed the report as “mischievous and presumptive.”
Mr. Vadra himself has attributed his brass-to-gold success story to hard work—and a little help from “family” friends like K.P. Singh, the chairman of the DLF Group. However, Mr. Vadra has strongly denied taking any favours from DLF in the past. “I have a good understanding with DLF. Our children are friends, we are friends. They are seasoned businessmen. They are not daft… They don't need me to enhance them. They’ve existed for years,” he told The Economic Times in March 2011.
Indeed, in January 2002, he made his distaste for favour-seeking capitalism public, dissociating himself from his brother and father, alleging that they were promising jobs and favours using his name and association with the Gandhi family. His father responded by suing him for defamation.
Hard work Mr. Vadra may well have put into building his property empire. But the help he received from friends like DLF suggests at least a part of his success flowed from the willingness of others to bet on the outcome of his enterprise.
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Chidu’s firesale will rob urban wealth to buy rural votes

by Oct 3, 2012
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Who said this? “India needs investment, not disinvestment.”

It was none other than Palaniappan Chidambaram, while criticising the NDA's privatisation efforts when he was jobless and had turned a columnist for the Indian Express in the early part of the last decade.

Who said this? “We must raise the tax revenue to defend (the expected aggregate decline of resources). I know many people won't like this. But, I think, I can summon the courage to make the statement… you must be prepared to pay higher tax rates, especially the rich must be prepared to pay higher tax.”

That, too, was Chidambaram, making the comment from the safe perch of Home Minister.

Chidambaram, now back as finance minister and scraping the bottom of the barrel at the national treasury, is quietly swallowing his words as his government prepares to launch the greatest firesale in Indian history - both of public sector shares and public sector land banks - to meet the gaping budget deficit which will exceed 6 percent of GDP this year. This year's disinvestment target is Rs 30,000 crore, and Chidambaram wants to exceed that.

Disinvestment will now be elevated to first priority.  Not exactly what he thought was right for the country when he was out of a job.

According to a report in The Times of India today, the government, as suggested by the Vijay Kelkar committee of fiscal consolidation, is planning to sell thousands of acres of public sector land - some owned directly by the government and others by ministries such as defence, railways and public sector companies.

The newspaper quotes a cabinet note from the finance ministry - which means Chidambaram is behind it - that says the money so raised will be used to repay debt or create capital assets, and not to feed any populist impulse.

The intention to use money from land sales for retiring debt seems good on paper, but one needs to ask: since the budget hole and huge government debts have been created precisely because of populist spending and subsidies (NREGA, farm loan waivers, etc), repaying debt with land sales is like paying for past vote purchases with the same money. This is better than spending the money on new populist schemes, for sure, but we still need to make this hair-splitting argument to explain why the sales are being thought of in the first place.

The firesale is to pay for previous largesse, and maybe also for future freebies. What is to stop the government from spending more on freebies (and hence incur more debt) and then saying the sales proceeds will be used to reduce the debt incurred?

The only right way to pay for populism is through taxation and price adjustments in subsidies, not asset sales - as Chidambaram himself seemed to suggest the other day when he talked of raising taxes for the rich. But he, too, is planning to abandon his original goals of taxing the rich on the altar of political expediency.

But is this what Chidambaram is planning to do?

Absolutely not. His ministry is even now considering lowering the tax burden on Vodafone, postponing GAAR - a law to prevent tax avoidance by companies and the rich - by three years, and abolishing capital gains tax on capital gains. It has already reduced withholding taxes on foreign loans.

All of this will benefit companies and the rich. One is not against the idea, if that is what is needed to improve business sentiment, but this is not what Chidambaram said last year when he talked of taxing the rich.

Now, let's consider the deeper and negative implications of disinvestment first.

When government sells its shareholdings in public sector units to the public, the company does not get the money since it goes into the pockets of a spendthrift government. The only way for a public sector unit to benefit is if it raises capital directly through an IPO or a further public offer, if it's already listed. The government need not disinvest, but can reduce its stake to benefit the company.

Secondly, when a government disinvests only to raise money but does not give up its right to meddle in the company, the stake reduction serves no corporate purpose. Corporate governance does not improve, nor does the government stop treating the company like a political vassal. So who benefits? Only Chidambaram.

The only correct way to disinvest is to privatise - hand over a company for a good profit to the private sector - and this was what Chidambaram was cribbing about during the NDA regime. He is no reformer if he does only disinvestment upto 51 percent.

Now, take land sales.
]The firesale is to pay for previous largesse, and maybe also for future freebies. AFP
Like public sector stake sales, land sales have negatives to them.

One, it takes money away from the owner (say, the railways or defence), which is then thrown down the bottomless pit called government spending. If the intention is to let the public sector undertaking use the money for its purposes, then Chidambaram should be the last one talking about it. At best, he can reduce his budgetary contributions to the railways, Air India or other such undertakings if they can finance their expansion through land sales.

Two, and this is more important, trying to plug budget deficits resulting from rural largesse is like transferring resources from urban areas to rural areas.

Let's understand why this is wrong.

The only land on which government can make big money is urban land.

The Economic Times estimates that in the big cities, “large tracts of land valued at thousands of crores are owned by the ministries of civil aviation, railways, defence and port trusts, along with other government agencies and public sector firms.” The port trusts own 6,300 hectares, the Airports Authority 20,400 hectares, the railways 43,000 hectares, and the defence forces 17.3 lakh acres.

Put together, that's the size of several Mumbais put together. (Mumbai's area: about 60,000 hectares).

Selling urban land to raise money for non-urban purposes is not right for the same reason why we oppose taking tribal land away from tribals without proper compensation and rehabilitation.

Let's also remember, the value in urban land comes from its people - from the process of migration and urbanisation. It has little to do with government contributions. The bulk of its value must thus go back to improving and speeding up urbanisation - which is vital for progress and speedy reduction of poverty.

India is urbanising at a rapid pace (we are already one-third urban) and investments need to flow to areas such as public transport, sewerage, water supply, et al.

If urban land is sold to raise resources for the centre, one can be certain that most of the money will go to buy votes in rural areas, and not in urban areas. Land sales will be used to fund the Food Security Bill, the fertiliser subsidy, the high minimum support prices for foodgrain,  and fuel subsidies - only the last named subsidy benefits urban areas more than rural, and even here subsidies have to be phased out. Public sector disinvestment and land sales are thus intended to ultimately buy rural votes.

Two conclusions follow:

First, disinvestment in public sector shares is not good for the public sector. Privatisation is better. If the government does not have the gumption to do this, it can at least be honest and say this firesale is to save our budget, not to improve the public sector. Since ordinary disinvestment involves only tapping global and Indian urban savings for budgetary purposes, its a veiled money transfer scheme to favoured constituencies.

Second, selling urban land is not for the benefit of the urban population. The money will be used to plug the budget hole and is effectively an indirect way of transferring even more resources from urban to rural areas - when this is already being done with food subsidies, makework schemes (NREGA) and the new Land Acquisition and Mining Bills.

Given the high cost of urban housing and infrastructure, shouldn't urban resources raised from land sales be routed back to these areas?

The recent Supreme Court opinion on auctions suggests that government can auction or not auction scarce resources depending on public good. Urban land comes under this category.

The government can auction land for investment in urban infrastructure. Or it can even give away urban land at cheap lease rates for building affordable housing for the aam aadmi. 

What it should not do is sell urban land to raise resources for the exchequer. This way it will be serving neither the aam aadmi nor the growth agenda. It will only be fattening the profits of realtors and promoting more profligate spending in rural giveaways.

India needs an urban revolt to prevent rural politicians from hijacking urban resources.
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October 14, 2012 13:55 IST

Planning laws enforced only against the poor, laments Supreme Court

J. Venkatesan
A view of the Supreme Court of India.
The HinduA view of the Supreme Court of India.
Planning laws are enforced only against the poor and not against the rich people, the Supreme Court has observed. It has said: “The common man feels cheated when he finds that those making illegal constructions are supported by the people entrusted with the duty of preparing and executing master plan/development plan/zonal plan.”
The Bench of Justices G.S. Singhvi and S.J. Mukhopadhaya, while ordering demolition of an unauthorised building in Kolkata and imposing a Rs. 25-lakh fine on the builder, said: “What needs to be emphasised is that unauthorised constructions not only violate municipal laws and concepts of planned development of the particular area but also affect various fundamental and constitutional rights of other persons.”
Justice Singhvi, who wrote the judgment, said, “The reports of demolition of hutments and jhuggi jhopris belonging to the poor and disadvantaged sections of society frequently appear in the print media, but one seldom gets to read about demolition of illegal multi-storied structures raised by the affluent. The failure of the state apparatus to take prompt action against such illegal constructions has convinced citizens that planning laws are enforced only against [the] poor, and all compromises are made by the state machinery when it is required to deal with those who have money power or an unholy nexus with the power corridors. There should be no judicial tolerance of unauthorised constructions by those who consider law to be subservient to them.”
Illegal constructions in different parts of the country have become a menace in the last four decades, the Bench noted, saying that the apex court has “repeatedly emphasised the importance of planned development of the cities and either approved the orders passed by the High Court, or itself gave directions for demolition of illegal constructions.”
“It must be remembered that while preparing master plans/zonal plans, the Planning Authority takes into consideration the prospect of future development and accordingly provides for basic amenities like water and electricity lines, drainage, sewerage, etc. Unauthorised constructions not only destroy the concept of planned development, which is beneficial to the public, but also place unbearable burden on the basic amenities and facilities provided by public authorities. At times, such buildings become hazards for the public and create traffic congestion. Therefore, it is imperative for the public authorities not only to demolish such constructions but also impose adequate penalty on the wrongdoer.”
In the instant case the appellant, Dipak Kumar Mukherjee of Kolkata, was aggrieved by an order passed by the Division Bench of the Calcutta High Court reversing that of a single judge approving the demolition of an unauthorised multi-storeyed building by respondent No. 7 — M/s. Unique Construction — on the plot owned by respondent No. 8, Sarjun Prasad Shaw.
The Bench allowed the appeal and set aside the impugned judgment, and fined the builder Rs. 25-lakh for brazen violation of the sanctioned plan and continuance of illegal construction despite a ‘stop work notice.’
“With a view to ensuring that the illegal construction raised by respondent No. 7 is pulled down without delay” the Bench directed the builder to pay within three months the price of the flats, etc. to the purchasers at an 18 per cent per annum interest from the date of payment.
It asked the occupiers of the building to vacate within one month after which the Kolkata Municipal Corporation should undertake demolition.
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Real estate in Delhi-NCR is a bubble about to pop

by Sunainaa Chadha May 4, 2012

Two days ago, property consultant Knight Frank  termed NCR (the National Capital Region of Delhi) as the largest residential market in India, with around 5 lakh houses under construction that are slated to be ready for possession by next year.
But there is a dark side to the Delhi property market, and this will become apparent with the Delhi government passing an order this week that no further transfer of property should be allowed through general power of attorney (GPA), where the buyer gets a GPA from the seller not only for his own use of the property, but for further ‘sale’ to someone else if he so desires.
A Times of India article on  Friday said “the revenue department has made all realty sales through transfer of general power of attorney null and void with retrospective effect from October last year.”

GPAs are a one-way ticket to black money in realty. Reuters
Those holding properties on GPA and SA (Special Attorney) will have to get a sale deed registered if they wish to sell the property in future. Many may face problems getting sale deeds because their properties do not have a clean title.
Realty experts told Firstpost the order will help curb evasion of duties, flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.
The move to ban general power of attorney as a mode of property transfer is sure to impact the entire realty market in the region, and will finally regularise property transactions. In the absence of a clear procedure for converting leasehold property into freehold, the real estate market became highly speculative and GPAs were being used as a trading tool as and  when the price of a property would appreciate.
The order passed by Supreme Court in October 2011 states that no sales deed will be registered if it is through transfer on GPA. This means that transactions carried out since October on GPA transfers will have to be registered afresh with complete documents.
Even though realty players have opposed the order, saying it will reduce the number of saleable properties in the capital, the truth is the ban will finally allow the real estate market to cater to real, genuine end-users and not just traders, who are looking to make a quick buck.
Pankaj Kapoor, MD of property consulting firm Liases Foras, told Firstpost  that GPAs are the main reason why large private real estate developers like DLF and Unitech are reeling under massive debt despite claims of selling the entire stock  The truth is property remains unsold but is floated in the market through a piece of paper, which makes NCR realty an even bigger scam than Mumbai realty. ” There is no real consumption here, NCR is a bubble market,” Kapoor said.
A builder can easily sell flats to investors at a token price of Rs 5  lakh  for a Rs 1 crore property before the construction of a project begins. While the allotment of the flat would be in the name of the investor, the GPA ensures that the name of the buyer remains blank in the document, thus allowing the investor to sell the property further when the property appreciates in the next couple of months.  Hence, what happens is that the buyer will book his profits, sell the property at a 10-15 percent mark-up, and make his money without even registering the house! So an investor who spends only Rs 5 lakh for a Rs 1 crore property, will end up with Rs 10 lakh in just three months.
” The power of attorney gets circulated within investors, making real estate tradable like equity”, explains Kapoor. So although the stock gets sold from the builder’s point of view, it remains unsold and traded in the market, which is why  the  gestation period for construction of properties is so long in Delhi.
Another realty expert told Firstpost on condition of anonymity that GPAs are a one-way ticket to black money in realty. One of the leading realty groups —Sahara— in Nagpur offered to sell 100 flats for Rs 3 crore with the promise of no construction for the next three years. Result? The price is sure to appreciate and the buyer can easily trade the flats with a 20-40 percent gain, without owning a single flat.
The Economic Times cited Mahesh Gupta of Mukul Consultants Group as welcoming the ban too.  “Deals made via power of attorney involve black money. If someone sells his property for Rs 100 crore, he may show just Rs 2 crore in the sale deed. But in freehold property, they have to show at least the circle rate, which may be Rs 50 crore,” he told the newspaper.
And what’s worse is that banks were earlier at a massive risk since the documents would get registered only after the competition of the project. But now that property will have no value under GPAs, banks too will be relieved.  But realtors won’t give up with a fight as GPA deals are their bread and butter.
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Chart: Mumbai realty is of the rich, by the rich, for the rich

by Oct 17, 2012
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Just two numbers tell us the story of Mumbai's real estate over the last seven or eight years.

One, between 2006 and 2011, the construction of flats which cost  up to Rs 25 lakh fell from 21 percent of the total Mumbai Metropolitan Region (MMR) region to merely nine percent. In the same period, construction of flats that cost more than Rs 2 crore rose from 9 percent to 22 percent, as seen in the chart below. Mumbai is now out of reach of the middle class.


Chart:Liases Foras
Two, thanks to skyrocketing real estate prices, lakhpatis of 2005 are now crorepatis in real estate terms. A flat costing Rs 27 lakh in January 2005 is now valued at Rs 1.04 crore in the MMR region. That's an appreciation of 285 percent!  No wonder wealthy NRIs and investors see Mumbai property as a safe haven for their money.

Data by Liases Foras
As things stand today, Mumbai's real estate is among the most expensive in the world but there is still no shortage of buyers at the upper end of the market. The market is as much driven by dollar-rupee exchange rates than domestic loan rates. This is evident from the fact that foreign capital in the housing sector jumped from Rs 171 crore in 2006, when FDI opened up to the realty sector, to Rs 14,027 crore in 2010, according to data available with DIPP (Department of Industrial Policy and Promotion). The number, however,  has now come down to Rs 5,600 crore in 2011 due to the global economic uncertainties. Clearly, the fortunes of the wealthy even in real estate  are interlinked with the stock market boom of the 2000s.

] foreign capital in the housing sector jumped from Rs 171 crore in 2006, when FDI opened up to the realty sector, to Rs 14,027 crore in 2010
Hot foreign inflows have made realty unaffordable to locals. The vast inflow of capital pushed up land costs and the spiralling prices invariably pushed actual consumers away from the sector. Instead, investors with surplus cash were roped in. Since an investor-driven market is less transparent and has a lot of complexities, it began to attract a lot  of black money.

The result? Sky-rocketing property prices. Price and cost of flats in MMR increased at a compounded annual growth rate of 22 percent since the infusion of foreign capital!

"The widening gap between the prices and affordability is pointing towards speculative market practices," says Pankaj Kapoor MD at property consulting firm Liases Foras.

Here are three consequences of an investor-driven real estate market:

1. Developers justified the escalating prices to increasing land and construction costs. All the high- priced land deals were later blessed with incentive FSI to make a project viable. Developers, and perhaps politicians, did gain but it spoiled the urban economic balance, leaving the whole city hooked to high prices!

Clearly builders are targeting high-end investors to deliver promised returns to private equity (PE) funds. " In order to accommodate the PE investor, property prices rose 43 percent in one year alone. Accordingly, land prices rose by 55 percent and in turn investors as a proportion of home buyers now make up more than 70 percent of the Mumbai market," said Kapoor.

Secondly, the greed for appreciation  has resulted in failure of affordable housing since all affordable housing schemes are plagued by investors: you have empty buildings while the needy live on the road, or are being forced into slums.

Third, the crux of the problem is this: A market driven by free-flowing capital will only address the needs of the investor and not the genuine buyer and nor will it ever address the affordability problem.

Private equity should only be restricted to capital-intensive assets such as commercial and hospitality, while residential should only work on sales proceeds, says Kapoor. It is this private equity investment in the unregulated real estate sector that has resulted in the sharp rise of billionaire wealth in India.

According to an article titled 'Where Do India's Billionaire's Get their Wealth' published in the Economic and Political Weekly, 43 percent of the total number of billionaires, accounting for 60 percent of billionaire wealth in India, had their primary source of wealth from rent-providing avenues: think sectors like real estate, infra and construction, "because of the pervasive role of the state in giving licences, reputations of illegality, or information on monopolistic practices."

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http://www.thehindu.com/news/national/thousands-of-urban-poor-march-in-mumbai-against-builders/article4266318.ece?css=print

News » National

Published: January 3, 2013 01:54 IST | Updated: January 3, 2013 01:54 IST

Thousands of urban poor march in Mumbai against builders

Staff Reporter
Thousands of urban poor of Mumbai marched on the streets of the city, covering a distance of about 30 km in two days, demanding land, housing rights, dignity and equal rights. The march was organised by the National Alliance of People’s Movements, under the leadership of Medha Patkar.
 The march began on January 1 from two different areas in Mumbai, namely Govandi and Golibar, to demand the implementation of the Rajeev Awas Yojana as self-development towards right to shelter. The protesters halted at Shivaji Park in Dadar on Tuesday night and resumed the march towards Mantralaya in South Mumbai on the morning of January 2. The protesters were stopped in South Mumbai and taken to Azad Maidan.
“The builders under the disguise of slum rehabilitation have formed a nexus with politicians, bureaucrats and administration. We will be submitting a letter describing all the frauds committed by these builders against the poor of this city. The shelter of these people will be snatched away and we will not let this happen,” said Ms. Patkar.
 Krushna Nayar of Jawahar Nagar in the western suburb of Mumbai slammed the Congress-NCP alliance government for siding with builders. “They claim to give us, the slum dwellers, free houses. Let me remind them that these are not free houses. The builders will use our FSI to build towers and we will be replaced in a new home. The government should stop fooling us to benefit the builders,” he said.  
In the evening, a 20-member delegation went to meet Chief Minister Prithviraj Chavan with the letter of demands, but was stopped as authorities wanted only 6 people in the delegation. Following this, the delegation returned and decided to meet only when a proper appointment and enough time for discussion is given to all the representatives of the delegation. The protesters continued to sit on Azad Maidan till last reports came in.
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The New York Times

March 2, 2013

Think New York Is Costly? In New Delhi, Seedy Goes for 8 Figures


By 

NEW DELHI — The fading bungalow at 38 Amrita Shergil Marg does not immediately shout real estate bling.
There is no tennis court, no infinity pool, no Sub-Zero refrigerator or walk-in closet. The paint is chipped, the bathrooms are musty and the ceilings have water stains. The house may ultimately be torn down.
Yet when it went up for public auction, the winning bid was almost $29 million. And many neighbors consider that a bargain. One block away, a gracious if not quite Rockefeller-ready residence once leased by the Mexican ambassador is now reportedly on the market for more than $100 million. Other nearby houses are going for $40 million to $70 million.
“The price of the Mexican residence is $110 million,” said Jorge Roza de Oliveira, Portugal’s ambassador to India. “You can buy a home in New York and Miami and Lisbon and London and keep a lot of change for that much.”
Real estate prices in the heart of New Delhi, especially for the bungalows built nearly a century ago during the British Raj, are among the highest in the world.
Though India’s economy has cooled, the demand for property in elite areas remains so strong that even finding a house for sale is tricky: formal listings do not exist; prices usually circulate by word of mouth. Transactions often require some “black” money, or stacks of cash paid under the table to avoid taxes.
The buyers are often Indian industrialists looking for a trophy property, a real estate Rolex. Or, real estate agents and sellers say, they can be politicians or their proxies, who often pay with trunks of cash.
For their money, buyers get a lovely piece of land and a piece of history, if not much in the way of amenities. Many houses require a major overhaul. Services, if far better in these elite areas, are still inadequate: drinking the tap water is not advised, and power failures remain an irritant.
The obvious question about the prices, in a country where hundreds of millions of people still live on less than $2 a day, is: Why?
To a large degree, India is experiencing the sort of real estate boom common to big, emerging economies. When Japan’s economy was soaring in the 1980s, prices in Tokyo were so frothy that the 845-acre compound of the Imperial Palace was valued at more than all the real estate in California. More recently, China has seen a boom, with real estate values rising in some cities by 500 percent.
But the spike in New Delhi is also being fueled by ego, status and some unique distortions in India’s economy. Few properties come available in the leafiest, most prestigious section of the capital, known as Lutyens’ Delhi, because the area is mostly dedicated to government housing. Powerful government ministers live in British-era bungalows with stately lawns of several acres, while lesser officials are eligible for different categories of government housing in an oasis largely separated from the rest of the chaotic capital, where many people live crowded into slums or shanties.
“This is the best part of Delhi, the core of Delhi,” said Munish Kumar Garg, who oversees the allocation of government housing. “If these properties in Lutyens’ Delhi were put on sale, there would be a queue two kilometers long.”
Mr. Garg, the director of the government’s Directorate of Estates, controls one of the more valuable residential real estate portfolios in the world. Asked how many New Delhi properties fell under his agency, he shrugged. “It would be difficult to know,” he said. “Maybe 10,000.”
It was a British architect, Edwin Lutyens, who in the early 1900s designed what is now the governmental heart of the capital. Beyond the grand buildings erected as the seat of British imperial power, Mr. Lutyens and other architects also built a residential bungalow zone of whitewashed single-story homes surrounded by verdant gardens. When India won its independence in 1947, the British moved out of many of the houses and the Indians moved in.
Today, power in Delhi can be measured by where a politician lives. The Directorate of Estates divides properties into eight categories, with Category 8 bungalows, the most exclusive, reserved for ministers and other top leaders. Former prime ministers and presidents, and their spouses, are allowed to remain in Category 8 housing until death.
Given the shortage of such housing, the recent death of former Prime Minister Inder Kumar Gujral has spurred jockeying over who will get the bungalow.
Navin Chawla, who was India’s chief election commissioner from 2005 to 2010, lived with his wife in a Category 8 bungalow on six acres, with accommodation for 17 servants, including a separate house most likely worth many millions of dollars. When his term ended, so did his tenancy.
“I have to tell you, these homes are very timeless,” he said, sounding wistful. “It’s a bonus of the job to get a six-acre property for five years, one of the few bonuses of being election commissioner, I can tell you.”
Not surprisingly, as Indian industrialists have amassed great fortunes in recent years, the temptation to buy into a zone where status is so nakedly demarcated and only a few hundred private properties exist has proved irresistible. Property values in the Lutyens’ bungalow zone, as well as in nearby neighborhoods, have appreciated steadily for many years but skyrocketed in the past decade.
In some cases, families have held these private houses for generations. Many were refugees from Pakistan after partition in 1947, when streets like Amrita Shergil Marg were hardly exclusive. Veena Kumar’s parents arrived almost penniless in 1947 and rented a bungalow on the street for about $5.50 a month, before buying it eight years later. In those days, the house was at the southern rim of the city, beside what is now Lodi Garden, which is known as the city’s most beautiful park but seemed like jungle back then. Longtime neighbors recall hearing the cry of hyenas at night.
Now the house lies in the heart of the city and Ms. Kumar and her sister are looking to sell. Ms. Kumar declined to discuss her asking price, but local media reported it as about $55 million.
“One cannot afford these taxes,” she said, explaining that the upkeep and property taxes had pushed her to sell. “It is very expensive.”
The wild prices have also affected the rental market. For decades, owners happily rented to ambassadors or diplomatic missions. Now, rents have jumped so sharply that some ambassadors are moving. Mr. Oliveira, the Portuguese ambassador, recently relocated after his rent soared. Mexican ambassadors had lived at 13 Prithviraj Road — the house priced at $110 million — for a half-century, with the original lease signed by Octavio Paz, the Nobel Prize-winning writer and poet who was Mexico’s ambassador in the 1960s.
(The United States Embassy is a beneficiary of the rising real estate values, because for several decades it has owned several residential properties in elite areas.)
Rahul Rewal, a local real estate agent, said that demand was pushing up prices all over the capital region and that the Lutyens’ zone actually was a safe investment, since values keep going up, partly because so few places come onto the market. Fifteen years ago, the telecommunications magnate Sunil Mittal paid about $6.6 million for a property on Amrita Shergil Marg that he razed and rebuilt. At the time, the price was astonishing; today, it would be a bargain.
Mr. Mittal’s brother, Rajan, was the winner of the auction for 38 Amrita Shergil Marg. The property had been entangled in a family legal feud for three decades until a judge ordered that the property be sold at auction, with the proceeds divided among family members. Had it been sold privately, many neighbors and brokers say, the final price would have been higher. To avoid taxes, many sellers demand huge, secret cash payments to supplement the publicly recorded selling price.
Even now, the owners are still bickering. G. K. Gupta lives in the front half of the house, while his nephew Shivraj Gupta lives with his family in the back half. The uncle is in favor of the sale, but the nephew says he is still challenging it in court. And though both would be wildly rich when the sale is completed, the elder Mr. Gupta said that kind of money only goes so far in New Delhi.
“I’ll have to invest it in property,” he said. “And property is very expensive in New Delhi.”
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 March 6, 2013 12:55 IST

When water flows like money

P. Sainath
  • Advance Booking in Osmanabad: The water won't run here for another few hours, but the women have started placing their pots in line for it. The women themselves are collecting water from other sources too, and will arrive when the water does. Photo: P. Sainath
    The HinduAdvance Booking in Osmanabad: The water won't run here for another few hours, but the women have started placing their pots in line for it. The women themselves are collecting water from other sources too, and will arrive when the water does. Photo: P. Sainath
  • On water duty, the cycle awaits its owner, who is on
    The HinduOn water duty, the cycle awaits its owner, who is on "full-time water duty" for his family. He will add a couple of pots more and journey two to three kilometres for water at least thrice that day. Photo: P. Sainath
  • Almost every vehicle you see on Osmanabad's roads is ferrying water somewhere. Photo: P. Sainath
    The HinduAlmost every vehicle you see on Osmanabad's roads is ferrying water somewhere. Photo: P. Sainath
  • Women in Takwiki explaining their recycling routine:
    The HinduWomen in Takwiki explaining their recycling routine: "first we use the water to bathe. What's left we use to wash the clothes. What remains, we clean out the utensils with." Photo: P. Sainath
  • Bharat Raut in Takwiki with the ghaddas (plastic pots) he will strap on to his Hero Honda to fetch water for his family. Every family has one member on
    The HinduBharat Raut in Takwiki with the ghaddas (plastic pots) he will strap on to his Hero Honda to fetch water for his family. Every family has one member on "full-time water duty." Photo: P. Sainath
  • In the villages of Osmanabad, every lane and gully has people moving about at all hours, collecting water as scarcity bites deeper. Photo: P. Sainath
    The HinduIn the villages of Osmanabad, every lane and gully has people moving about at all hours, collecting water as scarcity bites deeper. Photo: P. Sainath
If drought is making many in Osmanabad struggle for survival, it is also boosting a 24-hour trade that thrives on scarcity
Bharat Raut spends around Rs.800 a month on petrol — just to fetch water that belongs to him. So do a lot of others in Takwiki village in Osmanabad district in Marathwada. Almost every household in Takwiki (and other villages) has one member locked into a single task each day: fetching water from wherever they can. Nearly every vehicle you see on Osmanabad’s roads is ferrying water somewhere. That includes cycles, bullock carts, motorbikes, jeeps, lorries, vans and tankers. And women carrying it in pots on their heads, hips and shoulders. The drought ensures that most do it for sheer survival. Some, for a neat profit.

Timings and distances

“Yes, every household has a person on full-time water duty,” says Bharat a small farmer with five-and-a-half acres. In his family, he is the one. “I fetch the water that comes sporadically from the borewell on our own fields. But it’s a little over three kilometres away from home.” So Bharat hooks four ghadas (plastic pots) to his Hero Honda and makes three trips a day to his fields to return with around 60 litres of water each time. “I go there just for the little water the bore gives,” he says. “The crop itself is dying.” There are some 25 motorcycles in this village roving about on this task at any time.
Since each round trip is over six kilometres, Bharat clocks close to 20 km each day, or 600 km a month. That takes up 11 litres of petrol, or around Rs.800 a month for just this task alone. “The water timings alternate each week,” explains Ajay Niture, who visits a government-controlled source. “This week we have power from 10 a.m. to 6 p.m. so we get water during those hours. Next week it will be from midnight to 10 a.m.” He does his two-three kilometre trips on a bicycle mounted with seven plastic pots. And he’s been to the local hospital twice — “it really hurts your shoulders.”
Landless workers run into trouble with employers. “Some days you turn up late. Some days you don’t make it at all,” says Jhambhar Yadav. “That delays chores like feeding the animals, which is bad. And this has been on for five months now.” Jhambhar has already made two trips with six ghadas on his cycle this morning.

Impacting women

Yet their efforts are eclipsed by the women of Takwiki who do multiple trips daily on foot, carrying two to three pots with them. “That’s 8-10 hours a day on the job,” they explain at one of the water sources where they’ve congregated. They also tell us of their recycling of water: “First you use it for your bath. Then you use that same water for washing clothes. And finally for cleaning out the utensils.” The distances the women walk are often greater than those covered by the men on motorbikes. They do far more trips and log over 15-20 km in a day. The stress causes several to fall ill.
Women like Phulwantibai Dhepe have it worse. She is a Dalit and so excluded from many water sources. Even at the government-acquired well from where she fetches her water, “I am always last in the line.”

Sugarcane and rain

Scarcity impacts on livestock too. With little water and less fodder, “those like me who sell milk are in a bad way. My cows are suffering and so am I. I used to make Rs.300 a day selling milk,” says Suresh Ved Pathak. “Now the yields have fallen and I make just a third of that.”
Takwiki is a microcosm of Osmanabad’s built-in problems. The village has less than 4,000 people, but maybe 1,500 borewells for irrigation needs. “The ones being drilled now are going to 550 feet and beyond,” says Bharat Raut. And the main crop in this drought-prone district is sugarcane. “We got 397 mm of rainfall least season, as against our normal average rainfall of 767 mm,” says Osmanabad Collector K.M. Nagargoje. “In itself, 800 mm is not at all bad rainfall. And some regions get by on 400 mm, too.”
But you can’t get by, even on 800 mm, if your output is 2.6 million metric tons of sugarcane. A crop that demands roughly 18 million litres of water per acre. (Enough to fill seven-and-a-half Olympic swimming pools.) And the number of farmers who can afford to save on water by using drip is very small, just a handful in Takwiki.
Collector Nagargoje has serious trouble on his hands. And having had a stint with the Groundwater Department, he knows it. Almost all the district’s big or medium water projects are at dead storage level. That’s when water is below the point from where it can be pumped out or controlled. At that stage, it serves to keep the fish alive. He does have around 3.45 million metric cubic feet left in the district’s small projects. That can’t last too long in this district of 1.7 million people. He also has 169 water tankers presently serving two towns and 78 villages. And a district where private borewells for irrigation are spreading rapidly.
“The ground water table this January was at around 10.75 metres. That’s five metres below the five-year average in this region,” he says. “In some blocks, it’s even lower.” He remains optimistic about the district’s capacity to handle the crisis this year. But knows the existing cropping patterns will thwart rescue plans in the next one.

Private trade rules

Back in Takwiki, indebtedness grows as income falls. “The sahucari (money lending) rate here is now anything between Rs.5 to Rs.10 per hundred per month, explains Santosh Yadav. (That’s 60 to 120 per cent annually.) Yadav’s own family spent nearly Rs.10 lakh in laying down pipelines — all of which have run dry — to their fields. And summer isn’t far away. Yadav asks: “Who can think of that? We’re focused on getting past today. One day at a time is all we can handle.”
But if the drought makes many struggle for survival, it also boosts a trade that thrives on scarcity. This is visible everywhere. “We spend whole days on cell phones trying desperately to buy water from those who have it because they own borewells or some other source,” says Bharati Thawale, a social worker. “I struck a deal with one of these water-sellers. He was to give me 500 litres for Rs.120. But on the way he got offered Rs.200 for it and sold out. Many frantic calls later, he brought me the water I needed, at 9 p.m. the next night.” After that, she’s been buying water from a neighbour.
The brisk trade in water is on around the clock across the district. Scarcity drives the rates upwards. The government has requisitioned 720 wells of water. It pays the owners of each of these Rs.12,000 a month. Water from these is free for the public. But the long distances and the huge crowds at these points can be daunting. Which means privateers rule. With them, you bargain by the litre. The price can go well above Rs.200 for 500 litres. The rate spikes sharply if you are buying small quantities. And it will all get worse in coming days. Every colony now has someone with a borewell or other source, milking the scarcity. Here, water flows like money.





 

















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