35kimmig

I would not be surprised that a few years down the line it becomes apparent that the Mumbai Police has been largely responsible for the insane 300 - 400% rise in property prices in the last 4-5 years.

The thought came to my mind as I was trying to figure out why such a meteoric rise in prices which even the developed nations have not seen? Today’s property prices in Mumbai rival those in NY and London .. why? If one considers the quality of construction, amenities, lifestyle, commute and infrastructure .. we are nowhere close to them. And why aren’t the prices dropping in Mumbai / India as they are in these markets?

While I do buy into the India growth story theory, easy finance availability etc etc BUT these economic forces don’t support such a meteoric rise on their own .. the bottomline is .. incomes of the common man have not suddenly risen 400% nor has the population gone up 4 times. Try to blame the IT industry .. no way .. believe you me .. there is little or no IT industry left in Mumbai .. most of it has gone to Chennai, Bangalore, Hyderabad thanks to our great politicians and their industry friendly policies. And believe me for those that are left .. they do not pay as well as one is given to believe, especially not enough to support the EMIs for a 1 Cr flat. Any ways, most of the hiring in IT and BPO companies happens at the lower levels .. more than 55% of the staff strength in the big Indian IT companies have less than 3 years experience .. earning maybe Rs 5 – 6 lakhs at the top end.

When prices were being raised .. they always cited “strong demand / low supply” as a reason to take it or leave it .. I am surprised that the same economic criteria does not come into play when it’s a well known fact that demand is non-existent today. We can argue back and forth but frankly I see little or no co-relation between economics of supply and demand and ground reality in Mumbai realty.

My theory goes such, earlier the Mumbai underworld would form a sort of check and balance on the builders. Builders were always under pressure to keep prices in check because the gangsters had their sources of knowing how much they were making and that, though not exactly scientific, resulted in the amount of protection money demanded. Additionally, there was always pressure on the builders to liquidate stocks to keep meeting demands made for protection money .. the “Shootout in Lokhandwala” movie captures this aspect quite well.

Once the encounter killings started and the gangs were either wiped out or forced to flee, builders started having a heyday .. increasing prices like its nobody’s tomorrow and amassing wealth without any fear. Even today the reason they are able to stave off the slowdown without reducing prices is because they do not have any pressures to liquidate stock.

Ofcourse .. while doing so they have thrown some bones to these "encounter specialists" by getting them some flats here and there .. but that is nothing given that that they are making 400-500% profit on each and every square foot sucking the blood of the common middle class person in Mumbai.

Believe me, while huge amounts of press was written that time abt gangsters etc .. it never directly affected the common man .. I have stayed in Lokhandwala Complex during those times .. once considered a hot bed of gangster activities .. but never heard of anyone ever pulling a gun or any common person troubled by these so called gangsters. However, what the builders are doing by forming pricing cartels is definitely hurting people by denying them a chance of putting a roof over their head.