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Monday, June 3, 2013

Investing in 'real Estate'..........“From Turf Club to SRK’s Mannat: How Mumbai lost acres of public space”

Poor have no place in the World ~ the best of things go to the rich and famous…. life has changed so much…. A few decades ago, it was simply ‘roti, kapda our makhan’~ a popular Hindi phrase meaning ‘food, cloth and shelter’ – almost in the same order – referring to the basic necessities of life, popularized in the late 1960s by Indira Gandhi ahead of the 1967 general elections.

Things have changed ~ in yesteryears, only rich and famous owned palatial houses ~ middle class lived in rented houses… in Triplicane I remember houses would be long and winding till almost the next lane – there would be multiple occupations – many tenants living together exhibiting rare ‘camaraderie’ ………… in the 1990s came the ‘flat culture’ – old houses got razed down and in their places, apartments sprung up. The rate in earlier days was around Rs.250 per Sq ft. – it kept rising and now when a building is razed down, there are people to book a flat @ Rs.11000/- SFT that too paying in advance, even before there is any semblance of construction activity.

The earlier day flats were smaller ones ~ 450 SFT single bed room and 550 – 750 sft – double bed room….  Very small ones, in the present day context and as one found out living in such small plaes for a while……….. the real estate market perhaps has only upward curve !!!!! ???? ~ logically it cannot be… but there could be umpteen reasons – it is not proper market value – there could be sentimental value, it could be due to other facilities springing up and more….. it could also be due to lack of supply but ever increasing demand…

The term ‘real estate’ refers to  property consisting of land and the buildings on it; in Urban areas it does not refer to the natural resources, crops and the like. Indians have a fancy for buying gold and then  investing in property stating it to be the surefire way to profit. Ask any expert, they would reel our statistics as to the market rate of property in a particular area 2 decades ago; how much they have risen since and how people have made enormous profits……. Happy stories to hear….  There is always opinion of Market analysts that the bubble would blow at any stage ~ so there are also fears that the real estate boom could crack… !!

It is also stated that in the recent decade, there has been a growing trend of  middle class Indians trying their hand at the property market. These people are not speculative but primarily make their first purchase, for living in them. In areas like OMR, some promoters went in a big way constructing hundreds of flats ~ of which some remained unsold, thereby threatening the middle class investor. Often the interest rates vary and rise, thereby stressing those who buy apartments with loans – either the EMI would go up or the tenure would get extended.  To most Indians [especially those who are earning abroad in foreign currency] – real estate is a great asset…….. they want to purchase land or apartments, keep them as investment, expecting that it would fetch many folds more than invested value, when they return back to India. There are many areas in suburbs which were bought at low rates and are now raking in lakhs, nay in crores….

Away, some experts state that high profile areas like Nariman point underperformed … but this could be due to new supply and more extentions…… there is no long return in owning building materials but there is much in owning a plot of land or a constructed house…

Away from this argument, this article in Firstpost dated 29th May 2013  titled : “From Turf Club to SRK’s Mannat: How Mumbai lost 200 acres of public space” certainly deserves to be read and circulated.  Here it is reproduced in its entirety

Given the official shroud of secrecy over old leases of large tracts of land in the island city of Mumbai, it is not surprising that citizens learnt only recently that the term of the Royal Western India Turf Club (RWITC) in Mahalaxmi is ending on May 31. Club officials and members are scrambling to get the lease renewed, while public opinion is solidly against leaving this relic of the Raj (which still genuflects to British royalty) a private amenity for the elite, sprawling over 225 acres in the heart of the city.

Like many leases of land given over for recreation (as well as industrial purposes, notably the erstwhile cotton mills), the Turf Club’s history is complicated. The Brihanmumbai Municipal Council (BMC) owns only a third of the area, while the state government owns the rest. The government is being noncommittal on what it proposes to do at the moment; many of the club’s upper echelons wield considerable clout, which they are apparently bringing to bear on the Congress-NCP coalition.

The fact that the site provides the only helicopter pad for all of prosperous south Mumbai must also be a factor in favour of extending the lease. However, the BMC is run by the Shiv Sena-BJP and it has made no secret of its desire to convert part of this huge tract of land into a garden in memory of Bal Thackeray. At a meeting at the Observer Research Foundation (ORF) last week-end, RWITC members have argued that barring the racing months when access to one part of the grounds is excluded, entry to much of the area is open to the general public.

However this amounts to obfuscation because this is not public knowledge and the site is not easily accessible by public transport; there is an invisible barrier which separates the private from the public. To add insult to injury, the 2,400-metre race track occupies only 88 acres; horses are housed in a woody corner. An exact parallel is the Bombay Gymkhana, whose lawns in a maidan are also meant to be open to the public when they are not being used, but aren’t.

The fact remains that if one divides the total open space in Greater Mumbai, the city proper, by its population, each Mumbaikar has only a little over 1 sq metre to himself. It has for years been pointed out that when the norm for open space in a city is 4 acres for every thousand residents, Mumbai has a miserable 0.03 acres. London is the best off among mega cities with some 6 acres and New York – with its iconic Central Park – over 4 acres. Delhi also has around 4 acres. With the sordid stealth that the Maharashtra government displayed around 2001 in altering its earlier formula for mills to sell or redevelop land, the city lost around 200 acres of public space which was its due.

According to some reports, the RWITC has a total turnover of Rs 85 crore a year, of which Rs 45 crore is paid to the public kitty, including rent from restaurants on the site as well as from betting and other taxes. Of this, the BMC earns a pittance. The ground lease rent it received last year was Rs 56 lakh and this goes up by 10 percent a year. Gallops restaurant pays a risible Rs 1.4 lakh a year; the Touchee bar Rs 94,788. Both, as the RWITC and BMC openly admit, have violated their lease conditions. The major revenue-earner for the BMC is the letting out of the grounds by the club for marriages, which brings in Rs 1.25 crore a year. However, the club either has to pay the BMC a third of the amount it earns “during the financial year towards extra ground rent” or Rs 25,000 per day, whichever is greater.

At the ORF meet, former Information Commissioner in Delhi, Shailesh Gandhi, who has exposed the niggardly rents that many large companies and others pay to the authorities, cited how such low rentals robbed the public exchequer of much-needed revenue. In fact, he pointed out that the very purpose of a long lease was a hedge against inflation. The RWITC leased expired in 1994, while everybody slept over it. It was backdated a decade later. “Land can’t be given in perpetuity,” he observed. He cited the farcical case of Simplex Mills in the city, the lease of which expired in 1983. It continues to pay the government the princely sum of Rs 48.31 paise per year.

Another state-owned property which is shortly to be gifted away is none other than Shahrukh Khan’s famous residence, Mannat in Bandra. He recently announced that he was, as a law-abiding citizen, paying the government Rs 8.3 crore to buy the seaside plot. The market value of the land is around Rs 200 crore. Gandhi reckons that between the two Collectors under whom most of the city’s land vests, Mumbai is foregoing as much as Rs 2,500 crore a year by way of lease rents. This, at a time, when no one can possibly fathom how Maharashtra will recover from its current debt, which has touched Rs 2.7 lakh crore. Protagonists of the club maintain that there is a “trust deficit”: no one trusts the government or municipal corporation to run such a large open space.

Just two days after the ORF meet, newspapers reported how political netas were reluctant to pay higher charges on the public grounds they maintain, in return for being permitted to erect club houses. No prizes for guessing that this is an ill-disguised form of political corruption.

Shiv Sena and BJP legislators are largely to blame: one club is even named after the Thackeray residence, Matoshree. Thus, there is certainly truth in this allegation. However, there are sufficient instances in the city where public-minded residents and citizens have formed trusts which maintain public grounds without in any way benefiting financially from this. The Oval Maidan in Churchgate is a prime example; left to itself, the state government would have parceled out land to favourites, as they have to Dilip Vengsarkar to run a cricket training academy. It was only due to public surveillance that he was prevented from constructing a building for this purpose. The Cross Maidan and Horniman Circle are other examples; indeed, some trustees are common to all three.

In Bandra, the two seaside promenades which are an iconic feature of this suburb are yet another reminder of how citizens can rise to the occasion, given the opportunity to do so. The ORF is to hold an international design competition for making the racecourse a multipurpose park. As for concerns that the government may extend the lease when it expires this week, there are sufficient precedents – not excluding the race course itself – for carrying over the expired lease on the same terms till a decision is reached about it. A decision, compulsorily, where citizens should have the first say.

With regards – S. Sampathkumar.
30th May 2013.


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