Vantage point

Tuesday, January 29, 2008

Make them the owners

This piece from Dilip D'souza is refreshing because for once he has included sound economic theory in his thought process. Of course, my pal Ravikiran has been quick to point out the inconsistencies with Dilip's previous positions, but I welcome the change in the right direction and would prefer to focus on the positives.

As Dilip points out, the problem with grand government plans for slum redevelopment is that they assume the demand and supply curves will remain constant. But a massive injection of housing supply will lead to a drop in property prices making those very grand plans unfeasible. Dilip may or may not realize, but this is an excellent illustration of why central planning will fail more often than not.

There is a simpler and more "workable" way out of the problem which will not put as many additional overheads on the already deficit-ridden Maharashtra government. Just give the slum-dwellers titles to the shanties they have built on public land. I will always welcome the transfer of public property into private hands, and even the most left-liberal activist will agree that it is more preferable to hand over property rights to the "little guy" transparently than to big evil builders after intense backroom dealings. Issuing property rights to slum dwellers will indeed shift the supply curve too. But the subsequent negotiations with builders for redevelopment will be driven by market realities and will be controlled by the actual stakeholders, i.e. the slum dwellers, as opposed to some minister or babu with grandiose and unworkable visions.

Personally I refuse to take a condescending position which assumes that the average slum-dweller is gullible and will be screwed over by the evil builders in such negotiations. But even if I grant the point for the sake of this discussion, surely the very activists who go on hunger strikes to protest injustice in such deals can help slum dwellers out in a collective bargaining process. A negotiation process in which slum-dwellers and their friendly principled activists have a say will be much more workable than negotiations between the government and builders with infinite opportunities for kickbacks.

Now, I have always had a great deal of respect for the late J.B. D'souza and I am happy to know that he spearheaded a realistic and workable scheme for slum redevelopment which took into account economic realities of the situation. Cynics may scoff at the idea that only 6000 odd flats were built over a long period of 25 years. But given the on-ground realities in Mumbai concerning regulations as well as property prices, it is a remarkable achievement which armchair pundits may not fully appreciate. Whatever Dilip mentions in his article about the scheme sounds very sound to me, and I would love to know more details about it. What I would like to see is the government getting out of the way after handing over titles to the slum-dwellers and letting well-meaning and intelligent folks private individuals like J.B. D'souza take a keen personal interest in what happens thereafter.

Of course, it will be workable only if strict enforcement ensures that people don't sell their re-developed houses and move back into slums. My contention is that if we let the slum-dwellers control the process of negotiating with builders, they are more likely to get houses they will be happy with and stay in. And I base this not just on my instinct or on classical liberal theory, but also my own personal interactions with "rehabilitated" slum dwellers. For 4 years that I was in a Rotaract Club, I was a volunteer for the Pulse Polio drives. The area I was responsible for contained the slums near Paud Phata in Pune and the high rise (by Pune standards) buildings near the Paud Phata Flyover where several slum-dweller families had been "rehabilitated". They lived in 6 or 7 storeyed apartment buildings with water pumps that were strong enough to pump water only up to the 4th floor. So those who stayed on the 5th floor and upwards had to go to the taps down stairs and lug water up to their houses in buckets. They had to do the same thing they did when they lived in slum shanties, only now they had to climb the staircases 4 floors and higher. Needless to say, most people who were given houses on the 5th floor and upwards had sold or unofficially rented their houses to someone else. But 4th floor and downwards, the number of such resales dropped drastically. Several of the families who stayed on in their 6th and 7th floor apartments mentioned to me that if they had a say, they would have ensured that stronger water pumps were installed in the buildings. But surely, babus who executed the project thought that giving them a pucca house was good enough and other minor details like water suuply did not merit enough attention. Which is why it is crucial to let the owners themselves take care of the negotiations with builders.

Anyway, and I mean this with no disrespect, but this is my favourite Dilip article by a long long way.

P.S. Dilip mentions in his article that his 1100 sq ft house (which I think is in Bandra-W) is worth 3.25 crores. So the houses in Bandra-W are going at 30K rupees per sq foot??? Holy hell!!!!! So I guess the only way I could buy a house in Bombay is if there is a massive recession.