Editorial: I Hope the Shit Has Hit the Ceiling

No newspaper has yet captured the trepidation that has enveloped the thousands of home buyers who were picking up second and third homes in the hope of renting them and making fast and easy money.

The game plan was simple: take a 15-year loan at 10-12% and have the rent fund the EMI. It was so simple that even housewives had become ace investors in real estate. Accidental millionaires now waxed eloquently about how astute they were in investing in real estate, when all they had done was simply put their money in to a home, because banks had started offering a measly 5-6% interest on fixed deposits.

Further, builders and newspapers issued colorful supplements on how great it was living in polluted cities like Mumbai as long as your place had some patch of shrub and a lot of glass and plastic and as long as they had names like Eden, Amrit, Luxuria, Palazzo; as long as there were buyers who believed that by purchasing these places, they were actually moving to the Himalayas, South of France or Italy. This, when all over the world, and especially the US, homes were dropping 15% each month. The general view going around in India, and loudly cheered on by the likes of ICICI's KV Kamat and HDFC's Keki Mistry was that we do not have a subprime issue in India. It appears that now we do.

Noone had anticipated that powerful builder lobbies would begin to lose their battle to environmentalists and the High Court. After all, they have been champions of bribing the BMC, government officials, ministers and bulldozing their ways through all opposition.

What will it be like a year from now in Kandivili where people have purchased flats at Rs 6,400 a square ft and now can neither register, complete their loans, nor sell it to anyone else. A grim mound of decay seems to be the final destination for Bhoomi Valley and Sun City, two of the projects that now face a bleak future.

Two hundred flats in Bhoomi Valley but only 7 have been occupied. Two hundred and fifty in Sun City and none occupied. The High Court orders of March 24, declaring all these projects on forest lands as illegal has put investors in a state of limbo.

Civic authorities have suspended any further issuance of No Objective Certificates post the court order, and harried buyers are banging on the doors of builders for their possession certificates. Further, banks have suspended all loans to buyers who have purchased on these lands.

The fear in the eyes of builders for once is very real. There are the usual denials: that the government does not know what it is saying, that the court will not rule against hapless home buyers, that there is an election in the offing and no government can afford to upset the voters.

What they have not bargained for is that in a city if 17 million, there are good 16.5 million who cannot buy a home because rates have spiralled to beyond ludicrous levels. That a few 500,000 can afford to sacrifice their lakhs of hard earned income for the larger good of the rest. After all, is this not what good democracy is all about: the majority simply wins irrespective of what is right or wrong.

I believe the courts must simply abide by the Constitution, and encroachment of forest and natural resources is a serious offence. I hope for the good of all of us that as far as this real estate mania is concerned, the shit has finally hit the ceiling.