Mumbai's Mighty Cash In on a Real Estate Boom

Chandrahas Choudhury, a novelist, is based in New Delhi. His novel "Arzee the Dwarf" is published by New York Review Books. Follow him on Twitter at @Hashestweets.
Read More.
a | A

"In Mumbai, property is destiny," the novelist Vikram Chandra, author of the huge fictional investigation into the city's hidden vortexes of power "Sacred Games," once said to me.

Of course, every one of the 20 million or so denizens of the space-starved Indian financial capital knows and feels (and dreams) this truth, but the city's extortionate real estate prices and lamentable urban planning mean that more than half of its industrious population lives and suffers in slums, while hundreds of thousands of middle-class people expend their energies on debilitating journeys on jam-packed trains and buses from homes in the distant suburbs.

But more than the average Mumbaikar, more even than the city's sizeable class of entrepreneurs and investors, it is Mumbai's politicians (and those of Maharashtra, the state in whose crown Mumbai is the jewel) and its bureaucracy that might be said to hold this mantra closest to their hearts. Over the last two decades, as India's liberalization has spurred an economic boom and made some sections of the country flush with capital, no business in Mumbai has grown so rapidly as the business of property, and no partnership has generated so much intrigue and malfeasance as that of the nexus between the city's politicians and builders.

Simultaneously, as an exhaustive report in a recent issue of the investigative weekly Tehelka showed, politicians in power have worked assiduously at capturing real estate by leasing or transferring land held by the government at highly subsidized rates to "trusts" run by themselves or family members, thereby turning public goods into private wealth and draining the city of much-needed investments in roads, parks, hospitals, and schools.

The extent to which this corruption is no longer individual but systemic, built into the very structures of the city's economy, political parties, government, and laws (and periodic amendments to those laws) is no secret to Mumbaikars. But its secrets, deceptions and compromises are by and large well-managed and contained by those who perpetrate them. Every now and then, though, the persistence of an isolated journalist or activist pays off, and the curtain falls away from the truth, toppling those at the very top. Last week, after a series of arrests of high-profile bureaucrats, including that of the former municipal commissioner of Mumbai, in a housing scam, newspapers were abuzz with speculation that a really big fish -- the state's previous chief minister, Ashok Chavan, himself the son of a former chief minister of the state -- might be arrested.

In November 2010, Chavan, then the incumbent chief minister (and holder of the coveted urban development portfolio), lost his job after his complicity in the Adarsh Housing Society scam was revealed. The details of this audacious land grab provide a revealing snapshot of how power beds itself down in modern India through networks of patronage, and even straight barter.

In 2003, the Maharashtra government passed a proposal to construct a six-story building in Colaba, one of Mumbai's most expensive neighborhoods, offering flats at concessional rates to veterans of the Kargil war of 1999 with Pakistan, or their widows. Many suspicious aspects of the project were queried as far back as 2003 by the journalist Samar Halarnkar in the Indian Express, but to no avail. By the end of the decade, the building had come up, but it was now 31 floors high, the many clearances it needed having been expedited swiftly by a compliant bureaucracy. But it housed only a handful of soldiers.

The rest of the flats had been parceled up between politicians (in both government and opposition), their proxies, and bureaucrats in the state government. As a who's who of the residents of the building published by the Indian Express showed, almost everyone who had contributed to the building project being passed had been rewarded with a prime address in the city. Every chief minister of Maharashtra of the past decade (including the notorious Vilasrao Deshmukh, now taking a breather in the union government from the frying pan of Maharashtra politics) had some involvement with the project, and stood to benefit in return.

The Deccan Herald reported in a piece called "Maharastra's Land Scandals":

The defence first located the plot and then approached the state politicians for their help way back in 2000. The incumbent chief minister Ashok Chavan was then the revenue minister, and as per the government records, the land belonged to the government, although it was given to the Army. Although Chavan now denies it, the politician in him must have noticed the windfall the building in Colaba could bring, and he reportedly insisted that the Society, initially meant for defence officials, should allow 40 per cent membership to civilians. That was agreed, and the file moved quickly.

At current market price, the flat in Adarsh will cost somewhere between Rs 7 to 8 crore [$1.6 million], but the members of the Society were asked to invest up to Rs 85 lakh [$170,000] for a 2 BHK apartment. The appreciation would be more than 10 fold, that is, 1000 per cent. Can any business or job fetch this kind of returns in so short a time? No wonder, four former state CMs -- Vilasrao Deshmukh, Sushilkumar Shinde, Narayan Rane and Shivajirao Patil Nilangekar -- who had given various clearances to the controversial project at some point of time, were benefited directly or indirectly through allotments to their associates or nominees. Three relatives of Ashok Chavan were alloted flats in the Society, which he confirmed publicly.

So where do the surpluses generated by such sweetheart deals go? Certainly into the election war-chests of political parties, and perhaps into Swiss bank accounts. But, most damagingly, they perhaps go into the subversion of democracy, and fund the corruption of the public sphere. It is surely not a coincidence that Chavan's tenure as chief minister marked not just a new chapter in the history of crony capitalism in the city, but also, as a scathing series of reports by the journalist P. Sainath during the Maharashtra elections of 2009 proved, a new era for the capital-intensive phenomenon of "paid news" -- articles published on the eve of elections praising the incumbent chief minister.

And just as significantly, such collusions, if they go unpunished, vitiate the reputation and professed ideals of capitalism itself far more than any critics on the left could, and demonstrate what a great gulf may lie between "free" and "just," when capitalism's votaries often think of the second word as virtually synonymous with  the first.

It is indisputable that the energies of capitalism have worked wonders in the last two decades in transforming the static and oppressively hierarchical India of old. But simultaneously, capitalism's disregard for its own professed rules has greatly skewed access to the wealth it has generated, and supplied damning data to its critics, while suggesting even to those who are new to its ways -- as most young Indians are -- that it is a system that depends more on access than on efficiency.

As the historian Joyce Appleby argues in her history of capitalism, "The Relentless Revolution," “the shape and direction of capitalism are always set by its participants and never by inexorable laws” -- although economic determinists would have us believe that they are. All too often in India today, as examples like Adarsh prove, political power is thoroughly compromised by its proximity to special interests and lobbies, and capitalism's participants don't make a good enough case for the legitimacy of the system. In the case of Mumbai, the politician-builder nexus has condemned its citizens to a vastly poorer life than they deserve, and the parallel lines of genuine capitalism and crony capitalism have spawned a double economy. As an editorial titled "A Profitable Partnership" in The Economic and Political Weekly pointed out:

Mumbaikars believe that no matter which party is in power, it is the builders’ lobby that is all powerful. While the Congress Party has been at the helm for the longest duration, the Shiv Sena--Bharatiya Janata Party (SS-BJP) government did little for the predominantly jobless mill workers whose interests it claimed to espouse and whose homes were being taken over by the developers. [...] As the National Alliance of People’s Movements has pointed out, the shanties of the poor are regularly demolished as encroachments but rules are regularly flouted to accommodate the illegal housing of the rich.

In the “India Shining”, regulatory capture of different kinds (changing regulations, bending rules, discretionary allotments, etc) in infrastructure meets the needs of all sections of the powerful: it oils the machinery of the political parties, it lines the pockets of senior politicians and bureaucrats and, of course, it benefits those corporates who at a price are able to get the rules changed in their favour. Adarsh is just a speck on the landscape.

Can things change at all when both government and opposition in Maharashtra are deeply invested in the politics of property -- capture, development, slum rehabilitation and redistribution? In a long investigative essay in Tehelka last May called "Land Grab. And How To Make Millions" -- required reading for anybody interested in Indian politics -- the journalist Ashish Khetan supplied indictments of dozens of prominent Maharashtra politicians:

In Mumbai, almost every MLA [member of the legislative assembly] and MP, both past and present, cutting across political lines, owns at least one real estate project, either directly or through family members or a proxy, at any given point of time.

Maharashtra Navnirman Sena chief Raj Thackeray runs a big construction company named Matoshree Infrastructure. Right now, this company is redeveloping a cluster of over a dozen residential buildings in Mulund. Former chief minister and Shiv Sena leader Manohar Joshi and Raj had together bought the 4.8-acre Kohinoor Mill Land for Rs 421 crore in 2005 amidst a slew of controversies and allegations. [...] Raj’s company also constructed one of the first slum rehabilitation projects in the city. [...]

BJP MLA Mangal Prabhat Lodha (Malabar constituency) is today one of the top real estate developers in the city. Lodha first became an MLA in 1999 and has not looked back since then. Lodha Group, which he started in 1980, currently has 38 real estate projects under construction covering over 29 million sq ft of built-up area.

People often say that Raj and Uddhav Thackeray [of the Shiv Sena] will never contest elections. Why? Because then they will have to declare their assets, both movable and immovable. Similarly, the stories surrounding the alleged illegal gains of [former Chief Minister] Sharad Pawar, who in the last Lok Sabha election declared his total worth as 8.73 crore [roughly $18 million], are the stuff of urban legend.

In a sense, then, no Indian city is as great a symbol of the exhaustion of democracy and the takeover of policy by special interests as Mumbai, historically a city of entrepreneurship and public-spiritedness. Returning to the city -- the one I know best and love best, and the place where my own stories are set -- late one night last week after a couple of months away, I found it looking, even at midnight, weary, ill-lit, dusty, and dystopian, the roads littered with construction debris and garbage, and hundreds of people sleeping on the pavements or beneath flyovers. I found myself remembering the close of Cyrus Guzder's excellent essay about the city from 2003:

An Irish proverb says ‘It is in the shelter of each other that people live.’ Bombay’s builders and their rich clients may forget this only at their own peril.

(Chandrahas Choudhury, a novelist, is the New Delhi correspondent for the World View blog. The opinions expressed are his own.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author of this story:
Chandrahas Choudhury at

To contact the editor responsible for this story:
Max Berley at